2003 PLP 1527 (PTD)

NASIM SIKANDAR, J.

Lahore Bench of the Income Tax Appellate Tribunal at the instance of the petitioner Messrs Kawality Paper Mills (Pvt.) Ltd., Lahore has framed and referred following questions of law which were agreed to have arisen out of their order, dated 31-10-2000:

(1) "Whether an amount shown as share deposit money over and above the authorised capital in the accounts,, can, be treated as a loan by the Income Tax Authorities? (2) "Whether in the facts and circumstances of the case, mere fact that share deposit money was received in advance on the promise of allotting shares of the company subsequently could be treated as loan within the meaning of section 12(18) of the Ordinance? (3) "Whether in the facts and circumstances of the case, the provisions of section 66-A were attracted? (4) "Whether the respondent had jurisdiction to modify the final order of the Deputy Commissioner of Income-tax under section 66A of the Ordinance? (5) In the facts and circumstances of the case, whether deemed income under section 12(18) of the Ordinance could be assessed and taxed particularly when it was exempt under the Second Schedule read with section 14 of the Ordinance?

2. Learned counsel for the petitioner at the outset claims that the issue with regard to application of provisions of section 12(18) of the late Income Tax, Ordinance, 1979 as these existed at the relevant time to similar facts stands resolved by this Court in a judgment reported as re: Micropak (Pvt.) Ltd. v. Income Tax Appellate Tribunal, Lahore (2001 PTD 1180). The appeal of the revenue against the aforesaid judgment was subsequently dismissed by the Hon'ble Supreme Court of Pakistan through a judgment now reported as re: I.A. CIT v. Micro Pak. (Pvt.) Limited (2002 PTD 877).

3. Learned counsel for the Revenue has attempted to distinguish the present case from the facts prevailing in the aforesaid judgment. His main stress is on the fact that in the case in hand the share advance money was received even before a resolution for increase in the authorized capital of the company was passed, Therefore, according to him, the assessee-company in this case could not receive any amount as a consideration for allotment of shares and accordingly, in his view, the learned revising authority was justified in treating the advance as loan.

4. However, we will not agree. Even if what has been said for the Revenue is accepted as correct the fact remains that the amount in question was never claimed as loan in the account of the assessee company. As recorded in the aforesaid judgment of this Court in re: Micropack (Pvt.) in order to tax an amount by invoking the provisions of section 12(18) of the late Income Tax Ordinance, 19'79 at the relevant time the claim of tae amount by an assessee as a "loan" was a condition A precedent. Where an assessee had not claimed the disputed amount as a loan the Assessing Officer or the revising authority could not treat the same as loan to invoke these provisions. The later development in law when in the year 1998 these provisions were completely substituted and the word "advance" as well as "gift" were added could not be made applicable to the facts in hand. That aspect of the matter was also considered by us in the aforesaid judgment.

5. Since the Revenue has not been able to convince us of any distinguishing feature between the facts in hand arid those which fell for our consideration in the aforesaid case which was subsequently approved by the Hon'ble Supreme Court of Pakistan, we will disapprove the exercise of jurisdiction under section 66-A of the late Income Tax Ordinance, 1979 by the concerned IAC. For various reasons recorded in the aforesaid judgment of this Court, we return a negative answer to Question No.1 (as re-cast by the Tribunal), 2 and

3. Question No.4 having already been disallowed does need to be answered while Question No.5, in our view, does not out of the order of the Tribunal. Therefore, we will decline to the same. Reference disposed of, S.A.K./K-195/L Order accordingly