Law: Income Tax Ordinance, 2001

Section: 133(1)(5)

Law: Income Tax Ordinance, 1979

Section: 22(c)

Income Tax Ordinance, 2001 (the Ordinance of 2001)-- ----S. 133(1)--Assessing officer--Proportionated total amount and added a sum of Rs. 20,000,000/- as income for each tax year--Respondent taxpayer was filed an appeal before CIT--Dismissed--Second appeal before AT--Accepted--Demand of tax--Burden of proof--Non-competition amount as income--Challenge to--It is well settled law that anything which is not income cannot be treated as income--It, therefore, follows that receipt is not sole test of chargeability--The initial burden to show that a receipt is income taxable under law, is on applicant- department--This burden of proof cannot be shifted on respondent-taxpayer to quote any provision of law, which specifically declares that sum received by respondent- taxpayer was exempt from income tax instead of specifying charging provision purportedly covering it--Needless to say that in revenue cases one must look at substance of thing and not at manner in which account is stated. 1996 SCMR 1470 and PLD 1985 SC 109. Income Tax Ordinance, 1979 (the Repealed Ordinance)-- ----S. 22(c)--Non-competition fee--Question of--Whether non-competition fee falls within mischief of charging provision as claimed or not--Determination--Under law, non-competition fee is considered a capital receipt--Unlike a revenue receipt, which is a substitution of income and is chargeable to tax, whereas a capital receipt is received in exchange for source of income and is not chargeable to tax unless specifically made taxable by charging provision of taxing law--Applicant-department has failed to show that compensation received by respondent-taxpayer for non-competition has nexus with any source of income taxable under law, and is, thus not covered under any charging provision of repealed Ordinance of 1979--Non-competition fee, received by assessee, is a capital receipt which is not chargeable to income tax under provisions of repealed Ordinance of 1979. 1999 PTD 3270 ref. Capital Receipt-- ----A capital receipt, which is not covered under clear language of charging provisions, cannot be termed as income and subjected to income tax. THIS JUDGMENT DELIVERED BY: MUHAMMAD SAJID MEHMOOD SETHI, J.-…

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