1985 PLP (Trib (PTD)

FARHAT ALI KHAN (MEMBER).‑These two cross‑appeals are arising out of the consolidated order of learned Commissioner of Income‑tax (Appeals) recorded on 4th May, 1981 in Income‑tax Appeal No. C. I. T. Z‑1/108/ 80‑

81. The Department has attacked. finding of learned Commissioner of Income‑tax (Appeals) regarding entertainment duty amounting to Rs. 11,48,309 whereas the assessee has impugned certain add‑backs. We shall be referring to the assessee as "the appellant" and the Depart ment as "the respondent".

2. The brief facts giving rise to these cross‑appeals are that the appellant, a registered partnership firm, has been deriving its income from exhibition of films in a cinema house. For the assessment year 1977‑78 it disclosed in Part IV of the return an amount of Rs. 11,48,309 as entertainment duty payable to the Provincial Government. The Income- tax officer, however, treated aforesaid amount as trading receipt of the appellant and added it to its profit. He also disallowed some expenses regarding telephone, legal, entertainment, depreciation and interest allegedly paid by the appellant. The appellant felt aggrieved and went up in appeal. The Commissioner of Income‑tax (Appeals) by his impugned Order accepted the contention of the appellant that the declared receipts of Rs 11,48,309 were not the trading receipts ; hence ordered its deletion. He also recorded his order regarding expenses. This time both the Department as well as the appellant felt aggrieve4 and have come up in appeal. The Department in its appeal has challenged the finding of the Commissioner of Income‑tax (Appeals) in so far it relates to entertainment duty admittedly collected by the appellant and the appellant has attacked the findings of learned Commissioner of Income‑tax (Appeals) regarding add‑backs. Mr. 1,Muhammad Farid, the learned Departmental Represen tative appeared for, the Department and Mr. I. N. Pasha, the learned counsel appeared for the appellant, we will dispose of both appeals by this consolidated order.

3. Mr. Muhammad Farid, the learned Departmental Representative vehemently argued before us that the decision of this Tribunal reported as 1981 P T D (Trib.) 46 in the case of appellant itself regarding assessment year 1975‑76 was not, applicable. Elaborating his arguments further the learned Departmental Representative strenuously urged that point in issue regarding entertainment duty was very much concluded by several decisions of no less an authority than the Indian Supreme Court and sortie High Courts. In this connection Mr. Muhammad Farid firstly cited before us Chowrangi Sales Bureau (Private) Ltd. v. C. I. T. (1973) 87 I T R 547) Sine Lair Murray & Co. Private Ltd. v C. I. T (1974) 97 I T R 615) and All. H. C., C. I. v. Bijli Cotton Mills Ltd. (1970) 76 I T R 625).

4. Mr. I. N. Pasha., the earned counsel for the appellant, however, built up the superstructure of his argument on the authority of British Court of Appeal case Morley v. Tatter Sail (22 T C 51), which was reported as early as 1938. Turning to the Indian jurisdiction Mr. I.‑N. Pasha relied upon a decision of Indian Supreme Court C. I. T. v. Bijli Cotoon Mills Private Ltd. (1979) 116 I T R 60). Relying upon various Indian High Court decisions the learned counsel referred to U per India Sugar Exchange Ltd. v. C. I T., Allahabad High Court (196 1) 71 I T R 8). Sandersons & Morgans v. C. I. T. Cal. H. C. (1979) 75 I T R 433) and C. I. T. v. Karam Chand Thakur (19 79) 117 I T R 621). From Pakistani jurisdiction he invited our attention to Messrs N. T. v. Director Collector, Excise and Taxation (P L D 1976 Kar. 712), and, of course, the decision of this Tribunal reported in 1981 P T D (Trib.) 46 which has been subsequently followed in I. T. A. No 889/KB of 1979‑80, dated 22nd December, 1980 in the case of the appellant itself for assessment year 1976‑

77. Regarding add‑back from interest the learned counsel cited C. I. T. v. Messrs Adamjee do Sons (1981 P T D 390). On the basis of these authorities Mr. I. N. Pasha., contended that the count of entertainment duty was a liability and could not be treated as trading receipt of the appellant. He, therefore, supported the impugned order. Regarding telephone and legal expenses, he did 'not press his claim. However, regarding entertainment, depreciation and interest. he made his submis sions which we would revert to when we deal with these items.

5. We have heard both the learned counsel for the appellant as well as the learned Departmental Representative at length and have also perused both the assessment as well as impugned orders and. have also gone through the cases cited at Bar. It appears that under the West Pakistan Entertain ment Duty Act, 1958, it was the legal obligation of the appellant to collect entertainment duty from every cinema‑Boer and then pay it to Provincial Government. It further appears that the appellant went on discharging its legal obligation under West Pakistan Entertainment Duty Act, till the year 1971 when the Cantonment Boards issued notices to the owners of all cinema houses directing them not to make any payment of entertainment duty to the Provincial Government as they were entitled to it. It appears that on receipt of this notice the appellant stopped paying entertainment duty to the Provincial Government. However, to the assessment years 1970‑71 to 1974‑75 it offered the collected amount of entertainment duty as its income for income‑tax purposes. The Prov incial Government took note of the non‑payment of entertainment duty and usual notices were issued to all cinema‑house owners for making payment, failing which coercive methods of recovery were threatend to be adopted. The appellant alongwith other cinema house owners, after receipt of this notice, invoked the extraordinary jurisdiction of the High Court and filed several Constitutional Petitions in Karachi High Court which were disposed of by a learned Division Beech vide a consolidated order which has been reported as Messrs Nishat Talkies and another ‑ The Director/Collector, Excise and Taxation, K and another (P L D 1976 Kar. 712). From perusal of this decision it appears that the appellant alongwith other cinema‑house owners had challenged the very competence of Provincial Government to collect and impose entertainment duty under the West Pakistan Entertainment Duty Act, on the ground that such cinema‑houses were located within the centrally administered areas which were governed by Cantonment Act. The learned Division Bench, however, dismissed the aforesaid petitions. It has been stated at Bar that an appeal has been filed and is presently pending in Supreme Court.

6. Be it as it may, in assessment year 1975‑76 the appellant, however, did not offer the entertainment duty realised by it for income‑tax purposes. It followed the same practice in assessment years 1.976‑77 and 1977‑

78. Let us mention at this stage that in assessment year 1975‑76 the total amount of entertainment duty recovered by the appellant amounted to Rs. 3,86,354. whereas in assessment years 1976‑77 and 1977‑78 it went up to Rs. 4,34,381 and Rs. 3,27,578 respectively, the total of all this amount aggregated to Rs. 11,48,

309. As pointed out by us in assessment year 1975‑76 the amount involved was Rs. 3,86.354 which the appellant had shown on the left‑had side of its Balance Sheet as its liability. The Income‑tax Officer, however, issued notice under section 23(3) and sought appellant's explanation but was not convinced by it and treated aforesaid amount of Rs 3,86,354 as surplus obtained during normal trading activity. He added aforesaid amount to the taxable income of the appellant accord ingly. On appeal, the learned Appellate Assistant Commissioner declined to interfere with the order of assessment. The appellant still felt aggrieved and went up in second appeal. Before a learned Division Bench of this Tribunal reliance was placed by the appellant on Morlay's case, Bijli Cotton Mills case and Upper India Sugar Exchange Ltd. case (supra). It was contended before the learned Division Bench of the Tribunal that the quality and nature of receipt for Income‑tax purposes was fixed once for all when it was received. It was further argued that the amount of entertainment duty received by the appellant was not in the nature of trading receipts in the hands of the appellant. The learned Division Bench upheld both the contentions of the appellant. Dealing with the above noted Submissions of the appellant and the arguments advanced by the learned Departmental Representative the learned Division Bench made the following observation : "A perusal of the assessment order clearly shows that the assessee did not, unlike the preceding year, offered for tax any trading receipts under the head entertainment duty surplus'. Admittedly the amount of Rs. 3,86,351 was explicitly recorded on the liability side of the balance sheet as provincial Government Entertainment Duty. Despite having shown it as a liability in the balance sheet, the assessee, as per assessment order, had declared it in the return as income claimed, to be exempt'. It would, however, not make any difference inasmuch as, as rightly pleaded by the counsel for the appellant, the quality and nature of a receipt for Income‑tax purpose is fixed once and for all when the same is received. From the facts narrated before us as well as elaborately stated in the judgment of the Sind High Court referred to above, we have, not the least hesitati6n in holding that the amount on question was not in the nature of the trading receipts in the hands of the appell ant above‑named The appellant was under a legal obligation to collect entertainment duty from cinema goers for witnessing a show and pass it on to the Provincial Government. The amount of entertainment duty collected by the appellant but not paid to the 'Provincial Government therefore, in our opinion. at no point of time ceased to be a liability, or alternatively, did not any time become a trading profits or a trading receipts of the firm."

7. From persual of the order recorded in I. T. A. No. 889/K.B of 1979‑80 regarding assessment year 1976‑77, which was recorded in depart mental appeal filed against appellant, aforesaid decision of the learned Division Bench was followed. The learned Commissioner of Income‑tax (Appeals) has also based' his impugned finding on the authority of the same decision of this Tribunal, Mr. M . . . ... F.... , the learned Departmental Representative, however, has canvassed before us‑ that in view of the cases relied upon by him; the appellant should offer the en ire amount collected by it , as entertainment duty for Income‑tax purposes . Let us now turn to the cases cited by learned Departmental Representative.

8. In Chowrangi s case (supra) the appellant, a private limited company, derived its income inter alia from auctioneering. In respect o sales effected by the appellant as auctioneer, it realised, in assessment year 1960‑61, Rs. 32,986 as Sales‑tax. This amount was credited separately in the books of the appellant under the "Sales‑tax Collection Account". The total balance standing to the credit of this account since 1946 swelled up to the tune of Rs. 2,71,

698. This sum was neither paid over to the Government exchequer' or was refunded to the persons from whom it was recover. In the earlier years those collections were not added to the appellants, income. However, in the relevant assessment year the Income- tax Officer was of the view that the said sum was in reality a portion of the sale-price itself because the Sales‑tax was not the liability of the purchasers of the goods but was the liability of the sellers of the goods only. Accordingly, he added Rs. 32,986 to the appellant's income. Having been dissatisfied the appellant filed an appeal. The learned Appellate Assistant Commissioner, relying upon Chowrangi Sales Bureau Ltd. v. State of West Bengal (1961) 12 S T C 535), however, ordered the deletion thereof. Finally, after passing through different forums the matter went to the anvil of Indian Supreme Court. Since the vires of the provisions of section 2(c) of a Bengal Act was involved, the Supreme Court issued notices to the Advocate‑General of West Bengal also and heard the arguments in details. Let us point out at this juncture that in the aforesaid Bengal Act the word "dealer" was used in Explanation 2 of section 2(c), which included an auctioneer also. Since entry 54 in List II of the VII Schedule of the Indian Constitution empowered the State Legislature to impose tax on "sale of goods and on advertisements", the precise point which finally came up before Indian Supreme Court was as to whether an auction sale conducted by an auc tioneer fell within the definition of sale of goods, as defined in the Sale of Goods Act. It was contended on behalf of the appellant that since an auctioneer was selling specifically chattel or goods for an un‑known or a disclosed principal and the buyer knew that the auctioneer was not the owner, the appellant could not be considered as seller, hence would not fall within the definition of "dealer". It was further urged that the definition of w rd "dealer" in Explanation 2 of section 2(c) of the Bengal Finance (Sal ‑tax) Act, 1941, was ultra vires in so far it included an auctioneer within, its fold. After reviewing entire case law the Supreme Court made the following observation : As such, the definition of the word 'dealer' in Explanation 2 of section 2(c) of the Bengal Act, cannot be deemed to be ultra vires the power of the Provincial or State Legislature on the ground that legislature purports to levy tax on a person who is neither a he seller nor a purchaser. It was, in our opinion, within the compet ence of the Provincial Legislature to include within the definition of the word 'dealer' an auctioneer who carries on the business of selling goodsandwhohas in the customary course of business authority to sell goods belonging to the principal. 9 Turning to the order of the Income‑tax authorities, the Bench of India Supreme Court comprising of three learned Judges made the following observation, which is very relevant for our purpose. Their Lords ship observed : "The amount realised by, the appellant from the purchasers included sales‑tax. The appellant, however, did not pay the amount of tales‑tax to the actual owner of the goods auctioned because the statutory liability for the payment of that Sales‑tax was that of the appellant. The appellant Company did not also deposit the amount realised by it as Sales‑tax in State Exchequer because it took the position that the statutory provision creating the liability upon it was not valid. As the appellant in its character as auctioneer received the amount of Sales‑tax, the amount, in our view, should be held to form part of its trading or business and trading receipts. The appellate would, of course, be entitled to claim deduct on of amount as and when it pays it to the state Government."

10. In Singlair Murray's case (supra) the appellant Company with its Head Office in Calcutta sold jute to certain buyers of Orissa which was ultimately to be used In Aodhra Pradesh. It charged Sales‑tax and showed it in his books as "Sales-tax buyers account to be paid to Orisa Govern ment." It also showed the recovered amount as liability for expenses in its Balance‑Sheet. Since aforesaid amount was not paid to Orissa Govern ment, the Income‑tax Officer wanted to add it to the income of the appellant. But it wars contended before the Income‑tax Officer that the Sales‑tax so realised from the purchaser did not constitute the trading receipt. The Income‑tax Officer, however, repelled the content on and treated it as appellant's income. On appeal, it was submitted that the appellant realised sales tax from its customer on the understanding that if ultimately no sales‑tax was exigible on those sales, the amount as collected would be refunded to the purchasers. On this basis it was further argued that the tax so collected did not form part of the sale‑price and the appellant did not acquire any beneficial interest in that amount. But' he learned Appellate Assistant Commissioner rejected the aforesaid submissions. However, on further appeal, the aforesaid submissions of the appellant found favour with the Tribunal but the question was ultimately referred to High Court and their Lordships held that if tax, which was validly exigible, was realised by a trader from its customer, and was then utilized in his business, the tax so realised could not but form part of the sale‑price. According to the High Court the tax was liable to be included in the trading receipt of the appellant. On further appeal to Supreme Court the reliance was placed by the appellant on Morley's case (supra). However, for the Department Chowrangi's case '(supra) was pressed into service and the learned Judges of Supreme Court followed Chowrangi's case (supra).

11. The third case relied upon by Mr. M ..F is the case of Bijli Cotton Mills (supra). In this case the respondent, a private limited company, supplied yarn to a Bombay customer. In the beginning of 1948 the Government imposed additional Excise Duty on yarn. The respondent apprehended that it might be required to pay additional Excise Duty on the yarn supplied to the Bombay party. It, therefore, called upon its customer to pay a sum of Rs. 74,361 towards additional levy that might be required to be paid to the Government. The customer paid this amount on the understanding that if aforesaid amount was not paid to the Govern ment, it would be refunded back. The respondent, however, persuaded the Government that no additional levy was payable by it but it refunded only Rs. 7,239 to its Bombay customer. The balance amount of Rs. 67,125 was shown in the capital reserve account of the respondent. The Income‑tax Officer treated aforesaid amount as income of the respondent. On appeal, learned Appellate Assistant Commissioner confirmed the order of Income‑tax Officer; but on further appeal the respondent was successful in persuading the Tribunal to hold that aforesaid amount of Rs. 67,125 was not its income. On a reference, it was contended before High Court, relying on Morley's case (supra), that the quality and nature of the receipt for Income‑tax purposes was fixed once and for all when it was received, hence Rs 67,125 did not constitute trading receipt of the respondent. It was further urged that, in any case, it was not an, income for assessment year 1951‑

52. The learned Division Bench of Allahabad High Court held that on the facts and circumstances of the case, the afore said sums 'as not a business receipt assessable to Income‑tax Tax the assessment, year 1951‑52.

12. Now turning to the authorities cited by Mr. I. N. Pasha, we would start with Morley's case (supra). In this case a firm of Blood Stock Auctioneer sold animals of its clients and after deducting their commission and other expenses from sale‑proceeds retained the money till its clients claimed it. Some of such amounts remained unclaimed for a number/of years. In its Balance Sheet this unclaimed amount was shown on the left hand side as the liability but on the right hand side it stood merged with other assets of the firm. There was no contract with the clients that such money would be kept by the firm in some separate or trust account. However, the firm retained the money on certain conditions regarding payments to its clients. This firm wad reconstituted several times And there always was a stipulation in the Articles of Partnership regarding payment of unclaimed money to its clients although such amount was distributed amongst its partners. Since the partners had received this unclaimed amount, the question arose whether 'it could be treated as income of partners. It was in this context that Greene M. R. made the following observation : "It seems to me that the quality and nature of a receipt for Income‑tax purposes is fixed once and for all when it is received. What the partners did in this cash, as I, have said, was to decide among them selves that what they had previously regarded as a liability of the firm they would not for practical reasons, regard as a liability but that does not mean that at that moment they received something, nor does it mean that at that moment they imprinted upon some existing asset a 'quality different from what it had possessed before. There was no existing asset at all at that time. All that they did, as I have already pointed out, was to write down a liability item in their Balance‑Sheet, how in the world by effecting that operation you can be said to have converted a sum received years and years ago into something which it informed us is a thing which, with all respect, passes my comprehension."

13. The next case relied upon by Mr. I. N. Pasha, the learned counsel for the appellant, is that of Bijli Cotton Mills case (supra). In this case the respondent a private company, charged one Anna per bundle of 10 Ibs. of yarn and two Annas per bale of cotton as Dharmada from every customer. The amount so received was shown in "Dharmada Account" to which all such receipts were credited and all payments made therefrom were debited. This Dharmada was compulsorily to be‑paid by every cus tomer and the respondent had discretion regarding the time and the manner in which it was to be spent. However, it was kept in separate bank account. The Indian Supreme Court after reviewing the entire case law, on the compulsory deductions called "Dharmada" or "Dharmada" or "Mehimai" in different regions of the country, held that the collecting agent of such ‑an amount was nothing but a conduit pipe or clearing house for passing on the amount to the objects of charity. It, therefore, affirmed the finding of the High Court that such amount was not liable to Income‑tax as it was not trading receipt of its recipient.

14. In the case of Upper India Sugar Exchange (supra) the assessee -company was running the business of forward transactions of its constituent members which were carried through the agency or approved Brokers. The assessee‑Company collected as per its by‑laws from its constituents, in addition to commission and Dharmada, an amount of Brokerage also at a certain rate which was to be paid to the concerned broker. This amount of brokerage was debited and credited in separate accounts. If any amount of brokerage remained unpaid in any year, it was carried over as a liability. In the assessment year 1959‑60, an amount of Rs. 4,042 remained surplus in brokerage account. The Income‑tax Officer added it to the income of the assessee. Company but ultimately on reference to High Court it was held that taxability of such unclaimed balances would depend on nature and character of initial receipts and since initially such amounts were not a trading receipt, therefore, they could not change their character while coming in the hands of the assessee‑Company.

15. In Karamchand Thapar's case (supra) under carriage charges were received by the assessee as an agent from its consumers. The assessee in some cases had to pay these charges to the colliery in addition to the price of coal supplied and sometime they remained with it. Relying upon Morley's case a learned Division Bench of Calcutta High Court held that such amount received by the assessee did not constitute trading receipts despite the fact that the assessee transferred such unpaid amounts to Profit and Loss Account.

16. The last case relied upon by Mr. I. N. Pasha, the learned counsel for the appellant is of a solicitors' firm known as Messrs Sanderson & Morgan. They received amounts from their clients from time to time to meet day to day expenses. Some times some amount remained unpaid which was ultimate ly apportioned between partners. The Income‑tax Officer added Rs. 4,078 in assessment year 195%‑58 to the income of the assessee treating it as trading receipt. However, on reference, a Division Bench of Calcutta High Court relying upon Morley's case (supra) laid emphasis on the nature and char acter of the receipt when it was received for the first time.

17. From discussion made above it appears that the classical observa tion of Greene M. R. in Morley's case (supra) made as far back as 1938 about the quality and nature of a receipt for Income‑tax purposes has withstood the test of time. As discussed above, it has been followed in the sub‑continent of India and Pakistan from time to time and the latest instance is provided by Karam Chand Thapar's case (supra) which was decided by Calcutta High Court in 1979. With due respect, we agree with His Lordship's observation that the quality and nature of a receipt for Income‑tax purposes is fixed once and for all when it is received. However, we emphasise that while discussing Morley's case (supra), its several important features have to be carefully considered. From perusal of this decision it appears that His Lordship has repeatedly laid emphasis on the contractual obligation of the partners of the firm. Indeed, the money was retained as per terms of the contract. In other words, the right to retain the money was conferred upon the firm as per terms of, the contract entered into with its customers. Since the right to retain he money was given to the firm by contract, Greene Mr. laid emphasis, time and again, on the obligation of the firm regarding payment of the money as and when demanded. As discussed earlier, the firm was re‑constituted several times. However, the right of the customer to demand the payment and the obligation of the partners of the firm to pay back such amounts, specifically and in unmistakeable terms, were spelt out every time in the Articles of the Partnership. Since in jurisprudence the concepts of right and obligations are inter dependent or a necessary corrollary of each other, therefore, His Lordship laid equal emphasis on both of them. If we peruse other cases cited by Mr. Pasha, the learned counsel for the appellant, it would appear that in all of them the rights and obligations were creation of contracts except in the case of Bijli Cotton Mills (supra), where the rights and obligations were finding their origin in a custom which was well‑established amongst business community. In all these cases the quality and nature of the receipts for Income‑tax purposes were fixed once for all keeping into consideration the corresponding rights and ‑obligations. In other words, we should point out that the quality and nature of a receipt was determined with reference to and in context of the corresponding rights and obligations created by either a contract or a custom. In all these cases, it appears that the quality and nature of a receipt revolves round‑the facts and circumstances of every case. However, with due respect to Mr. I. N. Pasha, the learned counsel for the appellant, we are of the view that none of them comes to his rescue under the facts and circumstances of these appeals.

18. From perusal of the cases relied upon by Mr. Muhammad Farid, the learned Departmental Representative, on the contrary, it appears that the amounts involved were realised by virtue of a right conferred by a statute which has also, at the same time, created an obligation. The assessees in these cases recovered the money under the cover of the statute in exercise of the right conferred upon by it but when it came to dis charging the obligation thereunder, they rushed to Courts of law to challenge the vires of that very statute. It was in this background that the Indian Supreme Court in Chowrangi's case (supra) while determining the true nature and character of receipts, held that the amount of sales‑tax received by the appellant was his trading receipt. However, Their Lord ships did not close the chapter but rather gave an opportunity to the appellant to claim deduction of the amount as and when it was paid to the State Government. To our mind what Their Lordships kept into' consideration was that if an assessee had recovered some money under the authority of some statute, be should not be allowed the benefit of keeping it with him by circumventing his obligation of paying it to the Government Exchequer. This principle, to our mind, appears to be based on sound policy of law. Let us also mention at this juncture that even in those cases where a person who has more than one claimant for any amount has to pay it in Court if he wants to discharge himself from that liability. A Inter‑pleader suit is one of the best example of such type of matter. Other example, is provided by various rent legislations which direct a tenant to deposit the rent in Court where there are more than one landlord claiming it. It maybe noted that generally the Courts of Equity also insist on al plaintiff to deposit the money in Court if he prays for a specific perform ance of a contract. Thus, in our view, all the cases cited by the learned Departmental Representative are very much relevant for disposal of these appeals.

19. Now turning to the merits it appears that, under West Pakistan Entertainment Duty Act, it was the legal obligation of owner of every cinema‑house to charge Entertainment Duty from every cinema goer. The same Act has also laid down that aforesaid money was to be paid to the Exchequer of Provincial Government. It is thus clear that the appellant recovered the amount in dispute under cover of a statute which not only imposes a legal obligation on it to collect aforesaid amount from all‑ the cinema goers but, at the same time, also makes it obligatory to pay such amount so recovered to Provincial Government Exchequer. However, the appellant though has been recovering the Entertainment Duty all these years yet it has failed to deposit it in Provincial Government Exchequer. It has thus recovered the amount under compulsion of a statute but has not discharged its obligation. Let us, therefore, now turn to facts ands circumstances of these appeals because ultimately the true nature and character of the receipts would be determined in context of and with reference to them.

20. From perusal of the case of the appellant reported in P L D 1976 Kar. 712, it appears that the very right of the Provincial Government of imposing Entertainment Duty was called in question. In other words, the competence of Provincial Legislature in enacting the Entertainment Duty Act was challenged on the ground that it was for the Cantonment Board to recover such Entertainment Duty. From perusal of the reported decision it is not clear as to whether the appellant had obtained any stay order against the recovery proceedings though some of them appear to have got it. We presume that they had not made any such prayer otherwise the learned Division Bench of the High Court would have asked them to deposit the entire sum in Court for the benefit of either the Provincial Government or the Cantonment Board. It is also apparent from the record that the appellant and other cinema‑houses owners had invoked the extraordinary jurisdiction of High Court as early as 1971 i.e. immediately after receiving notices from the Cantonment Boards. Further more, constitutional petitions were also filed in 1972 and 1973. But, nevertheless, the appellant went on offering the Amount of entertainment duty for tax purposes upto assessment year 1974‑

75. It also emerges out from the record that since assessment year 1975‑76 the appellant has been receiving Entertainment Duty from cinema goers with the clear intention of not paying it immediately after its recovery to either the Provincial Government or the Cantonment Boards. This intention could further be gathered from the fact that the appellant has finally distributed the entire amount amongst its partners in the relevant assessment years. Thus, if all these circumstances are kept into consideration; they go a long way in helping us to determine the true quality and nature of the receipt in the hands of the appellant for Income‑tax purposes. We, therefore, following the Supreme Court decisions of India, which have been cited by Mr. Muhammad Farid, are of the view that the total amount of Rs. 11,48,309 was trading receipt in the bands of the appellant. However, at the same time, we are also of the view that it would be entitled to claim it as deduction in the year when it is paid to the Provincial Government or the Cantonment Board as the case may be.

21. As far as our earlier decision is concerned let us point out that firstly the matter was neither properly argued nor all the relevant case was brought to the notice of the learned Division Bench. Secondly, the reported decision of this Tribunal is not an authority for the proposition that the partners of the appellant are entitled to distribute this amount amongst themselves and than utilize it for their own benefit. Let us also point out that the fact that the order of the High Court recorded in P L D 1976 Kar. 712 has been taken to Supreme Court, with due respect, is also wholly immaterial as far as the point in issue before us is concerned.

22. Now turning to the total income added by the Income‑tax Officer, Mr. Muhammad Farid, the learned Departmental Representative argued that an amount of Rs. 11,48,309 was rightly treated as trading receipt in the relevant assessment year. He, however, gave us details of the total amount received as entertainment duty as under ;‑ Assessment year Total amount 1975‑76 Rs. 3,86,354 1976‑77 Rs. 4,34,381 1977‑78 Rs. 3,27,574 Mr. I. N. Pasha on the contrary, has argued that as far as Entertainment Duty received in assessment years 1975‑76 and 1976‑77 is concerned, there is a definite finding of this Tribunal that they were not the trading receipts of the appellant. The learned counsel further added that the Department has not gone up in reference, as such, both the decisions of the Tribunal regarding assessment years 1975‑76 and 1976‑77 have attained finality. With due respect we find considerable force in submission of the learned counsel for the appellant. From perusal of both the decisions it does appear that the amounts received in respective assessment. years have not been declared to be trading receipts of the appellant. It is, true that the Tribunal also has not held that the appellant was entitled to retain afore said amounts but, in our view, it makes no difference. Even if they were to be treated as trading receipts both the amounts should have been added to the income of the assessment years 1975‑76 and 1976‑77, which was not done. From perusal of assessment 'order it appears that the Income‑tax Officer was informed that the matter regarding Entertainment Duty payable to the Provincial Government was subjudice before Supreme Court of Pakistan. With: due respect, the question which is pending before Supreme Court is regarding Legislative competence to enact laws regarding levy of Entertainment Duty. The question whether such amount recovered should, or ‑should not, be treated ' as trading receipt of the appellant has neither been agitated before High Court nor is pending for adjudication before Supreme Court. , In fact; it came for decision before this Tribunal twice but its finding has been allowed to attain finality. Let us also mention here that the fact that the total amount of Rs. 11,48,309 has been distributed amongst, partners in the relevant assessment year is also immaterial for the simple reason that we have no jurisdiction to reverse two decisions of this Tribunal for earlier two assessment years. We are, therefore, of the view that Rs. 3,27,574 which have been recovered by the appellant as Entertainment Duty in charge year 1977‑78 should be treated as its trading receipt for the relevant assessment year. Let us also mention here that in Chowrangi's case (supra) the total amount recovered by the appellant amounted to Rs. 2,71,698 which was recovered in various years. However, an amount of Rs. 32,986 v is added to the income of the appellant in assessment year 1960‑61 as it is the same amount recovered as Sales‑tax in that assessment year. Similarly, in Siclair's case (supra) the total amount recovered in assess ment year 1953‑54 was Rs. 7,14,398 and the same was added to the income of that assessment year.

22. Now turning to the submissions of Mr. I. N. Pasha regarding Profit and Loss Account, let us mention here that the learned counsel gave up his plea regarding telephone and legal expenses.' Regarding interest which amounted to Rs. 27,694 the learned counsel relied upon the decision of this Tribunal recorded in I.T.A. No. 889iKB of 1979‑80 on 22nd December, 1980. Respectfully relying upon the decision of this Tribunal cited above, we agree with the contention of learned counsel for the appellant and order deletion of Rs. 27,694.

24. The next point agitated was regarding car maintenance. The Rs. 50,057 as expenses under this head. However, the Income‑tax Officer disallowed 1/6th thereof. The learned Commissioner of Income‑tax (Appeals) however, brought it down to 10 % disallowance on the authority of the decision of the Tribunal cited. We, therefore, see no reason to interfere with it.

24. The appellant claimed Rs. 23,354 as entertainment expenses and the Income‑tax Officer disallowed 1/5th thereof. It is true that personal element is very much involved. However, keeping into consideration the nature of the business of the appellant we, disallow 10 of the claim. Undoubtedly the appellant must be having lot of visitors from various departments but in any case personal element cannot be com pletely overruled.

25. The last claim is regarding depreciation at 1/3rd being not related to the business which was, however, brought down to 1/6th of the claim by the learned Commissioner of Income‑tax (Appeals). Mr. Pasha urged that it should also be brought down to 10 % of the Here again the personal element is involved and we do not think Commissioner of Income‑tax (Appeals) calls for any interference.

26. In view of the discussion made above, both the cross‑appeals stand disposed of as indicated above. M. B. A. Order accordingly.