2020 PLP 904 (PTD)

Through instant Reference Application under Section 133 of the Income Tax Ordinance, 2001 ("Ordinance of 2001"), the following question of law, asserted to have arisen out of impugned order dated 09.08.2010, passed by learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), has been proposed for our opinion:- "Whether under the facts and in the circumstances of the case, the learned Appellate Tribunal was justified to make its own interpretation of section 34(5) of the Income Tax Ordinance, 2001?"

2. Brief facts of the case are that assessment for the tax year 2005, filed by respondent-taxpayer, was amended under Section 122(5A) of the Ordinance of 2001 to determine income at Rs.162,281,433/- which was inclusive of addition of Rs.25,266,317/- on account of bad debts/receivable written off made under Section 34(5) of the Ordinance of 2001. Feeling aggrieved, respondent-taxpayer challenged the said order in appeal before CIR (Appeals), which was partly allowed vide order dated 31.03.2007 and addition made under section 34(5) was reduced to Rs.16,342,153/-. Being dissatisfied, applicant-department and respondent-taxpayer filed their respective appeals before learned Appellate Tribunal, wherein addition has been deleted and both the appeals were disposed of. Hence, this Reference Application.

3. Learned counsel for respondent-taxpayer, at the very outset, submits that no question of law is arising out of impugned Appellate Tribunal's order, which is even otherwise based on findings of facts and subsequent payment of the amount in question was gratuity payments. When confronted, learned Legal Advisor for applicant-department, despite effort, he could not give any satisfactory reply.

4. Arguments heard. Available record perused.

5. Perusal of impugned order shows that learned Appellate Tribunal observed that subsequent payment of the amount in question was gratuity payments, but this aspect was not earlier dilated upon by the fora below. It is the stance of respondent-taxpayer that the amount was paid to the employee after the conversion date i.e. January 1, 2003, hence, the provisions of Section 34(5) of the Ordinance could not be invoked even on facts of the present case. Perusal of record reveals that learned Appellate Tribunal, after appreciating the available record, has given findings of facts as well and also observed that said provisions can only be invoked in case of a deduction that was claimed in a tax year or tax years covered under the regime of the Ordinance of 2001. The relevant part of impugned findings is reproduced hereunder:- "

The AR further contended that the aspect of the subsequent payment of the amount in question as gratuity payments have throughout been skipped from consideration. It is the contention of the AR that the subject amount was paid by the appellant to the employee after the conversion date i.e. January 1, 2003 and accordingly, it has been argued that the provisions of section 34(5) of the Ordinance could not be invoked even on facts of the present case. The arguments of both the parties have been heard. We are convinced with the contentions of the learned AR that the provisions of section 34(5) of the Ordinance are only invoked in case of a deduction that was claimed in a tax year or tax years covered under the regime of the present Ordinance. We, therefore, delete the addition being made beyond the jurisdiction of the provisions of the present Ordinance."

6. Under the law, only substantial legal questions can be examined, which may arise from an order passed by the Appellate Tribunal, whereas questions which require no interpretation of any provision of law, rules or regulations, or its application on undisputed facts of a case, do not constitute a question of law to be decided by this Court under the reference jurisdiction. Reference is made to Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax (2014 SCMR 907), Commissioner Inland Revenue, Zone-I v. Messrs Ltd. Industrial Chemicals (Pvt.) Ltd. (2017 PTD 756), Commissioner of Income Tax v. Ghee Corporation of Pakistan (Pvt.) Ltd. (2017 PTD 1167), Commissioner Inland Revenue v. Messrs Adeel Brothers (2017 PTD 1579) and Commissioner Inland Revenue, Zone-II v. Al-Hamad International Container Terminal (Pvt.) Ltd. (2017 PTD 2212).

7. Since the decision by learned Appellate Tribunal is based on findings of facts, therefore, we decline to exercise advisory jurisdiction. This Reference Application is decided against applicant-department.

8. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal as per section 133(5) of the Income Tax Ordinance, 2001. SA/C-23/L Reference dismissed.