KARACHI (May 13 2003) : The Central Board of Revenue (CBR) has ruled that payment against any supply can be made in kind by transferring landed property provided certain conditions are met.
The ruling has been given following a question referred to the CBR by a textile mill, if the payment against any supply can partly be made by transferring landed property and if the said transfer of land could fulfil the requirement of transfer of payment from the business account of the buyer to the business account of the seller in terms of Section 73 of the Sales Tax Act, 1990.
The conditions laid down by the CBR are:
— Attested copy of mutation deed following transfer of landed property between the two registered persons is furnished.
— Transfer of property is duly reflected in the books of accounts with reference to sales tax invoice,
— Number and date, payment of sales tax due on such supply is made either by the buyer from his bank account to the bank account of the supplier or tax is deposited by supplier himself.
— Balance/remaining amount, if any, even less than Rs 50,000 is transferred from the bank account of the buyer to the bank account of the seller through banking instrument, as mentioned in Section 73 of the Act.
The CBR has also given its ruling relating to the proof of payment under Section 73 of the Sales Tax Act, 1990 for bank drafts/pay orders obtained from a bank where buyer does not have an account.
The CBR also ruled that the payment made though a crossed bank draft or a crossed pay order by a buyer to the seller from a bank from the same city where the buyer does not have an account, would fulfil the condition stipulated in Section 73 of the Sales Tax Act, 1990, provided that the buyer had the documentary evidence to prove that:
— The amount of crossed bank draft or crossed pay order has been withdrawn from a bank account and credited in the cash book.
— The amount has been shown debited in the cash book and a crossed bank draft/crossed pay order got issued from a bank in the same city where a buyer does not have an account for payment in favour of the registered supplier.
— The crossed bank draft or crossed pay order was sent to the registered supplier by mail/courier or got delivered through a special messenger.
The Central Board of Revenue had received representations from various associations/registered persons for the ruling as to whether or not payment through a crossed bank draft or pay order in favour of supplier from a bank where the buyer did not have an account, fulfilled the requirements as stipulated in Section 73 of the Sales Tax Act, 1990, in cases wherein the buyer had the proof that the amount had been withdrawn from the bank account of the buyer and shown as credit in the cash book and later cash amount was taken to the other bank in the same city for the preparation of crossed bank draft/pay order for payment to the seller.
The issue raised was deliberated upon in consultation with the Law, Justice and Human Rights Division.
According to the CBR, it has been found that as a normal business practice, a buyer obtains a crossed bank draft or crossed pay order in favour of the supplier from a bank in the same city where the buyer does not have an account.