2014 PLP 997 (PTD)

CH. ANWAAR UL HAQ (JUDICIAL MEMBER).

The instant appeal has been preferred by the department against order No. 362 dated 7-3-2011 passed by the Commissioner (Appeals), Inland Revenue, Gujranwala.

2. Brief facts leading to the instant appeal are that the taxpayer AOP, deriving income from manufacturing and supply to auto parts, filed statement under section 115(4) for tax year 2008 declaring supply of goods and export/indenting commission/export services and tax deducted thereupon was claimed as financial discharge of tax liability. Subsequently, it was transpired that an amount of Rs.13,01,435 for assessment year 2001-2002 and tax years 2003 to 2006, was received by the taxpayer as compensation on account of delayed disbursement of refund which was required to be declared by the taxpayer as "income from other sources". Accordingly, the assessment for the tax year 2008 was amended under section 122(1) and amount of Rs.13,01,435 was treated as concealed income. Being aggrieved, the taxpayer preferred appeal before the learned CIR(A) and asserted that compensation allowed by the department was a receipt of capital in nature and not chargeable to tax. To support his submissions, the learned AR relied upon the decision of this Tribunal reported as 2006 PTD (Trib.) 1800. The learned CIR(A) after considering the submissions of the learned AR and relying on the above decision of the Tribunal has deleted the addition made on account of compensation received on the delayed disbursement of refund.

3. The learned DR on behalf of Revenue submitted that the learned CIR(A) was not justified to delete the addition made by the assessing officer on account of concealed income which was the taxpayer has failed to declare in the return of income filed for tax year 2008. It is also submitted by the learned DR that the case-law relied upon by the AR before the CIR(A) was not relevant as the same relates to a banking company. It is further contended by the learned DR that in terms of section 39 of the Income Tax Ordinance, 2001, the taxpayer was liable to declare the compensation received at Rs.13,01,435 in the return of income. On the contrary, the learned AR supported the order passed by the learned CIR(A) and reiterated the submissions as made before him.

4. I have looked into the matter and after due consideration, I find that no exception can be taken to the treatment as accorded by the learned CIR(A) which is found to be reasonable in the ambient circumstances of the case which is also consistent with the statutory stipulation obtaining in law at the relevant time. The learned Tribunal in the case reported as 2006 PTD (Trib) 1800, has held that "when compensation admittedly pertains to refund due to the assessee and not disbursed in time by the department, such compensation is without doubt capital in nature and hence not taxable". Furthermore, the provisions of section 39(c) of the Income Tax Ordinance, 2001, wherein it was provided that additional payment on delayed refund under any tax law come under the purview of "income from other sources", is not applicable to the period under reference i.e. tax year 2008, as the said provision of law was brought on the statute through Finance Act, 2012. Under the circumstances, I find no reason to disturb the order passed by the learned CIR (A) which is hereby maintained.

5. Appeal of the department is dismissed being filed without any merit or substance. CMA/19/Tax(Trib.) Appeal dismissed.