1998 PLP (Trib (PTD)
N/A
| Citation | 1998 PLP (Trib (PTD) |
| Forum / Court | Income-tax Appellate Tribunal Pakistan |
| Bench Members | Muhammad Mujibullah Siddiqui, Chairman and Inam Ellahi Sheikh, Accountant Member |
| Parties | N/A |
| Primary Law | (d) Income-tax, (e) Income-tax, (a) Income-tax |
Q1: What are the key laws and sections cited in 1998 PLP (Trib (PTD)?
This judgment primarily cites: (d) Income-tax, (e) Income-tax, (a) Income-tax, (f) Income-tax, (c) Income-tax, (b) Income-tax as referenced in Pakistani case law index.
Q2: Which judicial bench decided the case 1998 PLP (Trib (PTD)?
The case was heard and decided by the Income-tax Appellate Tribunal Pakistan bench comprising: Muhammad Mujibullah Siddiqui, Chairman and Inam Ellahi Sheikh, Accountant Member.
Q3: What is the official citation format for this judgment on Pakistan Law Portal?
Cite this legal precedent as: 1998 PLP (Trib (PTD) (N/A). Read the full summary and cross-referenced laws free on Pakistan Law Portal.
Laws Cited
Representation
- Zia H. Rizvi for Respondent (in I.T.A. No.5977/LB of 1996).
- Shafqat Mahmood, D.R. for Appellant (in I.T.A. No.5977/LB of 1996).
- Zia H. Rizvi for Respondent (in I.T.A. No.6591).
- Shafqat Mahmood, D.R. for Appellant (in I.T.A. No.6591/LB of 1996).
- Date of hearing: 20th December, 1997.
- 5. During the course of arguments before us we asked learned counsel for the appellant and its Accountant Mr. Ayub Malik to show as to how much amount has been paid to the employees directly from the company's fund. After very lengthy arguments and perusal of record it transpired that the assessee company appellant actually paid an amount of Rs.29,19,572 only out of its funds to the gratuity fund trust in the assessment year under appeal. No other amount was paid out of income of the assessee company for the assessment year 1993-94 and the gratuity was paid to the employees out of the gratuity fund trust which had the accumulated claims allowed in the earlier years plus the interest earned on the investments. Thus, Mr. Zia H. Rizvi, Advocate and Mr. Ayub Malik, Accountant of the assessee company conceded that the only expenditure which was made out of the income of the assessee company for the assessment year 1993-94 was Rs.29,19,572 which was entered in the books to have been transferred to the gratuity trust fund account. Thus, we found that the assessing officer as well as learned C.I.T.(A) did not examine the issue in the right perspective. The assessing officer allowed expenses on account of gratuity at Rs.21,19,292 only against admissible claim of Rs.29,19,572 while the learned C.I.T.(A) reduced the addition from Rs.1,90,49,169 to Rs.1,42,76,096 and thereby allowed excessive relief. Although the department has preferred cross appeal but no objection was raised to the direction of learned C.I.T.(A) in respect of the gratuity expense, therefore, we served a notice of enhancement on the learned counsel for the appellant while hearing appeal at Lahore on 13-12-1997. The learned counsel for the appellant sought time for submitting his arguments on the issue. The time was allowed and the hearing was adjourned to 20-12-1997. On the adjourned date the appeal was heard at Karachi and as already observed the learned counsel for the appellant as well as Accountant conceded after consultation of record and arguments that the only amount which is admissible under the head gratuity is Rs.29,19,572 which was transferred to the gratuity fund trust. In the above circumstances we direct that out of the total claim of Rs.2,11,68,461 under the head gratuity the claim should be allowed to the extent of Rs.29,19,572 only and the remaining amount should be added back to the total income of appellant.
Headnotes / Summary
Only amount which is admissible under the head "gratuity" is the one which is transferred to the gratuity fund trust by the assessee
Remaining amount under the head of gratuity, if any, has to be added back to the total income of the assessee.
Golden shake hand
Apportionment of expenses on account of golden shake hand is not sustainable in law
Addition made by the Assessing Officer was ordered to be deleted with a direction to the Assessing Officer to allow entire accounts of golden shake hand as claimed.
Perquisite
Amount paid by assessee to employees under a Provincial law cannot be treated as perquisite but had to be included in salary.
Perquisites
Washing allowance and uniform allowance paid by assessee has to be treated as excess perquisites.
Perquisite
Ex gratia incentive
Whether excess perquisite are part of salary.
Perquisite
Medical reimbursement has to be treated as perquisite. 1996 PTD (Trib.) 100 fol.
Judgment & Decree
Hill Allowance 104328 - - Shift Allowance 357159 - - Washing Allowance 707173 10334 Other allowances 895574 444097 35599 Entertainment 189089 419796 24356 Personal staff salary 54000 120496 - Ex. Gratia/Incentive 5271921 643361 157419 Med/Reimbursement 5316745 797230 155951 Stipend 303075 5340 950 Subsidy 4546048 83193 - Uniform 364763 21637 - LFA 1672058 173183 23835 Long Service Award 2198007 151205 - Transport 267228 - - Week and Facility 341972 - - Other benefits 579789 30893 49236 Grand Total 39527858 6264938 1031337 50 % of salary 25190610 4185686 990857 Excess perquisites and benefits liable to be added under section 24(i) 14337248 2079252 40480 Total:
9. The appellant was duly confronted who submitted following explanation: "Salaries, allowances, perquisites or benefits have been paid to the employees as per past practice of the company and company's expenditure on this account has never been found fault with. The salaries, allowances, wages and benefits have always been allowed in the past. The inference drawn by your kind honour is neither correct nor proper. The provisions of section 24(i) are not at all attracted in this case because the perquisites, benefits and facilities provided to the employees are made available to them in accordance with the various mandatory provisions of labour laws. Allowances like Punjab Special Allowance and other fall within the ambit of salary. Entertainment, personal staff salary and medical re imbursement and Hospital expenses are not paid without actually having been incurred by the employees. The expenditure on these accounts is re-imbursed to the employees on the basis of actual expenditure incurred. Washing allowance is paid to uniformed staff for actual expenditure incurred on washing of their uniforms Expenditure -on uniforms is incurred on account of providing the uniforms to the employees who are required to wear uniforms while on duty. Stipend is paid to the employees children for Education. Subsidy is the expenditure incurred by the company on provisions of various items through fair price shop to the employees. Transport week end facility and other benefits too are not any direct benefit to the employees from employer. The company is not in a position to regulate or adjust such payment/expenditure to its advantage. These are collective, general and essential expenses incurred by assessee company on over all basis for the purposes of the business of the company. These cannot be termed as perquisites or benefits by am standard or on any basis."
10. The assessing officer held that explanation was not convincing for the reason that various allowances mentioned in the explanation constitute part of salary as provided under definition under section 24 of the Income Tax Ordinance, 1979. He further observed that considering the fact that assessee has already added an amount of Rs.58,355 in respect of excess perquisites the addition to the total income was made at Rs.1,63,98,
625. The learned C.I.T.(A) confirmed the treatment.
11. Mr. Zia H. Rizvi, learned counsel for the appellant has submitted that Punjab Special Allowance has been paid in pursuance of "the Punjab Employees Special Allowance Payment Act, 1988" Sections 3, 4, 5 and 6 whereof read as follows: "
3. Every employee whose wages, in respect of his employment on or after the 1st day of May, 1988 does not exceed one thousand four hundred and fifty rupees shall with effect from the said date be paid by his employer a Special Allowance. (a) equal to fifty rupees per month, if his wages do not exceed one thousand four hundred and fifty rupees; or (b) at such rate as, together with his wages, makes a total of one thousand and five hundred rupees per month if his wages are more than one thousand four hundred and fifty rupees.
4. Every employee whose wages, in respect of his employment on or after the 1st day of July, 1988 does not exceed one thousand three hundred and fifty rupees shall, with effect from the said date, in addition to the Special Allowance under section 3, be paid by his employer a Special allowance
(a) equal to one hundred rupees per month, if his wages do not exceed one thousand three hundred and fifty rupees; or (b) at such rate as, together with his wages, makes a total of one thousand and five hundred rupees per month if his wages are more than one thousand three hundred and fifty rupees."
5. Every employer shall be responsible for the payment of the Special Allowance required to be paid under this Act.
6. The Special Allowance shall be paid alongwith wages in accordance with any custom, usage, practice or law applicable to the undertaking.
12. The learned D.R. has conceded that the amount having been paid under the provincial law is not to be treated as perquisite and has to be included in salary, and we direct accordingly He has next contended that the washing allowance and uniform allowance should also be treated as part of salary but has ultimately conceded that it has been rightly included m excess perquisites In view of the concession made by Mr. Zia Rizvi no interference is required on our part. He has next submitted that the amount paid under the head ex-gratin incentive has been wrongly included in the excess perquisites and that it should be treated as part of salary. He has stated that no amount has been paid as ex-gratin and if the assessing officer finds any such amount he can include the same in the excess perquisites. Mr. Zia Rizvi submitted that the entire amount has been paid on account of incentive bonus and, therefore, same treatment should be given to it as given to the bonus which has been included by the assessing officer himself in the salary. In support of his contention that the amount paid under the head incentive is actually a bonus, he has produced a letter, dated December 30, 1993 from General Manager, F & A to General Manager Gharibwal Cement Limited. It contains that, "the Management is pleased to approve incentive bonus for the half year ended 31st December, 1993 to all the employees of the company. The incentive bonus has been approved in consideration of achieving first half' year's budgetary production. The management expects the similar spirit in the second half year. The incentive bonus shall be equal to one month's basic salary as on 31-12-1993 plus Rs.300 to all the permanent employees who were on the present pay Roll. " It appears that Mr. Zia Rizvi had due to' inadvertence produced the letter in respect of incentive bonus for the period not relevant to the assessment year 1993-94. The Income year for the assessment year 1993-94 is ending 30th of June, 1993 the letter has been produced in respect of half year ending 31st of December, 1993, meaning thereby that it is for the period 1-7-1993 to 31st December, 1993 which is relevant for the assessment year 1994-95. However, in the interest of justice we give an opportunity to the assessee to produce similar document if available with the appellant before the assessing officer within three months of receiving of this order and if any such document is produced before the assessing officer the incentive bonus should be treated as part of salary in the same manner as bonus has been treated as part of salary. Mr. Zia has further submitted that medical reimbursement should not be treated as part of perquisites. The point in issue already stands decided against the assessee by a Division Bench of this Tribunal vide judgment reported as (1996) PTD (Trib.) 100 and, therefore, the contention is not accepted.
13. The issue relating to the excess perquisites stand disposed of in the terms of finding above.
14. The last objection is to the disallowances in the profit and loss account. Mr. Zia has not pressed the objection and consequently the additions as maintained by the learned C.I.T. (A) in the profit and loss account are hereby upheld.
15. The appeal at the instance of assessee stands disposed of as above.
16. This brings us to the appeal at the instance of department. The firs objection raised on behalf of the department is to the deletion of additions under the head cement surcharge and service charges. The learned D.R. has conceded that the issue already stands decided by the Tribunal against the department in other cases. A perusal of the assessment order also shows that the department accepted the claims up to the assessment year 1991-92. As the issue already stands decided against the department, therefore, no interference is required on our part and the impugned finding of learned C.I.T.(A) is hereby maintained.
17. The next objection raised on behalf of the department is to the reduction allowed by the learned C.I.T. (A) in the additions under the heads travelling and conveyance, rent, rate and taxes and miscellaneous expenses. A perusal of the assessment order and the first appellate order shows that the learned C.I.T.(A) reduced the addition which were found excessive. In the assessment order the specific items of unverifiable nature to the extent of disallowance were not cited and, therefore, it is held that the learned C.I.T.(A) has rightly reduced the additions to which no exception can be taken.
18. The appeal at the instance of department stands dismissed. M.B.A./514/Trib. Order accordingly.