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I. T. A. No. 784/KB of 1980‑81, decided on 11th August, 1983.

‑‑‑‑ S. 24 (2)‑Workers Welfare Fund Ordinance (XXXVI of 1971), S. 4‑Levy of amount payable to Workers Welfare Funds to be made with reference to total assessable income‑‑Where assessee sustaining loss or profits or gains in any year and loss cannot be wholly set of, so much of loss as is not so set off or whole of where assessee had no income under any other bead, held, was to be carried of loss to follow ing year‑Assessee after adjustment of loss brought forward under S. 24 (2), Income‑tax Ordinance, 1979 having forward no assessable income left and on the contrary there was huge loss to be carried forward. Held further, there could be no levy of surcharge in circumstances.

Abrar Ahmad, D. R. for Appellant.

Hyder Bhimjee, C. A. for Respondent.

Date of hearing: 27th July, 1983.

This departmental appeal is directed against the order of the learned Appellate Assistant Commissioner has disputed the deletion of an addition of Rs, 34,572 made to the trading account. Deletions of partial add‑backs made out of some expenses claimed in the Profit and Loss account are also agitated. The last grievance relates to the cancellaticn of workers welfars fund.

2. The respondent is a public limited Company deriving, income from manufacture and sale of cotton and manmade yarn. The Income‑tax Officer noted that the respondent had claimed a combined wastage of 17'34 %. He con sidered this wastage to be excessive when compared to the normal admissible wastage of 15% in cotton yarn. He, therefore, did not accept the wastage as declared mainly because the respondent did not maintain stagewise pro duction record. Keeping in view the Awan Committee Formula, be res tricted the allowance of wastage to 15 Y. and made an addition of Rs. 34,572 representing the value of excessive unexplained wastage of 25,962 pounds. In the appeal brought before the learned Appellate Assistant Commissioner, this addition was deleted mainly relying upon the certificate of test conducted by Pakistan Institute of Cotton Research and Technology to the effect that the wastage claimed by the respondent was reasonable. The department's grievance is that the learned Appellate Assistant Commissioner was not justi fied n deleting the addition because tile wastage claimed was on the high side. The learned Authorised Representative appearing on behalf of the respon dent contends that in the first instance the wastage shown during the year under consideration was lower as compared to the immediately preceding year when it was claimed at 1803 On this account an addition of Rs. 77,867 was made but in appeal the learned Appellate Assistant Commis sioner deleted this addition against which the department did not come its second appeal. In this background he contends that the wastage show in this year being lower than preceding year there was no justification whatever for making the addition. The learned Authorised Representative further submits that before making such an addition the Income‑tax officer should stave found substantial defects in the accounts. In the instant case the Income‑tax Officer has not been able to find any substantial defects in accounts so as to justify any addition to the declared trading results: Further, the rate of Gross Profit shown this year was 24'66 % as against 21‑14 % of the immediately preceding year. He submits that this factor also goes against the department.

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6. The last grievance of the department relates to the cancellation of the levy of workers welfare fund. The relevant facts in this regard are that Income‑tax Officer determined the taxable income at Rs. 17,39,8.64. He ad justed this amount against the loss brought forward from the earlier years amounting to Rs. 75,10,807 resulting in a loss of Rs. 57,70,943 to be carried forward. The Income‑tax Officer, however, determined the income for the year at Rs. 17,75,371 and at 2% of the aforesaid amount he calculated the workers walfare fund amounting to Rs. 35,570. In appeal, the learned Appellate Assistant Commissioner deleted the addition because after adjusting loss brought forward from the earlier years there was no profit left and on the contrary there was a huge amount of loss to be carried forward and as such there being no income left the levy of workers welfare fund was not justified.

7. We have also beard the learned Departmental Representative but he was not in a position to support the Income‑tax Officer's action. As matter of fact the workers welfare fund is charged according to the Work Welfare Fund Ordinance, 1971 which levies 2% of the total income assessee to be the amount payable to the welfare fund. It is patent from the provision of the aforesaid Ordinance that the levy is to be made with reference to the total income assessable. The total income is a defined term an it is this income which is assessed to tax. The provisions of section 24(2) lay down that where an assessee sustains a loss or profits or gains in any year and the loss cannot be wholly set off, so much of the loss as is n so set off or the whole of the loss where the assessee bad no income under any other bead is to be carried forward to the following year. In the inert case after adjusting the loss brought forward under section 24 (2) there was no assessable income left and on the contrary there was huge loss to be carried forward. As mentioned above the workers welfare fund can be charger only from the assessable income. Since there was no assessable income avail able in this year, there could be no levy of surcharge. In this view of the matter the finding of the learned Appellate Assistant Commissioner does no call for any interference.

8. No other issues are pressed. In the result, the appeal is disposed of as indicated above.

M. Z.M. Order accordingly.

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