Law: Income Tax Ordinance, 2001

Section: 2(54), 34(3), 34(5), 34, 21(g), 21, 21(c)

O R D E R NASIR MAHMUD (Member): The facts in brief encompass are that M/s Honda Atlas Cars (Pvt) Ltd (hereinafter as the “Taxpayer”) is a public listed company, is engaged in the business of manufacture, sale of automobiles and related parts. These cross appeals, earlier filed by the taxpayer and department for tax year 2006 against appellate order dated 05-05-2009 passed by the Commissioner Inland Revenue (Appeals) [hereinafter referred to as ‘CIR(A)’], were decided by this Tribunal in taxpayer’s favour vide hrough order dated 01.10.2010. Being aggrieved, the department assailed the order of this Tribunal in reference before the honourable Lahore High Court and the honourable Court vide order dated 11.01.2023 remanded back the matter to this Tribunal on following points: (i)    Admissibility of provision of custom duty is decided in the light of judgement dated 09.01.2023 earlier passed by the honourable Court in PTR No. 205 of 2011; and (ii)   The issue as to whether the ‘license fee’ falls under the definition of ‘royalty’ be decided after taking into account the license agreement, the provisions of section 2(54) of the Income Tax Ordinance, 2001 (‘Ordinance’) and the treatment adopted by the department for subsequent tax years. 2.    Post remand hearing notice was issued. And the learned AR as well as the learned DR were heard.        Heard the parties and length and record has been perused with the assistance of the parties. 3.    First we will advert to the issue of Provision for custom duty, the honourable High Court, in PTR No. 205 of 2011, had not interfered into the Tribunal’s decision of holding that provision for custom duty was not hit by mischief of section 21(g) of the Ordinance and further, deduction thereof was admissible to the taxpayer u/s 34(3) of the Ordinance; however, the matter was remanded by the honourable High Court to the Tribunal only to the extent of determination of implications of section 34(5) of the Ordinance in respect of such expense. In this context, the learned AR…