1995 PLP (Trib (PTD)

(iii) The income should represent cash reward. (iv) The reward should be for outstanding performance of duties. (v) The reward should be in pursuance of any Rules made for the grant and regulation of such rewards. The first four conditions as specified above are fulfilled in the case of the appellant but the fifth condition that reward should have been in -pursuance of any rules made for grant of such reward is not-applicable in the case of the appellant. The appellant has relied on that payment is covered by F.R. 46(b). Copies of Finance Division's Letters No.D 721-84/75-F:16 (4)R1/75, dated 1-9-1975 and No.44(5)-R2(RWP)/62, dated.24th October, 1962 are also perused and it is evident from these letters that the honorarium or reward can be granted for any special work of an occasional and intermittent character. The Rules are to be framed for granting such reward or honorarium. These notifications though clearly establish that rules can be framed for granting such honorarium and reward as is claimed by the-appellant as being exempt but there are no such definite rules or regulations, which cover the grant of such honorarium or reward. The appellant's A.R. was specifically asked for providing any such rules or regulations which have not been complied with. The honorarium received of Rs.15,000 is not exempt from levy of income-tax as no specific and definite rules or regulations which cover such grant of reward or honorarium have been framed. The appeal is dismissed. The I.T.O.'s order maintained."

6. Mr. Muhammad Khalid, Advocate, the learned counsel of the assessed, contended that the assessee received honorarium/reward in lieu of special work done by him for National Taxation Reforms 'Commission. According to the learned counsel of the assessee the honorarium received by the assessee was covered by clauses (41) and (41-A) of the Second Schedule of the Income Tax Ordinance, 1979. According to the learned counsel of the assessee the learned AA.C has refused the claim of exemption on the ground that under clause (41-A) of the Second Schedule of Income Tax Ordinance an assessee should fulfil 5 conditions, referred to above in the observations of the learned A.A.C. The learned counsel of the assessee contended that the learned A.A.C. has observed that assessed does not fulfil the last condition that the reward should be in pursuance of any rules made for the grant and regulation of such rewards. But according to the learned A.A.C. there are no rules or regulation to cover such reward. According to the learned A.R. of the assessee this reward is covered by F.R. 46(b) of the Financial Rules, hence, no further rules are required to be framed.

7. The learned D.R. on the other hand frankly conceded that honorarium/reward received by the assessee is exempt from income-tax.

8. I have carefully considered the facts of the case and listened to the arguments advanced by the learned counsel of the assessee as well as the learned D.R. and also perused the record. The admitted facts in this case are that the assessee was a Regional Commissioner of Income Tax Department in the year under consideration, however, his services were requisitioned by the National Taxation Reforms Commission in the capacity of an expert. The duties performed by the assessee in National Taxation Reforms Commission were in addition to his duties as Regional Commissioner of Income Tax. In recognition of services performed by the assessee the National Taxation Reforms Commission gave him a cash reward of Rs.15,000 vide Letter No. Nil, dated 11-1-1987 from Chairman, National Taxation Reforms Commission. In the assessment order this amount has been mentioned as reward and at some places as honorarium. But judging from the character of receipts there is no difference between honorarium and reward for the purposes of disposal of this appeal. The I.T.O. as indicated above has refused the claim of exemption simply on the ground that C.B.R. has turned down the request of the appellant for exemption. But the record produced before me does not contain the copy of C.B.R.'s Letter C.No.I.T.JI.I.(22)/85, dated 16-8-1987. Even if it were produced by the learned D.R. it could not be relied because the Honourable Supreme Court of Pakistan have recently held that C.B.R. is no authority to interpret law. (1993 PTD 793).

9. The learned A.A.C. in his order has not relied on the instructions of the CBR but has simply contended that assessee's case is not covered by the clauses (41) and (41-A) of the Second Schedule only because that reward received by the assessee was not in pursuance of any rules made for the grant and regulation of such rewards. At this stage it is pertinent to reproduce the provisions of clauses (41) and- (41-A) of the Second Schedule of the Income Tax Ordinance, 1979. These are as under: "(41) Any income of a person, being an employee of the Federal Government or a Provincial Government, representing cash reward paid to him for any outstanding performance of duties in pursuance of any rules made for the grant and regulation of such rewards. (41-A) Any income of a person, being an employee of the Federal Government or a Provincial Government, representing honorarium paid to him in pursuance of any rules made for the grant and regulation of such honorarium:

10. As mentioned above the assessee was granted reward for outstanding services performed by him with the National Taxation Reforms Commission. This reward/honorarium is covered by F.R. 46(b) Finance Letter No.F-1(3) F&A/85-2434, dated 30-12-1986. The relevant portions from this letter are as' under:

"

1. In accordance with provisions of F.R.46 (b), I am directed to convey the sanction of the President to grant the honorarium of Rs.1,85,000 (Rupees one hundred eighty rive thousand only) to certain officers of Taxation Services and Private individuals mentioned in the Annexure to this letter for completing a number of studies assigned to them by the National Taxation Reforms Commission.

2. It is certified that the work for which honorarium has been granted was important in nature and so labourious and of such special type as to justify the grant of special reward. It 'is also certified that the provisions of F.R. 11 and this Division' C.M. No.D.721-8.4/75-F, 16(4)RI/75, dated 1-9-1975 have been considered while sanctioning honorarium mentioned above.

3. The expenditure of Rs.1,85,000 (Rupees one hundred eighty-five thousand only) will be met from the . Demand No.42

Other Expenditure of Finance Division of the Current Financial year 1986-87 and is debatable to the head of account given below:

000-General Administration. 020-Fiscal Administration. 016-General Commissions and Enquiries. 030-Other Allowances. 033-Honorarium."

11. The reward was sanctioned by the Government and other persons. The learned counsel of the assessee has also produced copies of Letter No.F.4(5)-R (RWP)/62, dated 24-10-1962 and Letter No.D.721-R4/75 F.16(4)RI/75, dated 1-9-1975. These two letters clearly indicate that assessee's case is covered not only by F.R.46(b) but also by F.R.9(9). The learned A.A.C. has mentioned that reward ranking for exemption should be available in special work of an occasional and intermittent character and reward should be given in pursuance of some rules. The assessee's case is covered by all these conditions. The reward is for work of occasional and intermittent character because the assessee has not received this reward every year and regularly. It was a one time exercise and in pursuance of which the reward was given to the assessee for the duty performed by him from the National Taxation Reforms Commission. The learned AA-.C observed that .for the above reward no rules and regulations have been made but the letter from National Taxation Reforms Commission vide No. F.1(3)-F&A/85-2434, dated 30-12-1986 clearly mentions that reward is being given under Rule F.R.46(b). I fail to understand why the learned AA.C has observed that for this reward no rules have been made. Actually no reward can be sanctioned by Government to any person unless it is covered by some rules. Perhaps the learned A.A.C. is under the mistaken notion that reward given to the assessee should be covered by rules as framed by the C.B.R. for granting of reward/honorarium every year to various officers of Income Tax Department for outstanding performance in Income Tax Department. But these rules are departmental rules which laid down an objective criteria for granting reward but the assessee's case is clearly on different footing and covered by F.R.46(b) and F.R.9(9). It is pertinent to mention here that the learned A.A.C. has not upheld the disallowance of exemption to the assessee on the basis of C.B.R.'s letter referred to above but r on the basis that assessee does not fulfil the conditions laid down in clauses (41) and (41-A) of the Second Schedule but as mentioned above the learned A.A.C. is not correct in disallowing the exemption to the assessee.

12. There is yet another aspect of the case that although the assessee has not agitated his case from this point of view, however, assessee's case is covered by clause (65) of the Second Schedule of the Income Tax Ordinance, 1979 where the assessee's services were requisitioned by the National Taxation Reforms Commission, there was no condition that his services will be rewarded on additional pay or allowance will be given to him for the work to be done by him. Reward or honorarium received by the assessee was a windfall. The reward received by the assessee was one time receipt and it is casual in nature viewed from any angle. Although the assessee has not claimed exemptions under clause (65) of the Second Schedule of the Income Tax Ordinance but while deciding the appeal any aspect of the case can be looked into by the ITAT. The assessee's case is also covered by C.B.R.'s Circular No.8 of 1982, dated 8-7-1982. Because of these reasons the claim of exemption made by the assessee is allowed.

13. The appeal of the assessee succeeds as above. M.B.A./102/T Appeal allowed.