| Case ID |
059a2874-cdf7-4c67-99ce-1184dedb3aa6 |
| Body |
View case body. Login to View |
| Case Number |
I.T.A. No. 307/PB of 2001-02 |
| Decision Date |
May 27, 2002 |
| Hearing Date |
Apr 18, 2002 |
| Decision |
The Income Tax Appellate Tribunal ruled that the action taken by the Inspecting Additional Commissioner under Section 66-A of the Income Tax Ordinance, 1979 was uncalled for. The Tribunal restored the order of the Assessing Officer, concluding that the income of the non-resident German company, Voith Hydro Kraftwerkstechnik GmbH & CO, KG, was taxable in Pakistan only to the extent it was attributable to its permanent establishment in Pakistan. The Tribunal emphasized the importance of distinguishing between on-shore and off-shore activities in accordance with the tax treaty between Pakistan and Germany, thereby upholding the principle that only income directly connected with the operations in Pakistan is subject to taxation. The Tribunal also addressed the validity of expense claims in the absence of declared income, affirming that expenses can be allowed even when no income is reported, provided they are substantiated. |
| Summary |
In the case of I.T.A. No. 307/PB of 2001-02, the Income Tax Appellate Tribunal dealt with the taxation of a non-resident German company, Voith Hydro Kraftwerkstechnik GmbH & CO, KG, involved in the supply and installation of turbines for hydropower projects in Pakistan. The key legal issue revolved around the applicability of the Income Tax Ordinance, 1979, particularly Sections 66A and 62, and the implications of the Convention for Avoidance of Double Taxation between Pakistan and Germany. The Tribunal determined that the income attributable to Voith's permanent establishment in Pakistan was the only income subject to taxation, thereby rejecting the Inspecting Additional Commissioner's stance that all business transactions should be taxed. This decision underscores the importance of proper jurisdictional understanding in international taxation, especially regarding the delineation of income derived from on-shore versus off-shore activities. The Tribunal's ruling clarified that expenses may be permissible even in the absence of declared income, provided they are adequately documented. This case is significant for tax professionals and businesses operating across borders, emphasizing compliance with international tax treaties and local laws. |
| Court |
Income Tax Appellate Tribunal
|
| Entities Involved |
WAPDA,
Voith Hydro Kraftwerkstechnik GmbH & CO, KG
|
| Judges |
FAZLUR REHMAN KHAN, JUDICIAL MEMBER,
MRS. ABIDA ALI, ACCOUNTANT MEMBER
|
| Lawyers |
Anjum A. Sheikh, F.C.A. for Appellant,
Qaiser Ali, D.R.,
Abdul Wadood, I.A.C. for Respondent
|
| Petitioners |
Not available
|
| Respondents |
Not available
|
| Citations |
2002 SLD 441,
2002 PTD 3027,
(2003) 87 TAX 264
|
| Other Citations |
(1999) 80 Tax 17 (Trib.),
172 ITR 358,
116 ITR 868,
CIT v. Gabriel India Ltd. 203 ITR 108
|
| Laws Involved |
Income Tax Ordinance, 1979
|
| Sections |
66A,
62,
11,
12
|