1989 PLP 762 (PTD)

FAKHAR-UD-DIN SIDDIQUI (JUDICIAL MEMBER).--This appeal of the assessee company relating to charge year 1986-87 has been filed against the order dated 29-8-1987 passed by the learned C.I.T. (A), Zone-1, Lahore.

2. The assessee, a private Limited Company, was incorported for the first time in the year under review. Nature of business was sale of milk. The assessee company filed return declaring loss of Rs.9,44,660 claiming exemption of income under clause 99/101 of the First Schedule to the Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance). The I.T.O. allowed the assessee's claimed exemption of income. An addition of xxx Rs.2,71,913 was made by the I.T.O. under section 13 (1) (d) of the Ordinance with the prior approval of the learned I A C on account of under statement of cost of land. The I.T.O. did not accept the assessee's plea regarding completion of the building of the factory till 30-6-1986 and after good deal of discussion of details of construction an addition of. Rs.10,31,777 was made due to disparity in the declared cost of construction of the building and the estimate reported by the Inspector. The I.T.O. also made addition of Rs.8,15,585 under section 13 (1) (a) of the Ordinance for lack of evidence regarding deposits made by the three Directors.

3. On appeal, the learned C.I.T. (A) remitted the matter of addition of Rs.8,15,585 to the I.T.O. for de novo decision as deposits made by the Directors could not be added under section 13 (1) (a) of the Ordinance at the hands of the company. Addition of Rs.2,71,913 made on account of cost of land was deleted. Out of third addition of Rs.10,31,777 the first appellate authority allowed relief of Rs.2,00,000 holding that cost of boundary wall estimated by the I.T.O. at Rs.5,00,000 was excessive. The first appellate authority estimated the cost of boundary wall at Rs.3,00,000.

4. The assessee's AR did not press ground No.2 as taken up in the memo of appeal regarding setting aside of addition of Rs.8,15,585 as after the order of the first appellate authority the I.T.O. has not repeated the addition. On the issue of addition of Rs.8,31,777 as maintained by the learned C.I.T. (A), the assessee's AR contended that the same could not be made in this year because no depreciation of building has been allowed. The D.R. after perusal of record stated that the assessee company having not claimed any depreciation of building of the factory the same was not allowed.

5. Taking into consideration the fact that the I.T.O. has not allowed any depreciation of building in this year, we feel that addition made under section 13 (1) (d) of the Ordinance on account of cost of construction of the building is not tenable as such addition could be made in the year of completion of building. The amendment as made in Section 13 of the Ordinance regarding addition to be made in the year of discovery being not retrospective in nature was not applicable to this year. In this view of the matter, we vacate the orders of the departmental officers on the issue of addition made under section 13 (1) (d) of the Ordinance for low cost of construction of building and remit the matter to the I.T.O. for de novo decision in accordance with law. M.BA./622/T Order accordingly.