Law: Income Tax Ordinance, 1979

Section: 52,62,86

This ORDER PASSED BY: SYED KABIRUL HASAN, JUDICIAL MEMBER:------------ In these two appeals common ground has been taken by the appellant company i.e. That DCIT was not justified in holding the appellant company as assessee-in-default and CIT(A) was not justified in confirming this. 2. Briefly stated the facts are that appellant company was awarded a tender of 67 million dollars to construct a terminal with facilities of cargo handling and storage at the port by Karachi Port Trust. Out of the contract, about 9% of the total contract, was sublet by the appellant company to a non-resident company called J.N.P. (Overseas) Ltd. The nature of the sub-contract was to level the terminal area and to make walkable/motorable pavement. The appellant company deducted tax at the rate of 5% on payments to JNP (Overseas) Ltd. In the opinion of the DCIT the rate applicable for deduction of tax was 8%, the sub-contractor being non-resident executing a turn-key project. He A therefore, held the appellant company to be assessee-in-default in respect of the balance amount of tax not deducted and charged additional tax under section 86 of the Income Tax Ordinance. The amount of default under section 62 was held at Rs.12,42,672 and Rs.60,75,390 on which additional tax at the rate of 24% was charged amounting to Rs.9,69,898 and Rs.33,23,271. The appellant company was required to pay an amount of Rs.22,12,572 for 1997-98 and Rs.93,07,661 for assessment year, 1998-99. Aggrieved by this assessment appellant company preferred appeal before the First Appellate Authority and contended that contract awarded to the non-resident company was only a part of the over-all contract and could not be, by any stretch of imagination or legal terminology, be called a turn-key project. The learned CIT(A) was not impressed by the arguments of the appellant, mainly on the ground that Auditors had classified the contract as turnkey contract as per note 6.1 of the Audited Accounts. He, therefore, upheld the order of DCIT and dismissed the appeal. These appeals are therefore, filed before us. 3. Heard Mr. Irfan Saadat, Advocate for the appellant and Mr. Umer Farooq, D.R. For the respondent. 4. Mr. Irfan…

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