' AQEEL AHMED ABBASI, J.---Through instant reference application, the applicant has proposed the following questions of law, which according to learned counsel arise from the impugned order dated 09.01.2007 passed by the learned Income Tax Appellate Tribunal (Pakistan), Karachi, in Income Tax Appeal No,1150/KB of 2005 for assessment year 2001-2002:--
(i) Whether in the facts and circumstances of the case, the learned ITAT was justified in law in holding that no income chargeable to tax had accrued to the taxpayer when it had received payments from its client?
(ii) Whether the payment received by the full constitutes consideration chargeable to tax as fee for technical services?
2. Learned counsel for the applicant has read out the impugned order passed by the Appellate Tribunal in the instant case as well as the orders of the authorities below and submits that both the Appellate Forum have erred in law and facts while setting aside the assessment order passed by the Taxation Officer, as according to learned counsel, the assessment order passed by the Taxation Officer was based on proper appreciation of facts and relevant provision of law i,e, Section 12(5) and section 80(AA) of Income Tax Ordinance, 1979. Per learned counsel, the respondent is a non- resident company, engaged in the business of providing investment and other services to its foreign clients, whereas, during the relevant assessment year i,e, 2001-2002, certain amounts were received by the non-resident company from its agent i,e, Messrs Tapal Energy (Pvt.) Limited towards providing services of independent engineers and other consultants. Per learned counsel, the amount received by the respondent on this account is taxable under section 12(5) read with section 80(AA) of the Income Tax Ordinance, 1979. It has been prayed that the impugned order passed by the Appellate Tribunal may be set-aside and questions proposed by the applicant department may be answered in favour of applicant and against the respondent.
3. Conversely, learned counsel for the respondent at the very outset submits that the proposed questions are not questions of law nor the same arise from the impugned order passed by the Appellate Tribunal in the instant case, as according to learned counsel, the findings as recorded by the Appellate Tribunal with regard to nature of the amount, which has been taxed by the Taxation Officer under the deceiving provisions of section 12(5) read with section 80(AA) of the Income Tax Ordinance, 1979, is based on findings of facts. It has been further contended by the learned counsel that treatment meted out by the Taxation Officer to such receipts towards services of independent engineers and other consultants is totally erroneous in facts and the law as well, for the reasons that such amount was infact paid towards reimbursement of expenses, which were incurred by the respondent on behalf of its resident company i,e, Messrs Tapal Energy (Pvt.) Limited for arranging independent engineers and other consultants, whereas, the respondent did not earn any income or profit whatsoever, in respect of such payments. Learned counsel for the respondent, while referring to the orders passed by the two Appellate Forums in the instant case, as well as the contents of the letter dated 06.06.2003, which according to learned counsel for the respondent, was submitted before the Taxation Officer along with annexures in response to Show Cause Notice, has submitted that the nature of the entire payments along with supporting documents was explained to the Taxation Officer. However, per learned counsel, such detailed reply and the evidence has been totally ignored by the Taxation Officer deliberately, while passing the impugned order. Per learned counsel, neither the contention of the respondent in this regard has been recorded nor the evidence produced including the Auditor's report, has been refuted or dislodged by the Taxation Officer, while treating such amount as income of the respondent, whereas, the said amount was paid to the independent engineers and other consultants on behalf of Messrs Tapal Energy (Pvt.) Limited by the respondents, which was infact reimbursed to the respondent as an expense already made and the same cannot be treated as income of the respondent in terms of section 12(5) read with section 80(AA) of the Income Tax Ordinance, 1979. It has been prayed that instant reference filed by the applicant department is misconceived, whereas, no question of law arises from the impugned order passed by the Appellate Tribunal, hence, the same is liable to be dismissed.
4. We have heard the learned counsel for the parties, perused the impugned order passed by the Appellate Tribunal in instant case, order of Commissioner (Appeals) Karachi as well the assessm ent order passed by the Taxation Officer with their assistance. From perusal of the order passed by the Taxation Officer in the instant case, it appears that the Show Cause Notice issued by the Taxation Officer, wherein the Taxation Officer proposed to invoke the provisions of section 12(5) read with Sections 80 (AA) of the Income Tax Ordinance, 1979 in respect of the amount received towards providing services of independent engineers and other consultants on behalf of Messrs Tapal Energy (Pvt.) Limited, the detailed reply vide letter dated 06.06.2003 along with annexure was furnished to the Taxation Officer by the respondent. Copy of such letter has been placed on record by the learned counsel through statement dated 08.02.2013 to demonstrate that the Taxation Officer deliberately did not take into consideration the reply or the documents attached thereto.
There is no cavil to the legal proposition that provisions of section 12(5) read with section 80(AA) of the Income Tax Ordinance, 1979 can be invoked where any amount is received by a non-resident by way of fee for providing technical services, whereas, the whole of such amount shall be deemed to be income of the non-resident company and liable to be charged Q 15% of such income.
However, while invoking such provisions of law, the Taxation Officer is required to satisfy itself that the amount so received is in the nature of income by way of fee for technical services. In other words, such receipt should have the character of income, which may accrue or have arisen during relevant income year to a non-resident company. In the instant case, it appears that the respondent has not provided any direct services to the resident company i,e, Messrs Tapal Energy (Pvt.) Limited of independent engineers and other consultants, which were arranged by the respondent, who were paid on behalf of Messrs Tapal Energy (Pvt.) Limited, which fact can be verified from record available in the shape of a vouchers and invoices to the third parties and also reflected in the Auditor's report in respect of relevant income year, however, it appears that such evidence has not been taken into consideration by the Taxation Officer. We are of the opinion that the Taxation Officer while invoking the deeming provisions of section 12(5) read with section 80(AA), could not discharge the onus, which primarily lies on the Taxation Officer to bring certain receipts within the definition of income. On the other hand, while ignoring the detailed reply and the evidence produced in this regard, including Auditor's report, entries in the accounts of respondents to this effect, and also the vouchers issued by such engineers and consultants, arbitrarily added the said amount as income by invoking deeming provisions of section 12 (5) read with section 80
(AA) of the Income Tax Ordinance, 1979. Whereas, the Commissioner (Appeals) as well as Appellate Tribunal after having taken into consideration the entire evidence and the material produced by the respondent in this regard, has categorically held that the disputed amount was paid towards reimbursement expenses incurred by respondent, which does not have the characteristics of income, hence, cannot be taxed by invoking the provisions of section 12(5) read with section 80(AA) of the Income Tax Ordinance, 1979. We do not find any error or illegality in the concurrent findings on facts as recorded by the Appellate Tribunal in this case, which otherwise depicts correct legal position and does not require any interference by this Court. Accordingly, instant reference application being devoid of any merits, is hereby dismissed along with listed application, whereas, the questions proposed by the applicant under the facts and circumstances of the case, are not questions of law, as there was a factual dispute created by the taxation officer with regard to nature of the receipt, which has been elaborately dealt with by both the Appellate Forums in detail in instant case.
' Instant reference application stands dismissed in the above terms.