SALEEM AKHTAR, J.-l. The respondent is a company engaged in indenting business and deals in dyes and chemicals sale. The respondent paid Rs. 41,820/- as advance tax under section 18-A of the Income Tax Act in East Pakistan to which no credit was allowed to it. The respondent while filing its return for the assessm ent year 1972-73 claimed this amount as a current asset. Without doubting the correctness of payment of Rs. 41,820/- or the fact that no credit was given to it for the said amount the Income Tax Officer refused to allow it as a current loss. In appeal the plea raised by the respondent was accepted by the Appellate Assistant Income Tax Commissioner. The Department agitated it before the Tribunal without any success. Likewise the respondent had purchased Refundable Income Tax Bonds worth Rs. 12,650/- which was refundable after i.e years.
The Income Tax Officer did not allow it also as current loss but in appeal the respondent succeeded which was confirmed by the Tribunal. The applicant filed an application under section 66(1) which was dismissed: Now the Department has filed application under section 66(2) raising the following question: "Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that a sum of Rs. 41,820/- paid by the assessee under section 18-A and Rs.
12,650/- paid for the Refundable Income Tax Bonds were current assets lost in East Pakistan and are allowable deduction."
2. Mr. Shaikh Haider the learned counsel for the Department has contended that the amount of Advance Tax paid by the respondent is a legal liability and can not be terms as a current asset.
Under section 18-A Advance Tax is payable in the circumstances specified under sub-sections 1, 2 and 3. This amount so paid remains deposited with the Government till such time assessment is made and the tax assessed is adjusted from it. Sub-section 5 of section 18-A provides that the Central Government shall pay on amount paid as Advance Tax interest at the rate of 4% p.a. From the date of payment to the 30th day of June of the financial year from which the amount was paid.
After assessm ent and adjustment of the Income Tax assessed, if any amount deposited as Advance Tax remains in excess of the tax payable then the Central Government shall pay simple interest at the rate of 4% p.a. From the date of the provisional assessment to the date of assessm ent under section 23. Therefore the nature of the Advance Tax is an advance deposit held by the Government for adjustment towards the tax which may be assessed for the previous year.
The assessee gets a benefit for such deposit as an asset. The amount remains deposited till it is adjusted and so long it remains unadjusted interest is paid by the Government.
3. Considering these aspects and nature of payment we have to examine whether such amount can be treated as current asset. The expression 'assets' was considered in Haji Ismail Dossa vs. Monopoly Control Authority (now reported as PTCL 1984 CL 414) where at page 427/E it was observed as follows: "There are two types of assets which are clearly mentioned in the balance sheet. They are known as current assets and fixed assets. The current assets known as liquid and circulating assets are of immediate utility than other assets because they can be converted into cash or other kind of assets quickly and without much loss of time. This includes cash and such assets which can be sold, converted or consumed reasonably soon. The cash includes bank notes, cheques, money orders and currency. In the category of current assets will fall debtors accounts or bills receivable stock, merchandise, material and finished goods."
This Judgment was upheld in Sanaullah Woollen Mills Ltd. And another vs. Monopoly Control Authority (now reported as PTCL 1987 CL 175) where the meaning of the word 'asset' was explained in the following manner: "The word 'assets' is generally used in collective plural, and in commercial law it denotes the aggregate of available property stock in trade, cash etc, belonging to a merchant or mercantile company. It is also used to signify the means which a person or a bank or a corporation has as compared with his/its liabilities, that is, its identity is separate and is not inclusive of debts or liabilities but is only comparable to them."
From the aforesaid observations it can be seen that the aggregate of available property, or cash belonging to a person can be treated as an asset. In the present case the amount paid as Advance Tax remains deposited with the Government for the purposes of adjustment and is not straight way treated as a tax which is payable like a tax payable after assessment. It is a deposit set out for adjustment of a future liability. By mere fact that it has become obligatory to make payment, the Advance Tax can not be converted into liability but is a deposit to meet a future liability. In or view therefore the view taken by the learned Tribunal is correct.
4. The Refundable Income Tax Bonds were admittedly for the purpose of repayment to the respondent after 5 years. They have not been paid. Applying the principles set out above there can be no doubt about the character and nature of this amount as a current asset. We therefore answer the question in the affirmative.