MESSRS PAKISTAN TOBACCO COMPANY LIMITED VS GOVERNMENT OF PAKISTAN
1991 P T D 345
[Karachi High Court]
Before Saleem Akhtar and Hussain Adil Khatri, JJ
Messrs PAKISTAN TOBACCO COMPANY LIMITED
versus
GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance,
Islamabad and 3 others
Constitutional Petitions Nos.D-1044 and D-1045 of 1989, decided on 31/01/1991.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 65---Notice under S.65 when amounts to have been issued on the basis of change of opinion.
If an order has been passed consciously by taking into consideration the facts and material relating to the controversy and subsequently on the same facts a different view is taken and notice under section 65 is issued, then it will amount to have been issued on the basis of change of opinion. But where no conscious order has been passed by application of mind and the assessment seems to have been framed mechanically in a routine manner accepting the accounts as filed by the assessee and subsequently if any information is received, then on that basis the assessing officer is entitled to initiate action under section 65 of the Income Tax Ordinance, 19.79.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 65---Constitution of Pakistan (1973), Art.l99---Notice under S.65 issued to assessee was not challenged immediately by the assessee when it was served but it waited till such time the assessment order was passed ---Assessee, held, could not by-pass the remedy available under the Ordinance and invoke 'the Constitutional jurisdiction under Article 199, impugning said notice in the circumstances.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss. 24 & 23--Constitution of Pakistan (1973), Art.199---Constitutional jurisdiction would be attracted where interpretation placed on a provision of statute by the Assessing Officer was palpably wrong, completely mistaken and against the provisions of law and the judgments of the superior Courts.
1968 (68)1TR 786; 790 and (1978) 112 ITR 87 ref.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss. 24, 23 & 16---Scope and application of Ss.23 & 24---Terms "perquisites" and "other benefits"---Connotation---Whatever expenditure falls within the terms "perquisites" and "other benefits" which is a wide term, the employer is entitled to claim deduction to the extent of 50% of the salary.
The provisions of section 24 of Income Tax Ordinance, 1979 are in the nature of an exception to section 23. Section 23 allows deduction and allowances but section 24 notwithstanding anything contained in section 23 prohibits the allowance or deduction mentioned in it (section 24). Section 24 (i) prohibits the deductions of "any expenditure incurred by an assessee ' on the provisions of perquisites, allowances or other benefits to any employee in excess of 50% of his salary excluding allowances or other benefits." Section 24 (i) puts a limit on deduction on any expenditure incurred on perquisites to employees or any expenditure or allowance. For the purposes of this clause salary has been defined as remuneration or compensation for services rendered and includes dearness and cost of living allowance or benefits or amount paid to any employee in terms of his employment and the word "perquisites" means the same as provided by section 16, subsection (2)(b) which includes the value of rent free accommodation to the value of any concession in the matter of rent for any accommodation; any sum payable by employer towards employee's insurance on life or annuity for the benefit of employee's spouse or child, the value of any benefits provided free of cost or at a concessional rate or any sum paid by an employer in respect of any obligation to an employee. The definition is inclusive and not exhaustive and may include such payments and expenditure though not defined in section 16(2) as are covered by the word "perquisites". Therefore, whatever expenditure falls within the term "perquisites" and "other benefits" which is a wide term, the employer is entitled to claim deduction to the extent of 50% of the salary.
(e) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65, 23 & 24---Constitution of Pakistan (1973), Art.199---Notice under S.65 issued to assessee was legal and proper and within the jurisdiction---Where inquiry into the claim of perquisites and rebate required consideration of facts and checking of accounts, proper forum was the departmental authorities as provided under the Ordinance and Constitutional petition was not maintainable and assessee should have sought his remedy under the statute---If the assessee had filed appeal the same was to be dealt with by the relevant authorities--While dismissing Constitutional petitions, High Court, however, observed that if no appeal had been filed, and the assessee wanted to file appeal within a period of two weeks from the date of judgment of High Court, appellate authorities might consider sympathetically to waive the bar of limitation and decide the same according to law.
Sirajul Haq for Petitioner.
Shaikh Haider for Respondents.
Dates of hearing: 19th, 20th, 21st and 22nd November, 1990.
JUDGMENT
SALEEM AKHTAR, J.---These petitions relate to the assessment years 1986-87 and 1987-88. The petitioner filed return of income under section 55 of the Income Tax Ordinance but the cases for both these years were subjected for total audit and assessment was framed under section 62. The assessments for assessment years 1986-87 and 1987-88 were made alongwith petitioner's cases relating to assessment years 1983-84, 1984-85 and 1985-86 which were reopened under section 65. These assessments were challenged in C.P. Nos.571/87 and 1129/87 which have been allowed holding that the interpretation of clause 122 of 11 Schedule to the Ordinance and the provisions relating to depreciation were palpably wrong and misconceived and orders for re-assessment have been set aside.
It seems that after the assessment was made under section 62 respondent No.4 served a notice under section 65 in respect of perquisites and export rebate claim allowed under these assessment orders. The petitioner was allowed to file particulars of perquisites and allowances which were submitted and ultimately the impugned order dated 19-10-1989 was passed and demand notice was issued. The petitioner has challenged the notice as well as the assessment order passed in this matter. The learned counsel contended that the notice under section 65 is based on change of opinion in respect of the material and documents which were available on record even at the time when original assessment was made. The petitioner has filed the assessment order passed by Mr. Munawar Zaman. It seems that the claim of perquisites and rebate made by the petitioner were accepted without any investigation. The order seems to have dealt mostly with the claim of exemption under clause 122 and depreciation allowance. There is nothing to show that there was any application of mind in respect of these two items which have been challenged in this petition. As the assessing officer had at no stage applied his mind and passed a conscious order in respect of perquisites and rebate the question of change of opinion does not arise. In this regard the learned counsel for the petitioner has relied on the following authorities:--
1990 P T D 155, 1990 P T D 338 and 1990 P T D 870.
On the other hand Mr. Shaikh Haider has relied on the following authorities:--
1969 S C M R 175 and (1975) 89 I T R 382.
We have already considered these authorities in several judgments and in our view if an order has been passed consciously by taking into consideration the facts and material relating to the controversy and subsequently on the same facts a different view is taken and notice under section 65 is issued, then it will amount to have been issued on the basis of change of opinion. But where no conscious order has been passed by application of mind and the assessment seems to have been framed mechanically in a routine manner accepting the accounts as filed by the assessee and subsequently if any information is received, then on that basis the assessing officer is entitled to initiate action under section 65 of the Income Tax Ordinance. Considering from this point of view we find that the action of the assessing officer is not without jurisdiction.
Mr. Shaikh Haider the learned counsel has contended that the notice under section 65 cannot be challenged as the petitioner has submitted to the jurisdiction, replied to the notice and has complied with all the requirements in pursuance of which assessment order has been passed. In such circumstances according to Mr. Shaikh Haider the proper remedy is to avail the statutory remedy provided under the Ordinance and to proceed according to it. According to Mr. Sirajul Haq the remedy available under the statute is not adequate and therefore, the petitioner is entitled to invoke the constitutional jurisdiction. Notice under section 65 can be challenged when it is without jurisdiction but if the notice is legal and proper and an assessment has been made on that basis in which the petitioner has fully participated, then unless there is any defector irregularity which vitiates the order as without jurisdiction, the assessee is not entitled to challenge by constitution petition. According to Mr. Shaikh Haider the petitioner did not challenge the notice immediately when it was served but waited till such time the assessment order was passed and therefore, it cannot by-pass the remedy available under the Ordinance. The contention seems to be justified in the circumstances of this case.
The learned counsel for the petitioner contended that section 24 (i) has wrongly and erroneously been interpreted and therefore, this will amount to error apparent on the face of the record and the petitioner is entitled to challenge for its quashment under Article 199. Reliance has been placed on 1968 (68) I T R 786 and 790 and 1978 (112) ITR 87. The writ jurisdiction will be attracted where interpretation placed on a provision of Statute by the Assessing Officer is palpably wrong, completely mistaken and against the provision of law and the judgments of the superior Courts. According to the learned counsel section 24 (i) has not been correctly interpreted as perquisites should be calculated separately and not on cumulative basis. This objection relates to calculation and jurisdiction. The provisions of section 24 are in the nature of an exception to section 23. Section 23 allows deduction and allowances but section 24 notwithstanding anything contained in section 23 prohibits the allowance or deduction mentioned in it (section 24). Section 24 (i) prohibits the deductions of "any expenditure incurred by an assessee on the provisions of perquisites, allowances or other benefits to any employee in excess of 50% of his salary excluding allowances or other benefits." Section 24 (i) puts a limit on deduction on any expenditure incurred on perquisites to employees or any expenditure or allowance. For the purposes of this clause salary has been defined as remuneration or compensation for services rendered and includes dearness and cost of living allowance or benefits or amount paid to any employee in terms of his employment and the word "perquisites" means the same as provided by section 16, subsection (2) (b) which includes the value of rent free accommodation to the value, of any concession in the matter of rent for any accommodation; any sum payable by employer towards employee's insurance on life or annuity for the benefit of employee's spouse or child, the value of any benefits provided free of cost or at a concessional rate or any sum paid by an employer 11n respect of any obligation to an employee. The definition is inclusive and not exhaustive and may include such payments and expenditure though not defined in section 16 (2) as are covered by the word perquisites. Therefore, whatever expenditure falls within the term "perquisites" and "other benefits" which is a wide term, the employer is entitled to claim deduction to the extent of 50% of the salary. Respondent No.4 has included cost of living allowance and dearness allowance within the salary and not in the perquisites. Therefore, prima facie the interpretation placed by respondent No.4 seems to be correct. Any way we have held that notice under section 65 was legal and proper and within the jurisdiction and as inquiry into the claim of perquisites and rebate requires consideration of facts and checking of accounts, in our view the proper forum is the departmental authorities as provided under the Ordinance. We are therefore, of the view that the petition is not maintainable and the petitioner should seek his remedy under the Statute. If the petitioner has filed appeal, the same may be dealt by the relevant authorities. However, if no appeal has been filed, and the petitioner files appeal within a period of two weeks from the date of judgment, the appellate authorities may consider sympathetically to waive the bar of limitation and decide it according to law. With this observation the petitions are dismissed.
M.B.A./P-185/K Petitions dismissed.