2003 PLP (Trib (PTD)
N/A
| Citation | 2003 PLP (Trib (PTD) |
| Forum / Court | Income‑tax Appellate Tribunal Pakistan |
| Bench Members | Fazlur Rehman Khan, Judicial Member and Mrs. Abida Ali, Accountant Member |
| Parties | N/A |
| Primary Law | (a) Income‑tax‑‑‑, (b) Income Tax Ordinance (XXXI of 1979)‑‑‑ |
Q1: What are the key laws and sections cited in 2003 PLP (Trib (PTD)?
This judgment primarily cites: (a) Income‑tax‑‑‑, (b) Income Tax Ordinance (XXXI of 1979)‑‑‑ as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 2003 PLP (Trib (PTD)?
The case was heard and decided by the Income‑tax Appellate Tribunal Pakistan bench comprising: Fazlur Rehman Khan, Judicial Member and Mrs. Abida Ali, Accountant Member.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 2003 PLP (Trib (PTD) (N/A). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- Dr. Ikram Ghani, D.R. for Appellant.
- Iqbal Naeem Pasha for Respondent.
- Date of hearing: 31st May, 2001.
Headnotes / Summary
Portfolio management ‑‑‑Fund/cash management‑‑‑Connotation and meanings‑‑‑Portfolio management was nothing else than the methods evolved or to be evolved for realizing income from portfolio which included income from interest or income from other known methods of investments‑‑‑Phrase "fund/cash management" carried the same meaning as carried by the phrase "portfolio management". Black's Law Dictionary, 6th Edn. ref. ‑‑‑Ss. 30 & 23(1)(vii)‑‑‑Income from other sources‑‑‑Interest income‑‑ "Unallocated" capital expenditure‑‑‑ Set off‑‑‑Set off of the interest income against unallocated capital expenditure on the ground that investment of, the surplus money or withdrawing/realizing investment from one financial institution and re‑investing the same in more profitable investment was part of the income from business of the company which has been authorized by the resolution of the Board of Directors passed under Memorandum of Association of the company and the respondent was entitled to set‑off the same against the unallocated capital expenditure and the balance, if any, to capitalize in order to reduce the capital cost of the project‑" Interest income" received by assessee on the investment of its surplus money was treated as income from "other sources" falling under S.30 of the Income Tax Ordinance. 1979 and taxed accordingly by the Assessing Officer‑‑‑First Appellate, Authority directed the Assessing Officer to set‑off interest income against the "unallocated" capital expenditure, inclusive of financial charges and to capitalize the balance interest income, remaining unabsorbed in order to reduce the capital cost of the project ‑‑‑Validity Main business of the assessee was to earn income from manufacture an. ‑sale of cement and though Articles of Association allowed the company to invest surplus money but it could not be included in the normal business of the assessee‑‑‑Order of the First Appellate Authority, held, was not maintainable‑‑‑Appeal of the Department was accepted‑‑‑Order of the First Appellate Authority was set aside and that of the Assessing Officer was restored by the Appellate Tribunal‑‑‑[(1988) 58 Tax 15 (Trib.) overruled. (1988) 58 Tax 15 (Trib.) overruled. I.T.A. No.920/LB of 1986‑87; (1921) 3 KBD 258; (1995)
211. ITR 55; (1988) 171 ITR 663; (1981) 132 ITR 70 and 1996 PTD (Trib.) 11 ref. PLD 1962 SC (Pak.) 128 and 1999 PTD (Trib.) 708 rel.
Judgment & Decree
Short Notice Term Deposits 42684 1057 43741
9. Metropolitan Profit & Loss Khi. 698813 1035061 1733874
10. Metropolitan Profit & Loss Isb 4334 4334
11. MCB Profit & Loss 2102510 110062 2212572
12. A.G Zurich Fixed Deposits Receipts 15026878 7653480 22680358
13. A.G Zurich Short Notice Term Deposits 1422657 214885 1637542
14. City Bank Profit & Loss 773 773
15. Alfysal Investment Certificate of Investment 15879453 10821232 26700685
16. PICIC Certificate of Deposits 13673972 1380822 16857534
17. NDFC Standard Certificate of Deposits 14904109 3851922 18756031
18. Habib Cooperative Call Deposit Receipt 1262934 666420 1929354 Sub Total 15411176 174582184 47753807 237747167 Realized Sources From Other 165089 373699 758032 1296820 Grand Total 15576265 174955883 48511839 239043987
9. It may be mentioned here that previously, there was a difference of opinion amongst. different Benches of the Tribunal with regard to the interest income. One view vide 1988 PTD (Trib.) 369 was that the income earned from deposit of surplus money in fixed account was business income and if the assessee enjoys exemption, it is not chargeable to tax and the other view vide 1996 PTD 11 (Trib.) was that such income is interest income and separately chargeable to tax. Accordingly, a Full Bench was constituted wherein it was held:‑‑ "
36. Thus, in our considered opinion, income earned by way of interest without engaging in an activity falling under the meaning of business or, say where money is not utilized as stock‑in‑trade, is income from other sources under section 30 of the I.T. Ordinance. Neither the assessee's personal status nor the nature of business, profession or occupation, one is engaged in, would change the nature of such income. Similarly, neither the source of the funds generating such interest income nor the purpose for which such funds are obtained by the depositor would have any bearing on the nature of such income.
37. In short, neither the fact that the assessee is a company incorporated to set up an industrial undertaking, the profits and gains being derived or to be derived wherefrom, are exempt under the I.T. Ordinance or otherwise, nor the fact that such company or an assessee having any other personal status under subsection (32) of section 2 has deposited the funds out of equity or out of borrowed capital, not the fact that, in the income year during which such funds are deposited, the assessee is engaged or is not engaged in any business or profession would change the classification of such income under section 15 of the Ordinance."
10. It may be stated here that during the course of arguments, the learned A.R. for the respondent candidly agreed that the income at Serial Nos. 7, 18, 12, 13 and 18 of the Schedule, as reproduced above, is interest income. However, for the rest, he contended that these incomes were mainly from portfolios/management and fund management/cash management which was apart of the business of the respondent, as such, not separately taxable. However, in support of his arguments, 'he produced no authority. From our search, we have not been able to lay Hands on the definitions of portfolio/management or fund/cash management from the available books in the Library of this Tribunal. However, in the Black's Law Dictionary, 6th Edition, the word "portfolio" and the phrase "portfolio income" have defined as under:‑‑ "Portfolio. In investments, the collective term for all the securities (which may consist of various types) held by one person or institution. Portfolio income. Income from interest, dividends, rental, royalties, capital ‑gains, or other investment sources. Portfolio income is not considered passive income, therefore; net passive losses cannot be used to off‑set net portfolio income. See also passive investment income; passive loss."
11. From the foregoing definitions, we are of the view that portfolio management is nothing else than the methods evolved or to be evolved for realizing income from portfolio which includes income from interest or income from other known method of investments. We believe that the phrase "fund/cash management" carries the same meaning as is carried out by the phrase/portfolio management".
12. In the case reported in PLD 1962 SC 128 it was observed by their Lordships of the Hon'ble Supreme Court of Pakistan that: "We have considered the various Articles by which this Company was governed. We have no hesitation in agreeing with the view of the High Court that the normal business of the Company was the construction and the running of the Railway and not investment of its moneys on interest. Other powers were also given to the Company by the Articles of Association, but it is not contended that all those powers pertained to the earning of normal business‑income. If the Company, instead of retaining its surplus moneys in idle condition, invested them under the powers given to, them by their Articles of Association, it would not follow that the income so derived would be part of the Company's normal business‑income. Each case must be decided on its own facts and, in the instant case, the circumstances brought out in the evidence do not indicate that the receiving of interest on invested moneys was really included in the business income of the Company. We are, therefore, of the opinion that the view taken by the High Court is not open to any legal exception."
13. In the case‑in‑hand also the main business of the respondent is to earn income from manufacture and sale of cement and though clause (6) of the Articles of Association allows the Company, to invest surplus money but in view of the, foregoing observations of, their Lordships, it cannot be included in the normal business of the respondent.
14. The above judgment of the Hon'ble Supreme Court of Pakistan has been followed by the learned Full Bench of this Tribunal in the case reported in 1999 PTD (Trib.) 708, the relevant portions of which, have already been re‑produced, which clearly support the submissions made by the learned D.R. and has also overruled the authority reported in 1988 PTD (Trib.)
369. Accordingly, the impugned order of the learned CIT(A) is not maintainable.
15. As a result, this appeal is accepted, the impugned order of the learned CIT(A) is set aside and that of the Assessing Officer on the issue is restored. C.M.A./506/Tax(Trib.) Appeal accepted.