Asim Hafeez, J: - This reference application by the department is directed against judgment dated 13.10.2017 ('order impugned') of learned Appellate Tribunal Inland Revenue Lahore ('Appellate Tribunal'), whereby appeal filed by respondent taxpayer , against the order of disallowance of deductions with respect to provisioning of gratuity payments, was allowed and additions made under the head 'provision for gratuity', were accordingly deleted. The matter pertains to tax year 2008.
2. Though various questions of law, statedly arisen out of the order impugned, were proposed for determination, on examination whereof, it appears that real controversy orbits following question of law - also recorded in the order dated 30.01.2018 - which is reproduced hereunder for facility; i) "Whether on the facts and in the circumstances of the case, the learned ATIR was justified in holding that contribution to gratuity fund which is not recognized by the Commissioner is an admissible expenditure, whereas section 21 (e) of the Income T ax Ordinance, 2001 clearly states that no such deduction shall be allowed?
3. Learned counsel representing department contends that Appellate Tribunal had erred in law and erroneously ordered deletion of additions made by disallowing expenditure with respect to provisioning for gratuity payments - claimed as allowable expenditure during the relevant tax year - which deletions by Appellate Tribunal are contrary to the mandate of section 21(e) of the Income Tax Ordinance, 2001 (Ordinance, 2001). Contends that, the authorities below had rightly disallowed expenditure for provisioning of gratuity payments, in accounts, as no contribution was made towards an approved gratuity fund, condition precedent for claiming deductions as an admissible expenditure in terms of section 21(e) of Ordinance, 2001. Adds that reliance of the Appellate Tribunal on the judgment reported as "Messrs Nida-i-Millat (Pvt). Ltd Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2006 PTD 1085) was misplaced. The issue relating to the adjustment of Mark-up income with Mark-up expenses and appropriation in terms of section 67 of Ordinance, 2001 was not pressed.
4. Conversely , learned counsel for the respondent taxpayer placed reliance on the cases reported as "Messrs Nida- i-Millat (Pvt). Ltd Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2006 PTD 1085 ), Commissioner of Income Tax v. Oriental Dyes and Chemical Co. Ltd (1992) 65 Tax 254, and "Messrs Nida-i-Millat (Pvt). Ltd Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2001 PCTLR 196), and "Commissioner Legal Division v. Civil Aviation Authority [(2008 97 TAX 301], to support order of the Appellate Tribunal. Learned counsel, when asked, contends that no gratuity fund was established, let alone approved, nor any contribution was made to any such fund. Adds that in view of adoption of mercantile system of accounting - accrual based accounting - provisioning for gratuity payment, being an ascertained liability though payable at later stage, would constitute an allowable expense and entitled the respondent taxpayer to claim deductions accordingly. Adds that liability to pay gratuity payments arose in the wake of statutory obligation, created under the provisions of Industrial and Commercial Employment (Standing Orders) Ordinance 1968. Learned counsel averred that section 24(g) of erstwhile Income Tax Ordinance 1979 (repealed Ordinance) and section 21(e) of Ordinance, 2001 are to be treated as pari-materia, hence, to be construed accordingly.
5. Arguments heard.
6. In the wake of submissions made, following two pertinent issues arose, equally relevant for the determination of the question of law proposed, which for facility are prcised hereunder; a) Whether section 24(g) of repealed Ordinance and section 21(e) of Ordinance, 2001, are to be treated as pari- materia, hence, be construed as such OR both the provisions differ in their scope, construction and application? b) whether the judgments, relied upon and referred to by the learned counsel for respondent taxpayer, provide any rule of law / ratio decidendi to be followed while determining the question of law proposed?
7. When confronted, learned counsel for the respondent averred that section 24(g) of repealed Ordinance and section 21(e) of Ordinance, 2001, are pari-materia, and therefore, the judgments pronounced regarding treatment of provision for gratuity payments and construction of section 24(g), ibid, are fully applicable. Before we embark upon determination of question regarding pari-materia nature of the provisions, it is expedient to reproduce the sections hereunder:- Section 24 (g) of repealed Ordinance; any sum paid to any provident fund, superannuation fund or gratuity fund, not being a recognized provident fund, an approved superannuation fund or an approved gratuity fund ; Section 21(e) of Ordinance, 2001; 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;[emphases supplied]
8. A quick reading may give an impres sion that section 24(g) is pari-materia to section 21(e) - in its scope, construction and application - but when same is analyzed and construed in the context of Explanation (b) to section 23 and section 32 of the repealed Ordinance [prescribing Method of Accounting] both show conspicuous and consequential distinction in their scope and effect, with respect to their construction and applicability . The distinction between expressions 'sum paid' and 'contribution made' as employed in section 24(g) of repealed Ordinance and 21(e) of Ordinance, 2001, appears more striking when examined in view of Rule 11 of Part-III of Sixth Schedule to the Ordinance of 2001, and read with Rule 14 of Part-I of Sixth Schedule to the Ordinance of 2001, [in addition to Explanation (b) to section 23 of repealed Ordinance]. It is expedient to reproduce Explanation
(b) to section 23 of repealed Ordinance, Rule 1 1 and 14, ibid, which read as; "Explanation; Section 23 - Deductions;
(a) the expression "any expenditure", as used in clauses (xii), (xiii) and (xiv), includes expenditure in the nature of capital expenditure; and
(b) the expression "paid", as used in this section and section 18, 24 and 31, means actually paid or incurred according to the method of accounting upon the basis of which the income is computed.
Rule 1 1 of Part-III to Sixth Schedule;
11. Definitions. - In this Part, unless the context otherwi se requires, "contribution", "employee", regulations of a fund" and "salary" have in relation to gratu ity funds, the meaning assigned to those expressions in rule 14 of Part I in relation to provident funds.
Rule 14 of Part-I to Sixth Schedule;
14. Definitions . - In this Part, unless the context otherwise requires.
(a).......
(b)......
(c).......
(d) "contribution" means any sum credited by or on behalf of, any employee out of his salary or by an employer out of his own money , to the individual account of an employee, but does not include any sum credited as interest; [emphasis supplied]
9. A bare perusal of section 24(g) of repealed Ordinance and especially expression 'sums paid' - in the absence of Explanation (b) to section 23 of repealed Ordinance - manifest that deductions, with respect to the gratuity payments, are admissible only if paid towards an approved gratuity fund and not otherwise. However , section 24(g), ibid, when construed in the light of Explanation (b) of section 23 of repealed Ordinance implied that gratuity payment actually paid or incurred accord ing to the method of accounting - in terms of section 32 of the repealed Ordinance - upon the basis of which the income is computed, becomes admissible allowance or deduction. The significance of Explanation (b) of section 23 of repealed Ordinance and discretion to adopt any method of accounting under section 32 of repealed Ordinance cannot be undermined or ignored while determining admissibility of deductions under section 24(g) of the repealed Ordinance. Now we come to moot question.
Whether mandate of section 21(e) of the Ordinance, 2001 was subjected to choice of method of accounting adopted [Mercantile / Accrual method of accounting as claimed to have applied by the respondent taxpayer], while determining admissibility of deductions, claimed upon provisioning of gratuity payments - though payable at the time of retirement of an employee.
10. Section 21(e) of Ordinance, 2001 only envisages contribution of gratuity payment - to qualify as admissible expense - to be made towards an approv ed gratuity fund and not otherwise. The expression 'contribution' refers to payments actually made and not the contingent liabilities merely incurred / provis ioned. It is notable that no such explanation qua the expression 'contribution' was provided with respect to section 21(e) of Ordinance, 2001 - as done in the case of 24(g) of repealed Ordinance, which permits allowance of deductions upon provisioning of gratuity payments under mercantile / accrual based accounting method, as claim ed by the respondent taxpayer .
Section 34 of Ordinance, 2001 also supports the legislative intent expressed through section 21(e) of Ordinance, 2001, for the purposes of determining the scope of contributions made with respect to gratuity payments. While examining section 34 of the Ordinance, 2011, it is apt to make reference to section 32 of the repealed Ordinance, to highlight conspicuous dissimilarities therein. It is expedient to reproduce section 32 of repealed Ordinance and section 34 of Ordinance, 2001, which are reproduced hereunder for facility; Section 32 of the repealed Ordinance.
Method of accounting . - (1) Income, profits and gains [except income from dividends, shall be computed for purposes of sections 17, 19, 22, 27 and 30 in accordance with the method of accounting regularly employed by the assessee.
(2) Notwithstanding anything contained in sub-section (1), the Central Board of Revenue may, in the case of the any business or profession, or class of business, or profession, or any other source of income or any class of persons,-
(a) require, by a general or special order published in the official Gazette that the accounts shall be maintained in such form and in such manner as may be prescribed; and
(b) prescribe the manner in which payments of commercial nature shall be made or commercial transactions recorded, And thereupon, the income, profits and gains of the assessee shall be computed on the basis of the accounts or records maintained or payments made accordingly .
(3) Where no method of accounting has been regularly employed, or if the method employed is such that, in the opinion of the Deputy commissioner, the income, profits and gains cannot be properly deduced therefrom, or where, in any case to which sub-section (2) applies, the assessee fails to maintain accounts, makes payments or records transaction in the form or manner, as the case may be, prescribed under the said sub-section, then, the income, profits and gains of the assessee shall be computed on such basis and in such manner as the Deputy Commissioner thinks fit.
(4) For the purpose of sub-section (3), where the Central Board of Revenue deems necessary , it may, by a general or special order in writing, prescribe rates of net profit or gross profit and condition s of their applicability in respect of any trade, business or profession for any assessment year or years; Provided that such rates shall be applicable in case of an assessee at his option to be exercised in writing before finalization of assessment proceedings for an assessment year .
Section 34 of Ordinance, 2001 Accrual-basis accounting; (1) A person accounting for income chargeable to tax under the head "Income from Business" on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person.
Section (2) Subject to this Ordinance, an amount shall be due to a person when the person becomes entitled to receive it even if the time for discharge of the entitlement is postponed or the amount is payable by installments.
Section (3) Subject to this Ordinance, an amount shall be payable by a person when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy .
Section (5)............
Section (5-A) ............
Section (6)...........
[emphasis supplied]
11. A perusal of section 34 of Ordinance, 2001 and especially sub-section (3) thereof, established that method of accounting employed is 'subject to the Ordinance' which supports the mandate extended to section 21(e) of Ordinance, 2001, which is otherwise a special clause - dealing with the issue of gratuity payments. There is no gainsaying that 'general provision, if any in same statute cannot operate to control specific provision'. In these circumstances, section 21(e), ibid, is a special provision providing for allowable deductions, only if gratuity payment is contributed to an approved gratuity fund - irrespective of method of accounting adopted. If the argument of the learned counsel is adverted to, it would render section 21(e), ibid, redundant and superfluous. Mere adoption of mercantile method of accounting would neither dilute nor nullify the effect and applicability of section 21(e), ibid. Therefore, no exception can be claimed regarding provision for gratuity under mercantile method of accounting, alleged to have been adopted by the respondent taxpayer.
Hence, allowable deductions can only be claimed qua gratuity payments, only if contribution is made towards an approved gratuity fund. And no allowable deduction, in lieu of gratuity payments, can be claimed on the pretext of adopting mercantile / accrual method of accounting under the Ordinance, 2001 - which legislative intent was reaffirmed by use of expression 'subject to the Ordinance' in sub-section (3) of section 34 of Ordinance, 2001.
12. In view of the reasons above, there is a clear distinction between section 24 (g) of repealed Ordinance and section 21(e) of Ordinance, 2001, which distinctive features make this case distinguishable from the facts and circumstances of other cases and judgments otherwise rendered therein, quoted as precedents and claimed to laid dicta, applicable to present case as well. Therefore, section 24(g) of repealed Ordinance cannot be construed or treated as pari-materia to section 21(e) of Ordinance.
13. This brings us to second issue that whether the judgments relied upon by the respondent' s counsel are applicable to the facts and circumstances of the case and the ratio therein holds any binding precedent qua determination of question of law proposed for our opinion. Appellate Tribunal has relied on judgment in the case of "Messrs Nida-i-Millat (Pvt). Ltd Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2006 PTD 1085 ). It is expedient to reproduce relevant portion thereof in order to adjudge its applicability qua facts of this case. It reads as; "We have heard the learned counsel for the parties at some length. We find that at no stage of proceedings any question has arisen whether the assessee being a limited company was a person incapable of incurring expenses on travelling, telephone and the like which was liable to be deleted and disallowed for the purpose of computing taxable income of the assessee. The other two questions Nos. 1 and 2 were, however, answered by the High Court in affirmative in view of the judgment of this Court in the case of Commissioner of Income Tax v. Oriental Dyes and Chemical Co. Ltd. (1992) 65 Tax 254. It was held that the amount of gratuities payable to employees was a proper charge on the income of the petitioner and was, therefore, admissible as an expense. The High Court was justified in taking the view that question No.3 was never, raised before the Tribunal for the purposes of section 136 of the Ordinance. Even otherwise question No.3 was irrelevant to the real dispute between the parties."[emphasis supplied]
14. The matter in issue in the case of "Messrs Nida-i-Millat (Pvt). Ltd, Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2006 PTD 1085 ) relates to the assessment years 1977- 78 to 1986-87 [carried out under the provisions of repealed Ordinance). It is notable that August Supreme Court of Pakistan, while upholding the determination by the Lahore High Court in the case of "Messrs Nida i-Millat (Pvt). Ltd Lahore Vs. Commissioner of Income Tax Zone-I, Lahore" (2001 PCTLR 196), refused leave to appeal. To appreciate the contentions of counsel for respondent taxpayer , it is apt to reproduce relevant portion of this court' s judgment in case of Messrs Nida-i- Millat (Pvt). Ltd Lahore' s case, (supra), which reads as; "3. Heard the learned counsel for the parties. Both of them agree that the issue if gratuity payable to employees is an allowable expense has finally been settled in affirmative by the Hon'ble Supreme Court of Pakistan in re: Commissioner of Income-tax v. Oriental Dyes & Chemical Co. Ltd. 1992 SCMR 763. Accordingly , the first two questions must be answered in the affirmative to hold that' the amount of gratu ities payable to employees is a proper charge on the income of the assessee and as such is admissible as an expense."
15. This court in the case of "Messrs Nida-i-Millat (Pvt). Ltd Lahore" (supra) while determining the lis before it - relating to assessment years 1977-78 to 1986-87 under the repealed Ordinance - followed ratio of the judgment reported as Commissioner of Income Tax v. Oriental Dyes and Chemical Co. Ltd (1992 SCMR 763) = [(1992) 65 TAX 254 (S.C.Pak), wherein the Apex Court has declined grant for leave to appeal, while relying in the judgment in case of Commissioner Income Tax, Karachi v. Messrs Pakistan Security Printing Corporation Ltd. (1985 PTD 413). To understand the context, it is expedient to reproduce relevant portion of the judgment in the case of Oriental Dyes and Chemical Co. Ltd (supra), reproduced hereunder; 'High Court after hearing the counsel for both parties answered the question in negative following two decisions of the same High Court rendered earlier in the case reported as Commissioner of Income tax, Karachi v. Messrs Pakistan Security Printing Corporation (1985 PTD 413) and Messrs S.J.G, Fazal Elahi Ltd. v. Commissioner of Income tax, Central Zone, Karachi 1989 PTD 579. In fact latter reported case has followed rule laid down by former reported case in which there is detailed discussion in the light of sections 10 (2) and 2(6BB) of Income tax Act No.XI of 1922 on description of `free reserve, gratuity and trading liability'. In support of the proposition, reliance is placed upon a large number of reported cases, relevant paragraph from the aforementioned judgment in 1985 PTD 413 is reproduced as under: "We have quoted the relevant portion of the order of the Income tax officer hereinabove in para. 4, from which it is evident that every year the respondent assessee made a provision for the gratuity of the staff on the basis of the emoluments received by them and the amount was credited to this account, on the basis of the accounting principle that the amount of gratuity is earned every year by the employees and thus it is debitable against the profits of the year in which it is earned though it is payable only when the employees retire from the service. The learned Income tax Appellate Tribunal in its order, dated 3rd April, 1973 has held that the reserve for gratuity has been created to meet ascertained liability and, therefore, cannot partake of the nature of free reserve. In other words, it is not the actual amount of the liability incurred by the respondent assessee towards its employees in respect of the gratuity of the years in question nor it is the case of the department that the respondent assessee was not liable to pay the above gratuity either under the contract or under the statutory provision. Factually the case proceeded before the Income tax Officer as well as before the learned Income tax Tribunal on the assumption that the respondent assessee's liability to pay gratuity is a legal liability, and it is not an ex gratia payment by the respondent to its employees. We may place on record that Mr. Shaikh Haider, learned counsel for the appellant has fairly cited the cases which were in fact against the department, namely, the cases referred to hereinabove in paras. 5(a)(vii)(viii) and (ix) which are the decisions of the Madras High Court and which clearly lay down that the liability of gratuity ascertained each year is a proper charge against P&L accounts though the liability to pay may accrue subsequently. Reference may also be made to the House of Lord's case Owen (H.M.
Inspector of Taxes) v. Southern Railway of Peru Ltd. 1953-56 TC 602 referred to hereinabove in para. 5(b)(vi), in which it was held that provision for the payment of compensation to the assessees' rate of pay etc. is a proper charge on P&L upon the basis of proper principles of commercial accountancy from year to year. Further, reference may also be made to the case of the Indian Supreme Court reported in (1969) 731 TR 53 quoted hereinabove in para. 5(b)(vii), in which it has been held with reference to a scheme of gratuity that liability already accrued though to be discharged at a future date would be a proper deduction while working out the profits and gains of business under the accepted principles of commercial practice and accountancy and that it is not necessary that the amount actually be expended or paid."
16. The case of Oriental Dyes and Chemical Co. Ltd (supra) followed dictum in the case of Messrs Pakistan Security Printing Corporation (supra), wherein the question of provisioning of gratuity, as payable, was determined in the context of 'free reserves' in terms of SRO 116 dated 1 July 1968, issued in exercise of powers under section 2(6-BB) of Income Tax Act 1922 and gratuity was treated as trading liability in terms of sub-section 2-A of section 10 of Income Tax Act 1922. The judgments referred hereinabove, deal with the matters, raised and discussed in terms of the Income Tax Act 1922 and repealed Ordinance, having no bearing on the question raised before us. The decisions in the cases of "Messrs Nida-i-Millat (Pvt). Ltd Lahore" (supra) and Oriental Dyes and Chemical Co. Ltd, (supra) are, otherwise, leave refusing orders and do not enunciate any question of law, in terms of Article 189 of Constitution of Islamic Republic of Pakistan, 1973.
17. The learned counsel has referred to another judgment reported as "Commissioner Legal Division v. Civil Aviation Authority [(2008 97 TAX 301] = 2008 PTD 647, which also has no application with reference to the controversy at hand and facts of this case. It is expedient to reproduce relevant part thereof, which reads as; "Whether on the facts and in the circumstances of the case, the learned ITAT was justified in law to hold that provision made in the books of account of compensated absences was allowable expenses even though it was not based on the demand in this regards?"
4. We have examined the proposed question in the light of the arguments of the learned counsel and the judgments relied on by the learned counsel and the Tribunal in support of their order. We find that the Tribunal had relied on their order dated 29-10-2005 for the assessment year 2001-2002 in which relying on the judgment of this Court reported in 1990 PTD 248 Karachi, they had held that the provision in the books of accounts under mercantile basis of account is an allowable deduction. The learned counsel has been unable to say with certainty if a reference has been filed for the previou s assessment year. However , despite this lack of assistance we decided to examine the question independently of the T ribunal's order for the previous year .
5. On an examination of the judgment relied on by the learned counsel we find that in this case the Honourable Peshawar High Court has held that word `paid' used in context of Bonus in section 10(2)(x) could not be extended to cover any provision of payment of sum at the end of year unless the actual payment of the sum involved is made during the accounting year .
6. The perusal of the judgment of the Sindh High Court relied on by the Tribunal also relates to Income Tax Act, 1922, but in this case this Court has analyzed section 10(2)(x) in the light of section 10(2)(v) which reads as under: - -- "10(2)(v).--- In subsection "(2)" paid means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under this section."
7. On the basis of interpretation of this section, this Court has held that if the taxpayer followed the mercantile basis of accounting then he is entitled to the deduction of the bonus provided during the year despite the fact that it was not paid during the year. We have also examined the judgment of the Honourable apex Court reported in the case of Commissioner of Income Tax v. Oriental Dyes and Chemical Co. Ltd. reported in 1992 SCMR 763 in which thest Honourable Apex Court had held that the provision for gratuity being an ascertained liability is an allowable expenses even, though not actually paid during the year ."
[Emphasis supplied] 18. The case of Civil Aviation Authority deals with interpretation of section 10(2)(v) of Income Tax Act 1922 - which, by and large, portrayed similarity to the Explanation (b) to section 23 of repealed Ordinance, hence, lacked any proximity to the facts of this case and implications of section 21(e) of Ordinance, 2001. We lay our hands on the judgment reported as Commissioner of Income Tax, Companies-I, Karachi v. Messers M.M. Silk Mills Limited, Karachi (2006 PTD 460), wherein question of provision of gratuity in terms of sections 2(4) & 24(g) of repealed Ordinance came up for adjudication. It is expedient to reproduce relevant portion thereof, which reads as; "10. We find substance in the contention canvassed by Mr. Jawaid Farooqui. In the first instance, if the law requires that an approved gratuity fund is to be created and any sum paid to such approved gratuity fund is to be allowed and if no such approved gratuity fund exists then the person claiming the benefit is required to act in accordance with the law and cannot be allowed to take premium for circumvention of or non-compliance with the requirements of law. Secondly, even if no fund has been created formally, the provision created to which the gratuity accrued but not actually paid is transferred and on the basis whereof claim for gratuity is preferred itself amounts to creation of gratuity fund. The reason being that the expression "fund" in the ordinary common parlance means accumulation of money for some specific purpose. We are of the opinion that the expression `fund' used in section 24(g) is to be taken as an ordinary expression and not as a term of art. The rules relating to approved gratuity fund are contained in Part-III of Sixth Schedule to the Income Tax Ordinance, 1979. The term gratuity fund has not been defined in these rules. However, the term "approved gratuity fund" has been defined in section 2(4) of the Income Tax Ordinance, 1979, to mean a gratuity fund which has been and continues to be, approved by the Commissioner in accordance with the rules contained in Part-III of the Sixth Schedule. Thus, the expression "approved gratuity fund" has been defined in the Income Tax Ordinance, 1979, but the expression `gratuity fund' has not been defined in the Ordinance or rules framed thereunder. The result is that the expression shall not be treated as term of art and is to be given ordinary meaning as is understood in common parlance.
14. Consequent to the above discussion, it is held that the Assessing Officer rightly disallowed the claim for provision of gratuity on account of clear bar contained in section 24(g) of the Income Tax Ordinance, 1979. It is further held that no such bar was contained in the Income Tax Act, 1922, and therefore, this Court while considering the provisions contained in the Income Tax Act, 1922, held in the cases referred to above, that the provision of gratuity was admissible expenditure for the reason that it pertained to the ascertained liability . After introduction of bar contained in section 24(g) of the Income Tax Ordinance, 1979, the earlier judgments of this Court delivered on consideration of the provisions contained in the Income Tax Act, 1922, are no more applicable for the reason that no provision analogous to section 24(g) of the Income Tax Ordinance, 1979, was there in the Income Tax Act, 1922. It is therefore, held that the ITAT was not justified in confirming the order of C.I.T.(A), whereby the provision for gratuity was held to be an inadmissible expense under the law contained in the Income Tax Ordinance, 1979." [Emphasis supplied]
19. The case of Messers M.M. Silk Mills Limited, Karachi (supra) elucidated section 24(g) of repealed Ordinance and distinguished earlier judgments on the subject including the case of Messrs Pakistan Security Printing Corporation (supra) - though no reference therein was made to the judgment in the case of Oriental Dyes and Chemical Co. Ltd (supra). In Messers M.M. Silk Mills Limited, Karachi' case (supra) their Lordships have not discussed and considered the scope and import of section 21(e) of Ordinance, 2001 and effect of Explanation (b) of section 23 of repealed Ordinance and section 32 of the repealed Ordinance, while interpreting section 24(g) of repealed Ordinance. The case of Messrs M.M. Silk Mills Limited, Karachi (supra), lends no support to address the question of law proposed, more particularly when section 24(g) of repealed Ordinance is not Pari-Materia to section 21(e) of the Ordinance, 2001.
20. In brief, the judgments referred by the learned counsel for the respondent taxpayer, some of which are also relied upon by the Appellate Tribunal, may be authorities with respect to their facts and circumstances and laws discussed therein, but same have had no bearing / relevance with regard to the questions of law proposed for our opinion and determination in this case. It is notable that none of the judgments, referred had discussed and interpreted section 21(e) of Ordinance, 2001 and its peculiarity, when compared with section 24(g) of the repealed Ordinance. Therefore, mere provisioning of gratuity payments - payable in future subject to the happening of contingency - under mercantile method of accounting would not constitute compliance of section 21(e) of Ordinance, 2001 and allow deductions claimed in this behalf.
21. In view of the aforesaid, we opine that Appellate Tribunal was not justified to hold and declare that mere provisioning for gratuity payments constitute allowable / admissible deductions, in terms of section 21(e) of Ordinance, 2001. Our answer to the question of law, therefore, is in Negative. This reference application is decided in favour of the department and against the respondent taxpayer.
22. Office shall send a copy of this order under seal of the Court to the learned Appellate Tribunal, Inland Revenue as per Section 133(5) of the Income Tax Ordinance, 2001.