Table of Contents

SL. No. Name of the Content Page No

01 Case Information 3

02 Fact of the Case 3

03 Issues of the Case 4

04 Case reference 5

05 Rule 5

06 Arguments of the Parties 5-7

07 Finale Judgment 8

1|Page
 “Titas Gas (T & D) Co. Ltd.
Vs.
Commissioner of Taxes”
53 DLR (2001) 209.
Case Information:
Judge: Syed Amirul Islam
Lawyers Involved:
Md. Altaf Hossain, Advocate—For the Applicant.
Md. Abdur Rahim Bhuiyan, Assistant Attorney General—For the Respondent.
Advocate: Mr. Abdur Rahim Bhuiyan,Mr. Altaf Hussain
Court: Appellate division, Supreme Court of Bangladesh, Dhaka.
Citation: 53 DLR (2001) 209
Case Year: 2001
Appellant: Titas Gas Co. Ltd.
Respondent: Commissioner of Taxes
Delivery Date: 2000-6-14
Judgment: June 14, 2000

Fact of the Case:

Facts are involved in these reference applications and the parties being same they are heard
together and are being disposed of by this judgment. Reference application No.43 of 1994 relates
to the assessment year 1985-86 and arises out of judgment and order dated 21-3-94 passed in
ITA No. 860 of 1989-90 (Assessment year 1985-86) by the Taxes Appellate Tribunal Division
Bench 1, Dhaka. Reference application No.44 of 1994 relates to the assessment year 1986-87
and arises out of an order dated 21-3-1994 passed in ITA No. 861 of 1989-90 (Assessment year
2|Page
1986-87) by the Taxes Appellate Tribunal, Division Bench 1, Dhaka. Reference application
No.46 of 1994 relates to the assessment year 1988-89 and arises out of an order dated 21-3-94
passed in ITA No. 386 of 1992-93 (Assessment year 198 8-89) by the Taxes Appellate Tribunal,
Division Bench-1, Dhaka. Reference application No. 47 of 1994 relates to the assessment year
1989-1990 and arises out of an order dated 21-3-1994 passed in ITA No. 385 of 1992-1993
(Assessment year 1989-90) by the Taxes Appellate Tribunal, Division Bench 1, Dhaka.
Reference application No. 48 of 1994 relates to the assessment year 1990-91 and arises out of an
order dated 21-3-94 passed by the Taxes Appellate Tribunal, Dhaka, Division Bench-1, Dhaka in
ITA No. 79 of 1993-94 (Assessment year 1990-1991).

Issues of the Case:

Issues of the case are followings-

(i) Whether the Taxes Appellate Tribunal was justified in not directing the Deputy
Commissioner of Taxes to accept the accounts in its entirety as per section 82(1) of
the Income Tax Ordinance, 1984.
(ii) Whether the Taxes Appellate Tribunal failed to take notice that the DCT did not come
to any finding that the entry in the books of accounts was not correct or that the
assessee was not employing a method of accounting or that such a method had been
irregularly employed by the assessee or that the DCI has come to any finding that
there has been no material before the DCT on the basis of which it could be said that
the trading results were not verifiable and that, therefore, the account should not be
acceptable;
(iii) Whether, the Taxes Appellate Tribunal was justified in maintaining addition of Taka
1,20,50,664.00 as excess perquisites under section 30(e) of IT Ordinance of 1984.
 
(iv) Whether the Taxes Appellate Tribunal was justified in law in partially
maintaining disallowance from profit and loss accounts in respect of the following
expenses:
(a)Telephone expenses Taka 50,000.00
(b)Traveling expenses Taka 50,000.00

3|Page
 (c) Repair and maintenance of vehicles Taka 7,00,000.00 in spite of the fact that
Assessee Company maintained all the vouchers and the DCT could not find out any
specific defect;
(iv) Whether the Taxes Appellate Tribunal was justified in law in not allowing rebate of
tax as Industrial Tax Company. And in respect of Reference Application Nos. 46 of
1994, 47 of 1994 and of 1994 the following additional questions have been
formulated, namely, “Addition of Jamuna Bridge Levy”. And in Reference
Application Nos. 46 of 1994 and 48 of 1994 another question has been added as to
the disallowance in profit and loss account and these questions have been formulated
in the following terms:
 

Case References:

Sagorika and Co. Vs. Commissioner of Taxes 27 BTD 87; Commissioner of Taxes Vs. Mysore
Commercial Chemical Co. Ltd. 126 ITR 340 and the Case of CIT Vs. Johanson Pumps (India)
Ltd. 172 ITR 333; Md Umar Vs. CIT, Bihar 101 ITR 525; 45 ITR 24, 119 ITR 431, 137 ITR 285
and 827; Meghna Petroleum Co Ltd Vs. CIT 50 DLR (AD) 165, 26 BTD (AD) 74;
Commissioner of income Tax Vs. SRA Reddier 205 ITR 426

Rule:

Section 35(3) of Income Tax Ordinance (XXXVI of 1984):

The DCT without pointing out any defect whatsoever in respect of the audited accounts of the
assesses disallowed certain deductions on omnibus grounds which are not sustainable in law.

Arguments of two parties:

Argument of the applicant:

Mr. Altaf Hossain, the learned Advocate appearing for the assessee-applicant, submits that the

DCT in flagrant violation of the provisions of section 35(3) of the Income Tax Ordinance

4|Page
rejected the book version of the assessee-applicant without arriving at any finding that the

method of accounting employed by the assessee-applicant has not been regularly employed or

the method employed was such that the income of the assessee could not be properly deduced

therefrom and, as such, he acted illegally and without jurisdiction in rejecting the audited account

of the assessee applicant. The learned Advocate further submits that the DCT without

pinpointing any defect in respect of the accounts maintained by the assessee applicant arbitrarily

rejected certain items illegally which is not sustainable in law and in support of his Contention he

relies on the decision of the Case of Sagorika and Co. Vs. Commissioner of Taxes reported

in 27 BTD 87. The learned Advocate then submits that the DCT has committed illegality in

computing excess of perquisites in each of the years under consideration inasmuch as the

benefits conferred on the employees do not amount to perquisites within the meaning of

perquisites as defined in section 2(45) of the Ordinance and he submits that any benefit given to

an employee in kind, amount to perquisites but any benefit given in cash forms part of the salary

and in support of his contention he relies on the Case of Commissioner of Taxes Vs. Mysore

Commercial Chemical Co. Ltd. reported in 126 ITR 340 and the Case of CIT Vs. Johanson

Pumps (India) Ltd.  reported in 172 ITR 9. Mr. Md Abdur Rahim Bhuiyan, the learned

333, where it has been laid down that any benefit given to an employee in kind amounts of

perquisites but any benefit given in cash becomes a part of his salary. The learned Advocate

further submits that the assessee company answers the description of an industrial company is

involved in the exploration and extraction of gas and distribution thereof and, as such, both the

DCT, AJCT and the Tribunal taking an erroneous view of law disallowed the rebate to the

assessee company which it is entitled to enjoy as an industrial company. The learned Advocate

further submits that the DCT taking an erroneous view of law did not allow the gratuity

5|Page
inasmuch as the assessee-applicant maintain their accounts on the mercantile basis and, as such,

when the gratuity becomes due it debited in the accounts of the employees and, as such, no

actual payment of the same is required. The learned Advocate further submits that provisions of

claiming bad debt has not been followed by the assessee company but since there is huge

numbers of defaulters of the assessee-applicant 2-1/2% of the overdue bad debts are deducted

and this has been a long standing practice and in that view of the matter this amount ought to

have been allowed by the DCT The Advocate referring to section 3 of Ordinance No 43 of 1985

submits that the assessee-applicant had to pay Jamuna Levy on its interest but that amount has

not been deducted from the total income of the assessee company and in doing so the DCT as

well as the Tribunal has committed an illegality inasmuch as the amount by way of Jamuna Levy

was taken away by the Government before the Income reached the assessee and, as such, in

respect of the Jamuna Levy the doctrine of diversion of income by over riding title is attracted.

The learned Advocate finally submits that the DCT as well as the Tribunal has committed

illegality in maintaining disallowances from profit and loss account in spite of the fact that the

assessee company maintained all vouchers and the DCI could not find out any specific defect

and, as such, the entire accounts ought to have been accepted by the DCT under section 82 of the

Ordinance.

Argument of the Respondent:

Mr. Md. Abdur Rahim Bhuiyan, the learned Assistant Attorney-General, appearing for the

respondent, on the other hand, submits that mere compliance with the provisions of section 36(3)

of the Ordinance is not sufficient for compelling the DCT to accept an audited accounts of the

assessee company inasmuch as under section 83(1) of the Ordinance the assessee is to produce

6|Page
evidence in support of the return and in the instant Case the DCT issued notice under section

83(1) of the Ordinance and, as such, examination of the materials and documents produced by

the assessee-applicant determined total income on the basis of the materials produced before him

and thereby he has not committed any illegality whatsoever in disallowing certain claims. The

learned Assistant Attorney-General after going through the decision relied on by Mr. Altaf

Hossain in support of his contention that anything paid in cash does not amount to perquisite,

finds it difficult to support the impugned order on that point. The learned Assistant Attorney-

General submits that in the instant Case huge numbers of defaulters of the assessee- applicant

has failed to comply with the provisions of law for claiming bad debts and, as such, taking a

correct view of law and facts the DCT as well as the Tribunal rightly disallowed the deduction

named by the assessee applicant on account of written off bad debts. The learned Assistant

Attorney-General further submits that in respect of Jamuna Levy the DCT and the Tribunal

taking a correct view of law and facts rightly disallowed the same inasmuch as that amount was

paid by the assessee applicant after accrual of the interest income and that amount was not a

charge upon the income

Final judgment:

Accordingly, we answer the question No.2 of the amendment application and question Nos. 2, 3

and 4 of the original reference applications in respect of Reference Application Nos. 43, 44 and

46 of 1994 in the negative and in favor of the assessee-applicant and refrain from answering

question No.1 as it is not necessary to answer the same. Similarly, we answer the question No. 2

of the amendment application favor of the assessee. In respect of Reference Application No. 47

of 1994 we answer que No.2 of the amendment application and question Nos.2, 4 and 6 in the

negative and in favor of the assessee. Similarly, in respect of Reference Application No. 48 of

7|Page
1994 we answer question No.2 of the amendment application and question No.2, 3, 4 and 5 of

the original reference applications in the negative and in favor of the assessee. The question

relating to the bad debts in these reference applications are answered in the affirmative and

against the assessee applicant and we refrain from answering the other questions. There will be

no order as to cost.

8|Page