MR. JUSTICE UMAR ATA BANDIAL.--(1). Learned ASC for the appellant submits that there is only one question of law involved in this case. That question pertains to the applicability of section 36 of the Income Tax Ordinance, 2001 ("Section 36"). Section 36 deals with long term contracts and in this respect it provides the criteria in the method for calculating profits in a case where the performance of a long term contract in the course of business by a taxpayer extends beyond one tax year. The relevant provisions of the section are contained in subsections (2) and (3) thereof. For ease of reference these are reproduced below: "(2) The percentage of completion of a long-term contract in a tax year shall be determined by comparing the total costs allocated to the contract and incurred before the end of the year with the estimated total contract costs as determined at the commencement of the contract.
(3) In this section,-- "long-term contract" means a contract for manufacture, installation, or construction, or, in relation to each, the performance of related services, which is not completed within the tax year in which work under the contract commenced, other than a contract estimated to be completed within six months of the date, on which work under the contract commenced; and "percentage of completion method" means the generally accepted accounting principle under which revenue and expenses arising under a long-term contract are recognized by reference to the stage of completion of the contract, as modified by sub-section (2)."
2. At the very outset, it is admitted that the contracts (separately) entered between the appellant and each of its customers had a construction period that extended beyond one tax year. Installments were paid over the period as agreed in the contract. Under subsections (2) and (3) of section 36, the percentage of completion method for long term contracts is to be applied for the profits of the relevant tax year to be calculated. In this respect (but subject to what is stated below), it is straightaway clear that in relation to its contract with each customer the appellant had to determine the estimated/total costs allocated to such contract at the commencement thereof and the costs allocated and incurred towards the said contract during the relevant tax year. Such calculation had to be placed on record before the respondent-tax authorities. Those costs, and any determination based thereon whether placed on record or not) is a matter of factual inquiry. It does not lie within our ambit to re- appraise that evidence for being a question of fact.
3. Insofar as the claim made before us, and also obliquely referred to in the leave granting order dated 10.10.2013, that each constructed house constituted a separate contract and therefore section 36 did not apply is not (subject to what is stated below) a forceful point because admittedly the contract of construction (and the payment schedule for each customer as per the appellant's contract with him) extended beyond one tax year.
The contracts as relevant for present purposes thus appear to have been long term contracts within the meaning of section 36 and therefore the said provision was applicable to the same.
5. Be that as it may, we were assured that the contractual documents would be produced before the Court, as recorded in our last order dated 29.10.2019. That too has not been done. It may be that under the terms of the contracts involved (and we can only assume that each one was the same, in a standardized format adopted by the appellant) the payment of the installments was not with "reference to the stage of completion of the contract", in which case the contracts may not have come within the scope of the definition of "percentage of completion method" and hence fall outside the ambit of section 36. However, absent the documents in question it would be wholly speculative to take into account any such proposition. The taxpayer being the appellant, the onus lay on it to produce the entire record, as made available to and before the learned Tribunal. This has not been done. Accordingly, the submission in absence of those documents is altogether academic and therefore carries no weight. Before concluding, we may note that learned counsel for the appellant submitted that this was a case of first impression, inasmuch as section 36 does not appear to have come before this Court for consideration before. The unsatisfactory state of the record in the present appeal has already been noted.
Therefore, any observations made herein are, for purposes other than the disposal of this appeal, to be regarded as tentative in nature. The proper (and any authoritative) interpretation, scope and effect of section 36 must await some other appropriate case in the future.
6. For the foregoing reasons, we are not inclined to interfere with the orders passed by the Commissioner, the learned Tribunal and the learned High Court. This appeal is therefore dismissed.