2005 PLP (Trib (PTD)

Ten cross appeals have been filed by the assessee as well as by the department for the assessment years 1998-99 is 2002-2003 against the orders passed under sections 132/62. Another appeal has been filed by the assessee for the assessment year 2001-2002 challenging the confirmation of order under section 52 by the CIT(A). Different issues have been raised by the assessee as well as by the department which are decided as under:-- INTEREST CREDITED TO SUSPENSE ACCOUNT (ASSESSMENT'S APPEALS-ASSESSMENT YEARS 1998-99, 1999-2000, 2000-2001) (DEPARTMENTAL APPEAL ASSESSMENT YEAR 2001-2002).

2. In separate orders passed by the Assessing Officer under section 62 of the Income Tax Ordinance, 1979 for the assessment years 1998-99, 1999-2000, 2000-2001, the Assessing Officer found that as per audited accounts, mark-up of Rs.48,85,000 in the assessment year 1998-99, Rs.1,48,18,652 in the assessment year 1999-2000 and Rs.1,40,18,652 in the assessment year 2000-2001 has been credited to suspense account instead of P&L account. Since the assessee is maintaining its accounts on mercantile system of accounting, the Assessing Officer relying upon various judgments of superior Courts held that accrued profits are taxable in assessee's case. The assessee was confronted on the issue and the reply of the assessee that the interest was taken to the suspense account in accordance with Prudential Regulations of State Bank of Pakistan and International Accounting Standard and the suspended profit is not the real income of the bank was found unsatisfactory on the ground that it had been held by the ITAT that concept of real income is not recognized in the Income Tax Ordinance, 1979 where accounts are maintained on accrual basis and such suspended profits which are in accordance with the Prudential Regulations do not have a bearing on the taxability of this income and, therefore, the B income credited to suspense account was brought into the ambit of taxation. In appeal the CIT(A) in view of the reported judgments 1998 PTD (Trib.) 1878 and 1999 PTD (Trib.) 2294 upheld the order of the Assessing Officer on this issue.

3. The AR of the assessee contended that the issue of taxability of income credited to the suspense account has been decided by the ITAT in the case reported as (2002) 85 Tax 245 (Trib.) wherein it was held that interest on sticky loans transferred to suspense account by the Banks in compliance with the Prudential Regulations is not liable to tax. In another decision of the ITAT passed in ITA No.3760 to 3763/LB/1999 (assessment years 1994-95 to 1997-98), dated 15-12-2001, the interest credited to the suspense account was held to be not liable to tax by a majority decision. In view of the above decision of the ITAT, the action of the CIT(A) confirming the taxing of income credited to suspense c account cannot be upheld. The amount credited to suspense account in the assessment years 1998-99, 1999-2000 and 2000-2001 is held to be not liable to tax.

4. In the assessment year 2001-2002 the Assessing Officer also subjected to tax the amount of Rs.1,519,142 credited to suspense account for the same reasons as discussed earlier. In appeal the CIT(A) in view of the reported judgment of ITAT (2002) 85 Tax 245 (Trib.) deleted the addition made to income on account of interest credited to suspense account. In this year the department has filed appeal challenging the action of the CIT(A). As already discussed the issue of interest income credited to suspense account has been decided by the ITAT holding such income not taxable. We, therefore, uphold the decision of the CIT(A).

5. Resultantly, the assessee's appeals for the assessment years 1998-99, 1999-2000 and 2000-2001 succeeds while the departmental appeal for the assessment year 2001-2002 the fails. TAXATION OF DIVIDEND INCOME (DEPARTMENTAL APPEAL-ASSESSMENT YEARS 1998-1999, 1999-2000, 2000-2001 AND 2001--2002).

6. The Assessing Officer while framing the assessments under section 62 of the Income Tax Ordinance, 1979 for above assessment years observed that assessee had shown dividend income at reduced rate of tax. The Assessing Officer through a notice under section 62 of the Income Tax Ordinance, 1979 confronted the assessee that dividend income is incidental to main banking business of the assessee and forms a part of composite business income to which tax rate prescribed for banking companies is applicable. The assessee contended that dividend income has been offered for tax at reduced rate as has been specifically provided in the First Schedule and cited case law in support of its contention. The Assessing Officer did not accept the plea of the assessee and held that the earning of dividend income is incidental to the assessee's main business and forms part of composite business income to which tax rate prescribed for banking company is applicable and, therefore, taxed the dividend income in each year at normal rates. In appeal the CIT(A) in view of the decision of ITAT vide I.T.A. No.2447 & 2448/LB/1999, dated 5-10-1999 and I.T.A. No.2449/LB/1999, dated 12-4-2000 in the case of Union Bank Limited held that tax on dividend income is to be charged at reduced rates under para. D(a) of Part-V of First Schedule.

7. We have also examined the issue. It is observed that dividend income received by bank is chargeable to tax at rates as specified in para. D(a) of Part-V of the First Schedule to the Income Tax Ordinance, 1979. The law is quite explicit on the issue. The following case-law on this issue was also considered. (i) PLD 1997 SC 700 = 1997 PTD 1693 (ii) (2002) PTD (Trib.) 507 (iii) The decision of ITAT vide I.T.A. No. 2449/LB of 1999, dated 12-4-2000 in the case of Union Bank Limited. Respectfully following the decision of the Superior Courts and ITAT earlier decisions the dividend income of the assessee is to be charged to tax at reduced rate under para D(a) of Part-V of First Schedule. We, therefore, upheld the order of the CIT(A) on this issue. PROVISION FOR BAD DEBTS (DEPARTMENTAL APPEAL-ASSESSMENT YEARS, 1999-2000, 2000-2001, 2001-2002 AND 2002-2003)

8. The Assessing Officer did not allow provisions for bad debts claimed at Rs.2,29,84,000 in the assessment year 1999-2000, Rs.3,18,95,000 in the assessment year 2000-2001, Rs.4,76,14,000 in the assessment year 2001-2002 and Rs.85,76,700 in the assessment year 2002-2003 for the reason that a provision cannot he equated with the word actually written off as required under section 23(1)(x) of the Income Tax Ordinance, 1979. The amount was disallowed after confronting the assessee on the issue. In appeal the CIT(A) after considering the arguments of AR of the assessee and the decision by the superior Courts on the issue deleted the additions made to the income on account of provision for bad debts in assessment years 1999-2000, 2000-2001, 2001-2002 and 2002-2003.

9. The assessee has cited number of judgments to support his point of view wherein it has been held that the provisions for bad debts is an allowable expenditure. Following reported cases 2002 PTD (Trib.) 1898, (2002) 85 Tax 245 (Trib.) 2003 PTD (Trib.) 1189 have been cited in support of assessee's contention. We have gone through the reported case-law on the issue. We have no reason to disagree with the judgments of the first appeal authority on this issue. The order of the CIT(A) does not call for any interference on this issue. The deletion of addition under F the head of provision of bad debts by the first appeal authority is upheld. TAXATION OF CAPITAL GAIN AT CONCESSIONARY RATE (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2002-2003)

10. The assessee has shown gain of Rs.21743,000 on purchase and sale of securities i.e. FIBs and PIBs which was claimed exempt. The assessee was confronted by the Assessing Officer that such income is not exempt under any provisions of Income Tax Ordinance, 1979. The assessee submitted that the gain/loss on sale of securities is of capital nature as the securities are purchased by the Bank to meet its Statutory Liquidity Requirement and any security purchased to meet this SLR is capital in nature. The assessee also relied on the reported decision of apex Court PLD 1997 SC 700 = 1997 PTD 1693 wherein it has been held that while applying the tax rate the banks are entitled to any benefit of reduced rate of taxation. The reply of the assessee was found unsatisfactory on the ground that purchase and sale of securities is a part of the normal business activities and no exemption can be given to the assessee on sale of such securities. The exemption claimed was, therefore, disallowed. In appeal the AR of the assessee argued that assessee's claim of exemption is based on the decision of the Supreme Court of Pakistan and contended that benefit provided in para. A(4) of Part IV of the First Schedule to the Income Tax Ordinance, 1979 is available to the assessee. The AR also referred to the reported decision of the ITAT 2003 PTD (Trib.)

494. After considering the arguments of AR and case-law cited by the AR in support of his arguments, the CIT(A) held that on net capital gain of Rs.2,17,43,000 the provisions of para. A(4) of Part-IV of First Schedule to the Income Tax Ordinance, H 1979 is to be applied.

11. The AR of the assessee reiterated his arguments as submitted before the CIT(A). We have also considered the arguments of AR of the assessee and also gone through the case-law cited in support of the A.R.'s arguments. In the reported case of ITAT as 2003 PTD (Trib.) 494 it was held that:

"Obviously when it is purchased in order to meet with the statutory requirements of section 13 of the Banking Companies, 1962 then it is purchased on investment, whenever such securities are disposed of, the resultant gain or loss therefrom will be computable as Capital Gain or loss because these securities not being stock-in-trade but being an asset of the company satisfy the definition of capital asset as given in section 2(12) of the Income Tax Ordinance, 1979." In view of the above decision of the ITAT, we have no reason to disagree with the findings of the CIT(A). The order of the CIT(A) is upheld. The departmental appeal fails on the this issue. ASSETS WRITTEN OFF (DEPARTMENTAL, APPEAL ASSESSMENT YEAR 2002-2003).

12. The Assessing Officer disallowed an amount of Rs.319,000 claimed by assessee as assets written off. After confronting the assessee through a notice under section 62 of the Income Tax Ordinance, 1979, the claim was disallowed as the assessee failed to provide details of assets an, its sale price in the market. In appeal before the CIT(A) it was pleaded by the AR of the assessee that the Assessing Officer has admitted the veracity of the claim by referring to annual account and there was no justification for disallowing the claim as the annual audited accounts have been accepted in totality and the nature of write off has been explained in reply of the assessee to notice under section

62. The CIT(A) observed that the Assessing Officer has accepted the accounts and the addition of Rs.319,000 tantamount to tinkering with the accounts if and therefore deleted the disallowance made by the Assessing Officer.

13. We have also considered the issue. The findings of the CIT(A) on the issue are found correct and order of CIT(A) is upheld on this issue. PREMIUM PAID ON PURCHASE OF FIBS (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2002-2003).

14. The Assessing Officer disallowed an amount of Rs.1,56,21,571 claimed as amortization of premium on FIBs. The assessee was confronted on the issue through a notice under section 62 and after considering the reply of the assessee, the Assessing Officer observed that premium paid is cost of securities on 'which it is paid and forms purchase price of these securities and being a part of capital cost cannot be K amortized over the life of securities and, therefore, disallowed the amount of Rs.1,56,21,571 being capital in nature. The first appeal authority considered the arguments of AR of the assessee as well as case-law decided by ITAT vide ITA No.1658/LB/2003, dated 23-2-2004 wherein it was held that premium paid on purchase of FIB is a cost incurred by the assessee for the purpose of business of the Bank and has to be allowed during the period in which it is incurred and this is in form of a prepaid expense which is spread over the period to which it relates. The CIT(A) therefore, held that premium paid on purchase of FIBs is allowable as claimed amortized by the appellant bank.

15. We have considered the arguments of AR of the assessee on this issue. It is observed that point of view of the assessee was accepted by the appeal authorities in the immediately preceding year. The issue has been settled at the first appeal stage and we, are not inclined to interfere in the order of the CIT(A) on this issue.

16. The appeal of the department also fails on this issue. DEPRECIATION ON VEHICLES DEPARTMENTAL APPEAL-ASSESSMENT YEAR 1998-99)

17. The Assessing Officer observed that no details of vehicles provided to the employees have been submitted and, therefore, disallowed 50% of the amount claimed on account of depreciation for personal use of such vehicles by employees after confronting the assessee through .a notice under section 62 of the Income Tax Ordinance, 1979. In appeal the CIT(A) after considering the arguments of AR of the assessee observed that there was no justification of the treatment given by the Assessing Officer on account of conveyance provided by the employer and addition if any can be made in the hands of the employee as per Income Tax Rules or addition may be made under section 24(i) of the Income Tax Ordinance, 1979 on account of excess perquisites but there was no justification or curtailment of depreciation claimed. The CIT(A), therefore, deleted the addition made on this issue.

18. We have also considered the arguments of AR of the assessee on the issue. We agree with the findings of the CIT(A) that addition can be made in this case under the Income Tax Rules or under section 24(i) of the Income Tax Ordinance, 1979. Therefore, addition out of depreciation claimed on account of personal use cannot be endorsed. The order of the CIT(A) on this issue is upheld. EXPENSES ALLOCATED TO EXEMPT CAPITAL GAINS (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2001-2002).

19. The Assessing Officer observed that exemption on gain on sale of shares is allowable to assessee under clause 116 of Part-I of Second Schedule to the Income Tax Ordinance, 1979 and in view of this exemption the expenses relateable to capital gain are not to be allowed p against the business income as the capital gain and business income are two separate and distinct heads of income. After considering the assessee reply on the issue, the Assessing Officer disallowed an amount of Rs.4,57,004 as expenses relatable to capital gains but claimed under the head of business income. In appeal it was argued that banking is a composite business and as held by the Courts that where the income is from indivisible sources, the expenses cannot be proportioned between income from taxable sources and from exempt sources. The CIT(A) after considering the arguments of AR of the assessee and case decided by the ITAT in the case of Fidelity Investment Bank deleted the addition made under this head.

20. We have also considered the arguments of AR of the assessee and have also gone through the decision of ITAT in case of Fidelity Investment Bank and other decisions of ITAT on the issue. We do not find any merit in the arguments of learned DR for vacation of the impugned order. The first appeal authority deleted the addition under this head through well-reasoned arguments based on the earlier judgment of R Tribunal. We are not inclined to interfere in the order of the CIT(A) on this issue.

21. The appeal of the department fails on this issue. PREMIUM PAID ON FIBS (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2001-2002).

22. The assessee claimed expenditure of Rs.79,99,942 as premium paid on FIBS. The Assessing Officer after confronting the assessee on this issue through a notice under section 62 observed that the premium paid is cost of securities on which it is paid and forms purchase price of these securities, and being capital cost it cannot be amortized over the life of securities and, therefore, disallowed the same. In appeal the CIT(A) after considering the arguments of AR of the assessee and case-law on this issue and C.B.R. instructions issue vide Circular No.7 of 2003, dated 12-7-2003 held that premium paid is allowable deduction and deleted the addition.

23. We have also considered the arguments of AR of the assessee. The ITAT in the reported judgment cited as (77) Tax 273 (Trib.) (sic) has held that in case of bank securities or stock-in-trade, any gain or loss on their purchase/sale will be treated as business income. After considering the arguments, of AR of the assessee and the case-law cited in support of his arguments as well as the C.B.R.'s instructions issued vide Circular No.7 of 2003, the deletion of addition under this head by the CIT(A) is endorsed. The order of the CIT(A) on this issue is upheld. ADDITION ON ACCOUNT OF PERSONAL USE OF VEHICLES (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2001-2002).

24. The Assessing Officer observed that free use of bank maintained cars have been provided to Chief Executive and other Executives. Though no details of the running cost of these vehicles were provided, the Assessing Officer after confronting the assessee on the issue, disallowed Rs.641,119, 50% of the expenses under this head. In appeal it was argued that the car was provided to the employees by the Bank as a salary package and it is up to the employees how to use them and it is employee who has to pay tax on these perquisites and not the employer. The CIT(A) agreed with the arguments of the AR of the assessee and the action of the Assessing Officer was found unjustified and the addition was deleted.

25. We have also considered the arguments of AR of the assessee. Those employees who are receiving this benefits/perquisites should pay tax on account of these perquisites. The provisions of section 24(i) will also be attracted in such case to calculate the excess perquisites provided to the employees by the employer. This disallowance should not be made on the basis of estimation but rather be property worked out. We, therefore, are not inclined to interfere in the order of CIT(A) on this issue. MEMBERSHIP OF KORANGI (DEPARTMENTAL APPEAL-ASSESSMENT YEAR 2000-2001).

26. The Assessing Officer found that an amount of Rs.1,00,000 has been paid to Korangi Association and observed that the fee has been paid for providing different services to the assessee and the assessee was required to deduct tax under section 50(4) of the Income Tax Ordinance, 1979 at the time of payment of this fee and subscription and, therefore, disallowed the amount paid under section 24(c) of the Income Tax Ordinance, 1979. It was argued before the CIT(A) that this is a mandatory fee and is not subject-matter of withholding tax under v section 50(4). The CIT(A) deleted the addition as no action under section 24(c) is called for and that the Assessing Officer has observed that separate action under sections 52/86 will be taken and disallowance will amount to double taxation. The CIT(A), therefore, deleted the addition being illegal and unjustified. It is observed that separate action under sections 52/86 was taken by the department on this issue, therefore, the deletion of addition by the CIT(A) is upheld. ADDITION UNDER SECTION 24(1) (ASSESSEE'S APPEAL-ASSESSMENT YEAR 1998-99)

27. The Assessing Officer found that the assessee advanced loans to its employees at rates which are less than the rates at which loans are advanced to ordinary customers. The benefit provided to the employees w was found to be falling under the ambit of excess perquisites under section 24(i) of.the Income Tax Ordinance, 1979. The Assessing Officer worked out the addition under section 24(i) at Rs.33,22,225 in the assessment year 1998-99 which was added to the income of the assessee. In appeal before the CIT(A) it was contended that difference of rate of interest charged from customers and from employees can be deemed as income under section 12(7) of the Income Tax Ordinance, 1979 but the provisions of section 12(7) have been suspended from 1-7-1985. The CIT(A) observed that the difference of interest as worked out by the Assessing Officer falls in the definition of perquisites as per section 16 of the Income Tax Ordinance, 1979 and any benefit provided within the terms and conditions of service does not mean that the same shall not be treated as perquisites and not charged to tax and the Assessing Officer in the absence of details of loans, had no alternative except to calculate the perquisites in the manner adopted by the Assessing Officer. The addition made by the Assessing Officer was upheld.

28. We have heard both sides. The AR of the assessee contended that there is no justification to hold that benefits such as concessional loans/advances to employees are hit by section 24(i) and that the claim of expenditure under section 23 is a pre-condition for disallowance under section 24 and in case of concessional loans no expenses were incurred and rather banks earned income by charging interest on such loans/ advances.

29. We have also examined the issue. Section 24(i) under which the perquisites in excess of 50% of the salary are disallowed reads as under: -- " Any expenditure incurred by an assessee on the provision of perquisites (allowances) or other benefits to any employee, in excess of (fifty) per cent of his salary excluding perquisites (allowances or other benefits):" The explanation to section 24(i) defines perquisite as under:-- "(ii) "perquisites", "employee" and "employer" have the same meaning as in subsection (2) of section 16." The issue has been examined, in details. Section 24 starts with the headings "Deductions not admissible" and reads as under:-- "Nothing contained in section 23 shall be so construed as to authorize the allowance or deduction of." A bare reading of the section shows that any allowance or deduction under section 23 shall be allowed as allowance or deduction subject to condition as laid down in section 24 subject to limit of such allowance or deduction as has been provided in section 24(i). Thus, an expenditure is a pre-condition and this expenditure is subject to a limitation as provided under section 24(i). The primary condition for disallowance under section 24(i) is that an expenditure has been shown/claimed by the assessee which will be allowed to the extent as prescribed under section 24(i). The explanation under section 24(i) refers to the definition of perquisites as per section 16(2) of the Income Tax Ordinance, 1979 and section 16(1) deals with the determination of income of a person under the head of salary and perquisites as defined in section 16(2)(b) will be included in the salary income of a person receiving the benefit/perquisite. The benefit on account of a concessionary loan could be brought into the ambit of taxation as deemed income under section 12(7) of the Income Tax Ordinance, 1979 but the provisions of section 12(7) have been suspended since 1-7-1985. The benefit on account of concessional loans can also be brought into the ambit of taxation under Rule 18 of the Income Tax Rules, 1982 but this benefit will be subjected to tax in the hands of the person receiving the benefits.

30. The. AR of the assessee also referred to clause 3 of part-IV of Second Schedule to the Income Tax Ordinance, 1979. wherein the banking company and financial institutions owned and controlled by the Federal Government did not attract the provisions of section 24(i). The AR of. the assessee contended that word "or" used in this clause is disjunctive and words owned and controlled by the Federal Government pertain to the financial institution only and in the case of a banking company provisions of section 24(i) are not attracted. This plea of AR of assessee is legally not correct and is not accepted.

31. We have already discussed earlier that expenditure is a precondition for the application of provisions of section 24(i) and this expenditure if claimed by the assessee is subject to certain limit as provided under section 24(i). For example an employee has been provided free conveyance which is a benefit provided to the employee and expenditure for providing this benefit is being claimed by the assessee in the accounts. This expenditure is perquisite as per section 16(2)(b) to be added to income of assessee subject to limit as provided under section 24(i). Further, if utilities are provided to employee free of cost and bills for the utilities are being paid by the employer and claimed as expenditure in accounts, such expenditure will be deemed as benefits/perquisites in the hands of the employee and will be included in the income of employee as per income tax rules and will also be included in the income of employer subject to provisions of section under section 24(i). The provisions of section 24(i) put limit to the allowability of such expenditure. But in the case of the assessee nothing has been claimed as expenditure and instead income has been shown on account of interest charged from the loans advanced to the employees. The Assessing Officer has also referred to the case of Messrs Hongkong and Shanghai Banking Corporation decided by ITAT vide I.T.A. No.652/KB of 1999-2000. This case has been examined. In cited case, the ITAT found earlier reported judgment (1997) Tax 40 Tax 9 irrelevant as no parallel provisions have been brought to their notice in the Repealed Income Tax Act of 1922 defining the expression "perquisites" as contained in section 16(2)(b) of the Income Tax Ordinance, 1979 under which the value of any benefit provided free of cost or at concessional rate is to be included in perquisites. The judgment of ITAT in case of Messrs Hongkong and Shanghai Banking Corporation is per incurrium. The provisions of section 16 pertains to the determination of salary income of a person and perquisites provided to such person will be included in the income of the person as per income tax rules. The expenditure for providing the perquisites and claimed in its accounts by an assessee under the provisions of section 23 is to be allowed subject to the limit as per section 24(i). In this case the assessee never claimed any expenditure and bank earned income by charging interest on concessionary loans/advances to its employees. Since no y expenditure has been claimed, the provisions of section 24(i) are not attracted and addition made on account of concessionary loans cannot be endorsed. The addition of Rs.33,22,225 is, therefore, deleted. ADDITION UNDER SECTION 24(I) (ASSESSEE'S APPEAL-ASSESSMENT YEARS 2000-2001, 2001-2002 AND 2002-2003).

32. An amount of Rs.35,70,231 was added to the income of the assessee under section 24(i) in the assessment year 2000-2001 which was upheld by the CIT(A).

33. We have examined the addition made by the Assessing Officer on account of excess perquisites. It is observed that the addition on account of excess perquisites in the assessment years 2000-2001 were made by the Assessing Officer after confronting the assessee on the issue. The excess perquisites have been correctly worked out after considering the contention of the assessee. The order of both the authorities below are upheld on this issue in the assessment year 2000-2001.

34. In the assessment year 2001-2002 an addition of Rs.29,92,760 was made to the income of the assessee under section 24(i) which was upheld by the CIT(A). It is observed that the Assessing Officer calculated the perquisites on account of grain compensation amounting to Rs.361,091 which was shown as part of the salary but the Assessing Officer treated the same as perquisites. Similarly, the amounts claimed under the head of medical expenses was found to include an mount of Rs.16,17,936 which represented the bonus. The contention of the assessee on this issue was not accepted by the Assessing Officer and the amount was considered as allowances for calculating the excess perquisites. Further, an amount of Rs.11,41,495 on account of concessionary loans given to employee was held by Assessing Officer to be covered under other benefits for working out the excess perquisites under section 24(i) in view of the case Messrs Hongkong and Shanghai Banking Corporation decided by ITAT. As held earlier by us in the assessment year 1998-99, the amount worked out due to difference in interest rate charged from employees and ordinary clients cannot be considered for purpose of calculating the excess perquisites under section 24(i) as the amount has not been claimed as expenditure in the accounts by the assessee. Therefore, this amount of Rs.11,41,495 on account of concessionary loans will not be considered for the purpose of calculating excess perquisites under section 24(i). The other amounts under the head of grain compensation and medial expenses have been correctly accounted for towards calculating the excess perquisites under section 24(i).

35. In the assessment year 2002-2003 the assessee has contested the addition of Rs.38,23,370 added to the income as excess perquisites under section 24(i) of the Income Tax Ordinance, 1979. The Assessing Officer observed that the assessee has not provided employee-wise details of such other benefits from where the working of excess perquisites could be made. The Assessing Officer worked out the excess perquisites at Rs.38,23,370 and added the same to the income of the assessee under section 24(i) in addition to Rs-.30,36,000 already shown by the assessee as excess perquisites. The CIT(A) has upheld the addition made on this account as the working of the Assessing Officer was found proper. The AR of assessee contended that in view of the clause-3 Part-IV of Second Schedule to the Income Tax Ordinance, 1979, no addition can be made on account excess perquisites in the case of the assessee being a banking company. Clause-3 of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 reads as under:-- "The provisions of clause (i) of section 24 shall not apply to any expenditure incurred by a banking company or a financial institution (owned and) controlled by the Federal Government on the provisions of perquisites, allowances or other benefits to any employee in pursuance of any law."

36. The AR of assessee contended that the word "or" used in this clause is disjunctive and condition of owned and controlled by the Federal Government will be read with the financial institutions and not with the banking company. The contention of AR of the assessee is not correct as word owned and controlled by the Federal Government refers to both banking company as well as financial institutions. Thus, the interpretation of the AR of assessee cannot be accepted. The assessee company though a banking company does not fall under clause-3 of Part-IV of Second Schedule to the Income Tax Ordinance, 1979. The addition under section 24(i) have been correctly made in the assessment year 200.2-2003. GAIN ON SALE OF GOVERNMENT SECURITIES AND DEPRECIATION DISALLOWED (ASSESSEE'S APPEAL-ASSESSMENT YEARS 2000-2001 AND 2001-2002) LEASE RENTALS (ASSESSEE'S APPEAL-ASSESSMENT YEAR 2000-2001) DISALLOWANCE FEE AND SUBSCRIPTION (ASSESSEE'S APPEAL-ASSESSMENT YEAR 2001-2002).

37. The AR of the assessee did not press the issue of gain on sale of Government Securities in the assessment years 2000-2001 and 2001-2002 and also issue of disallowance of depreciation in the assessment year 2000-2001 and 2001-2002. Also the issue of disallowance of lease rentals in the assessment year .2000-2001 was not pressed by the AR of the assessee. Similarly, the issue of fee and subscription in the assessment year 2001-2002 was not pressed by the AR of the assessee. DISALLOWANCE OF FINES AND PENALTIES (ASSESSEE'S APPEAL-ASSESSMENT YEARS 2001-2002 AND 2002-2003)

38. The Assessing Officer made an addition of Rs.367,471 in the assessment year 2001-2002 and Rs.297,000 in the assessment year 2002-2003 under section 24(j) of Income Tax Ordinance, 1979. The Assessing Officer observed that the amounts represented penalties imposed by the State Bank of Pakistan. The assessee's contention on this issue was considered and rejected by the Assessing Officer. In appeal the CIT(A) upheld the disallowance under this head and the judgments cited by the AR of the assessee in support of his contention were found no more relevant as being prior to insertion of this section in the Income Tax Ordinance, 1979.

39. We have also considered the issue. Section 24(j) was inserted vide Finance Ordinance, 2000. The CIT(A) has rightly observed that cited judgment is no more relevant being one prior to insertion of this provisions in the Income Tax Ordinance, 1979. We are, therefore, not inclined to interfere in the order of the CIT(A). The disallowances made c under section 24(j) in the assessments years 2001-2002 and 2002-2003 C are upheld. ADDITION UNDER SECTION 24(C) (ASSESSEE'S APPEAL) (ASSESSMENT YEAR 2001-2002)

40. The next issue pertains to disallowance of Rs.239,820 on account of rent paid for Gilgit Branch as tax under section 50(7B) was not deducted. The AR of assessee contented that the owner falls outside the taxable territories of the country and, therefore, no tax under section 50(7B) was deducted. The Assessing Officer in view of the clarification issued by the Law Division on representation of the C.B.R. observed that no exemption is available in such cases. The CIT(A) upheld the decision of the Assessing Officer. The AR of the assessee contended before us that separate action under sections 52/86 has been taken by the Assessing Officer and, therefore, the addition of this amount under section 24(c) amounts to double jeopardy.

41. We have also considered the issue. It is observed that separate action under sections 52/86 was taken by the Assessing Officer by passing a separate order and raising tax demand under section 52 on account of failure on the part of the assessee to deduct tax under section 50 on the rent paid of Gilgit Branch. The CIT(A) has upheld the disallowance under section 24(c). While deciding the issue under sections 52/86 the CIT(A) observed that action under section 52 is not maintainable as action under section 24(c) has already been taken and, therefore, vacated the order under section

52. In view of this observation whereby action under section 52 has been disapproved by the CIT(A) E and has upheld the addition under section 24, we are not inclined to E interfere in the order of the CIT(A) and uphold the addition made under section 24(c). The order of both the authorities below are maintained. ORDER UNDER SECTIONS 52/86 (ASSESSEE'S APPEAL-ASSESSMENT YEAR 2001-2002) I. T. A. NO. 5961/LB OF 2004

42. The Assessing Officer passed an order under section 52 for the assessment year 2001-2002 along with the order under section

62. The Assessing Officer observed that assessee failed to deduct tax under section 50 on account of rent paid of Gilgit Branch Office and on account of membership fee paid to Korangi Association. Therefore, the assessee was treated as assessee in default and tax under section 52 was charged F at Rs.22986 along with the additional tax under section 86 at Rs.8887. In F appeal before the CIT(A), the tax under section 52 on account of membership fee paid to Korangi Association was upheld as no tax was deducted at the time of making such payments. The CIT(A) observed that: "The addition made under section 24(c) is deleted as not called for. The Assessing Officer has also observed that separate action will be taken under sections 52/86. Double addition of the same amount under section 24(c) has already been held illegal and unjustified by the Tribunal in a number of cases. The Assessing Officer can take action as 52 if called for under the provisions of said section. It is clear from above that the issue of invocation of section 52 on payment of membership fee to Korangi Association was open for action. The Assessing Officer has rightly taxed the amount because no tax was withheld as per provisions of law. The appeal on this point fails."

43. As regards the non-deduction of tax on account of rent paid for Gilgit Branch Office, it was contended before CIT(A) that "owner falls outside the taxable territories as per Constitution of Pakistan, therefore, no tax on rent was deductible." The CIT(A) observed that:-- "At the material time ruling of Federal Ombudsman was in force and the people of the Northern Areas agitated the issue before the Supreme Court of Pakistan that since they had no voting rights the Federal Government could not levy Income Tax on them. Since Income Tax Law was not applicable to these areas, tax at source could not be withheld." "I upheld the addition under section 24(c) on this point in my order in Appeal No. 320 dated 1-11-2003. In this case the Assessing Officer made addition under section 24(c) as well as passed order under section

52. I have gone through the judgment relied upon by the AR which clearly holds ' that action under section 52 is not maintainable once the Assessing Officer resorted to section 24(c). Relying on this judgment and my own findings in above referred appeal in the case of the appellant, I vacate the order under section 52."

44. We have also gone through the orders of the both the authorities below. The order of CIT(A) is a speaking order which does not call for any interference. The order of the CIT(A) is upheld.

45. All the appeals filed by the assessee as well as by the department are disposed of as above. C.M.A./426/Tax (Trib.) Order accordingly.