I.T.As. Nos.4471/LB and 4472/LB of 1996, decided on 26th August, 2003. Versus I.T.As. Nos.4471/LB and 4472/LB of 1996, decided on 26th August, 2003.

ORDER

IMTIAZ ANJUM (ACCOUNTANT MEMBER).‑‑ ‑This appeal by the appellant‑company is directed against the rectification order passed under section 156 in order to include duty draw back in the total export sale to arrive at the turnover for the purposes of charge of tax under section 80D of the Income Tax Ordinance, 1979.

2. The facts briefly stated are that on the‑ basis of audit note it was pointed out that for the impugned assessment years 1991‑92 and 1992‑93 tax liability under section 80D has not been correctly charged as the export rebate has not been added to the total turnover. When confronted for rectification it was pleaded on behalf of the appellant that export rebate has been treated as sale, while in fact it is refund of the cost of import inputs which appellant had very rightly deducted from the cost sale. Explanation was not accepted and tax was charged in the following manner:‑‑

1991‑92 1992‑93

Cloth Export Rs.16503601 Rs.12338096

Export Rebate. 7300768 5717213

Total turnover Rs.23804369 Rs.18055309

Tax @a 0.5 under sec tion 80D. 119022 Rs.90277

Additional 'Tax under section 88

(from 31‑8‑1991 to 15‑6‑1992) 14134 4313 (from 30‑8‑1991 to 29‑6‑1992)

Total tax payable. 133156. 94590

Less Tax levied as per

IT‑30 78627 58857

Balance short fall 54529 34933

3. The learned CIT(A) after recording the facts as well as objections of the, appellant reproduced in the impugned order, dated 30‑5‑1996 on page 2 and case‑law referred by the appellant relevant to the issue as mentioned on page 3. of the appellant order disposed of the entire matter in the following manner:‑‑

"I am afraid that the above arguments of the AR are not on at fours with the instant case under appeal. The treatment given by the Assessing ‑Officer is fair and legal and calls for no interference.

The appeal is rejected."

4. The learned AR of the appellant has reiterated the facts of the accounting of the rebate and in support submitted copy of the statement of accounts for both the periods relevant to the impugned assessment years‑ Tote Learned AR has contended that duty draw back was deductible from the cost of sale and that was proper. It, therefore, could not be made part of export' sales for working out the turnover. In support of this contention the learned A.R. has relied upon a reported judgment cited as 2001 PTD 1649 (LHC) highlighting that Honourable Lahore High Court has very clearly discussed the matter of rebate; various type of commission, discount and the accounting done, by different companies/assessees. The ratio decided is that according to .the international standards of accounting, the rebate allowed against tax/duties etc. on imports is rightly deducted from the cost of sales.

5. We have considered the definition of turnover in terms of "Explanation" to subsection 2 of section 80(D) as well as nature of rebate and accounting vis‑a‑vis export rebate in the light of case law reported as 2001 PTD 1649 (LHC) in the facts and various factors of the case. The treatment meted out by both the authorities below has been recorded‑in para. 2 above. The Assessing Officer while carrying out rectification under section 156 of the Income Tax Ordinance, 1979 has failed to discuss the explanation rendered with regard to .refund/rebate clearly stated to be a duty draw back deducted from the cost, of, sales. In the similar fashion the learned CIT(A) after recording grounds, contentions as well as the case law referred summarily rejected the appeals. As is evident the issue of rebate vis‑a‑vis turnover has neither been examined nor appreciated on merit. We, therefore, are constrained to observe that both the authorities below have dealt with the issue without referring to (a) its exact nature and accounting (b) appreciation of the claim of rebate having been deducted from the cost of sales (c) as to how it was to be treated part of the turnover. As against that considering the merit of the contentions on behalf of the appellant; we have found the judgment of the Lahore High Court mentioned supra applicable to the instant case.

6. Since authorities below have failed to discretely scrutinize ,nature and consequential account of claim of refund/rebate on account of duty draw back deducted from cost of sale, we are of the considered view that they proceeded arbitrarily to treat the same as compensatory rebate on exports. In the facts and circumstances discussed above the rectification carried out by the department, thus is not sustainable. However, we deem it proper to direct the Assessing Officer to do the needful to determine the factual position for the purposes of inclusion or exclusion from turnover to charge tax under section 80‑D.

7. The Appeal of the appellant succeeds in the manner indicated above.

C.M.A.80/Tax (Trib.) Appeals succeeded