Law: Income Tax Ordinance, 2001

Section: 219c),36,36(1),36(3),100D,100D(9),111,11 1(1)(a),111(1)(b),122(1),122(5),122(9),1 77

INCOME TAX ORDINANCE, 2001, (XLIX OF 2001)---Sections: 21(c), 36, 36(1), 36(3), 100D, 100D(9), 111,111(1)(a), 111(1)(b), 122(1), 122(5), 122(9), 177 - IAS No. 18 - Deductions not allowed - Long term contracts - Special provisions relating to builders and developers - Unexplained income or assets - Amendment of assessments - Audit - Selection of applicant for audit - Show Cause Notices issued u/s 122(9) read with Section 122(5) Assessment amended u/s 122(1) read with section 122(5) - Additions u/s 21(c), 36, 111 - Treatment upheld in appeal by the CIR(A) - Appellate Tribunal also upheld additions in appeal - Reference to High Court - DECISION (a) High Court cannot second guess the factual finding made by the Appellate Tribunal - As no illegality or jurisdictional Haw has been pointed with regard to how section 111(1)(a) and 111(1)(b) additions have been made and no information has been pointed out by the applicant that was presented before the tax department and in the appellate forums but was not considered, this Court cannot second guess the factual finding made by the learned Tribunal. Consequently, the question with regard to additions made under section 111 is found to be misconceived. (b) Agreement for sale fell within the definition of long-term contract and the applicant was under obligation to offer such revenue for tax - For the aforementioned reasons, we find that the agreement for sale fell within the definition of a long-term contract within the meaning of section 36(3) of the Ordinance and the applicant was under an obligation to offer up such revenue for tax on the basis of percentage of completion method. This conclusion also addresses the questions in relation to capitalization of expenditure pursuant to section 21(c) of the Ordinance in computing the income arising for the relevant tax year. The applicant was obliged to account for the cost allocated to the contract and incurred before the end of the year, which could not be capitalized either. We therefore answer the questions in relation to sections 36 and 21(c) of the Ordinance accordingly. Cases Referred to: Workers Welfare Funds, M/o Human Resources Development, Islamabad v. East Pakistan…

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