LAHORE: The tax department remained unsuccessful in taxing the amount transferred by a beverage company to Workers Profit Participation Fund (WPPF), said sources.

The department had created an additional demand of millions of rupees on account of WPPF coupled with interest besides other additions for the assessment year 2001-02.

The Commissioner appeals confirmed the same but the tribunal deleted the addition made under section 25(c) of the repealed Income Tax Ordinance while observing that companies falling under section 2(c) of the Companies Profits (Workers Participation) Act, 1968 were allowed to use funds for their business operations and the income from such funds including capital gains was exempt from levy of tax, due to be granted through a special law.

The beverage company secured its interest by agitating that deduction made on account of WPPF does not fall within the ambit of section 25(c) because the companies are allowed to use WPPF for its business but the income arising out of the same was declared to be exempt under the Companies Profits (Workers Participation) Act, 1968.

According to the preamble of the Act, the company representative maintained, it was enacted to provide for participation of workers of companies and section 2 of the Act deals with investment of funds whereas section 9 clearly provides an exemption on income of the funds including capital gain through special law.

Also, the transferred amount to the WPPF does not fall within the definition of trading liability, which means buying and selling of goods and services. Therefore, the transferred amount could not be termed as arising out of a trader/trading. Rather, the same is a statutory liability.

The appellate forum maintained that the transferred amount was granted and exemption under the Companies Profits (Workers Participation) Act, 1968, which is a special law and takes precedent over the general law. If the Income Tax Ordinance is given more weight over the special law, it would not help the department’s stance because the transferred amount to the WPPF was not a trading liability and thus did not attract the provisions of section 25(c) of the Ordinance, it added.

Copyright Business Recorder, 2024