1993 PLP (Trib (PTD)

(ii) confirm, reduce, enhance or annul the assessment; ' (b) in the case of an order imposing penalty, confirm, set aside or cancel such order or enhance or reduce the penalty; and (c) in any other case, pass such order as he thinks fit. (2) The Appellate Assistant Commissioner shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has been given a reasonable opportunity of showing cause against such enhancement or reduction, as the case may be. (3) Where, as the result of an appeal, any change is made in the assessment of a firm or an association of persons or a new assessment of a firm or an association of persons is ordered to be made, the Appellate Assistant Commissioner may authorise the Income Tax Officer to amend accordingly any assessment made on any partner of the firm or any member of the association. (4) On the disposal of an appeal, the Appellate Assistant Commissioner shall communicate the order passed by him to the appellant and to the ITO and the Commissioner." The learned AR was very emphatic in insisting that according to section 132(1)(a)(i) the Appeal Commissioner could only set aside the order under the circumstances and direct the Income-tax Officer to make further inquiries and give a finding based thereon because in other eventualities he could only confirm, reduce, enhance or annul the assessment. It was contended that it was neither a case of confirmation of income determined by [TO nor that of reduction, enhancement or annulment because the order of the Income-tax Officer as far as the quantum of income is concerned has been confirmed for a different reason than that given by the Income-tax Officer. His attention was drawn to clause (c) of section 132(1) wherein it had been laid down that "in any other case, pass such order as he thinks fit". The learned AR insisted that it did not give unlimited powers to the Appeal Commissioner because such order which be thinks fit to be passed has to be with reference to the order passed by the Income Tax Officer based on the arguments given by the Income Tax officer in support of his decision. We do not subscribe to this view of the learned AR. The words are "as he thinks fit" and they are not circumscribed by any conditionality. According to our understanding the Appeal Commissioner can confirm an addition made for different reasons given by the Appeal Commissioner and the finding given by the Appeal Commissioner has to be contended on its own merits. When this opinion was conveyed to the learned AR he took the plea that the services rendered by his client cannot be classified as professional services and in support of this he produced a Booklet titled "Flopetrol Johnston Testing--a new approach", According to this report a chart of the set-up has been given on the very first page of this Booklet which is reproduced as under: -- OUR APPROACH TO WELL TESTING CUSTOMER OBJECTIVES TEST DESIGN using interpretation techniques SELECTION OF EQUIPMENT surface and downhole DATA ACQUISITION surface sensors real time monitoring downhole gauges surface/downhole sampling TEST VALIDATION COMPLETE REPORT detailed interpretation NODAL/CLAD TM analysis PVT analysis dynamic reservoir response perforation stimulation completion optimization Reservoir fluid properties From this Chart it is very clear how the customer objectives are to be met by the company. Now a further question arises as, to what is the importance of this Chart when the job is actually done by a sub-contractor, which is a sister concern, and not by the assessee itself. In modern international business different corporate bodies are created by the same group which can be assigned to perform specific functions but the control of all the companies lies with the group and the job is actually assigned to one of those subsidiaries which is competent to do the job obviously on behalf of the contracting company. Now there are different ways of executing a job after a contract has been obtained. It can be executed by the contract obtaining company or it can be done through a subsidiary or even it can be got done by some other person who is specialised to do the job. So, one can say that although the actual job has been done by a subsidiary yet it is primarily a discharge of obligation contracted by the company with which the contract awarding authority has entered into agreement for the execution of the job. So, it can be concluded that as far as the contract awarding authority is concerned the job has been executed by the contract receiving company which is the assessee and it is immaterial who actually did the job. Secondly the nature of the services rendered is independent of the person rendering these services. From the Chart it is quite obvious that the services rendered are highly technical and they need not only specialised equipment but also a specialised approach and ultimately a report is submitted to the customer. Whenever such specialised functions are performed by a person or a body of persons or employees of a person who are technically competent to render such services it means that professional services have been rendered. One can say that even in some industrial or commercial activities some professional services may be necessary but even in such an industrial and commercial enterprise those services basically remain to be professional. Different articles dealing with the professional and industrial/commercial activities in the convention have deliberately been introduced to give a different treatment dependent on the type of the activity. Here, as observed before, professional services have been rendered and the CIT (Appeals) is justified in saying that they were taxable under Article XI (1) of the Convention and not under Article III of the Convention. It has to be appreciated that in the case of Article XI (1) it is not essential to have a permanent establishment situated within the taxable territories of Pakistan. To conclude the finding given by the learned CIT (Appeals) holding the income declared to be taxable is hereby confirmed although the reasons given by him are different than the reasons given by the Income Tax Officer. The appeal of the assessee stands rejected. We deem it necessary to further observe that when a sub-contractor executes a job on behalf of the contractor then the permanent establishment maintained by the sub-contractor for executing the job assigned to it becomes the establishment of the contractor for the limited purpose of executing the job. The contract entered into between the principal company i.e. the assessee in this case and the sub-contractor may be governable by the laws of England but this is not of any importance as far as the assessees assessment is concerned because the profits earned by the assessee company have to be taxed under Pakistan law. As a result the appeal stands rejected. M.BA./1729/T Appeal rejected.