Law: Income Tax Ordinance, 2001

Section: 18(1)(d),122(5A),133

Income Tax Ordinance (XLIX of 2001)--Ss. 18(1)(d), 122(5A) & 133---Reference---Tax liability, determination of---Interest free loans by directors of company---Nature---Taxpayer was receiving interest free loans extended by its directors which was declared as taxpayer's benefits by tax authorities---Taxpayer's appeal before Appellate Tribunal Inland Revenue was dismissed ex-parte---Validity---No business relationship existed between taxpayer and its directors---Directors were managing taxpayers and had a fiduciary relationship with taxpayer, as such they were not engaged in business relationship with taxpayer hence, interest free loans given by directors given to taxpayer did not fall within meaning of "benefit derived during course of business relationship"---Provisions of S. 18(1)(d) of Income Tax Ordinance, 2011 were not applicable for the purposes of determining tax liability---High Court set aside order passed by Appellate Tribunal Inland Revenue---Reference was allowed in circumstances. Commissioner Inland Revenue, Zone-II v. Lucky Cotton Mills (Pvt.) Ltd. 2017 PTD 864 and 2015 PTD (Trib.) 386 ref. THIS JUDGMENT DELIVERED BY: AYESHA A. MALIK, JUSTICE:---.--- This Reference along with connected References being ITRs Nos.221219/18 and 221226/18 have been filed by the Applicant under section 133 of the Income Tax Ordinance, 2001 ("Ordinance") involving common questions of law. 2. The following questions of law have been raised in all three Reference, which are asserted to have arisen out of order dated 3.10.2017 passed by the Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"):-- i) "Whether the learned ATIR was justified to pass the order based on assumptions, which is not sustainable in the eyes of law being against the spirit of section 122(5A) of the Income Tax Ordinance, 2001 in tax years 2010, 2011, 2012?" ii) "Whether the learned ATIR was justified to treat provision of interest free loan given to the petitioner by the directors/sponsors as benefit and chargeable with Income Tax in terms of section 18(1)(d) of the Ordinance in respect of tax years 2010, 2011, 2012 which was even otherwise contrary to judgment of Sindh…

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