ORDER SHEET

IN THE HIGH COURT OF SINDH AT KARACHI

Present: Mr. Justice Aqeel Ahmed Abbasi

Mr. Justice Aziz-ur-Rehman, JJ

I.T.R.A. No.157 of 2016

___________________________________________________________ Date Order with signature of Judge

___________________________________________________________

Hearing of Case:

For hearing of main case.

(Fresh notices issued to the respondent

for 10.8.2017, as per Court’s order)

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10-08-2017

Mr. Muhammad Sarfaraz Ali Metlo, Advocate for Applicant.

Mr. Muhammad Aleem, Advocate for Respondent.

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AQEEL AHMED ABBASI, J : -- Through instant Reference Application, the applicant has proposed the following question, which according to the learned counsel, is a question of law arising from the impugned order dated 24.02.2016 passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi in ITA No.225/KB/2013 (Tax Year 2010): -

“Whether under the facts and circumstances of the case, the learned ATIR was justified to uphold that tax Written Down Value (WDV) of assets sold through auction to employees by the taxpayer should be adopted whereas section 68(3) of the Income Tax Ordinance, 2001 empowers the Commissioner to determine the Fair Market Value of an asset if it is ordinarily not ascertainable?”

2. Learned counsel for the applicant, after having read out the impugned order passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi, submits that the Appellate Tribunal has erred to hold that tax (WDV) of assets sold through auction to employees by the taxpayer should be adopted, whereas, according to learned counsel, the respondent did not ascertain the Fair Market Value of the motor vehicles, which have been sold to its employees on the basis of Written Down Value.

3. Conversely, learned counsel for the respondent has controverted the submissions of the learned counsel for the applicant and submits that the question proposed through instant reference application is not a question of law arising from the impugned order passed by the Appellate Tribunal, as according to the learned counsel, there is concurrent finding of the two Appellate Authorities, which is based on the facts and circumstances of the case, whereby, both the Appellate Authorities have been pleased to hold that the concerned Commissioner did not adopt any reasonable method to determine the Fair Market Value under section 68 of the Income Tax Ordinance, 2001. Per learned counsel, it has come on record that in order to ascertain fair market value of the vehicles, respondent invited tenders; however, since no reasonable price was offered during such process, therefore, the motor vehicles were sold out to the employees, however, on a higher value, which was offered pursuant to tenders or could be fetched in the open market. It has been further contended that the Taxation Authorities have not been able to show, as to how the Fair Market Value of such fixed assets was not ascertainable, nor any efforts have been made by the concerned Commissioner to ascertain the Fair Market Value in terms of section 68(3) of the Income Tax Ordinance, 2001, therefore, the addition in this regard was totally illegal and unjustified. It has been prayed that the impugned order does not suffer from any factual and legal error, which may be upheld, whereas, the question proposed is misconceived, hence instant reference may be dismissed in limine.

4. We have heard the learned counsel for the parties, perused the record with their assistance and have also examined the legal provisions relating to the determination of Fair Market Value and disposal of fixed assets under the Income Tax Ordinance, 2001.

5. From perusal of the order passed by the Commissioner in the instant case, it appears that while making addition under section 68(3) in the Income Tax Ordinance, 2001, no reasonable basis whatsoever, has been adopted by the Commissioner while determining the Fair Market Value, nor any finding has been recorded to the effect, as to how such market value was not ascertainable, or Written Down Value of the motor vehicles sold to the employees by the respondent’s company, was less than the prevailing Fair Market Value of such assets, the Commissioner Inland Revenue (Appeals-I) Karachi after having examined the relevant facts of the case has been pleased to decide the subject controversy as under: -

“Ground No.2 – Tax Years 2009 and 2010

The second is also common ground regarding addition of Rs.317,000/- and Rs.807,000/- made during the Tax Years 2009 and 2010 respectively u/s. 68(3) of the Income Tax Ordinance, 2001 on account of fair market value of sale of assets.

The A.R. argued that the Appellant has adopted a legal method to ascertain fair market value for the sale of vehicle by calling tender and selling assets to higher bidders. However, the apparent fair procedure is normally defeated when the assets particularly motor vehicles are sold to employees of the company, the officer has not provided a reasonable basis of his estimations u/s68(3), identification of assets and to whom the assets (Vehicles were sold out. Therefore the present addition can not be upheld being devoid of material justification. It would be fair to adopt tax WDV if higher than declared sales value.”

6. Similarly, the Appellate Tribunal Inland Revenue (Pakistan) Karachi while dilating upon the subject controversy has approved findings of the Commissioner (Appeals) in the following terms: -

“7. No doubt u/s 68 (3) the Commissioner is competent to determine the price if the same is not ordinarily ascertainable as provided u/s.68 (1) of the Income Tax Ordinance, 2001. In the present case, the order of the learned Commissioner (A) shows that the taxpayer has adopted a legal method to ascertain fair market value for the sale of vehicle by calling tender and selling assets to higher to bidders. No doubt such apparent procedure defeated when the motor vehicles are sold to employees of the company. In the present case, no reasonable basis of estimations u/s 68 (3) of the Income Tax Ordinance, 2001 provided by the assessing officer. No identification of vehicle and to whom the same were sold mentioned in the order of the learned assessing officer. In such circumstances, the learned CIR (A) has rightly given the findings that it would be fare to adopt tax WDV if higher than declared sales value. The findings of the learned CIR (A) with regard to ground No.2 of the present appeal are just and proper and in accordance with law, therefore, no interference is warranted under the law.”

7. When learned counsel for the applicant was confronted to point out any factual and legal infirmity in the above finding as recorded by two appellate forums, with particular reference to the provisions of section 68 of the Income Tax Ordinance, 2001. Learned counsel could not point out any such factual and legal infirmity in the aforesaid concurrent findings as recorded by the two appellate forums in the instant case.

8. In view of hereinabove facts and circumstances of the case, we are of the opinion that the order passed by the Appellate Tribunal does not suffer from any factual error or legal infirmity, on the contrary, it depicts correct legal position as emerged from the facts and circumstances of the instant case, as well as from examination of the provisions of section 68 of the Income Tax Ordinance, 2001. We may further observe that no legal controversy or question arises in the instant case, which may require any opinion from this Court in its reference jurisdiction.

9. Accordingly, we do not find any substance in the instant reference application, which is hereby dismissed in limine.

J U D G E

Farhan/PS