Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: ZARAI TARAQIATI BANK LTD. VS Respondent: COMMISSIONER INLAND REVENUE LTU, ISLAMABAD
Court Name: Appellate Tribunal Inland Revenue Judge(s): Jawaid Masood Tahir Bhatti, Muhammad Riaz Title:ZARAI TARAQIATI BANK LTD. vs COMMISSIONER INLAND REVENUE LTU,
ISLAMABAD Case No.: I.T.As. Nos.188/IB to 190/IB and 282/IB to 284/IB of 2014, Date of Judgment:2014-05-28 Reported As: 2015 PTD (Trib.) 1678 Result: Order accordingly Judgment ORDER Through these six cross appeals, (three filed by each of the party) the two separate impugned orders of the learned CIR(A) dated 24-12-2013 bearing No.113/2013 for the tax year 2010 and the consolidated order dated 16-1-2014 bearing Nos. 114 and 115/2013 for the Tax Year 2011 and 2012 have been objected on the following grounds:-- The taxpayer contested the appeals on the following grounds and prayer:-- TAX YEAR 2010 (2) "That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of provision for employees post retirement benefit amounting to Rs. 326,654,000 which has wrongly been made which is liable to be deleted. (3) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of recoveries amounting to Rs.3,614,606,121 which has wrongly been made which is liable to be deleted. (4) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of commutation to employees amounting to Rs.677,821,000 which has wrongly been made which is liable to be deleted. (5) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of unpaid liabilities of markup payable amounting to Rs.385,502,000 which has wrongly been made which is liable to be deleted. (6) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of unpaid liabilities of markup payable amounting to Rs.385.502,000
---
## Page 2
which has wrongly been made in violation of 7th Schedule to the Income Tax Ordinance, 2001 which is liable to be deleted. (7) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of properly income amounting to Rs.27,986,000 which has wrongly been made which is liable to be deleted. (8) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of reversal of amortization of deferred income amounting to Rs.71, 112,000 which has wrongly been made which is liable to be deleted. (9) That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of provision claimed non-performing loan amounting to Rs. 285,254,000 which has wrongly been made which is liable to be deleted. (10)That Commissioner of Income Tax (Appeals) is not justified .By not adjudicating the ground regarding addition on account of reversal against provision tax years 2010 to 2012 amounting to Rs. 2,245,262,000 which has wrongly been made which is liable to be deleted. (11)That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on account of impairment amounting to Rs.263,000 which has wrongly been made which is liable to be deleted. (12)That Commissioner of Income Tax (Appeals) is not justified by not adjudicating the ground regarding addition on accent of provision against other assets amounting to Rs.53,088,000 which has wrongly been made which is liable to be deleted. (13)That tax on PTR amounting to Rs.5,353,000 has wrongly been added in the tax payable. (14)That credit of tax paid / deducted on rent amounting to Rs.862,585 has not been given by the Additional Commissioner Inland Revenue. The assessing officer may be directed to give credit. It is therefore respectfully prayed that order under section 122(5A) may kindly be cancelled or such other relief granted as permissible under the law." TAX YEAR 2011 (2) "That proceedings under section 122(5A), of Income Tax Ordinance, 2001 have wrongly been initiated and have wrongly been confirmed by Commissioner Inland Revenue (Appeals) hence order is liable to be cancelled. (3) That order under section 122(5A) dated 30-9-2013 is liable to be cancelled as the case was not fixed for hearing on 30-9-2013. .The Commissioner Inland Revenue (Appeals) is not justified to reject the contention of the taxpayer. (4) That addition on account of provision against non performing loans/substandard loans amounting to Rs 209,335,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (5) That addition on account of provision against non performing loans and advances amounting to Rs. 76, 744,190 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (6) That addition on account of reversal against provision amounting to Rs.1,742,186,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. The Commissioner Inland Revenue (Appeals) could not order to conduct inquiry while remanding the order as the same was not permissible in the tax year 2011. (7) That addition on 'account of property income amounting to Rs.30,824,000 has wrongly been made and had wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. Income from property is liable to be taxed under section 15 read with section 155 instead of under the provision of the 7th schedule.
---
## Page 3
(8) That addition on account of reversal of amortization of deferred income amounting to Rs.67,329,000 has wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (9) That addition on account of reversal of provision for compensated absences amounting to Rs.395,897,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (10) That addition on account of reversal of provision against other assets amounting to Rs.1,209,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (11) That addition on account of penalty to State Bank of Pakistan amounting to Rs.691,000 had wrongly been made and has wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (12) That addition on account of recoveries amounting to Rs.728,697,000 has wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (13) That addition on account of unpaid liability of markup payable amounting to Rs.2,798,557,000 had wrongly been made and has wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (14) That addition on account of unpaid liability of markup payable amounting to Rs.2,798,557,000 has been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) in violation of 7th Schedule to the Income Tax Ordinance, 2001 which is liable to be deleted. (15) That addition on account of commutation to employees amounting to Rs.11,063,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (16) That surcharge amounting to Rs. 131,290,543 had wrongly been imposed and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (17) That credit of refund adjustment related to assessment year 2001-2002 amounting to Rs.452,201,854 has not been given by the Additional Commissioner Inland Revenue. The assessing officer may b.e directed to give credit. The Commissioner Inland Revenue (Appeals) is not justified to remand the issue to the assessing officer. It is therefore respectfully prayed that order under section 122(5A) may kindly be cancelled or such other relief granted as permissible under the law." TAX YEAR 2012 (2) "That proceedings under section 122(5A) of Income Tax Ordinance, 2001 have wrongly been initiated and have wrongly been confirmed by Commissioner Inland Revenue (Appeals) hence order is liable to be cancelled. (3) That order under section 122(5A) dated 30-9-2013 is liable to be cancelled as the case was not fixed for hearing on 30-9-2013. The Commissioner Inland Revenue (Appeals) is not justified to reject the contention of the taxpayer. (4) That addition on account of provision for post-retirement medical benefit amounting to Rs.15,272,000 had wrongly been made and has wrongly been remanded to the assessing officers by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (5) That addition on account of provision against non performing loans/substandard loan amounting to Rs.449,380,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted.
---
## Page 4
(6) That addition on account of reversal of provision against other assets amounting to Rs.2,966,431,000 has wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. The Commissioner Inland Revenue (Appeals) could not order to conduct inquiry while remanding the order as the same was not permissible in the tax year 2012. (7) That addition on account of property income amounting to Rs.29,768,000 has wrongly been made and had wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. Income from property is liable to be taxed under section 15 read with section 155 instead of under the provision of the 7th schedule. (8) That addition on account of reversal of amortization of deferred income amounting to Rs.51,024,000 has wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (9) That addition on account of reversal of provision for compensated absences amounting to Rs.454,479,000 had wrongly been made and has wrongly been, remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (10) That addition on account of incorrect claim of provision against NPLA amounting to Rs.1,851,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (11) That addition on account of unpaid liability of markup payable amounting to Rs.3,345,240,000 had wrongly been made and has wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (12) That addition on account of unpaid liability of markup payable amounting to Rs.3,345,240,000 had been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) in violation of 7th Schedule to the Income Tax Ordinance, 2001 which is liable to be deleted. (13) That addition on account or penalty to State Bank of Pakistan amounting to Rs.2,280,000 had wrongly been made and has wrongly been confirmed by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. (14) That addition on account of commutation to employees amounting to Rs.41, 182,000 had wrongly been made and has wrongly been remanded to the assessing officer by the Commissioner Inland Revenue (Appeals) which is liable to be deleted. It is therefore respectfully prayed that order under section 122(5A) may kindly be cancelled or such other relief granted as permissible under the law." 2. While the Department in the cross appeals has contested the appeals on the following grounds. TAX YEAR 2010 (2) "That the learned CIR(A) was not justified to annul order of the assessing officer passed under section 122(5A) by observing that earlier amendment order under section 122(1) dated 28-6-2013 should have been amended instead of original assessment order which stood finalized under section 120(1) of Income Tax Ordinance, 2001 notwithstanding the fact that subsection (4) of section 122 of the ITO, 2001 stipulates that where an assessment order has been amended under subsections (1), (3) or (SA) of section 122 of the Commissioner may further amend the original assessm ent order under section 120 of the Income Tax Ordinance, 2001. (3) That the learned CIR(A) was not justified to annul order of the assessing official passed under section 122(5A) by observing that earlier amendment order under section 122(1) dated 28-6-2013 should have been amended instead of original assessment order which stood finalized under section 120(1) of the Income Tax Ordinance, 2001 by ignoring principal settled by Honourable Islamabad High Court in reported judgment 2010 PTD 1506 wherein it was held that the
---
## Page 5
Commissioner may amend the original assessment order passed under section 120(1) of the Income Tax Ordinance, 2001. TAX YEAR 2011 (2) "That the learned CIR(A) was not justified to remand back the case to the assessing officer with the direction to check the assertion of the taxpayer for deletion of addition made under the head provision against non performing/substandard loan at Rs.209,335,000 as the same was disallowed strictly in accordance with terms of Rule 1(d) of 7th Schedule of the Income Tax Ordinance, 2001. (3) That the learned CIR(A) was not justified to direct to allow the deduction on account of addition made under the head provision of post retirement medical benefitin the light of reported ATIR judgment 2012 PTR 124 as the same was disallowed strictly in chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (4) That the. Learned CIR(A) was not justified to remand back the case to the assessing officer with the direction to allow deduction on account of addition made under the head reversal of provision against assets after verification/clarification in the light of reported ATIR Judgment 2012 PTR 124 despite the fact that same was chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (5) That the learned CIR(A) was not justified to remand back the issue to the assessing officer with the direction to allow deduction on account of addition made under the head unpaid liability of markup after verification/clarification despite the fact that same was chargeable to tax under section 34(5) of the Income Tax Ordinance, 2001. (6) That the learned CIR(A) was not justified to remand back the issue to the Assessing Officer for proper evaluation on account of addition made under the head commutation to employees despite the fact that same was rightly disallowed under section 1(c) of the Income Tax Ordinance, 2001. (7) That the learned CIR(A) was not justified to remand back the issue to the assessing officer for getting clarification of the taxpayer on account of addition made under the head provision for non performing loans and advances despite the fact that same was rightly disallowed strictly in accordance with terms of Rule 1(c) of 7th Schedule of the Income Tax Ordinance, 2001. (8) That the learned CIR(A) was not justified to direct to get explanation of taxpayer to allow the deduction on account of addition made under the head reversal against provision as the same was rightly disallowed and chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (9) That the learned CIR(A) was not justified to remand back the issue to the assessing officer for re-calculation of the amount on which tax was not paid on account of addition made under the head recoveries despite the fact that same was rightly disallowed strictly in accordance with law after considering explanation of taxpayer. TAX YEAR 2012 (2) "That the learned CIR(A) was not justified to remand back the case to the assessing officer with the direction to check the assertion of the taxpayer for deletion of addition made under the head provision against non performing/substandard loan at Rs.209,335,000 as the same was disallowed strictly in accordance with terms of Rule 1(d) of 7th Schedule of the Income Tax Ordinance, 2001. (3) That the learned CIR(A) was not justified to direct to allow the deduction on account of addition made under the head provision of post retirement medical benefit in the light of reported ATIR judgment 2012 PTR 124 as the same was disallowed strictly in accordance with terms of section- 34(1)(d) of the Income Tax Ordinance, 2001. (4) That the learned CIR(A) was not justified to remand back the case to the assessing officer with the direction to check the assertion of the taxpayer for deletion of addition made under the head
---
## Page 6
reversal of amortization of deferred income despite the fact that same was chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (5) That the learned CIR(A) was not justified to remand back the case to the assessing officer with the direction to allow deduction on account of addition made under the head reversal of provision for compensated absence in the light of reported ATIR judgment 2012 PTR 124 despite the fact that same was chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (6) That the learned CIR(A) was not justified. To remand back the case to the assessing officer with the direction to allow deduction on account of addition made under the head reversal of provision against assets after verification/clarification in the light of reported ATIR Judgment 2012 PTR 124 despite the fact that same was chargeable to tax under section 70 of the Income Tax Ordinance, 2001. (7) That the learned CIR(A) was not justified to remand back the issue to the assessing officer with the direction to allow deduction on account of addition made under the head unpaid liability of markup after verification/clarification despite the fact that same was chargeable to tax under section 34(5) of the Income Tax Ordinance, 2001. (8) That the learned CIR(A) was not justified to remand back the issue to the assessing officer for proper evaluation on account of addition made under the head commutation to employees despite the fact that same was rightly disallowed under section 21(c) of the Income Tax Ordinance, 2001. (9) That the learned CIR(A) was not justified to remand back the issue to the Assessing Officer for getting clarification of the taxpayer on account of addition made under the head provision for non performing loans and advances despite the fact that same was rightly disallowed strictly in accordance with terms of Rule 1(c) of 7th Schedule of the Income Tax Ordinance, 2001. (10) That the learned CIR(A) was not justified to direct to delete addition made under the head provision of Post Diminution in investment in the light of reported ATIR Judgment 2012 PTR 124 as the same was disallowed strictly in accordance with terms of Rule 9 read with sections 32 and 34 of the Income Tax Ordinance, 2001. (11) That the learned CIR(A) was not justified to direct to delete addition made under the head provision against other assets in the light of reported ATIR Judgment 2012 PTR 124 as the same was disallowed strictly in accordance with terms of section 34(5) of the Income Tax Ordinance, 2001. 3. Regarding the appeal for the Tax Year 2010 filed by the department, the learned DR argued that learned CIR(A) is not justified to annul the order on the basis that order has already been amended under section 122(1) of Income Tax Ordinance, 2001 on 28-2-2013 and order under section 120(1) was not in the field. It is contended that as per section 122(4) of Income Tax Ordinance, 2001, the Commissioner has been given the power to amend and further amend as many times as may be necessary the original assessm ent order. As order was amended under section 122(5A) of Income Tax Ordinance, 2001 taking into consideration the earlier amended order therefore annulment of the. Order under section 122(5A) of Income Tax Ordinance, 2001 by the learned CIR(A) is against the provision of section 122(4) of the Ordinance. On the other hand the learned AR of the taxpayer has supported the impugned order of the learned CIR(A) on the ground that the order under section 120 of Income Tax Ordinance, 2001 was not in the field land could not be amended by the Additional Commissioner. After considering submissions of both the parties we are in agreement with the learned DR that annulment of the assessm ent order by the learned CIR (A) is not justified therefore appeal of the department for the tax year 2010 against annulment of the assessment order is accepted. The appeal of the taxpayer is being decided on merits of the case as the common issues are involved in all the appeals.
---
## Page 7
4. The issue of Post-Retirement Medical Benefit is the subject matter of Appeal filed by the Tax Payer for the Tax Year, 2010 being not adjudicated by the learned CIR(A) in the impugned order and has been agitated by the Department for the Tax Years 2011 and 2012 as the learned CIR(A) had deleted the addition for these two years. We have found that in tax years 2011 and 2012 the learned CIR(A) has deleted the addition on the basis of case-law reported as 2012 PTR 124 (Trib) = 2013 PTD 246 (Trib). (Page 3 of the impugned Order). Relevant portion (point 7 paras. 26, 27, 28) of the order of Appellate Tribunal is reproduced as under:- "26. The claim of taxpayer is that these are ascertainable liabilities and not mere provisions. It is the substance that matters and not the mere nomenclature given to any transaction. In 2001 PTD 1427 and 2001 PTD 744 it has been held that any ascertainable accrued liability is deductible under the mercantile system of accounts. According to him, this issue has already been decided by this Tribunal in its decision in I.T.As. Nos.1516 to 1520/KB of 2003 dated 23-11-2005 27. The learned DR supported the order of Assessing Officer and argued that instead of providing employee-wise detail of expenses on actual basis, the bank provided total figure worked out by actuaries. 28. We have examined the arguments of learned AR and case-law cited by him. We agree with the learned AR that it is substance that matters and not the nomenclature given to any transaction. A liability cannot become unascertainable if it is named as provision. The cases cited by learned AR squarely cover the issue in hand. The department is therefore, directed to allow this deduction". The learned AR submitted that even otherwise order passed being in accordance with law laid down by the Tribunal vide order dated 15-5-2012 has wrongly been treated as erroneous by the Additional Commissioner vide order under section 122(5A) dated 30-9-2013. He has argued that apart from above, the addition is not maintainable as the same does not come under the ambit of seventh schedule. Business income has to be computed under the seventh schedule as specifically provided in Rule 6 to the Seventh Schedule. There is no provision in the 7th Schedule wherein disallowance of this expense can be made. Reliance is placed on case-law reported as 2012 PTD 1055 (Trib.) relevant para is reproduced hereunder:-- "Section 100 A read with seventh schedule to the Ordinance is a special non-obstante provision that overrides all other provisions as for as computation of income and tax payable by banking companies is concerned. Tax authorities are bound to accept the audited accounts from tax year 2009 in the case of banks subject to specified addition and adjustments. This position of law has also been admitted and explained by FBR in Para 10 of its Circular No. 1 of 2007 dated 2-7-2007 Circular No.2 of 2008 dated 28-2-2008, Circular No. 3 of 2009 dated 17-7-2009 and Circular No. 8 of 2009 dated 25-9-2009. These instructions are strictly as per law having binding force for all subordinate tax officials under sections 206(2) and 214(1) of the Ordinance. In the presence of unambiguous position of law and legally binding instructions, the Deputy Commissioner was bound to accept the balance of income as per audited accounts subject to additions/ adjustments mentioned in rule 1(a) to (h) of the seventh schedule. On the basis of misinterpretation of rule 9 of the seventh schedule, as elaborated above, the authorities below concluded that seventh schedule is not a self-contained provision as for as computation of income is concerned in the case of banking companies. We disapprove this interpretation and hold that for computation of income of the banking companies, the seventh…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.