' This appeal has been filed by the appellant against the Order No,638 of 2011 dated 22-2-2012 passed by the learned CIR(A-II) for the assessment year 2009 on the following grounds:--
(1) That the learned CIT(A) has erred in confirming the add back of Rs,25,373,872 claimed by the taxpayer on account of contribution to approved gratuity fund. In the financial statements it is mentioned as provision of gratuity and the word provision is in fact "payable". The gratuity fund is an approved fund and under section 21(e) such provision could only be disallowed in case of unapproved fund.
1.1 Sections 21(e) provides: any contribution made by the person to a fund that is not a recognized provident fund approved pension fund, approved superannuation fund, or approved gratuity fund; 1.2 copy of approval letter was duly filed with the tax officer.
1.3 That since the gratuity of the appellant is an approved fund, therefore the add back cannot be upheld by the learned CIR appeals.
(2) That the learned CIR(A) has further erred in confirming the add backs in the claimed expenses properly incurred by the appellant: Particulars Amount ClaimedAmount DisallowedPercentage 1 Salaries, wages and benefits.304,197,670 52,727,257 17% 2.1 That whenever what was applicable on salaries, it has been deducted and not a single salary has been paid without deducting what whenever applicable and annual statement was provided in support of this.
2.2 Employees who were getting salaries below taxable limits, monthly salary record provided to tax officer was enough documentation to prove this expense but the learned assessing alleged that no record was provided.
2.3 That the appellant has duly maintained proper records of salaries and wages and made payments through cross cheques. Twelve month complete details of salaries were provided to the tax officer.
2.4 Not a single instance of tax withholding provisions has been pin pointed by the tax officer and huge add back is made.
2.5 That the appellant had duly incurred the aforesaid expenses for the purposes of its business and if these are not to be incurred, it would not to be able to do its business. These expenses were incurred to earn its revenue.
2.6 There is no element of personal nature in any of the expenses particularly when the appellant company is a government and is twice audited by independent courses (AGPR and external audited chartered accountants) and no such deficiency has ever been pointed by ant of these auditors.
2.7 That not a single specific deficiency in any payment has been pointed out ley the learned Assessing Officer and therefore, in the light of directions of the superior courts and CBR, the add backs are liable to be deleted.
2.8 The learned Assessing Officer be accordingly directed to accept the salary expense as claimed and the add back be kindly deleted.
(3) That the learned CIT(A) has erred in remanding the add back under lease expenses back to the Assessing Officer for verification which was duly incurred and properly claimed by the appellant and the CIR(A) cannot set aside an issue in view of the amended provisions sections 130 and 131 of the Income Tax Ordinance, 2001: Particulars Amount ClaimedAmount DisallowedPercentage 1 Lease installment 4,962,915 1,455,460 29% 3.1 That the claimed lease installments are- proper, correct and verifiable even from third party i,e, leasing company and merely the cash flow statement could not be based for such disallowance.
Even the cash flow statement could not be based for determining the quantum of this amount and this fact was submitted to the tax officer. The tax officer could have asked for a lease schedule and agreement, payment vouchers for all 12 months and she would have easily confirmed and proved this claim.
3.2 That both the learned CIR and Assessing Officer were provided with the proof of payment of lease installments however it has been ignored.
3.3 The learned Assessing Officer be accordingly directed to accept the expenses as claimed.
2. Brief facts of the case are that the taxpayer is private limited company. That return for the year under appeal filed was deemed to be assessment under section 120 of the Income Tax Ordinance, 2001. Thereafter the case was selected for audit under section 177 of the Income Tax Ordinance, 2001 regarding which the taxpayer was duly initiated. During audit proceeding various discrepancies were noted and the taxpayer was confronted with related issues through show cause notices and after considering reply assessment was amended under section 122(1) of the Income Tax Ordinance, 2001. Being dissatisfied with the treatment given by the Officer Inland Revenue the taxpayer preferred appeal before learned CIR(A-II) who after considering the facts, partially maintained the order of Assessing Officer.
3. Feeling aggrieved with the treatment given by the learned CIR (A-II) the Taxpayer has came up in 2nd appeal before this Tribunal on the grounds mentioned above.
4. We have heard the arguments and scrutinized the record. First issue is that an amount of Rs,25,373,872 claimed by taxpayer on account of contribution to approved gratuity fund has been disallowed. In the financial statement it is mentioned as provision of gratuity. As per learned AR it is ascertained liability for gratuity which is an approved fund and under section 21(e) such provision could only be disallowed in case of unapproved fund. The contention of the learned AR has due weight this figure is allowable in view of calculation for entitlements of gratuity of various employees. This issue is answered in favour of Taxpayer and against the department.
Add backs in Salary, Wages due to non-deduction of Withholding Tax.
5. Learned AR states that the appellant has duly maintained records of salaries and wages. He made payments through cross cheques. Twelve month complete details of salaries were provided to the tax officer. He further states that not a single instance of tax withholding provisions has been pin pointed by the tax officer and huge add back is made. The appellant had duly incurred the aforesaid expenses for the purposes of its business and if these are not to be incurred, it would not to be able to do its business which is purely services provision to clients as these expenses were incurred to earn its revenue. There is no element of personal nature in any of the expenses particularly when the appellant company is a government and is twice audited by independent courses (AGPR and external audited chartered accountants) and no such deficiency has ever been pointed by ant of these auditors. He also states that not a single specific deficiency in any payment has been pointed out by the learned Assessing Officer and therefore, in the light of directions of the superior courts and CBR, the add backs are liable to be deleted.
6. As per learned AR, tax has not been deducted where salaries are below threshold. In this scenario amount disallowed on percentage basis is not warranted. We set aside the orders passed by both of officers below and remand the case to OIR to reanalyze the details as which of the payments are below threshold. Setting aside and remanding upon the issue of lease installment, we are of the view that none of right of Taxpayer is prejudiced because he can show record at the lower forum and get relief, then pass a speaking order after providing an opportunity of hearing to the taxpayer.
7. The appeal stands disposed of in the manner indicated above.