| Case ID |
ff8d4144-9a16-4805-a1c3-d9a0db0f545f |
| Body |
View case body. Login to View |
| Case Number |
I.T.A. No. 654(KB) of 1976-77 |
| Decision Date |
Jan 14, 1978 |
| Hearing Date |
|
| Decision |
The appeal was allowed, and the order levying additional tax under Section 18(7) of the Income Tax Act was cancelled. The tribunal found that the payments made by the assessee company to the non-resident company were not chargeable to tax under the Income Tax Act, as the services were rendered outside Pakistan and no element of profit was involved in the payments. The tribunal emphasized that the burden of proof was on the assessing officer to demonstrate that income had accrued to the non-resident in Pakistan. The tribunal concluded that the additional tax imposed on the assessee company was unwarranted and unjustified, as the payments were strictly on a cost basis and did not include any profit. |
| Summary |
In the case of I.T.A. No. 654(KB) of 1976-77, the Appellate Tribunal Inland Revenue addressed the issue of additional tax levied on a public limited company engaged in the manufacture and sale of fertilizers. The tribunal examined whether payments made to a non-resident company for engineering services were subject to income tax. The tribunal found that the payments, totaling Rs. 2,37,877.17, were made strictly on a cost basis and did not involve any profit, thus exempting them from tax under the Income Tax Act, 1922. The tribunal highlighted the absence of evidence from the assessing officer to support the claim that the payments were chargeable to tax. Furthermore, the tribunal underscored the agreement between the Government of Pakistan and the non-resident company, which stipulated that tax would only be charged on payments attributable to services rendered within Pakistan. This case illustrates the importance of proper documentation and evidence in tax assessments and reinforces the principle that tax obligations must be clearly established before imposing additional tax liabilities. The decision is significant for companies engaged in international transactions, emphasizing that payments for services rendered outside Pakistan may not be subject to local taxation if no profit is involved. |
| Court |
Appellate Tribunal Inland Revenue
|
| Entities Involved |
Assessing Officer,
Ali Athar,
E. E. Chemical Incorporated
|
| Judges |
A.A. DARESHANI,
MIAN ABDUL KHALIQ,
A.A. ZUBERI
|
| Lawyers |
Ali Athar, Advocate,
Mohammad Ahmad, D.R.
|
| Petitioners |
Not available
|
| Respondents |
Not available
|
| Citations |
1979 SLD 58,
(1979) 40 TAX 31
|
| Other Citations |
Not available
|
| Laws Involved |
Income Tax Act, 1922
|
| Sections |
4,
4(1)(c),
18(3)(B),
18(3)(7),
43
|