2009 PTD 1149 INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN
S.26(b), proviso—Special provisions regarding business of insurance and production of Oil and natural Gas and exploration and extraction of other mineral deposits—Application of proviso to S.26(b), Income Tax Ordinance, 1979—Scope—Proviso to S.26(b) of the Income Tax Ordinance, 1979 applies to companies who discovered commercial production before 26-9-1954—Assessee-company achieved the level of commercial production after the said date—No evidence was submitted that the company had achieved commercial production before 24-9-1954—In fact, company entered into agreement for production of petroleum with Government of Pakistan on 24-9-1954 and commenced its operations after the said date—Commercial production was discovered much later than the said date—Proviso to S.26(b) of the Income ‘fax Ordinance, 1979, thus did not apply to company’s case.
2009 PTD 1149 INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN
S.26(b)—Special provisions regarding business of insurance and production of Oil and natural Gas and exploration and extraction of other mineral deposits–Rate of petroleum companies were specifically determined in the concession agreement(s) entered into by them with Government of Pakistan—Said tax rates remain fixed/frozen during the period of currency of concession agreement—Any upward or downward revision in tax rates by the Government of Pakistan did not apply to the cases of petroleum companies—-Said companies were liable to par taxes @ 50% of its income.
2009 PTD 1149 INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN
Ss.26(b), First Sched. & Fifth Sched.—Special provisions regarding business of insurance and production of Oil and natural Gas and exploration and extraction of other mineral deposits—Rate of tax—Assessee contended that specific provisions had been laid in S.26(b) of the Income Tax Ordinance, 1979 to the effect that rules contained in Part-I of Fifth Schedule of the Income Tax Ordinance, 1979 shall not apply for the purposes of working out profits and gains and tax payable thereon in respect of income of companies who discovered petroleum (including natural Gas ) before 24-9-1954—In such conditions, rates of tax on income of companies as contained in First Schedule to the Income Tax Ordinance, 1979 were applicable—Tax was payable @ 35% in assessment year 1997-98 and 33% in assessment year 1998-99 on company’s income in the light of provisions contained in First Schedule to the Income Tax Ordinance, 1979—Assessing Officer was not justified to apply tax 50% on company’s income and First Appellate Authority was not legally correct to uphold the same—Validity—On 24-9-1954 no separate Schedule existed in the Income Tax Act, 1922, about working out tax liability of petroleum companies—With the introduction of Income Tax Ordinance, 1979 Fifth Schedule was specifically introduced therein which contained rules for the computation of profits of petroleum companies and taxes payable thereon—When said specific legislation came into existence, the profit of all petroleum companies and taxes payable thereon had to be worked out in the light of such specific/exclusive provisions of law—Nevertheless the agreement between the company and Government of Pakistan was at the same time applicable for working out the tax liability of the company—Since, taxes had been specifically fixed @ 50% in the agreement, dated 24-9-1954, the company’s profits shall be taxable at the same rate during the entire period of currency of agreement– Any upward or downward revision in tax rates by Government of Pakistan shall not apply to the case of said company—During such assessment years, rate of tax for private companies including those not engaged in Oil exploration business was more than 50% and it was not clear as under what provisions of law the assessee was claiming that tax @ 35% or 33%—Taxation Officer had rightly charged tax @ 50% of company’s profit—Such treatment was absolutely correct in the eyes of law and First Appellate Authority had rightly upheld the same—Orders of authorities below were confirmed by the Appellate Tribunal and company’s appeal being devoid of any merit was rejected.
