' Through this reference application under section 133 of the Income Tax Ordinance, 2001 ("Ordinance"), following questions of law, asserted to have arisen out of impugned order dated 06.02.2008, passed by the learned Income Tax Appellate Tribunal, Lahore Bench, Lahore ("Appellate Tribunal"), have been proposed and pressed for our opinion:---
1. "Whether under the facts and in the circumstances of the case, the learned ITAT was justified in holding that no interest was received by the Respondent Company and as such was not subject to deduction of tax under section 50(7D) of the repealed Income Tax Ordinance, 1979?
2. Whether under the facts and in the circumstances of the case, the learned ITAT was justified in holding that tax cannot be charged under section 52A of the repealed Income Tax Ordinance, 1979 on the payment of interest shown in the books of accounts?
2. Brief facts of the case are that respondent company obtained loan from banks which was further advanced to the Ghee units. The interest income received by the respondent company was set off against finance charges paid to Banks. Respondent company was not a financial institution, therefore, the provisions of Section 50(7D) of the repealed Income Tax Ordinance, 1979 ("repealed Ordinance") were applicable. The tax was charged at the rate of 10% on the interest received from Ghee units by the respondent company. The assessment order was passed on 21.03.2005 under section 162 of Income Tax Ordinance, 2001, read with Section 52A of repealed Ordinance, by Assessing Officer. Feeling aggrieved, respondent preferred an appeal before Commissioner Income Tax (Appeals), Zone-III, Lahore ("CIT(A)"), which was accepted vide order dated 13.06.2005.
The applicant department preferred second appeal before learned Appellate Tribunal, which was accepted vide order dated 04.01.2007. Consequently, order passed by CIT(A) was vacated and matter was remitted to the first appellate authority for proceeding de novo. The CIT(A) vide its order dated 31.07.2007 again deleted the tax charged along with the additional tax. The applicant department filed appeal before Appellate Tribunal, which was dismissed vide impugned order dated 06.02.2008, which has been assailed through instant application before this Court.
3. Learned counsel for the applicant submits that learned Appellate Tribunal was not justified in holding that no interest was received by the respondent company and as such was not subject to deduction of tax under section 50(7D) of the repealed Ordinance. He adds that tax can be charged under Section 52(A) of the repealed Ordinance on the payment of interest shown in the books of account. He adds that impugned order is not sustainable in the eye of law.
4. On the other hand, learned counsel for the respondent company defends the impugned order and submits that learned counsel for the applicant has failed to point out any illegality or legal infirmity in the impugned order, thus, the same is liable to be upheld under the law.
5. Arguments heard. Record perused.
6. The operative part of impugned order reads as under:-- "5. We have heard the learned counsel for both the parties. Before we embark upon giving our findings on the issue, it is pertinent to reproduce operative paragraph passed by the learned CIT(A) which by itself is a self-speaking order: "The matter has been considered in the light of above scenario of the case, written arguments and counter-comments of the department. Record available has also been examined which reveals that no interest income have been received actually from the Ghee units working under the control of GCP. The entries appearing in the accounts regarding set off the interest income received against financial charges paid to back is simply book adjustment. As such the tax deduction under section 50(7D) on interest not actually received by the appellant company does not arise and consequently recovery of the same through invoking section 162 of the Income Tax Ordinance, 2001 read with section 52A is improper. Perusal e4 the record further reveals that appellant company has not received any payment in respect of interest from the year 1998 till final settlement of loan in the year 2003 by the Government of Pakistan. The said picture is also evident from the reconciliation statement produced before this court showing the principal amount and mark-up thereon payable by the appellant company to banks and details of units current account for the period 1.7.99 to 30.6.2000. In view of above discussion, order passed under section 162 of the Income Tax Ordinance, 2001 read with section 52A of the Repealed Ordinance does not stand the test of appeal as recovery of withholding tax under section 50(7D) from the recipient in the whole scenario of the case does not arise. Hence tax charged @ 10% along with additional tax under section 86 is deleted in toto."
6. Perusal of the aforementioned paragraph from the impugned judgment clearly shows that no interest whatsoever was received by the assessee company the entries appearing in accounts regarding set off were simply book adjustment. We would also like to add that assumption of jurisdiction by assessing authority by issuance of notice under section 52 made the case illegal and unjustified in the eye of law. For the foregoing reasons we are not inclined to interfere in the impugned order which is hereby maintained."
7. The above reproduced operative part shows that learned Appellate Tribunal has given findings of fact that no interest whatsoever was received by the assessee company, rather, the entries appearing in accounts regarding set off were simply book adjustment.
8. It is now well settled that in the exercise of its advisory jurisdiction, this Court has to decide reference application, on facts and circumstances founded by Appellate Tribunal, which is the last fact finding forum. High Court cannot change findings of facts arrived at by the Appellate Tribunal.
Reference can be made to "Messrs F. MY. Industries Ltd. v. Deputy Commissioner Income Tax" (2014 SCM R 907).
9. Since no question of law is arising out of impugned judgment and the decision by Appellate Tribunal is based on findings of fact, therefore, we decline to exercise advisory jurisdiction.
10. This Reference Application is decided against the applicant department and in favour of respondent company.
11. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal as per Section 133(5) of the Income Tax Ordinance, 2001.