Versus Z. Lakhani , Asim Siddiqui
ORDER
Above captioned appeals have been filed by the taxpayer against the consolidated order, dated 26-2-2010 passed by the Commissioner Inland Revenue (Appeals-II), Karachi on the following grounds:--
I.T.A. No. 386/KB of 2010.
(2) The Commissioner of Income Tax (Appeals) has erred in maintaining the order passed under section 122(5A) of Income Tax Ordinance, 2001 by Additional Commissioner of Income Tax (Audit-A, Audit Div-II).
(3) The Commissioner of Income Tax (Appeals) has not considered the fact that the provisions of section 108 are not applicable in the appellant's case.
(4) The Commissioner of Income Tax (Appeals) has not considered the fact that the appellant has correctly allocated the portion of mark up to the Messrs Zephyr Power (Pvt.) Ltd.
(5) The Commissioner of Income Tax (Appeals) has not considered the fact that the Messrs Zephyr Power (Pvt.) Limited has utilized 90% of the loans borrowed by the appellant from P.I. C.I.C. Commercial Bank Limited.
I.T.A. No. 387/KB of 2010
(2) The Commissioner of Income Tax (Appeals) has erred in maintaining the order passed under section 183(1)(b) of Income Tax Ordinance, 2001 by Taxation Officer (Unit-14, Enforcement and Collection Division-III).
(3) The Commissioner of Income Tax (Appeals) has not considered the fact that the appellant had requested vide letter dated 30-4-2009 to keep the recovery proceeding in abeyance till the decision of Commissioner of Appeal Zone-II.
(4) That the total demand created under section 183(1)(b) of the Income Tax Ordinance, 2001 at Rs.12,504 may please be deleted.
2. Mr. Z. Lakhani C.A. learned counsel for the taxpayer company argued that the CIR(A) erred in maintaining the order passed under section 122(5A) of the Income Tax Ordinance, 2001 by Additional Commissioner (Audit-A, Audit-Div-II). He further argued that the CIR(A) has not considered the fact that the provisions of section 108 are not applicable in the appellant's case and that the Messrs Zephyr Power , (Pvt.) Limited has utilized 90% of the loans borrowed by the appellant from P.I.C.I.C. Commercial Bank Limited. According to him the CIR(A) has not considered the fact that the appellant had requested vide letter dated 30-4-2009 to keep the recovery proceeding in abeyance till the decision of Commissioner of Appeal Zone-Il. He argued that the demand created under section 183(1)(b) of the Income Tax Ordinance, 2001 at Rs.12,504 may please he deleted.
3. While arguing the case, A.R. of the appellant relied upon the cases laws reported as under:--
(1) 2004 SCMR 1319 = 2004 PTD 2255,
(2) 1992 PTD (Trib.) 298,
(3) PLD 1992 SC 562 = 1992 PTD 954 and
(4) 2001 PTD 1675
4. On the other hand Mr. Asim Siddiqui DR, opposed the contention of AR of the appellant/taxpayer and supported the order passed by the Commissioner Inland Revenue (Appeals-II) Karachi.
5. The CIR(A) while deciding the appeal of the taxpayer has found as under:--
"My findings are that the appellant has itself charged it interest of Rs.18.56,199 on the loan of Rs.23,189,364 which was advanced to a sister concern in the name of Messrs Zephyr Power Private Limited which the appellant has partially set off against the interest payable to Rs.2,665,834. This interest of Rs.1,856,199 is entirely taxable and is not covered by the provision of clause (125) of Part-I of second schedule to the Income Tax Ordinance, 2001 as the said clause grants exemption only from the business income covered under the said clause of Part-I, of Second Schedule to the Income Tax Ordinance, 2001. This Interest is taxable in terms of judgment of honourable Supreme Court of Pakistan in the case Messrs Genertic Pakistan Limited reported as 2004 PTD 2255 (SC Pak). Moreover expenses are not admissible to such income in terms of the judgment of honourable Sindh High Court reported as 2000 PTD 363 in the case of CIT v. Khiratul Hayat Amin also in view of the full bench judgment of the learned Income Tax Appellate Tribunal reported as 1999 PTD (Trib.) 708.
Under these circumstances it is held that the Interest income and Consultancy income have been rightly subjected to tax by the Taxation Officer as the same was not exempt under clause (125) of Part-I of 2nd Schedule of Income Tax Ordinance.
Order under section 183(1)(b) of the Income Tax Ordinance. 2001.
Since the appellant failed to discharge its tax liability raised through order passed under section 122(5A) of the Income Tax Ordinance, 2001, the imposition of penalty under section 183(1)(b) of Income Tax Ordinance, 2001 is in accordance with law and suffers from no infirmity to warrant any interference it is hereby confirmed:
6. We have heard the representatives of both the parties and examined the case record. Regarding the interest income AR of the taxpayer has submitted a case quoted supra viz. 2004 SCMR 1319 = 2004 PTD 2255 which is cited as under:--
"--Whether share capital deposits in banks by assesses provide separate income after post production stage of power generating activity therefore on income of interest. no exemption can be claimed under item 176, Second Schedule as it is different income from profits/gains being earned from post production activity of power generation---Held yes."
7. A plain reading of the above citation of the honourable Supreme Court of Pakistan speaks loudly about the fact that the action of the Assessing Officer is undoubtedly in accordance within the four walls of the income tax law, therefore, this bench is of the opinion that orders of the both the officers down below are factually and legally on sound footing, these are therefore, upheld.
8. Consequently, logically following the above, the action of the Additional Commissioner is also valid as the default stands established. The order under section 183(1)(b) is thus in accordance with the law. Therefore, the orders of both the officers down below are upheld on this score as well.
9. The A.R. of the taxpayer has challenged the jurisdiction of the Additional Commissioner under section 122(5A) of the Income Tax Ordinance, 2001. This bench finds no infirmity in the exercise of jurisdiction by the Additional Commissioner under section 122(5A) of the Income Tax Ordinance, 2001 as the same is legally sound. This ground of appeal is therefore, rejected.
10. Now coming to the next ground of appeal which relates to the provision of section 108. We find that the Assessing Officer rightly exercised his jurisdiction under section 108 of the Income Tax Ordinance, 2001 in accordance with facts and legal provision of the case. The CIT(A) upheld the same. After perusal of record and on the basis of factual and legal position we find that CIT(A) rightly upheld the order of the Additional Commissioner.
11. The next ground of appeal states that the CIT(A) did " not consider the fact that the appellant has correctly allocated the portion of markup to the Messrs Zephyr Power (Pvt.) Ltd. He contended that the latter did not consider the fact that Messrs Zephyr Power (Pvt.) Ltd. has utilized 90% of the loans borrowed by the appellant from P.I.C.I.C. Commercial Bank Limited. In support of his contention, the appellant has submitted the case laws. We feel that the case laws cited by the AR of the taxpayer do not have any bearing on the outcome of the case, therefore, these need not to be discussed. We feel that this point has been dealt in accordance with law and the facts of the case. The legal position emanating therefrom suggests that orders of both the authorities down below do not call for any interference. Accordingly, we uphold the order of the CIT(A).
12. In the light of the aforementioned discussion, we feel that both the appeals of taxpayer, being devoid of merit, fail.
H.B.T./150/Tax(Trib.) ????????????????????????????????????????????????????????????????????????? Appeal dismissed.