Law: Income Tax Act, 1922

Section: 18,4,18(3BB),42(1)

[Income Tax Act, 1922 (XI of 1922)]........Sections 4, 18(3BB), 42(1)-Income-Place of accrual-Business connection-Non-resident company-Services in the nature of consultancy rendered entirely outside Pakistan-No representative of non-resident visiting Pakistan-Payment for various jobs done in Pakistan made outside Pakistan in foreign currency-Whether income accrued in Pakistan-Held no- Whether a case of business connection-Held no-Provisions of Section 18(3BB), whether attracted-Held no-Income Tax Rules, r. 50-Central Board of Revenue Circular No. 10 of 1974. The work was contended to have been carried on entirely outside Pakistan and no representative of the appellant had ever visited Pakistan for this work. The TJV, it was further submitted, was constructing Tarbela Dam with the funds provided locally as well as by various foreign Governments which paid the money in foreign currency. According to the learned Authorised Representative, it was out of the funds received abroad by the TJV in foreign currency that the payments were made to the appellant and the payments made to it could not be brought to tax under Sections 42 or 4 of the Income Tax Act. The details of the work done by the appellant which were duly furnished to the Income Tax Officer also supported the appellant's contention that the work was carried out entirely outside Pakistan. On the other hand the Income Tax Officer has proceeded on the assumption that for execution of the work the appellant's employees must have visited Pakistan. This is, however, a mere assumption not based on any tangible material brought on record. The Income Tax Officer has also pressed into service the fact that the payments made to the appellant by TJV were claimed by the latter as an expense in the profit and loss account which, according to him, clearly implied that these payments were made from Pakistan. This is also an unwarranted implication, since the mere fact that certain expense is charged to accounts does not necessarily mean that the payment has been made at the place where the payer carries on his business. In the instant case, it is also pertinent that, admittedly TJV has vast resources outside Pakistan and…

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