COMMISSIONER INLAND REVENUE, LTU, LAHORE vs ADAM JEE INSURANCE COMPANY LTD

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COMMISSIONER INLAND REVENUE, LTU, LAHORE VS ADAM JEE INSURANCE COMPANY LTD. Ss.233, 158(c), 161 & 205---Brokerage and Commission---Advance tax, deduction of---Insurance companies, business of---Collection of premium---Principal and agent, relationship of---Commissioner Appeals deleted the liability under the commission under S. 233 of Income Tax Ordinance, 2001, imposed by the Assessing Officer---Plea of the appellant / Department was that S.233 of Income Tax Ordinance, 2001, envisaged that where any company made payment on account of brokerage and commission to another person (agent), the Principle (Company) would deduct advance tax at the rate specified---Validity---Record revealed that the respondent/company had not made payment directly to the commission agent rather it was paid by lead Insurer Company and the respondent, being co-insurer, shared the cost of commission through book adjustments and internal account settlement---Insurance services were, normally, provided by a number of insurance companies jointly by creating a consortium under an agreement to the client / insured---Premium is collected from the insured by the lead Insurer and allocated among the Insurance Companies proportionate to their understanding of the risk---It is the duty of the lead Insurer Company to ensure the discharge of deduction of advance tax against the payments made to the Commission Agent---There is no separate transaction / payment between the lead Insurer and the Co-insurer for the purpose of collection of advance tax under S.233 of the Ordinance, 2001---Insurance premium is received in full by the lead Insurer ;and after payment of taxes / deductions on the entire amount, the rest is distributed among the Co-insurer on the basis of alleged shares---Co-insures and their shares of risk are decided through agreement---Co-insurance agreement is only in the nature of general regulation for sharing the risk and premium involved in an insurance policy and the entire insurance premium as well as payment to Commission Agent has already suffered tax at the time of its receipt / payment in the hands of the lead Insurer---If there was any non-deduction on the payment made to Agent, the lead Insurer might be inquired but not the Co-insurer who had not made any payment directly to the Commission Agent---Tax liability, in the present case, was created by the Assessing Officer on a defective understanding of the subject which had rightly been deleted by the Commissioner Appeals---Tribunal directed the Appellant/Department to verify the factum of payment of withholding tax by the lead/Co-insurer on the disputed transactions and in case any non-deduction was found, proceedings be initiated against the lead Insurer in accordance with law---Tribunal further directed that the respondent shall provide all the necessary details regarding payment, lead Insurers and transactions---Commissioner Appeals had rightly deleted the tax-in-question---Tribunal upheld the impugned orders for having been passed in accordance with law---Appeal filed by the appellant (Department) was dismissed, in circumstances. Citation Name: 2023 PTD 1628 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTANBookmark this Case COMMISSIONER INLAND REVENUE, LTU, LAHORE VS ADAM JEE INSURANCE COMPANY LTD. Ss. 153 (1)(b) & 149(3) as inserted by Finance Act, 2014---Payment of salaries by the employer to its employees---Deduction of tax at source---Payments for services---Director's fee---Deduction of tax---Among the salaries paid by the taxpayer (company), Officer Inland Revenue taxed the payments on account of Director' fee by holding that said payments were in nature of services and tax deduction was applicable under S. 153(1)(b) of Income Tax Ordinance, 2001---Commissioner Appeal deleted the same by observing that the fee paid to directors had been made liable to withholding tax vide Finance Act, 2014, through insertion of subsection (3) of S. 149 of the Ordinance, 2001, whereas the matter-in-hand pertained to tax year 2013---Validity---Held, that under the existing provisions of the Income Tax Ordinance , 2001 ('Ordinance 2001') at the relevant time (tax year 2013), a company, being an employer, was required to deduct tax at the time of payment of salary to its employees---However, there was no specific provision for deduction of tax on the remuneration paid to a director which was not in nature of salary---Director had not provided any technical or professional service to the assessee, therefore, payment of sitting fees did not constitute payment for rendering services under S.153(1)(b) of the Ordinance, 2001---Had it been included in S.153(1)(b) of Ordinance, there was no need of insertion of subsection (3) in S.149 of Ordinance, 2001 specifically providing the deduction of tax at the time of payment made for directorship fee---Amendment brought in tax year 2014 relating to deduction of tax on director's fee in S. 149 of Ordinance, 2001 was prospective and did not apply in the present case---Commissioner Appeals had rightly deleted the tax -in-question---Tribunal upheld the impugned order passed by the Commissioner Appeals for having been passed in accordance with law---Appeal filed by the appellant (Department) was dismissed, in circumstances.

COMMISSIONER INLAND REVENUE, LTU, LAHORE vs ADAM JEE INSURANCE COMPANY LTD — 2023 PTD 1628 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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