I.TA. NO. 805/KB OF 1992-93, DECIDED ON 20TH OCTOBER, 1992. VS I.TA. NO. 805/KB OF 1992-93, DECIDED ON 20TH OCTOBER, 1992.
1993 PTD 637
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Judicial Member
I.TA. No. 805/KB of 1992-93, decided on 20/10/1992.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-D & 80-C---C.B.R. Circular No.12 of 1991---C.B.R. Circular No.8 of 1991---C.B.R. Circular No.10 of 1991---Object, scope, application and interpretation of S.80-D---Provisions of S.80-D when attracted---Tax payable under a particular block of income is not to be considered separately but the material point for consideration for applying S.80-D is the tax payable or paid by the Company and the gross receipt of the company from all sources and assessable under any provision of the Income Tax Ordinance whatsoever.
The intention of the Legislature in enacting section 80-D was to impose a minimum tax on the turnover of a company or a registered firm at 0.5% of its turnover from all sources where no tax is payable or paid by a company or a registered firm or the tax payable or paid is less than 1/2% of the amount representing such turnover. Thus, the expressions which require particular consideration are as follows:--
(a) Where no tax is payable or paid by a company or registered firm,
(b) the tax payable or paid is less than 1/2% of the amount representing its turnover from all sources,
(c) the aggregate of the declared turnover shall be deemed to be income of the said company.
An explanation has been added to section 80-D(1) whereby the expressions "where no tax is payable or paid" and "the tax payable or paid" have been explained. By virtue of this explanation these expressions applied to all cases where no tax was payable or paid for any reason whatsoever including any loss of income, profits or gains or set-off of loss of earlier years, exemption from tax, credits or rebates in tax and allowances and deductions (including depreciation) admissible under any provision of the Ordinance or any other law for the time being in force. The explanation has been added with retrospective effect. The legislature in its own wisdom has further defined the expression "turnover" to mean gross receipts, exclusive of trade discount shown on invoices or bills derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts. A perusal of section 80-D(1) itself further shows that the minimum tax of 0.5% has been levied qua the amount representing turnover of a company or registered firm from all sources and the aggregate of the declared turnover has been deemed to be the income of said company or a registered firm and the tax thereon is to be charged in the manner specified in subsection (2). The words "tax thereon" further clarify that the minimum tax prescribed under section 80-D is to be calculated with reference to the aggregate declared turnover from all sources and if the tax payable or paid is not less than 1/2% of the said amount then the provisions contained in section 80-D shall not be attracted. In order to create a fiction all the conditions are to be fulfilled strictly. The aggregate of the declared turnover, meaning thereby gross receipts from all sources, has been deemed to be the income of company or registered firm for the purpose of levying minimum tax prescribed under section 80-D. This is a fiction of law and in order to deem an income by fiction of law, all the necessary ingredients are always required to be fulfilled strictly failing which the fiction of law and thereby deeming a particular fact which otherwise does not exist shall not come into existence. It is established principle of the interpretation of statutes that a statute is to be read as a whole normally and particular provision is not to be read in isolation until and unless provided to be otherwise. There is nothing in section 80-D to infer that the expressions used "tax payable or paid" and "turnover from all. sources" as well as "the aggregate of the declared turnover" shall be read in isolation and the tax charged under section 80-C or any other provision of the Income Tax Ordinance shall not be taken into consideration and the receipts covered under section 80-C and already subjected to the levy of tax shall not be included in the gross receipts and/or the aggregate of the declared turnover. Any such interpretation would be clearly against manifest intention of the Legislature.
In the present case the turnover of assessee from all sources was Rs.16,89,981(Rs.16,55,856) covered by section 80-C and Rs.34,125 not covered by section 80-C). The turnover covered under section 80-C had been subjected to the levy of tax at Rs.28,266 by treating it as separate block of income. The receipt in the zinc calot account not covered by section 80C at Rs.34,125 had been assessed separately in normal manner and loss had been assessed at Rs.32,743. Thus, no tax was payable on the income in zinc calot account assessed in normal manner but the aggregate tax paid under section 80-C on the gross receipts/aggregate turnover was much in excess of 0.5%, the minimum tax prescribed in section 80-D on the gross receipt of a company, therefore, section 80-D was not to be attracted. In applying section 80-D it should always be kept in mind that the Legislature has used the expressions "the tax payable or paid by a company or a registered firm" and "its turnover from all sources". The word "its" denotes the company. Thus, tax payable under a particular block of income and the receipt under a particular block of income is not to be considered separately, but the material point for consideration for applying section 80-D is the tax payable or paid by the company and the gross receipts of the company from all sources and assessable under any provision of the Income Tax Ordinance.
In order to attract the provisions contained in section 80-D the assessing officer should first calculate the declared turnover from all sources meaning thereby that the gross receipts should be worked out irrespective of the fact if it is treated a separate block of income under section 80-C or any other provision of the Income Tax Ordinance, whether covered by section 80-C or any other deeming provision of the Ordinance or assessable in the normal manner and thereafter the total tax payable or paid by the assessee is to be worked out irrespective of the fact under which provision of the Ordinance the tax is payable and whatever be the rate of tax on the receipts/income forming part of the gross receipts.- After working out the gross receipts/aggregate turnover and the total amount of tax payable or paid, it shall be worked out, if the tax payable or paid under a provision of Income Tax Ordinance is less than 1/2% of the said turnover or not. If no tax is payable or paid under any of the provisions of the Income Tax Ordinance, 1979 or any of the receipts/income forming part of the gross receipts worked out as above or the amount of tax payable or paid is less than 1/2% of the said turnover, only then the provisions of section 80-D shall tic attracted. If the aggregate of the tax payable or paid under provisions of the Income Tax Ordinance on any receipts/income forming part of the turnover from all sources exceeds 0.5% of the said turnover the provisions of section 80-D shall not be attracted.
(b) Interpretation of statutes---
---- Statute is to be read as a whole normally and a particular provision is not to be read in isolation until and unless provided to be otherwise.
M. Musharraf Akhund, D.R. for Appellant.
Abdul Aziz for Respondent.
Date of hearing: 17th October, 1992.
ORDER
This appeal at the instance of department is directed against the order, dated 10-5-1992 by the learned C.I.T. (A) Zone-III, Karachi in ITA No.308/CIT(A)/III/92, relating to the assessment year 1991-92.
2. The sole objection raised by the Department is that the learned C.I.T. (A) was not justified in directing that no tax under section 80-D shall be imposed on the respondent in the facts and circumstances of the case.
3. Briefly stated the relevant facts are that the assessee (hereinafter referred to as the respondent) is a private limited company deriving income from manufacturing and sale of zinc calots which is used in dry battery cell's containers. The respondent has imported ovaltine also in the income year corresponding to the assessment year 1991-92. The total turnover under the head ovaltine was declared at Rs.16,55,856. As the entire ovaltine was imported and was covered under section 80-C the income-tax deducted under section 50(5) at Rs.28,266 was taken as discharge of full and final income-tax liability for the portion of income under this head. The turnover declared under the head zinc calot at Rs:34,125 was also accepted and loss on zinc calot business was assessed at- Rs.32,743. After assessing loss under the head zinc calot the assessing officer made the order under section 80-D which reads as follows:
"As the assessee has sustained loss, therefore, it has not to pay any tax. Thus, it is liable to pay tax under section 80-D on Rs.34,125 which is determined at Rs.170."
4. The respondent felt aggrieved with the order under section 80-D whereby a tax was determined at Rs.170 and preferred first appeal before the learned CIT(A) contending that a tax under section 80-C was already imposed at Rs.28,266. The tax paid was much more than 0.5% of the total declared turnover under section 80-D and, therefore, provision of section 80-D was not applicable. It was further contended that the provision of section 80-D was applicable in those cases only where no tax was payable by a company or if the tax is payable it is less than 0.5% of the aggregate declared turnover. The contention found favour with the learned CIT (A) who held that when tax payable/paid already exceeds 0.5% of the aggregate turnover, the provision of section 80-D was not applicable. He, therefore, directed that no tax under section 80-D shall be imposed on the respondent in the facts and circumstances of the case. The department feeling .dissatisfied has preferred this second appeal before the Tribunal.
5. I have heard Mr. M. Musharraf Akhund, learned Representative for the Department and Mr. Abdul Aziz, learned counsel for the respondent. The learned D. R. has contended that the provisions contained in sections 80-C and 80-D of the Income Tax Ordinance, 1979 are' absolutely independent, therefore, any tax payable/paid under section 80-C is not to be considered for the purposes of section 80-D which is to be read independently and in isolation to the other provisions contained in the Ordinance including section 80-C. He has further contended that any receipt income or tax under section 80-C is to be treated as separate block and is not to be considered for the purpose of section 80-D and, therefore, if there is any sale, receipt/turnover which is not covered by the provision of section 80-C then it falls under the provisions of section 80-D and is to be separately charged to tax under the provisions of section 80-D, independently. In other words the contention of learned D.R. is that the minimum rate of tax prescribed in section 80=D shall be levied on turnover which is not covered under the provisions of section 80-C as no adjustment Wallowed in respect of any tax payable under section 80-C and thus an assessee is not entitled to any benefit in respect of any tax payable under section 80-C in relation to any turnover covered under section 80-D. The learned D.R. has thus submitted that the I.T.O. had rightly treated turnover under section 80-D as a separate block other than under section 80-C and had rightly levied the tax and the learned C.I.T.(A) was not justified in giving direction to the contrary.
6. On the other hand Mr. Abdul Aziz, learned counsel for the respondent has submitted that although, any tax payable under section 80-C is not adjustable/refundable and no credit thereof can be taken but where the tax payable under section 80-C is more than 1/2% of the amount representing total turnover of an assessee from all sources the provision of section 80-D is not attracted.
7. I have carefully considered the, contentions raised by the learned representative for the parties. In order to appreciate the respective contentions it would be convenient to reproduce sections 80-C and 80-D of the Income-tax Ordinance, 1979 which read as follows: ?
"80-C. Tax on income of certain contractors and importers.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to any person the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule. ???
(2) The amount referred to subsection (1) shall be the following, namely:--?
(a) Where the person is a resident,-?
(i) the amount representing payments on which tax is deductible under "subsection (4) of section 50, other than payments on account of services rendered;
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(ii) the amount as computed for the purpose of collection of tax under subsection (5) of section 50 in respect of goods imported, on being goods imported by an industrial undertaking as raw material for its own consumption; and .
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(b) where the person is a non-resident, the amount representing payments on account of execution of a contract of construction assembly or like project in Pakistan on which tax is deductible under subsection (4) of section 50.
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(3) Nothing contained in this Ordinance shall be so construed as to authorise any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collected under section 50 or set off of any loss under any provision of this Ordinance.
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(4) Where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected, the .tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under this Ordinance and he shall not be required to file the return of total income under section 55:
Provided that, in respect of the assessment year commencing on the first day of July, 1991, where the tax deducted or collected in the preceding financial year under subsection (4) or subsection (5) of section 50 is less than the tax payable under this section, the tax so deducted or collected shall not constitute full and final discharge of the tax liability of the assessee and he shall be required to pay the amount representing the difference between the tax payable under this section and the tax so deducted or collected and all the provisions of this Ordinance shall apply accordingly.
(5) Where an assessee, while explaining the nature and source of any sum, investment money, valuable article, excess amount or expenditure, referred to in section 13, takes into account any source of income which is subject to tax in accordance with the' provisions of this section, he shall not be entitled to take credit of any sum as is in excess of an amount which if taxed at a rate or rates, other than the rate applicable to income chargeable to tax under this section, would have resulted in tax liability equal to the tax payable in respect of income under section.
(6) For the purpose of determining the share of a partner of a firm out of such income of the firm as is determined under section 80-B or this section, the said income of the firm shall be taken to be an amount which if taxed at the rate or rates, other than the rate applicable to income chargeable to tax under section 80B or this section, would have resulted in tax liability equal to the tax payable in respect of income under section 80-B or this section.
(7) In a case to which subsection (4) applies, an order under section 59-A shall be deemed to have been made in respect of income referred to in subsection (1).
80-D. Minimum tax on income of certain companies and registered firms.-?(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where no tax is payable or paid by a company or a registered firm resident in Pakistan or the tax payable or paid is less than one-half per cent. of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company for a registered firm and tax thereon shall be charged in the manner specified in subsection (2).
Explanation.---For the removal of doubt, it is declared that the expression where no tax is payable or paid "and" or the tax payable or "paid" apply to all cases where tax is not payable or paid for any reason whatsoever including any loss of income, profits or gains or set, off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including depreciation) admissible under any provision of this Ordinance or any other law for the time being in force.
(2) The company or a registered, firm referred to in subsection (1) shall pay as income-tax--
(a) an amount, where no tax is payable or paid, equal to one-half percent. of the said turnover; and
(b) an amount, where the tax payable or paid, is less than one-half per cent. of the said turnover, equal to the difference between the tax payable or paid and the amount calculated in accordance with clause (a).
Explanation.--For the removal of doubt it is declared that "turnover" means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts."
8. In the present case the admitted facts are that the respondent's turnover consists of imports to which section 80-C applies and sale of zinc calots which is outside the purview of section 80-C. For the tine being 1 am mainly concerned with the issue if provisions of section 80-D are attracted to the facts of the case or not, therefore would not like to dilate in depth regarding the provisions contained in section 80-C, but would like to refer the C.B.R. Circular No.12 of 1991, dated 30th June, 1991 according to which sales/supplies covered by section 80-C shall be treated as separate block of income and shall be taxed in accordance with the provisions contained in section 80-C. The sales entirely out of local purchases and the income not covered by section 80-C shall be assessable in the normal manner. The assessing officer has acted accordingly in the present case and has treated the turnover consisting of imports as a separate block of income and has applied section 80-C. He has determined income from the sales on account of zinc calot in ordinary manner and has determined loss at Rs.32,743. The dispute arises thereafter when the. assessing officer after determining loss in the account relating to zinc calot has held that since the assessee has sustained loss and has not to pay any tax, therefore, it is liable to tax under section 80-D on turnover of Rs.34,135 and has thereby determined the tax liability at 0.5% of the turnover which comes to Rs.170.
9. The C.B.R. in Circular No.8 of 1991, dated June 30, 1991 has explained the scope of section 80-D as follows:
"Section 80-D has been inserted in the Ordinance to provide that where no tax is otherwise payable by any company, body corporate or trust resident in Pakistan for any reason, including tax holiday or accounting concessions or the tax paid by it is less than 0.5% of its declared turnover, tax equal to 0.5% of the turnover shall be paid and where the tax otherwise payable is less than 0.5% of the said turnover, the difference between the tax otherwise payable and the amount calculated at the rate of 0.5% of the turnover shall become payable."
10.? Again in Circular No.10 of '1991, dated June 30, 1991 it has been stated as follows:
"A minimum tax equal to 0.5% of the declared turnover of every company, body corporate and trust resident in Pakistan has become payable as income-tax with effect from the assessment year 1991-92 under section 80-D of the Income Tax Ordinance, 1979.
The income-tax is payable on the deemed income representing the total amount of the declared turnover from all sources falling under the head `income from business or profession'. This would mean the gross receipt of the company, body corporate or, trust.
Where no tax is otherwise payable by the company. Body corporate or trust, for any reason whatsoever, income-tax equal to 0.5% of the declared turnover will be paid. In other cases, difference between the tax otherwise payable and the amount equal to 0.5% of the said turnover will be paid alongwith return of income required to be furnished under section 55 of the Income-tax Ordinance, 1979."
11. A perusal of section 80-D and the clarification issued by the C.B.R. clearly indicate that the intention of the legislature in enacting section 80-D was to impose a minimum tax on the turnover of a company or a registered firm at 0.5% of its turnover from all sources where no tax is payable or paid by a company or a registered firm or the tax payable or paid is less than 1/2% of the amount representing such turnover. Thus, the expressions which require particular consideration are as follows:
(a) Where no tax is payable or paid by a company or registered firm.
(b) The tax payable or paid is less than 1/2% of the amount representing its turnover from all sources.
(c) The aggregate of the declared turnover shall be deemed to be income of the said company.
12. An explanation has been added to section 80-D(1) whereby the expressions "where no tax is payable or paid" and "the tax payable or paid" have been explained. By virtue of this explanation these expressions applied to all cases where no tax was payable or paid for any reason whatsoever including any loss of income, profits or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax and allowances and deductions (including depreciation) admissible under any provision of the Ordinance or any other law for the time being in force. The explanation has been added with retrospective effect. The legislature in its own wisdom has further defined the expression "turnover" to mean gross receipts, exclusive of trade discount shown on invoices or bills derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts. A perusal of section 80-D(1) itself further shows that the minimum tax of 0.5% has been : levied qua, the amount representing turnover of a company or registered firm from all sources and the aggregate of the declared turnover has been deemed to be the income of said company or a registered firm and the tax thereon is to be charged in the manner specified in subsection (2). The words "tax thereon" further clarify that the minimum tax prescribed under section 80-D is to be ' calculated with reference to the aggregate declared turnover from all sources and if the tax payable or paid is not less than 1/2% of the said amount then the provisions contained in section 80-D shall not be attracted. It is trite law that in order to create a fiction all the conditions are to be fulfilled strictly. The aggregate of the declared turnover; meaning thereby gross receipts from all h sources has been deemed to be the income of company or registered firm for the purpose of levying minimum tax prescribed under section 80D. This is a fiction of law and in order to deem an income by fiction of law, all the necessary ingredients are always required to be fulfilled strictly failing which the fiction of law and thereby deeming a particular fact which otherwise does not exist shall not come into existence.
13. In addition to the above reasons it is established principle of the interpretation of statutes that a statute is to be read as a whole normally and particular provision is not to be read in isolation until and unless provided to be otherwise. There is nothing in section 80-D to infer that the expressions used "tax payable or paid" and "turnover from all sources" as well as "the aggregate of the declared turnover" shall be read in isolation and the tax charged under section 80-C or any other provision of the Income Tax Ordinance shall not be taken into consideration and the receipts covered under section 80-C and already subjected to the Jew of tax shall not be included in the gross receipts and/or the aggregate of the declared turnover. Any such interpretation would be clearly against manifest intention of the legislature.
14. As a result of above discussion it is held that in order to attract the provision contained in section 80-D the assessing officer should first calculate the declared turnover from all sources meaning thereby that the gross receipts should be worked out irrespective of the fact if it is treated a separate block of income under, section 80-C or any other provision of the Income Tax Ordinance, whether covered by section 80-C or any other deeming provision of the Ordinance or assessable in the normal manner and thereafter the total tax payable or paid by the assessee is to be worked out irrespective of the fact under which provision of the Ordinance the tax is payable and whatever be the rate of tax on the receipts/income forming part of the gross receipts. After working out the gross receipts/aggregate turnover and the total amount of tax payable or paid, it shall be worked out, if the tax payable or paid under all provision of Income Tax Ordinance is less than 1/2% of the said turnover or not. If no tax is payable or paid under any of the provision of the Income Tax Ordinance, 1979 or any of the receipts/income forming part of the gross receipts worked out as above or the amount of tax payable or paid is less than 1/2% of the said turnover, only then the provisions of section 80-D shall ' be attracted. If the aggregate of the tax payable or paid under any provision of the Income-tax Ordinance on any receipts/income forming part of the turnover from all sources exceeds 0.5% of the said turnover the provisions of section 80-D shall not be attracted.
15. Now reverting to the facts of the present case we find that the turnover of respondent from all sources is Rs.16,89,981 (Rs.16,55,856) covered by section 80-C and Rs.34,125 not covered by section 80-C. The turnover covered under section 80-C has been subjected to the levy of tax at Rs.28,266 by treating it a separate block of income. The receipt in the zinc calot account not covered by' section 80-C at Rs.34,125 has been assessed separately it normal manner and loss has been assessed at Rs.32,743. Thus, no tax is payable on the income in zinc calot account assessed in normal manner but the aggregate tax paid under section 80-C on the gross receipts/aggregate turnover is much in excess of 0.5%, the minimum tax prescribed in section 80-D on the gross receipt of a company, therefore, section 80-D shall not be attracted. In applying section 80-D it should always be kept in mind that the legislature has used the expressions "the tax payable or paid by a company or a registered firm" and "its turnover from all sources". The word "its" denotes the company. Thus, tax payable under a particular block of income and the receipt under a particular block of income is not to be considered separately, but the material point for consideration for applying section 80-D is the tax payable or paid by the company and the gross receipts of the company from all sources and assessable under any provision of the Income Tax Ordinance whatsoever. Thus, in the facts and circumstances of the present case it is held that the provision of section 80-D is not attracted and the assessing officer was not justified in applying section 80-D. The learned CIT(A) has rightly deleted the addition to which no exception can be taken.
16. The appeal stands dismissed accordingly.
M.BA./2244/T???????????????????????????????????????????????????????????????????????? ??????????? Appeal dismissed.