I. T. AS. NOS. 519/KB, 520/KB, 510/KB AND 511/KB OF 1980-81, DECIDED ON 14TH APRIL, 1983. Versus I. T. AS. NOS. 519/KB, 520/KB, 510/KB AND 511/KB OF 1980-81, DECIDED ON 14TH APRIL, 1983.
ORDER
MUHAMMAD MAZHAR Au (CHAIRMAN).‑‑(1) .
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7. The next griewtnce of the department is that the learned Appellate Assistant Commissioner was not justified in setting aside the order of the Income‑tax officer in respect of addition of interest amounting Rs. 7,54,095 by invoking the provisions of section 10 (2‑A) of the Income‑tax Act, A perusal of the impugned order of the learned Appellate Assistant Commissioner indicates that it was not disputed by the assessee that since the allowance of deduction of the amount in question a period of three years had not elapsed, the only contention raised was that the unpaid interest was added to the principal amount year after year and hence it could not be said that the trading liability in question had not been paid. The learned Appellate Assistant Commissioner found that this aspect of the case was not dealt with by the Income‑tax Officer and hence she set aside the impugned order quo ad hoc with a directions to the Income‑tax Officer to examine the matter afresh in the light of the observations made by her.
8. Having heard the arguments of the parties representatives and upon appreciation of the material prevalent on record we are convinced that the learned Appellate Assistant Commissioner acted improperly in setting aside the impugned order. There could be no denying the fact that in the accounts of the assessee the amounts in question continued to be a trading liability in respect of which an allowance eras made three years prior to the year in which it was sought to be added back under the provisions of year 10 (2‑A). How and in what manner it was posted in the books of accounts of the lender would not change the complexion of the liability as a trading liability for which an allowance or deduction had been made three years before the relevant previous years. All the conditions laid down for application of section 1.0 (2‑A) were present in the instant case and hence the order of the Income‑tax Officer was strictly in accordance with law. The order of the learned Appellate Assistant Commissioner is based on improper appreciation of facts as well as the relevant provisions of law and hence we vacate it. Consequently the order of the Income‑tax Officer stands restored.
9. The next ground taken in the Memorandum of Appeal reads as under :‑
"Learned Appellate Assistant Commissioner has also failed to appreciate that Workers Welfare Fund is to be charged under the provisions of section 4 of Income‑tax Ordinance on the total income of the year and on the basis of clause 2 of C. B. R. Circular No. 3 of 1976 C. No. 13 (3) IT‑1/76, dated 29‑5‑1976 on the total income of the previous year and Workers Welfare Fund is to be allowed as business expense against the income of that previous year, so learned Appellate Assistant Commissioner was not justified in deleting Workers Welfare Fund levied in the original order and/or in the rectified order."
10. The relevant facts pertaining to this issue are these. The assesses is admittedly an Industrial Establishment and it is liable to contribute towards Workers Welfare Fund if its income was more than Rs. 1 lac. For the year under appeal it returned a loss of Rs. 13,09,937 but the Income‑tax Officer assessed the total income from business of the year at Rs. 6,22,236. After adjustment of the brought forward loss of Rs. 14,25,144 of the earlier year. p total loss to be carried forward to the succeeding year was worked out at Rs. 8,02,908. The assesses had, it is further to be observed, also earned " some of Rs. 2,27,400 from rentals of looms which was to be brought to Tax as income from other sources under section 12 of the Act. The assessee sought it to be adjusted against brought forward loss under the provisions of section 24 of the Act but the Income‑tax Officer declined to do so on the ground that brought forward loses are to be adjusted against into of the same business and not against income derived from a difference source. Consequently, be subjected this income of Rs: 2,27,400 to tax an also worked out the Workers Welfare Fund on the basis thereof at Rs. 4,459 The assessee went in appeal before the learned Appellate Assistant Commissioner against this treatment. Its stand before the first appellate authority was that Workers Welfare Fund was not leviable on it as the total income of the assesses was a loss. The learned Appellate Assistant Commissioner without any elaborate discussion allowed the relief with the passing observation: "Keeping the above fact in view the levy of Workers Welfare Fund is not justified. The same is accordingly cancelled". The learned Departmental Representative vehemently urged that the Income‑tax Officer has rightly computed the income of the assesses and since income‑tax in respect of the income derived from rental of looms has been subjected to tax the assesses could not escape the liability to contribute to the Workers Welfare Fund. The learned .Authorised Representative of the assessee, on the other hand, submitted that the expression "total income" is defined in section 2(15) of the Income‑tax Act and notwithstanding the fact that for tax purpose the income derived from rentals of looms was subjected to tax under section 12 the overall position of business activity had resulted in a loss inasmuch as the Income‑tax Officer had himself carried forward the loss of Rs. 8,02,908; whereas the income derived from other sources anal taxed under section 12 is only of Rs. 2,27,400.
11. Under section 4 of the Workers Welfare Fund Ordinance, 1971, every Industrial Establishment, the total income of which is not less than Rs. 1 lad, is obliged to contribute to the said Fund a sum equal to 2 % of so much of its total income as is. assessable under the income‑tax Act, 1922. In the assessment order for the charge year 1978‑79 the Income tax Officer had the income of Rs. 2,27,400 assessable under section 12 of the Income-?tax Act. This action of the Income‑tax Officer has been accepted to correct by the assesses. The Income‑tax Officer has admittedly determined the amount of Workers Welfare Fund due from the assesses‑appellant on the basis of the income so assessed. In doing so, the Income‑tax Officer did not, in our opinion, fall into any error. The learned Appellate Assistant Commissioner has partently failed to keep this aspect of the matter in view and consequently, the has allowed relief to the assesses on untenable ground. We would, therefore, vacate her order in this behalf and restore that of the Income‑tax officer.
12. In the result, the departmental appeal for the charge year 1978‑79 succeeds and is allowed to indicated above.