Present
Mr.
Justice Faisal Arab.
Mr. Justice Aqeel Ahmed Abbasi.
Date
of hearing : 21.11.2011
Date
of judgment : .11.2011
Applicant : Pakistan
Steel Mills Corporation (Pvt) Ltd., through
Mr. Aga Zafar Ahmed, Advocate.
Versus
Respondent : Commissioner Inland Revenue (Legal Division), LTU through Mr.
Jawaid Farooqui
JUDGMENT
Aqeel
Ahmed Abbasi, J. Through instant reference application,
the applicant has proposed the following questions of law, which are said to
have been arisen from the impugned order dated 21.01.2010 passed by the
Tribunal in I.T.A No.438/KB/2009.
1. Whether on the facts and circumstances of the case, the
Learned Tribunal was right to hold that earlier decisions of the Tribunal
mentioned in impugned order are distinguishable and not relevant to the case of
the Applicant, when the said judgments deal with the issue in fact viz. issue
of exempted income from selling of extra land to downstream industries?
2. Whether on the facts and circumstances of the case, earlier
decisions of the divisional bench of Learned Tribunal on similar facts and
grounds can be ignored by two member bench of the Learned Tribunal, which were
binding on the Respondents?
3. Whether the notice issued and the order passed under section
122 (5A) of the Income Tax Ordinance was illegal, without legal authority and
void ab initio?
4. Whether on the facts and circumstances of the case, the
Learned Tribunal was right to vacate the order of the learned Commissioner
Inland Revenue (Appeal) and restore the impugned amended assessment order made
under section 122 (5A) of the Income Tax Ordinance, 2001?
5. Whether the Learned Tribunal erred in law to presume the
amount of Rs.569,754,000/- as the income of the Applicant when no evidence was
produced by the Respondents in support of the claim that Rs.569,754,000/-
represents income from Gulshan-e-Hadeed Society?
2. Brief
facts for the disposal of the instant reference application are that the
Taxpayer/Applicant is a State owned Private Limited Company/a corporation and
derives income from manufacturing and sale of Steels. For the year under consideration
the Taxpayer/Applicant has claimed a sum of Rs.569,754,000/- as exempt from
sale of extra land to down stream industries. The learned Additional
Commissioner treated the same amount as income from business of land
development known as Gulshan-e-Hadeed Scheme, therefore, finding the order
erroneous as well as prejudicial to the interest of revenue the Additional
Commissioner of Income Tax issued show cause notice and amended the order under
section 122 (5A) of the Income Tax Ordinance, 2001 by adding the amount of
Rs.569,754,000/- to the income of the taxpayer treating income as business
profit on development of housing scheme, Gulshan-e-Hadeed.
2. Learned
counsel for the applicant has contented that ITAT/ATIR has wrongly treated the said amount as development of
land/housing scheme i.e. Gulshan-e-Hadeed. Per learned counsel, the advances
received from allottees of Gulshan-e-Hadeed were shown in the financial statement
as “advances” and not charged to
profit and loss account {Note 21.3 of the financial statement). It has been
submitted by the learned counsel that there is mis-reading of evidence by the
ATIR. Per learned counsel, in previous years the issue viz. ‘whether the amount
received on allocation of plot of land to downstream industry, is an income as
an adventure in the nature of trade?’ came before the Hon’ble Appellate Tribunal
Inland Revenue, Karachi in earlier years (1995-1996, 1996-1997 and 1997-1998).
The learned Tribunal was pleased to hold that the amount received on allocation
of plot to downstream industries by the applicant cannot be treated an income
and is not an adventure in the nature of trade. In support of his contention,
learned counsel has placed reliance on the following judgments:
1. Commissioner of Income Tax, Madras v, P.K.N.Co. Ltd., AIR 1966
SC 1256
2. Janki Ram Bahadur Ram v. Commissioner of Income Tax AIR 1965
SC 1898
3. Commissioner of Income Tax, Nagpur v. Sutlej Cotton Mills
Supply Agency Ltd., 100 ITR/AIR 1975 SC 2106
4. CIT v.Mehmood Ali (Sindh High Court) 2008 PTD 82
5. Maj. General (Retd) Jalauddin v. ACIT (Sindh High Court) 2011
PTD 1377
6. International Traders Ltd v. CIT 1967 Tax 46
7. Soraj Kumar v. CIT West Bengal AIR 1959 SC 1252
8. Industrial Management v. CIT (Sindh High Court) PLD 1978
Karachi 673
3. Conversely,
learned counsel for the respondent has contended that the Taxation Officer has
specifically mentioned that the taxpayer is engaged in the business of
development of land and then sale to the various allottees, which is a
business, and the amount received is income from business and not a exempt
capital gain as alleged by the taxpayer. Per learned counsel the details of land
sold out as well as expenses incurred on leveling of land have been asked from
the Taxpayer/Applicant by the Taxation Officer vide notice letter dated
16.08.2008 but the same was deliberately not furnished which shows the
intention of the Taxpayer/Applicant towards earning of business income. Learned
counsel for the respondent has submitted that the transaction being adventure
in the nature of trade has correctly been added by the Taxation Officer into
the income of the Taxpayer/Applicant. Per learned counsel, the Commissioner of
Income Tax (Appeals) has erred in deleting the addition. In support of his
contention, he has placed reliance on the following judgments:
1. Hyderi Construction Co. Ltd., Karachi v. Commissioner of
Income Tax, Central Karachi 1967 PTD 242
2. 1967
Tax (16) 46
3. Syed Akhtar Ali v. Commissioner of Income Tax, Hyderabad 1994
(69) Tax 38
4. We
have heard both the learned counsel for the parties and perused the record. From
perusal of the record, it is seen that the issue of developing of land and
selling it out to the allottees on profit was not before the Tribunal. The
earlier decision of the Tribunal bearing ITA Nos.978/KB of 1998-99, ITA
No.1306/KB and of 1998-99 are distinguishable and not relevant in the instant
case. The order of the Alternate Dispute Resolution Committee (ADRD) is also
not relevant and has no binding effect on the Tribunal. The Commissioner of
Income of Tax (Appeals) has not controverted the findings of the Taxation
Officer about the earning of income by the Taxpayer from development of land
for housing scheme which was with full intention of profit earning having
provided modern facilities clearly shows the intention of the taxpayer to sell
it with profit. The taxpayer has allegedly shown the amount as exempt income
from alleged disposal of extra land for setting up downstream industries.
JUDGE
JUDGE