1. Through these four appeals the appellant-department has objected against the four separate impugned orders of the learned CIR(A) dated 13-6-2011 for the tax years 2006 to 2009 on the following common grounds; - "(2) That the learned CIR(A) was not justified to annul the combined order passed by the DCIR under section 161 of the Income Tax Ordinance, 2001 dated 18-12-2010 whereby the taxpayer company was treated in default for the non-deduction of income tax under section 151(1)(d) of the Income Tax Ordinance, 2001 from the amount paid on account of mark up to its associated company, therefore, tax amounting to Rs.15,966,088 was charged.
(3) That as per audited accounts of the company submitted along with the return of income, an amount of Rs.15,966,088 was paid as mark up. The taxpayer company did not disclose as per accounts type of transaction on which mark up was paid, therefore, several letters were issued for explanation but none was responded to. Finally, show cause notice under sections 161/205 of the Income Tax Ordinance, 2001 bearing No.272 dated 28-9- 2010 was issued specifically to recover tax deductible @ 10% amounting to Rs.17,034,302 from payment of mark-up made at Rs.170,343,032 which was not deducted at the time of payment.
(4) That the company actually, borrowed loan to whom mark up was paid but did not deliberately bring them on record to avoid facing departmental enquiries for probing their source of *MC.
2. Statutory phrase 'instrument of any kind' contained in clause (d) of subsection (1) of section 151 of the Income Tax Ordinances Ordinance squarely covers the loan transaction, thus, profit/mark up paid was subjected to deduction of tax under section 151 ibid. The statement of the taxpayer company recorded by the worthy CIR(A) at last para of page-5 of the appellate order that "no loan documents/instruments were written. Decision to pay mark up on the equity of the associated companies was taken in the Board meeting of the directors" is after thought and a collusive arrangement to keep the factual position in dark."
2. We have heard the learned representatives from both the sides and have also perused the impugned orders of the learned CIR(A) and other available records of the case. The brief facts of the case are that the taxpayer in this case is a private limited company engaged in the manufacturing and sale of yarn. The company during the tax years under review has paid mark up to its associated company which in the opinion of the DCIR are hit by mischief of section 151 and he has, therefore, held that the taxpayer in this case should have deducted tax at the rate of 10% at the time of making payments of the said mark up and has, therefore, charged the same by treating the taxpayer as taxpayer in default for all the four years under review. We have found that the DCIR has invoked the provision of section 151 in spite of the fact that a plain reading of the section show that the case of the present taxpayer is not hit by any of sub-clauses of section 151. The only sub- clause wherein companies have been made responsible to deduct tax is clause (d) of section 151 which is regarding payments made in respect of profits of any bond, certificate, debenture, security or instrument of any kind. But in this case, the DCIR has failed to point out as to which of the above said five items the case of the present taxpayer was involved on which profit was paid by the taxpayer attracting clause (d) of section 151(1). The learned DR has contended that the agreement regarding payment in this case is an instrument of payment which could be declared as such by this Tribunal. But we are of the view that whenever department has to burden a taxpayer with any charge, the onus squarely lies upon it to levy the same as per clear and unambiguous letter of the law which has not been done in this case. Neither the learned DCIR has bothered to carefully read the relevant provision i.e. Section 151 to bring the taxpayer in the ambit of any clause of said section nor has given any basis for invoking the said provision of law. He has passed a combined order in a careless manner without invoking the specific/relevant clauses.
3. Before the learned CIR(A) on behalf of the taxpayer it was explained that no loan documents/instruments were in written in this case and the decision to pay mark up on the equity of the associated companies was taken in the board meeting of the directors who hold common directorships in these companies. An affidavit from the General Manager of the taxpayer company in this regard was also filed before the learned CIR(A) denying any written agreement or any kind of instrument. We are of the view that the learned CIR(A) has rightly held that the mark-up in this case was not paid through some instrument of the loan on the basis of which section 151(1)(d) can be invoked. We are further of the view that the profit paid to the recipients who have not even been identified by the DCIR must have now been offered for taxation as same relates to the tax years 2006 to 2009 and are taxable at normal rate being income from other sources. The learned DR representing the appellant department has failed to establish that the tax in this regard has not been paid. Under such circumstances provisions of section 161(1B) come into play by excluding the clauses (a) and (b) of the said section 161(1B). According to which where at the time of recovery of tax under subsection (1) it is established that the tax which was to be, deducted from the payment made to a person or collected from a person has meanwhile been paid by that person, no recovery shall be made from the person who had failed to collect or deduct the tax but the said person shall be liable to pay default surcharge at the rate of eighteen percent per annum from the date he failed to collect or deduct the tax to the date the tax was paid. This Tribunal has already held in so many cases that the provision of section 161 is not a charging provision as the amount deducted from this mode is an adjustment against the demand of the recipient of the money. The reliance in this regard may be placed on the decisions of this Tribunal reported as 2008 PTD (Trib.)
4. 1683 and 2003 PTD 1167. Keeping in view all these facts, circumstances and the legal position we are of the view that the learned CIR(A) has rightly annulled the orders passed by the taxation officer under section 161 of the Ordinance for the four years under review. The impugned orders of the learned CIR(A) in the circumstances of the case are, therefore, upheld and the four appeals filed by the department are dismissed.
5. C.M.A./76/Tax(Trib.) .