(a) Income Tax Ordinance (XXXI of 1979)---

--S. 53---Advance payment of tax---Procedure---Liability for payment of advance tax on the basis of latest assessment order is also subject to revision after the assessment order is modified in appeal.

Section.53, Income Tax Ordinance, 1979 clearly lays down that in case of the company where total assessed income is not less than Rs.50,000 and in other cases assessed income is not less than Rs.1,00,000 then an assessee is liable to pay advance tax in four equal quarterly instalments starting from Fifteenth day of September, Fifteenth day of December, Fifteenth day of March and Fifteenth day of June in each financial year on the basis of latest assessment order.

Every assessment order is followed by a demand notice to recover the tax liability created by such assessment. This demand notice is also subject to incident of appeal as if any relief is granted by' appellate authorities then and I.T.O. is required to give appeal effect and accordingly issue new demand notices on the basis of such order. In view of this the liability for payment of advance tax on the basis of latest assessment order is also subject to revision after the assessment order is modified in appeal. In the present case the admitted position was that the assessment order of 1985-86 on the basis of which the liability for advance tax under section 53 was calculated, was modified on 20-1-1987 by C.I.T.(A), therefore, as a necessary corollary it was incumbent upon the I.T.O. to give appeal effect and since the assessment order had merged in the appellate order, therefore, the modified order or order after appeal effect wasthe actually latest assessment order on the basis of which the I.T.O. was required to calculate advance tax under section 53 of the Ordinance.

Begum Mumtaz Jamal's case P L D 1976 Lah. 761 distinguished.

(b) Interpretation of statutes---

---- Non-abstante clause will operate as an ouster clause only if an inconsistency between the two provisions is found to exist.

Words and Phrases, Permanent Edn., Vol. 28-A by Nephew-Nystagmus; Corpus Juris Secundum, Vol. LXVI; Stroud's Judicial Dictionary of Words and Phrases, Third Edn. and P L D 1991 SC 258 ref.

(c) Income Tax Ordinance (XXXI of 1979)---

----S.80-AA---Tax on income of non-resident from fees for technical services-- Tax liability computed under S.80-AA is not subject to levy of surcharge---Surcharge levied under S.10 of the Ordinance is a separate levy and over and above the liability of Income-tax.

I.N. Pasha for Appellant.

Khalid Siddiqui for Respondent.

Date of hearing: 10th August, 1993.

ORDER

SYED KABIRUL HASSAN (JUDICIAL MEMBER).---These five appeals, out of which four appeals relate to assessment year 1988-89 and 1989 90 and one appeal relates to assessment year 1987-88, are directed against the order of the learned C.I.T.(A). The issue in the assessment year 1987-88 is the charge of additional tax under section 87 of the Ordinance, whereas in the assessment years 1988-89 and 1989-90 the appellant is aggrieved against the levy of surcharge on tax computed under section 80-AA and charge additional tax under section 87 of the Ordinance.

2. The brief facts are that in the assessment year 1987-88 the assessee company did not pay advance tax under section 53 on the basis of latest assessment order, which was assessment order of 1985-86 duly served on assessee. The I.T.O., therefore, invoked the provisions of section 87 and charged additional tax thereon.

3. The learned counsel for the assessee has submitted that the order of the I.T.O. for the assessment year 1985-86 was modified by the learned A.A.C. on 20-1-1987, therefore, on the basis of Begum Mumtaz Jamal's case P L D 1976 Lah. 761 the order of the I.T.O. had ceased to exist as from the date of appellate order it merged with appellate order, therefore, the I.T.O. was not justified to levy additional tax under section 87 of the Ordinance.

The learned D.R. on the other hand has submitted that the order of the I.T.O. was modified on 20-1-1987, therefore, the I.T.O. was justified to calculate advance tax on the basis of assessment order in force prior to this date and that was the order of assessment year 1985-86 which was passed on 18-5-1986 and had created a demand of Rs.8,65,142. He has, therefore, supported the order of the learned C.I.T.(A).

4. To understand the contentions of both the representatives let us have a 'look at section 53, which states as follows:--

"53.Advance payment of tax.---(1) Where the total income of any assessee excluding income to which section 27 or (subsections (1) and (2) of section 50 applies) for the latest assessment year in respect of which the tax payable by him has been determined under section 59, (59-A, 60) 62, 63 or 65 (is, in case of a company not less than (fifty) thousand rupees, and in other cases not less than (one hundred thousand rupees) he shall pay by way of advance tax, the credit of Federal Government on or before the Fifteenth day of September, the Fifteenth day of December, the Fifteenth day of March and the Fifteenth day of June in each financial year, and amount equal to one fourth of the full amount of income tax and super tax) so determined to be payable in respect of that assessment year (without making any adjustment for any tax already paid by way of advance tax or otherwise, as reduced by the tax, if any, already collected or deducted and paid under section 50 in the said financial year... "

(On relevant portion has been reproduced)

This section clearly lays down that in case of the company where total assessed income is not less than Rs.50,000 and in other cases assessed income is not less than Rs.1,00,000 then an assessee is liable to pay advance tax in four equal quarterly instalments starting from Fifteenth day of September, Fifteenth day of December, Fifteenth day of March and Fifteenth day of June in each financial year on the basic of latest assessment order. In this case the applicability of this section is not disputed. There is no dispute about the latest assessment order, which was assessment order of 1985-86. This is also an admitted fact that this order was modified in appeal on 20-1-1987. The only point to be decided is that on what basis the I.T.O. should have calculated the advance tax under section 53 when the original order of 1985-86 on that basis first two instalments were calculated was modified on 20-1-1987. In order to sort out this controversy we would have to take into consideration the scheme of this Ordinance' relating to assessments and specific appeal provisions. According to scheme of this Ordinance an assessment order passed by an I.T.O. is subject to incident of appeal before the appellate authorities.

Every assessment order is followed by a demand notice to recover the tax liability created by such assessment. This demand notice is also subject to incident of appeal as if any relief is granted by appellant authorities then and I.T.O. is required to give appeal effect and accordingly issue new demand, notices on the basis of such order. In view of this the liability for payment of advance tax on the basis of latest assessment order is also subject to revision after the assessment order is modified in appeal. In this case the admitted position is that the assessment order of 1985-86 on the basis of which the liability for advance tax under section 53 was calculated, was modified on 20-1-1987 by learned C.I.T.(A), therefore, as a necessary corollary it was incumbent upon the I.T.O. to give appeal effect and since the assessment order had merged in the appellate order, therefore, the modified order or order after appeal effect was the actually latest assessment order on the basis of which the I.T.O. was required to calculate advance tax under section 53 of the Ordinance.

5. In view of above, the finding of the learned C.I.T.(A) on this issue is modified to the extent that the I.T.O. is directed to calculate advance tax under section 53 on the basis of modified order of assessment year 1985-86 passed on 20-1-1987. The case relied upon by the learned counsel for the assessee P L D 1976 Lah. 761 is not attracted to the facts of the case.

6. In the assessment years 1988-89 and 1989-90 the contention of the learned counsel for the assessee is that in view of section 80-AA the tax charged at the rate of 20% of the total income of the appellant-company was a final discharge of its liability under the Ordinance, therefore, levy of surcharge was illegal and assessments on this basis are liable to be cancelled.

7. In support of this contention the learned counsel for the assessee has submitted that assessee-company is a non-resident company and is deriving income from fees for technical services. In the assessment year 88-89, the assessee-company received Rs.3,64,108 for first period from 1-1-1988 to 30-6-1988 and Rs.1,32,01,677 for other period from 1-7-1988 to 31-12-1988. In the assessment year 1989-90 for the first period from 1-1-1979 to 30-6-1979 the assessee-company received Rs.1,58,86,340 and for other period from 1-7-1979 to 31-12-1979 Rs.4,02,66,942. The returns for separate periods were filed in view of the requirement of section 80-AA. During the assessment year the I.T.O. after calculating the income-tax due also levied 10% surcharge and this amount of surcharge according to the learned counsel for the assessee is not in accordance with law.

8. Elaborating his submission the learned counsel for the assessee has submitted that firstly section 80-AA is self-contained provision and secondly before the start of this section word "notwithstanding" has been used, therefore, the assessment procedure prescribed only in this section is to be followed and in view of subsection (5) of section 80-AA the tax liability determined under this section would be the final discharge of tax liability of an assessee. In this respect he has also referred to the definition of "tax" mentioned in section 2(43) of the Ordinance, and according to him tax includes surcharge also, therefore, tax liability determined under this section is inclusive of surcharge and hence no additional levy of surcharge is contemplated.

9. In order to understand the view point of the learned counsel for the assessee-company it would be pertinent to reproduce the relevant provisions of the Ordinance referred to by the learned counsel for the assessee-company.

Section 80-AA states as follows:--

"80-AA. Tax on income of non-resident from fees for technical services.-- (1) Notwithstanding anything contained in this Ordinance, where any consideration by way of fees for technical services referred to in the Explanation to subsection (5) of section 12 is received of is deemed to be received by, of accrues or arises or is deemed to accrue or arise to, a non-resident, the whole of such consideration shall be deemed to be income of the non-resident and tax thereon shall be charged at the rate of twenty per cent. of such income.

(2) A non-resident referred to in subsection (1) or an agent authorized by him in this behalf, shall prepare and furnish to the I.T.O. within thirty days from the last day of each period of six months in every financial year, that is to say, the Thirty-first day of December and the Thirtieth day of June, respectively, a return, in respect of each such period of six months as aforesaid showing therein full particulars of the income referred to in the said subsection:

Provided that, where such non-resident is likely to leave Pakistan in months period as aforesaid or shortly after its expiry and he has no present intention of returning to Pakistan, the provisions of section 81 shall, so far as may be, apply as if references to financial Year, the return of total income, the income year, the order of assessment, the assessment year and rate of tax were references to the corresponding provisions of this section.

(3) On receipt of such return, the I.T.O. may, after calling for such particulars, accounts or documents as he may require, determine the income referred to in subsection (2) and charge tax thereon in accordance with the provisions of this section.

(4) Nothing contained in this Ordinance shall be so construed as to allow any expense against the income determined under subsection (3).

(5) The tax paid under this section shall to the extent that the income of the non-resident is chargeable under this section 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 or be entitled to claim any refund or adjustment on the basis of such return.

(6) The provisions of this section shall not apply to a non-resident in respect. of any consideration referred to in subsection (1) for rendering technical services under an agreement entered into on or before the Thirtieth day of June, 1987.

The definition of tax mentioned in section 2(43) is as under:--

"Section 2(43):

tax' means income tax, super tax, surcharge and additional tax chargeable or payable under this Ordinance, and includes any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance;"

Section 10 speaks about the levy of surcharge and the same is as under:-

"10. Charge of super tax and surcharge.--- (1) In addition to the income-tax charged for any year, there shall be charged, levied and paid for that year in respect of the total income, or any part thereof, of the income year or years, as the case may be, of every person, an additional duty of income-tax (in this Ordinance referred to as `super tax') and surcharge at the rate or rates specified in First Schedule

(2) Subject to the provisions of this Ordinance, the total income of any person shall for the purposes of super-tax and surcharge, be the total income as assessed for the purposes of income-tax, and where an assessment had become final and conclusive for the purposes of income-tax for any year, the assessment shall also be final and conclusive for the purposes of super tax or surcharge, as the case may be, for the same year.

(3) All the provisions of this Ordinance relating to the charge, assessment, deduction at source, collection or payment in advance, recovery and refund of income-tax shall apply, so far as may be, to the charge, assessment, deduction at source, collection, payment in advance, recovery and refund of super tax and surcharge, as the case may be."

11. Now we take up the submission of the learned counsel for the assessee-company. The admitted facts in this case are that the assessee- company is non-resident company and income declared by the assessee company is income from fee for technical services rendered by the assessee -company. This fact is also not disputed that agreements for this purposes were entered into between the parties on or after July, 1987.

10. In reply the learned D.R. has submitted that surcharge is leviable in addition to charge of income-tax, therefore, the I.T.O. is not debarred from levy of surcharge even notwithstanding clause contained in section 80-AA.

12. As regards the contention of the learned counsel for the assessee that section 80-AA is a self-contained provisions and the tax calculated or levied under this section is discharge of total tax liability of an assessee computable on the basis of total income earned through fees from technical services, it is observed by us that this contention is>substantially correct. From the careful reading of section 80-AA it would appear that this para. starts with the word "notwithstanding" and the dictionary meaning of this word is:--

"Notwithstanding: The word `notwithstanding' means `without prevention or obstruction from or by' and `in spite or. State ex rel, Morse v. Christianson 55 N. W. 2d 20, 24, 262"

(The above definition has been taken from Words and Phrases Permanent Edition. Vol. 2ArA Nephew -- Nystagmus).

"Notwithstanding: Without prevention or obstruction from or by; in spite of. It has been held to be equivalent to `nevertheless' see ante p.20 note 5".

(The above definition has been taken from Corpus Juris Secundum VOI.LXVI)

"Notwithstanding---(1) Anything in this Act to the contrary notwithstanding is equivalent to saying that the Act shall be no impediment to the measure, and precisely corresponds to the words in the second saving of the Statute of Uses (27 Geb, 88, c.10), as if this Act had not been made."

(The above definition has been taken from Stroud's Judicial Dictionary of Words and Phrases, Third Edition).

13. In this respect we would also refer to decision of our Honourable Supreme Court reported as P L D 1991 SC 258, where at page 264 it is observed:

"... In our opinion a `non-abstante' clause operated as an ouster of the earlier provisions only where there is a conflict and inconsistency between the earlier provisions and those contained in the later provision and, therefore, must be read in the context in which it is operating. Accordingly, a non-abstante clause will operate as ouster only if an inconsistency between the two is found to exist... "

In view of above Supreme Court decision, it has been conclusively established that a non-abstante clause will operate as an ouster clause only if an inconsistency between the two provisions is found to exist. In this case if we minutely scrutinise the provisions of section 80-AA then it would appear that the whole procedure of filing of return and assessments have been changed even in view of subsection (5) the assessee is not required to file return under section 55. The rate of tax and computation of total income has been separately prescribed. If we look to charging section which is subsection (1) in this case then it appears that tax is chargeable at the rate of 20% of total receipts from fees for technical services and in view of definition of tax it is abundantly clear that tax includes surcharge and super tax also. In our opinion if the intention of legislature would have been to restrict this levy to income-tax only then the legislature should have used the ward income-tax, but the word "tax" has been intentionally used because of other provisions contained in subsections (3) and (4), as in subsection (4) the claim of expenditure against the total receipts have been specifically excluded. It is, therefore, inconceivable that legislature on the one hand wanted to tax the receipts from fees for technical services without allowing any expenditure incurred by the assessee which was against the scheme and spirit of the Ordinance and on the other hand it also intended to levy surcharge on such income. In our opinion this is the inconsistency which h4s been clarified by the non-abstante clause used in this section. This position has further, been clarified by subsection (5) wherein it has been-stated that tax levied in this section would be the final discharge of tax liability of an assessee under this Ordinance, as the first part used in subsection (5) speaks of the tax liability in this section and other part speaks of final discharge of his tax liability under this Ordinance. The position becomes crystal clear if the definition of tax is kept in mind.

15. We are in agreement with the contention of the learned D.R. that surcharge levied under section 10 of the Ordinance is a separate levy and over and above liability of income tax but the provisions of section 80-AA clearly speaks of total tax liability and not the income-tax liability, therefore, this argument or interpretation is not applicable in this case.

16. In view of above, we are of the view that tax liability computed under section 80-AA is not subject to levy of surcharge, therefore, the surcharge levied in the above assessment years is hereby cancelled.

17. As regards levy of additional tax under section 87 in the assessment years 1988-89 and 1989-90 it is observed by us that question of levy of additional tax under section 87 m this case does not arise in view of the fact that in Finance Act, 1987, section 4-A was introduced in section 50 simultaneously with the introduction of section 80-AA and as per provisions contained in section 4-A any receipts of a non-resident from fees for technical services are subject to deduction at source and in view of this the recipient is not liable to pay any tax but is liable to file six-monthly returns. According to the Second Schedule to the Ordinance the tax deducted at source is 20% of the total receipts and in fact the entire tax liability is deducted at source like salary income, then there is no liability outstanding as far as liability of tax is concerned. In view of this the question of levy of additional tax under section 87 does not arise, therefore, tax levied under section 87 in both the assessment years is hereby cancelled.

18. In terms of above these appeals are disposed of.

M.B.A./2596/T Order accordingly.