2012 PLP (Trib (PTD)

??????????? Through this appeal, the impugned order of the learned CIR (A) dated 22-7-2011 is objected on the following Grounds:-- "(2)????? That the Commissioner Inland Revenue (Appeals) has not only erred but also misdirected himself in law and on facts by confirming and treating "Dry Lease Charges" received by the appellant from lease of Air Crafts as Royalty on the basis of arbitrary and incorrect interpretation and treating "Air Crafts" as commercial equipments by incorrectly applying the provision of Clause 4(a) of Article XII of Double Taxation Agreement between Islamic Republic of Pakistan and Government of Canada. (3)??????? That the Air Crafts leased out by the appellant having been termed and defined as "machinery" in normal flying order under the First Schedule of Pakistan Custom Tariff and Custom Act, 1969, the Commissioner Inland Revenue (Appeals) has not only erred but also misdirected himself by confirming the order and treating air crafts as equipments with an arbitrary approach and with the intention to tax lease charges as Royalty although the concept and intention defined in Article XII of Double Taxation Agreement is totally different. The entire treatment accorded on the basis of incorrect and misinterpretation of provision of law and the tax levied and confirmed in appeal on the basis thereof is liable to be deleted and the order is liable to be cancelled and annulled. (4)??????? The order passed by the Commissioner Inland Revenue (Appeals) having been based on incorrect interpretation and irrelevant decisions of India, which are not applicable in Pakistan, the Commissioner Inland Revenue (Appeals) has erred in confirming the application of Clause 4(a) of Article XII of DTA with Canada in the case of the appellant. (5)??????? That the Commissioner Inland Revenue (Appeals) has erred in confirming the treatment accorded by the Assessing Officer whereby lease rental was treated as royalty for levy of the tax @ 20% under Article XII of Double Taxation Agreement, thereby confirming the tax liability at Rs.204,555,152. ??????????? The? tax? levied? and? confirmed? in? appeal? on? the? basis? of? incorrect? and? misdirected? interpretation? being? totally? un-justified is liable to be deleted and the order passed by both the Officers is not sustainable in law liable to be cancelled and annulled. (6)??????? That the Commissioner Inland Revenue (Appeals) has not only erred but also misdirected itself in law and facts by confirming lease rental paid to appellant as taxable in Pakistan in spite of the fact that appellant does not have Permanent Establishment in Pakistan." 2.???????? Briefly the, facts of the case as explained by the learned representatives for both the sides are that Messrs? Tawa Development INC, is a Company registered in Canada and had agreed to supply aircraft to Shaheen Air International Limited, on dry lease agreement. These aircrafts along with spare parts etc., are imported by Shaheen Air International Limited, maintenance of aircraft and replacement of parts are also carried out by the lessee. There is no dispute that appellant does not have any permanent establishment and is a non-resident in Pakistan. According to the learned Counsel for the appellant, various airlines in Pakistan such as Shaheen Air, Air Blue, Aero Asia and Bhoja Airline (Presently defunct) had been operating air transport business through leased aircraft on the basis of dry or wet lease agreements executed with airlines of various countries. During Hajj and other seasons, even Pakistan International Airline had obtained aircraft on wet or dry lease agreements. He has submitted that the lease charges or rentals received by these non-resident airlines is not taxable in Pakistan as it is taxed in their home country because they do not have any permanent establishment in Pakistan. He has contended that the Income Tax department being aware of the fact that lease rental was not taxable in Pakistan had initiated proceedings in the assessment year 1994-1995 with the intention of treating lease rental as royalty for use of industrial, commercial or scientific equipment under Article XII of Double Taxation agreement executed by Government of Pakistan with the countries of respective non-resident airline. As the provision of Article XII of DTA was not applicable, nor the payment of lease rental could be equated with royalty, the Income Tax department had subsequently withdrawn all the notices issued to non-resident airlines in this respect and had dropped the proceedings. He has submitted that, the department in order to resolve the disputed issue had entered into an agreement with non-resident airlines that 4% of lease rental will be attributed as taxable receipts in Pakistan on which Income Tax at the prevailing rate on Corporate cases will be applied and this was also accepted by the representative of all the non-resident airlines in Pakistan as a agreement. Accordingly, the assessment for the assessment years 1994-1995 till the tax year 2008 have been finalized on the above said agreement basis. Appeals filed by the non-resident airlines were also withdrawn and the assessments were accordingly rectified. ??????????? In this respect Photostat copies of assessment orders passed under section 62 of the repealed Income Tax Ordinance, 1979 for the assessment years 1994-1995 in the cases of Thai Airways, Messrs? Strongfield Aviation, Continental Airlines, Malaysian Airlines, Oasis Airlines, Messrs? Constellation International, Messrs? Tawa Development INC and other airlines have been placed before this bench wherein aircraft taken on lease by Shaheen Air International and lease rental paid were assessed in all the cases as business profit and not as royalty on the basis of mutual discussion and agreement with the then Regional Commissioner of Income Tax, Commissioner of Income Tax and Additional Commissioner with the representative of non-resident airlines in Pakistan. Accordingly to learned AR of the appellant the language and the terms of DTA agreements executed between various countries and the Government of Islamic Republic of Pakistan under Article XII of DTA are the same. He has placed Photostat copies of relevant portion of the Treaty before the bench. He has submitted that although the terms of agreement entered into by the representative of the airlines with the above Officers is not readily available as it was recorded in 1994-1995 during course of assessment on the order sheet, but can be traced out by the department from their record as they are the custodian of taxpayer record. Learned counsel in this regard has referred to the contents of assessment order of these non-resident airlines which clearly proves that the proceedings initiated for treating lease rental/charges as royalty under Para 4(a) of Article XII of DTA had been withdrawn by the concerned Officer and has also referred to the directions and approval obtained from the concerned Commissioner and Additional Commissioner of Income Tax for finalizing the assessment by treating 4% of lease rental as Income attributable to Pakistan on which Income Tax @ 35% was levied. According to the learned counsel, the agreement entered into and which was subsequently followed by the department and accepted by the non-resident airlines has become a binding precedent which should have to be followed as there is no change in law or DTA in this respect. He has referred to the observation of the learned CIR(A) on Page 24 of the impugned order and has contended that the learned CIR(A) has intentionally ignored and overlooked the finding of the Taxation Officer as incorporated in all the assessment orders for the assessment years 1994-95 onward wherein the Taxation Officer had withdrawn the proceedings initiated under Article XII and the assessments on the agreed basis were finalized. He has contended that the observation of learned CIR(A) is totally incorrect and misdirected. Accordingly to learned counsel the agreement has sanctity under the law and should have to be followed until there is no change in law. He as in this respect referred the decision in I.T.As. Nos.1232 to 1237/KB of 1998-99 assessment years 1989-90? to 1994-95? dated? 25-5-2004 in the case of Beecham Pakistan (Pvt.) Limited which has been upheld by the Hon'ble High Court of Sindh in I.T.Cs. Nos.127 to 132 of 2005 vide order dated 28-9-2005. 3.???????? In this respect the learned counsel of the appellant has also referred to a case of another non-resident airline R.A. Romavia (Romania) C/o Aero Asia International (Pvt.) Limited where in tax liability was computed by treating 4% of lease rental as income attributable to Pakistan on which appropriate tax rate was applied. He has argued that as in the case of Pakistan International Airlines Corporation, lease rental paid for Aircraft obtained on lease rental, income was assessed between 2.76% to 2.58% only, whereas in the case of other non-resident Messrs? R. A. Romania income was computed by treating 4% of lease rental due to this discriminatory treatment, the said Messrs? R. A. Romania C/o. Aero Asia had applied be for the Taxation Officer for rectification under section 156, but the application was rejected. In appeal, the Commissioner of Income Tax (Appeals Zone II), Karachi as per order dated 2-1-2006 had directed to recompute the income on the same basis as in the case of PIA. This order of the learned CIT(A) was confirmed by this Tribunal, and also by the Hon'ble High Court of Sindh, Karachi through consolidated orders dated 20-10-2007 and 23-10-2008 in I.T.As. No's.384 to 387/KB/2006 (Assessment years 1993-1994, 1996-1997, to 1998-1999) and I.T.R.As. No's 209 to 215 of 2008 respectively. 4.???????? Learned counsel of the appellant has argued that the treatment accorded by the Taxation Officer and confirmed by learned CIR(A) is totally unjustified and misdirected as neither the provision of Para 4(a) of Article XII of DTA in the present case with Canada is applicable nor the lease rentals falls within definition of royalty, nor aircraft can be treated as industrial or commercial equipments. He has in this respect referred? to? various? dictionaries,? wherein? the? word 'equipment'? has? been? defined:-- ??????????? -As per Black's Law Dictionam Sixth Edition, the word 'equipment' has been defined on Page 537 as under:- ??????????? Equipment.?????? Furnishings, or outfit for the required purposes. Whatever is needed in ??????????? Equipping.??????? the articles comprised in an outfit; equipage. ??????????? Under U.C.C., goods include "equipment" if they are used or bought for use primarily in business (including farming or a profession) or by a debtor who is a non-profit organization or a governmental subdivision or agency or if the goods are not included in the definitions of inventory, farm products or consumer goods. ??????????? -As per Words and Phrases. Volume 4A: ??????????? `Equipment' in common parlance means equipage needed for efficient action or service like "equipping a ship for voyage or "equipping a boat for an expedition" or equipping an automobile with rectifier used in charging battery of automobile and electric current. ??????????? -As per Corpus Juris Secundum (Volume 30 - Page 755) ??????????? 'Equipment' has been held to include barge, necessary for navigating a boat - (boat equipped with a barge) car control device attached to a subway car; fishing nets on a fishing boat (fishing boat equipped with fishing nets) or furnishing of a theater. ??????????? Whereas barges for navigating boats; car control devices; fishing nets; and furnishings are equipment. In our humbly opinion, the word 'equipment' means, equipages, furnishings, fittings, appurtenances, appliances, apparatus, gadgets, outfit etc. ??????????? According to learned counsel, in the case of Muhammad Fayyaz v. Central Excise Authorities reported as 1989 CLC 1642 it has been held that "The word 'equipment' is also used in a number of senses. First, as material or articles used in equipping something.? It is also used in other senses, but they need not be discussed here. According to Webster's International Dictionary (unabridged), Second Edition, the word 'equipment' means material or articles used in equipment, as for an expedition; the articles comprised in a outfit as furnishings or apparatus; equipage; as laboratory equipment. In Industry the physical facilities available for production, including the buildings, machines, tools etc." According to Shorter Oxford English Dictionary, this word means travelling etc. According to Funk and Wagnalls Encyclopedic Dictionary, this word is defined as 'Materials with which a person or organization is provided for some special purpose or service. The rolling stock and apparatus for operating a rail, road or other transportation system. "According to Black's Law Dictionary, it means 'Furnishings, or outfit for the required purposes. In a legacy to be applied towards rebuilding and equipment of a hospital, it was held 'equipment' meant everything required to convert an empty building into a hospital. An exceedingly elastic term, the meaning of which depends upon contest." ??????????? In Corpus Juris Secundum, Volume 30, Pages 754 and 755, the word Equipment has been defined as "the meaning depends on the context on which it appears. It is variously defined as meaning, the act of equipping or fitting, or the state of being equipped, as for a voyage or an expedition; the act or process of equipping with all needful supplies for any special services; anything used in equipping; the collective designation for the articles comprising an outfit, whatever is used in equipping; the combination of all the elements necessary to carry out a project; whatever constitutes an outfit for some special purpose or service; that which is needful or necessary, as for the operation of a plant; the outfit, that is, tools, machinery, implements, appliances, etc. necessary to enable one to do the work involved; whatever is needed for efficient action or service; and it has been said that, although in its plain, ordinary, and usual application the word may embrace all the appliance and furnishings necessary for, or usual in, the operation of an establishment or institution, it may nevertheless be restricted in its application, by the use of other words in the enactment or instrument in which it occurs. ??????????? While some authorities, in defining "equipment" restrict the import of the term to furniture, furnishings, and portable property, other give it a broader meaning, extending the term to include such articles or improvements as, when installed, become part of the building, having clearly in mind the subject which is being equipped; but the term is usually applied to movable and not to immovable property. ??????????? In the subjoined notes examples are given of what under particular circumstances, the term has been held to include, and what, under other circumstances, it has been held not to include. ??????????? As applied in transportation, more fully discussed in Railroads 193, it means the necessary adjuncts of a railway; and, as applied to automobiles, such additions as are made to complete the vehicle for the safety and convenience of the owner. 5.???????? The learned counsel has argued that the context in which the word equipment has been defined is much narrower than the word machine and equipment has not been treated nor defined as machinery but as an ancillary part of to assets in the used of machinery. Accordingly to learned counsel the aircraft is a machine which may be a conjoined status of various equipments joint together and placed in one basket, but aircraft is not equipment as defined in various legal dictionaries. He has also referred to chapter 88 of Pakistan Custom Tariff (12th addition) wherein the classification of aircraft in first schedule has been defined as machine in normal flying order and exclude there from equipment other than permanent fitted items being part of machine. He has contended that even the Aircraft Act 1934 defines the Aircraft as, "Aircraft means any machine which can derive support in the atmosphere from reactions of the air (other than reactions of the air against the earth surface) and includes balloons, whether fixed or free, airships, kites, gliders and flying machines." ??????????? He has in this respect also referred to a decision of the Indian Bombay High Court reported as CIT v. Kirloskar Oil Engines (1998) 230 ITR 88 (Bom), wherein the word aircraft has been defined as an independent machine and not equipment. Similarly in Chambers Science and Technology Dictionary, the word aircraft has been described only a mechanically driver heavier-than-air flying machine with wings of fixed or variable sweep angle. It has not been described to mean gliders, balloons and other flying machines. According to him is, therefore, not correct to say that aircraft which are heavier-than-air are not aircrafts but are aero-engines. All aircrafts whether lighter-than-air or heavier-than-air, are aircrafts. No aircraft can ever be termed as an aero-engine because an aero-engine is not an aircraft or aero plane at all. It is only the power unit of an aircraft. It is thus clear from the above discussion that aircraft does not mean only crafts like balloons, airships, helicopters but also means aircrafts heavier-than-air. 6.???????? Referring back to the treatment accorded by the Taxation Officer, the learned counsel has argued that reliance placed by the Taxation Officer on the decisions of Appellate Tribunal of India are not only totally misdirected but also misplaced as neither of the decisions are relevant nor applicable to the facts of appellant case. He has contend that, the submissions made before both the Officers were summarily rejected on the basis of incorrect insinuations without appreciating that the law in India is totally different and the decisions of Appellate Tribunal of India referred to by the Taxation Officer are based on Double Taxation Agreement of India with Cyprus wherein, ships are included in definition of equipment for treating lease charges on bare ships as royalty, but it does not include aircraft in the said Clause of DTA in India with Cyprus. Thus, reliance placed by the Taxation Officer is not only misdirected but also misplaced and misleading and not applicable in Pakistan as in the DTA executed in Pakistan with Canada, Thai Land, Belgium, Malaysia and other countries, the word equipment has neither been defined nor correlated to include ships and aircraft. According to him even in India the word aircraft is not included in DTA with Cyprus and as both the decisions are in respect of non-resident Cyprus lesser of ships and sea going vessels to lessees of India, neither of the decisions are applicable to appellant case in Pakistan. 7.???????? According to the learned counsel for appellant, in India, the relevant provision of law and exemption granted on lease rentals paid on Aircrafts leased from foreign companies are now taxable in India, but whether the lease rental is assessable as business profit or royalty is still disputed on the basis of DTA agreement in India. Even, tax treaties executed by India with some countries, defines royalties to include payments for the use of or right to use ICS Equipments as royalties. However, in tax treaties executed with countries such as Sweden, Israel, the Netherlands, Greece, Belgium, Ireland and other, lease rentals paid for use or right to use equipments has been excluded from the term royalty. But, as the key requirement for taxation of business profit is the creation of permanent establishment, the issue whether lease rental are taxable as royalty is under debate and is being examined. The legal experts in India have opined that law should be amended excluding lease rental from the term royalty with suitable amendment in DTA. As treaty executed in India, especially with Cyprus defines royalty to include lease rental for equipment and the decision of Tribunal in India is still pending before High Court with expectation of change in law. Thus, both the decisions are not applicable in Pakistan as law in India is different and both the decisions revolve around law applicable in India and its interpretations in accordance to Indian Law. 8.???????? He has argued that reliance placed by the Taxation Officer on the opinion of various authors of US and UN model convention are also misplaced as the opinion of various authors can not be termed as provision of law. He has also referred to the extract obtained on googol research from which he has asserted that US model convention usually treat lease rental as business profit with the exception of China and India where leasing income is treated as royalty and tax accordingly at limited rate. 1977 OECD model Income Tax had treated it as royalty, but later on the 1992 OECD model treat had removed leasing income entirely from Article XII deleting the word equipment and assigned it to Article VII. He has vehemently argued that the entire assessment framed by the Taxation Officer is based on the treatment accorded as per law in India and as appeared on googol research. Similarly, reference to a Spanish case-law referred to by the learned CIR(A) in the impugned order according to the learned counsel is not relevant as it was neither referred by the Taxation Officer during the appellate hearing, nor any opportunity to rebut the same was provided to the appellant. He has contended that this case also revolves around its facts and specific provision of law as applicable in Spain and cannot be commented without going through the correct contents of the said decision. Moreover, the issue involved was in respect of withholding of tax and the DTA agreement between Spain and Norway which in no way is relevant to the present case. 9.???????? He has pleaded that Aircraft is a machine and not equipment hence Article XII of DTA with Canada is not applicable. According to learned counsel both the Officers have totally misguided and misdirected themselves by applying incorrect provision of law and placing reliance on irrelevant decision of Indian jurisdiction which is based on DTA executed in India and is neither applicable nor relevant in Pakistan. He has pleaded to cancel the orders passed by the officer below whereby lease rental was incorrectly assessed as royalty by treating aircraft as equipment. According to the learned Counsel although lease rental is not assessable in Pakistan, but his client has no objection if the basis of income declared on the basis of a settled precedent is accepted. 10.?????? On the other hand learned D.R. has supported the impugned order and is of the view that the Taxation Officer has correctly invoked the provision of Para 4(a) of Article XII of DTA agreement with Canada as aircraft is a equipment and not machine. He has in this respect adopted the view points of the officers below in their respective order. According to him both the officer have discussed all the issues in detail which should have to be upheld. 11.?????? We have heard the learned representatives from both the sides and have also pursued the impugned order of learned CIR(A), the order passed by the Taxation Officer, decisions referred, the copies of relevant portion defining equipment and other relevant available record of the case. We are of the view that the main dispute in this case is whether lease charges paid to Tawa Development INC, Canada by Shaheen Air International Limited Karachi is assessable to tax in Pakistan. Although there is no dispute that non-resident Company does not have a permanent establishment in Pakistan. In this respect it is to be examined that whether "aircraft" was correctly treated as industrial, commercial or scientific "equipment" by the Taxation Officer in order to treat lease charges of aircraft as "Royalty" for levy of tax @ 20% as per Para 4(a) of Article XII of Double Taxation agreement executed between Islamic Republic of Pakistan and Canada as per Notification S.R.O. 71(I)/78 dated 14th January, 1978. Relevant Para 4(a) is reproduced hereunder:-- "4.??????? The term "royalties" as used in DTA with Canada means: (a)??????? payments of any kind received as a consideration for the use of or the right to use, any copyright, patent, trademark, design or model, plan, secret formula or process, or for the use of or the right to use, industrial, commercial or scientific equipment and includes payments of any kind in respect of motion picture films and works on film or videotape for use in connection with television." 12.?????? The issue which is to be decided is whether "aircraft" is equipment or a machine within the meaning of industrial, commercial equipment. We have perused the meaning of word equipment as defined in various legal dictionaries and decisions wherein equipment has been defined in a narrower sense as ancillary parts or components for the purpose of equipage for efficient operation and running of machine. Thus, in our opinion aircraft is a collection of various components joined together and placed in a single basket for efficient operation and capable of independent use and can be described as a flying machine with wings of fixed or variable sweep angle. We are of the view that the aircraft is a machine capable of flight or flying. In this respect we may also refer to a decision of the Indian jurisdiction of the Bombay High Court reported as (1998) 230 ITR 88, wherein the word aircraft has been defined very elaborately in the following words:-- ??????????? "Aircraft and aero-engines are two quite different and distinct machineries. An aircraft is a machine capable of flight, whereas an aero-engine is only the power unit of an aircraft. An aero-engine, therefore, cannot be termed as an aircraft, to put it differently, an aircraft can never be described as an aero-engine even if it is heavier-than-air. An aircraft which is heavier-than-air is also an aircraft. There is no basis or jurisdiction for the contention of the assessees that aircraft means only machines like helicopter, glider or balloon capable of flight in the air and not aircrafts which were heavier-than-air." ??????????? Reference in this respect may be made to the definition of aircraft in the Aircraft Act, 1934, which says, "Aircraft means any machine which can derive support in the atmosphere from reactions of the air (other than reactions of the air against the earths surface) and includes balloons, whether fixed or free, airships, kites, gliders and flying machines." ??????????? In fact, aircraft is a word of wide import. It includes any mechanically driven flying machine. As per the Encyclopedia Britannica (macropaedia) Vol.I: ??????????? In Chambers Science and Technology Dictionary, the word aircraft has been described as a mechanically driver heavier-than air flying machine with wings of fixed or variable sweep angle. It has not been described to mean gliders, balloons and other flying machines. Similarly, in the definition of aircraft in the Aircraft Act, 1934, balloons, airships, kites, gliders and flying machines have been added by specific inclusion. It is, therefore, not correct to say that aircraft which are heavier-than-air are not aircrafts but are aero-engines. All aircrafts whether lighter-than-air or heavier-than-air, are aircrafts. No aircraft can ever be termed as an aero-engine because an aero-engine is not an aircraft or aero plane at all. It is only the power unit of an aircraft. It is thus clear from the above discussion that aircraft does not mean only crafts like balloons, airships, helicopters but also means aircrafts heavier-than-air." 13.?????? From the above discussion it is clear that aircraft is a machine and not equipment. In this respect Pakistan Custom Tariff has been referred where in the classification as per Chapter

88. As per sub-heading notes, aircraft has been defined and assessed as, "machine in normal flying order" and excludes there from equipment other than permanent fitted items of equipments being part of machine. Thus, even for the purpose of assessment for levy of Custom Duty under the Custom Act, 1969, aircraft has been treated as a machine in normal flying order and not as equipment. We are fully convinced that aircraft is an independent machine and as it is neither an industrial nor commercial equipment within the meaning of Para 4(a) of Article XII of DTA with Canada or any other country, hence, lease charges paid to non-resident appellant can not be treated for the purpose of levy of tax as Royalty. Accordingly, tax levied by the Taxation Officer by invoking the provision of Article XII is not applicable. We therefore find no justification for tax levied under the said provision which is therefore deleted and? order in this respect by both the officers below are annulled. 14.?????? As per the, amended order, the Taxation Officer has objected to payment of tax @ 4%. According to him other non-resident lessor of aircraft the Air Blue Airline has paid Income Tax @ 35% on lease charges. In this respect it is explained by the learned counsel for the appellant that the Income Tax Return and Annexure filed by the non-resident lessor has not been examined correctly. The non-resident lessor has paid tax @ 35% and not @ 4% incorrectly assumed by the Taxation Officer. He has explained that as per the terms of dry lease agreement, since Messrs? Shaheen Air International Limited had agreed to pay the tax liability of non-resident lessor, hence, as per the terms of agreement with the then Regional Commissioner of Income Tax and also with Commissioner of Income Tax, Companies Zone-V, Karachi whereby 4% of lease charges were treated as Income attributed to Pakistan for tax on tax purpose and thereafter tax @ 35% was paid on Income of Rs.97,407,215 declared in Income Tax Return for tax year 2009. In order to justify his contention, he has also produced Photostat copy of Income Tax Return along with computation of Income and Tax liability filed for tax year 2009 which is strictly based on the following agreed basis. 15.?????? We have also perused various Articles of Double Taxation Agreement with Canada and other Countries executed in Pakistan and are of the view that these terms are identical to each other and there is not much difference. We agree with the contention of learned counsel that the terms and conditions of DTA executed in India cannot be applied in Pakistan nor comparable. Hence the decisions relied upon by the Taxation Officer are not applicable to the facts of the instant appeal before us. Moreover, even the opinions of various authors referred to by the Taxation Officer are not applicable in Pakistan, hence, does not support the contention of Taxation Officer for invoking Article XII of DTA agreement. Moreover, there is no dispute that the/non-resident appellant does not have any permanent establishment in Pakistan, hence, as per the terms of DTA, lease charges are not taxable in Pakistan. As Income Tax on lease charges paid to non-resident has also been paid by lessee M/s. Shaheen Air International Limited in Pakistan, hence, to this extend, Income of non-resident lessor is taxable in Pakistan. For this reason, the Regional Commissioner of Income Tax and the Commissioner of Income Tax, Companies-V, Karachi had correctly worked out a basis for levy of tax in Pakistan for the purpose of computing income for tax on tax basis and on such income, Income Tax @ 35% was correctly levied and paid in Pakistan. 16.?????? We have also examined the assessment orders of various other non-resident lesser for assessment years 1994-1995 onward wherein Income and Tax liability has been computed on the same basis and pattern for computing income attributable to Pakistan for tax on tax basis. After discussion with the learned DR and the learned counsel for the appellant we are fully convinced that the non-resident lessor has correctly computed the tax liability which is accordingly restored. Since we have already held that payment of Royalty is totally different and does not include lease charges paid to non-resident lessor of aircraft, the provision of Article XII of DTA with Canada is not applicable, both the orders passed by the two Officer are annulled and the Taxation Officer is directed to accept the Income and Tax liability as per Income Tax Return filed for the Tax Year 2009. ??????????? The appeal is allowed. C.M.A./102/Tax(Trib.)???????????????????????????????????????????????????????????? Appeal accepted.