The above cross-appeals, at the instance of both the parties have been filed, being aggrieved and dissatisfied from the order of the learned CIT(A), dated 30-10-2000.

2. The assessee has challenged the order of the learned CIT(A) taking following grounds:

(i) The learned CIT(A) has erred in holding that in the absence of any contract agreement exceeding Rs.30 million, tax is to be charged as:--

(a) Upto the 30 million Receipt/Payment in a financial year @ 5%.

(b) When payment exceed 30 million in a financial year @ 6% on the amount exceeding 30 million.

(ii) The learned CIT(A) has not followed the law properly and provision of clause E(ii)(a)(i) & (ii) of First Schedule of Income Tax Ordinance, 1979 and case-law submitted per (2002) 86 Tax 262 (Trib.).

3. The Department in his appeal has raised the following grounds:-

(i) That the learned CIT(A) Hyderabad is not justified in deleting the demand created in the light of para. CCC(I)(a)(ii) of Part-I of 1st Schedule wherein it has been mentioned that receipts totalling more than Rs.30.000(M) are to be subjected to deduction of tax under section 50(4) at the rate of 6%. The declared receipts of assessee are at Rs.76.003(M) hence tax was charged @ as per para. CCC(1)(A)(ii) of Part-I of First Schedule.

(ii) In the light of above facts the learned CIT(A) has erred to cancel the order passed under section 59A/143-B.

4. In view of above cross-appeals, firstly, we would take up the appeal of the assessee as follows:-

5. A perusal of assessment order shows that statement under section 143-B was filed, declaring total receipts of Rs.76,002,990 as against the deduction claimed at Rs.4,560,180. The Assessing Officer found that the receipts, of assessee are of the quantum where they attract provision of para. CCC(I)(a)(ii) of Part-I of First Schedule wherein it was mentioned that receipts totalling more than Rs.30.000 Million were to be subjected to deduction of tax under section 50(4) at the rate of 6%. In this view of the matter the Assessing Officer concluded that tax liabilities of the assessee on the above receipts should come to Rs.4,560,180, whereas an amount of Rs.4,260,180 has been deducted from the above receipts.

6. The learned CIT(A) deciding the appeal of the assessee on the first issue has held as follows:--

"After considering the facts of the case, grounds of appeal and arguments of the appellant, it transpires that in the case of the value of the contract has not been specified, instead Labour rate per ton for extraction of coal has been agreed upon and the quantity of coal to be extracted was also not specifically laid down. Hence when the payer started payments he did not know in advance that what would be the ultimate quantum of payment under the contract. Logically and legally he started deducting of tax at the rate of 5% as per clause (I) of clause (a) of sub-para. (I) of para. CCC to Part-I of the First. Schedule of the Income Tax Ordinance, 1979 (repealed). As the nature of the contract was not specified under the contract, therefore, when the payment exceeded the threshold value of 30(M) the payer started deducting tax at the rate of 6%. There was absolutely no way at the start of contract to find out "if the value of the contract would be more than the threshold value of Rs.30(M). As such the most logically and legal thing was done. Tax was deducted @ 6% till the value reached Rs.30(M). Once the value exceeded Rs.30(M) tax was deducted @ 6 % "

7. Heard the learned Representatives of the two parties, Mr. Mazharul Hasan, counsel appearing on behalf of the assessee argued that charging of tax at the rate of 6% of the receipts exceeding 30 Million in the absence of any settled amount of agreement or contract or where value of total contract has not been specified in terms of clause E(ii)(a)(i) and (ii) of Part I of First Schedule, is illegal as such CIT is not justified in holding that in the absence of any contract agreement exceeding Rs.30 Million tax is to be charged as.

(a) Upto Rs.30 Million receipts at the rate of 5%.

(b) When exceeds Rs.30 Million in financial year @ 6% on the amount exceeding Rs.30 Million.

8. It is further argued that the learned CIT(A) has totally ignored the case-law reported as 2002 86 Tax 262 (Trib), wherein ratio of the verdict is as follows:--

",,,.In this view of the matter payments received during the year regarding the contracts were to be subjected to the tax rate of 5% and not 6%. So far as the contract with Agha Khan University pertaining to CHS and JBR is concerned, this was for an amount of Rs.69,878,841 entered on 22-1-1998. In this view of the matter the rate of 6% was to be applied in respect of payment of Rs.42,62,160 received during the year in respect of this contract "

9. Before taking into consideration the grounds, it would be convenient to quote para. CCC of Part I of First Schedule:--

"CCC(i). In the case of every resident person holding National Tax Number and to whom section 80C applies:--

(a) From the assessment year commencing on or after the first day of July, 1999, on the income representing payments on account of execution of contracts other than the income to which clause (b) or (c) or (cc) applies-

(i) where the value of contract
does not exceed thirty million 5% of such income

(ii) where the value of contract
exceed thirty million Rupees 6% of such income"

10. A perusal of the above quoted para. will show that where contractual receipts exceed Rs.30 Million, the rate of deduction under section 50(4) and of assessment under section 80-C would be 6% of the income, representing payments on account of execution of contracts. It is, therefore, the value of contract, which is material and nothing to do with the amount of payments received in respect of that contract and or receipt from the same payer relating to different contracts. It is also clear that the word "contract" has been used in singular, therefore, higher rate of 6% will be applied if the particular contract exceeds Rs.30 Million. As such, for the purpose of present provision, the contracts will be taken as a whole for application of 5% or 6% tax.

11. Unfortunately, the case-law cited by the learned A.R. for the assessee reported as (2002) 86 Tax 262 Trib., at no point supports the assessee as it is laid down in the order that "each of the contracts for Siemens Complex was of an amount not exceeding Rs.30 Million." In this view matter, payments received during the year regarding these contracts were to be subjected to tax rate of 5% and not 6% whereas contract for Agha Khan University pertaining to CHSJ and JBR is concerned, it is held that contract was for an amount of Rs.69,878,841, hence in view of the matter, the rate of 6 per cent. was to be applied in respect of payments of Rs.5,52,160 received during the year in respect of this contract. In the same order, 6 per cent. tax has been confirmed in respect of contract with Siemens Pakistan Ltd. for an amount exceeding Rs.30 Million and 5 per cent. in case . of contract with Procone Engineering contract amount being Rs.29,89,305.

12. In view of the analysis of the case-law cited before us, we cannot find (sic) to conclude that the verdict of the Tribunal at any point supporting the assessee. In fact, this very verdict by all means goes against the assessee. We are therefore inclined to agree with the submissions made by the learned D.R. and to hold that this is the value of contract, which is determining factor for application of rate of 5 per D cent. or 6 per cent as the case may be, or the income representing the payments on account of execution of contracts. The argument that the present contract is silent about the final amount of contract and that value of the contract has not been specified instead Labour rate per ton for extraction of coal has been agreed upon and the quantity of coal to be extracted was also not specifically laid down find no merit, because the total receipts during the assessment year payer increased the value of Rs.30 Million and even if it is presumed that the assessee did not know in advance that what would be the ultimate quantum of payment under the contract, started deduction of tax at the rate of 5 per cent., even then the total payment of the contract in the assessment year exceeded from Rs.30 Million, hence the assessee was under legal obligation to cover up the amount if not deducted earlier at the rate of 6 per cent before the ending of the financial year, for the proper application of 6 per cent. deduction rate on receipts declared.

13. In the circumstances supra, the order of the learned CIT(A) is not justified, thus warrants interference. There is no question of charging 5% upto Rs.30 Million and 6 per cent., where 'the value of contract exceeds Rs.30 Million. Consequently, the appeal preferred by the department is allowed as the declared receipts of assessee are of Rs.76.003 Million. Hence tax has been rightly charged at 6 per cent. as per CCC(I)(a)(ii) of Part-I of First Schedule.

14. As a result of above discussion, the treatment meted out by the Assessing Officer is maintained.

Appeal accepted.