1995 P T D 856
[Karachi High Court]
Before Mamoon Kazi and Mrs. Majida Razvi, JJ
Messrs GEC AVERY (PVT.) LIMITED
Versus
GOVERNMENT OF PAKISTAN through Central Board of Revenue, Islamabad and 2 others
Constitutional Petitions Nos. D-714, 723, 724, 1364, 1365 of 1994, 1556 and 1642 of 1993, decided on 09/02/1995.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.13 & 80-C(5)---C.B.R. Circular No. 12 of 1991, dated 30-6-1991-- Constitution of Pakistan (1973), Art.199---Deemed income---Constitutional petition---Maintainability---High Court can step in to prevent excess, if any, committed by public functionaries.
M/s. Julian Hoshang Dinshaw Trust and others v. Income Tax Officer 1992 PTD 1; 1992 SCMR 250 and Edu1ji Dinshaw Limited v. Income Tax Officer 1990 PTD 155 ref.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.13 & 80-C---C.B.R. Circular No.12 of 1991, dated 30-6-1991---Deemed income---Application of S.80-C, Income Tax Ordinance, 1979---Scope-- Section 80-C would be applicable whenever the amount to be taxed is relatable to the provisions of S.50 (4) or 50(5), Income Tax Ordinance, 1979---Any excess credited in an assessee's account as referred to in S.13 (1)(a)(b)(c)(d)(e) shall be deemed to be the income of the assessee for the relevant income year chargeable to tax---Only in case when an assessee while explaining the nature or source of an excess as referred to in S.13, takes into account any source of income which is subject to tax in accordance with the provisions of S.80-C(5) of the Ordinance, the tax liability is to be determined in accordance with the provisions of S.80-C(5) of the Ordinance.
In view of the non obstante clause employed by the Legislature in section 80-C (1) of the Income Tax Ordinance, 1979 there can hardly be any doubt that section 80-C has been placed on a higher pedestal while compared to the other provisions of the Ordinance. The section would apply whenever the amount to be taxed is relatable to the provisions of section 50(4) or 50(5) of the Ordinance. Section 80-C provides that in such a case the whole of such amount shall be deemed to be income of the assessee and tax thereon shall be charged at the rate specified in the First Schedule: Subsection (3) of section 80-C disentitles an assessee to claim any allowance or deduction of the gross receipts the whole of which are deemed to be income. Subsection (4) of section 80-C further provides that when income referred to in section 80-C is the only income of the assessee, the tax deducted or collected under section 50 shall be deemed to be final discharge of his tax liability under the provisions of the Ordinance and the assessee shall not even be required to file the return of total incorfe under section 55 of the Ordinance. Subsection (5) of section 80-C must, therefore, be considered in such perspective. Reference to subsection (5) of section 80-C shows that it begins with the words "while explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure, referred to in section 13". Therefore, provisions of the said subsection cannot be invoked without reference to the provisions of section 13 of the Ordinance. Section 13(1) of the Ordinance indicates that in. case an assessee during any income year has credited any sum to his account or has invested any money or has acquired any valuable article, etc. and is unable to offer any explanation regarding its nature of source, such excess amount or expenditure shall be deemed to be the income of the assessee. Subsection (2) of section 13 further indicates that notwithstanding the offering of such explanation by an assessee regarding the nature or source of such expenditure etc., the same is found to be too low, all the provisions of subsection (1) of section 13 shall have effect.
Reference to the provisions of section 80-C(5) and section 13 shows that any such excess credited in an assessee's account, as referred to in clauses (a) to (e) of section 13(1) shall be deemed to be the income of the assessee for the relevant income year chargeable to tax. Further, reference to the words "takes into account any source of income which is subject to tax in accordance with the provisions of this section" occurring in subsection (5) indicates that the provisions of the said subsection cannot be invoked unless an assessee takes into account a source of income to which the provisions of section 80-C apply. The subsection further provides that under such circumstances the assessee shall not be entitled to take credit of any sum as is in excess of an amount which if taxed at rate or rates other than rate applicable to income chargeable to tax under the said section, would have resulted in tax liability equal to the tax payable in respect of income under the said section. It, therefore, clearly follows that only in case when an assessee while explaining the nature or source of an excess as referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C, the tax liability is to be determined in accordance with the provisions of section 80-C(5) of the Ordinance. There may be a case where an assessee while explaining such excess amount or expenditure etc., may take into account a source of income which is not subject to tax in accordance with the provisions of section 80-C. In such a case, the provisions of subsection (5) would not apply. Under such circumstances any such excess amount referred to in section 13 of the Ordinance can be assessed under the normal procedure provided by the Ordinance. It is, therefore, incumbent on the Assessing Officer to first identify the source of income before invoking the provisions of subsection (5) of the Ordinance. The only object behind incorporation of subsection (5) into section 80-C appears to be, to give effect to the provisions of section 13 of the Ordinance which otherwise was not possible without taking recourse to the provisions of subsection (5). Section 13 indicates that any unexplained excess shall be deemed to be the income of the assessee whereas according to the provisions of section 80-C, tax from an assessee is to be charged at a rate specified in the First Schedule on the whole of amount referred to in subsection (2) of section 80-C. The words "whole of such amount" refer to the gross receipts of an assessee which are not synonymous with "income" referred to in section 13. Therefore, an artificial method of determining the assessee's income under the normal procedure, as laid down by the Ordinance, has been provided by subsection (5) which would also include the unexplained excess referred to in section 13 of the Ordinance to determine the liability of the assessees. The procedure provided by Example VI in Circular 12 of 1991 issued by the Central Board of Revenue which has been respectively followed by the Taxing Officers in the present case provides as follows:---
"Example VI: Case of Private Limited Company:
| Contract payments received | Rs.2,000,000 |
| Presumptive tax paid | Rs.60,000 |
| Income, which if taxed at normal rates, would have resulted into a liability equal to the aforesaid amount of Rs.60,000. | Rs.109,000 |
In the explanatory note in the said example, it has been further observed:
"This company would be allowed a credit of Rs.109,090. Any sum in excess of that amount would be treated as its unexplained investment in accordance with the relevant provisions of section 13:"
Although the above example appears to be in consonance with the provisions of subsection (5) of section 80-C of the Ordinance but nothing can be spelt out from the provisions of subsection (5) to indicate that Example VI would apply in every case where any sum in excess of the amount which if taxed at normal rates would have resulted in tax liability equal to the tax payable in respect of income determined under the provisions of section 80-C. Subsection (5) cannot be invoked by the Assessing Officer in every case, unless such income has first been isolated as income to which the provisions of subsection (5) apply. The object behind section 80-C of the Ordinance is not to .impose a minimum tax liability on an assessee. When such was the intention, as in the case of section 80-D of the Ordinance, the same was manifested in unambiguous and clear terms by the legislature.
In the present case, although it was a common ground between the parties that all the assessees were manufacturers of goods and they had exercised their option under clause (9) of Part IV of the Second Schedule to the Ordinance, therefore, the whole of the income of the assessees was to be governed under the provisions of section 80-C. Although there could hardly be any cavil with the said contention but nothing could be spelt out from the notices respectively issued by the Assessing Officers to the assessees to indicate that the income which was purported to be taxed under the provisions of section 80-C(5) of the Ordinance had first been identified by the Assessing Officer as such income. The mere fact that the assessee's entire income was to be assessed under the provisions of section 80-C could not necessarily lead to an inference that the source of such excess income taken into account by the assessee would also be subject to tax in accordance with the provisions of section 80-C of the Ordinance. Unless the nature and source was determined by the Assessing Officer the provisions of subsection (5) could not apply. It would be erroneous to assume that subsection (5) was to be applied in every case where the income of an assessee is subject to tax in accordance with the provisions of section 80-C. The conditions under which subsection (5) shall apply, had been clearly spelt out in the said subsection and to apply, them in every case, would certainly not be in consonance with the legislative intent.
M/s. Julian Hoshang Dinshaw Trust and others v. Income Tax Officer 1992 PTD 1 = 1992 SCMR 250 and Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155 ref.
Khalid Anwar, Sirajul Haque and Dr. Nasim Ahmed Khan for Petitioners.
M.G. Hasan and Shaik Haider for Respondents.
Dates of hearing: 30th, 31st January, 1st and 2nd February, 1995.
JUDGMENT
MAMOON KAZI, J.---The petitioner in these petitions has challenged the applicability of section 80-C(5) of the Income Tax Ordinance, 1979 (hereinafter referred to as "the Ordinance") to its case. It has also called into question the correctness of the interpretation of the said provisions as indicated in Circular No.12 of 1991, dated the 30th June, 1991 issued by the Central Board of Revenue (respondent No.1).
2. The facts of the case, briefly stated; are that, section 80-C, which was incorporated in the Ordinance by Finance Act, 1991, has introduced a presumptive tax regime with effect from the assessment year 1991-92. The petitioner in each case is a corporation to which the provisions of section 80-C of the Ordinance are applicable. Section 80-C provides, in brief that, notwithstanding anything contained in the Ordinance or any other law for the time being in force, the whole of amount received shall be deemed to be the income of the assessee and tax thereon shall be charged at the rate specified in the . First Schedule. The amount in question is defined in terms of subsection (2) of the said section and the same is relatable for the purpose of the present case to the amount representing payments on which tax is deductible under section 50(4) of the Ordinance. The petitioner had submitted its income-tax returns for the relevant assessment years in the normal course. It had also filed a statement under section 143-B of the Ordinance alongwith computation of income showing the income falling under section 80-C as well as the income outside the said section. The Assessing Officer, who completed the assessment, imposed additional tax liability on the basis of the said Circular No.12 issued by respondent No.l. The said Circular, as was pointed out earlier, had purported to further interpret the provisions of section 80-C(5) of the Ordinance. The petitioners protested against creation of such additional burden by invoking of the provisions of section 80-C(5), but the respondent concerned proceeded with the assessment in accordance with the said Circular. The petitioner in one case also filed appeal before the Commissioner of Income Tax (Appeals) but without any success. Thereafter, the present petition was filed.
3. As the controversy mainly revolves around subsection (5) of section 80-C and section 13 of the Ordinance, the provisions of sections 80-C and 13 are reproduced as under:---
"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 being a resident, 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 in 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;
(ii) The amount as computed for purpose of collection of tax under subsection (5) of section 50 in respect of goods imported, not being goods imported by an industrial undertaking as raw material for its own consumption; and
(b) Where the person is a non-resident, the amount representing payments on account of execution of a contract for construction, assembly or like project in Pakistan on which tax is deductible under subsection (4) of section 50.
(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.
(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 deduced 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 this 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 80-B 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).
"13.Unexplained investments, etc deemed to be income. ---(1) Where,
(a) any sum is found to be credited in the books of an assessee maintained for any income year; or
(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year, or
(b) The assessee is found to have made any investment in any income year which is not recorded in the books of account maintained for that income year or is not shown. in the wealth statement furnished under section 58 in respect of that year, or
(c) The assessee is found in respect of any income year to be the owner of any money or valuable article which is not recorded in the books of account, if any, maintained by him or is not shown by him in any wealth statement furnished under section 58 in respect of that year, or
(d) The assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Income Tax Officer finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement furnished under section 58 in respect of that year,
(e) An assessee has, during any income year, incurred any expenditure,
and the assessee offers no explanation about the nature and source of such sum, investment, acquisition of the money or valuable article, excess amount or the money from which the expenditure was met, as the case may be, or the explanation offered by him is not, in the opinion of the Income Tax Officer, satisfactory, the sum so credited, the value of the investment, the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance:
Provided that, where any act referred to in clauses (a) to (e) is discovered after the assessment of income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in the total income of the income year relevant to the assessment year in which the said discovery is made:
Provided further that in cases referred to in clauses (aa) to (e) such income shall not be chargeable to tax unless prior approval of the Inspecting Assistant Commissioner has been obtained.
(2) Where the value of any investment or article referred to in clauses (aa), (b), (c) or (d) or the amount of expenditure referred to in clause (e) of subsection -(1) is, in the opinion of the Income Tax Officer, too low, the Income Tax Officer may determine, after giving a reasonable opportunity to the assessee of being heard and with the prior approval of the Inspecting Assistant Commissioner, a reasonable value or the amount thereof, as the case may be, and all the provisions of subsection (1) shall have effect accordingly."
4. The main contention raised on behalf of the petitioners is that as subsection (5) of section 80-C clearly indicates, the subsection is applicable only in case where nature or source of any sum, investment, money, valuable article etc. as referred to in section 13 has been taken into account by the assessee. In such case, the assessee would be liable to payment of tax in respect of any unexplained excess. The provisions of subsection (5), therefore, cannot be invoked by the Assessing Officer without first identifying the nature or source of such taxable amount. The petitioners have also challenged the interpretation of section 80-C (5) by respondent No. 1 as indicated in Circular 12 of 1991 as such interpretation, according to the petitioners, is not warranted by the language in which the said subsection is couched. However, according to the affidavit filed by the Deputy Commissioner of Income Tax, Circle A-5, Companies 111, Karachi in C.P. No.D-714/94, which has been adopted by the learned counsel for the respondents in all other petitions, even if there is a difference of opinion between a tax-payer and the Assessing Officer regarding taxability of any amount, section 13 of the Ordinance can be invoked by the Income Tax Officer if such amount is found credited in the books of account and has not been explained by the tax payer as to its nature or source or the explanation offered, in the opinion of the Assessing Officer, is not satisfactory. A preliminary objection has also been taken regarding maintainability of these petitions as alternate, adequate and effective remedies are available to the petitioners in the form of an appeal before the Commissioner of Income Tax or the Income Tax Appellate Tribunal, as the case may be, or by reference to this Court under section 136 of the Ordinance.
5. Before referring to the merits of the case, we would first like to deal with the preliminary objection raised on behalf of the respondents. No doubt, Chapter XIII of the Income Tax Ordinance, 1979 provides for an appeal, a revision or a reference to a High Court, which may be, filed by any person who is aggrieved by an order passed by an Assessing Officer, but Mr. Khalid Anwar, learned counsel for the petitioners in C.P. No.D-714/94 who has also addressed us on behalf of the learned counsel for the other petitioners, has argued that after the view taken by the Central Board of Revenue, as spelt out from Circular No.12 of 1991, exhausting of such remedies first by the petitioners, would have been nothing more than a futile exercise. The learned counsel has also relied upon the case of M/s. Julain Hoshang Dinshaw Trust and others v. Income Tax Officer 1992 PTD 1 = 1992 SCMR 250 to support his contention. In the said case, the following observations were made by the Supreme Court in more or less similar circumstances:---
"9. It is not understandable that in the presence of the directions embodied in the Circular, how an Income Tax Officer would lend any weight to the appellants' claim of immunity from taxability of the receipts in dispute. Indeed, it would be very difficult for the Assessing Officer to render an independent adjudication. To quote an instance of lack of objectivity, the attention of the High Court was invited to an order passed by the Income Tax Officer, imposing tax on similar receipt in the hands of another shareholder of the Company, namely Russie M. Dinshaw. It was in this context that the appellants instead of throwing themselves at the mercy of the Income Tax Officer, chose to approach the High Court under Article 199 of the Constitution. It is correct that the Income Tax Appellate Tribunal is not under any compulsion to follow the Circular, but there are indications on the record before us that in an identical case the changeability of the receipt was endorsed by the Tribunal. The superior Courts have repeatedly exercised the writ jurisdiction in appropriate cases, involving fiscal rights and on the allegation of misapplication of law or abuse of power stepped in to examine whether or not public functionary concerned acted in accordance with the powers conferred on him by the Statute. In M/s. Usmani Glass Sheet Factory Ltd., Chittagong v. Sales Tax Officer, Chittagong (PLD 1971 SC 205) this Court examined in detail whether the glass sheets manufactured by the assessee were covered by exemption from playability of tax granted through a notification issued under the Sales Tax Act, and repelled the argument against the review ability of the orders of the Sales Tax Authorities by the High Court. In a recent case Eduljee Dinshaw v. Income Tax Officer 1990 PTD 155, this Court discussed at some length the case-law on the subject and noticed that the High Court have made frequent interventions, in the fiscal disputes, in exercise of writ jurisdiction.
Upon careful consideration of the facts of the case before us, we are of the view that it was not necessary for the appellants to have travelled through grooves of the procedure laid down in the Statutes to approach the High Court. In our opinion, the writ petitions were competent, and a decision on merit of the issues raised therein was fully warranted."
Similar view was held by the Supreme Court in another case reported as Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155. Therefore, the identical nature of the preliminary objections in the present case and the reported cases cannot be more pronounced. The Central Board of Revenue has already issued a circular in this regard indicating a process to be followed by the Assessing Officer while applying the provisions of subsection (5) of section 80--C of the Ordinance. By working backward, a figure of income is to be first determined, which if taxed at normal rates, would have resulted into a tax liability equal to the presumptive tax paid. Any sum in excess of that amount is to be regarded as unexplained investment with reference to the relevant provisions of section 13. Now, in view of such clear instructions issued by the Board in the said Circular, it cannot be understood what useful purpose would have been served if the assessee had first availed the remedies provided in the Ordinance. Many instances can be found where even the Income-Tax Appellate Tribunal has been found to endorse the opinion held by the Board of Revenue. Even otherwise, as has been held by the Supreme Court in the case of Julian Hoshang Dinshaw Trust, in cases involving fiscal rights, the superior Courts have always stepped in to prevent excess, if any, committed by public functionaries. We are, therefore, not inclined to consider the preliminary objection.
6. Turning now to the merits of the case, in view of the non obstante clause employed by the Legislature in section 80-C(1) of the Ordinance, 1979 there can hardly be any doubt that section 80-C has been placed on a higher pedestal while compared to the other provisions of the Ordinance. The section would apply whenever the amount to be taxed is relatable to the provisions of section 50(4) or 50(5) of the Ordinance. Section 80-C provides that in such a case the whole of such amount shall be deemed to be income of the assessee and tax thereon shall be charged at the rate specified in the First Schedule. Subsection (3) of section 80-C disentitles an assessee to claim any allowance or deduction of the gross receipts the whole of which are deemed to be income. Subsection (4) of section 80-C further provides that when income referred to in section 80-C is the only income of the assessee, the tax deducted or collected under section 50 shall be deemed to be final discharge of his tax liability under the provisions of the Ordinance and the assessee shall not even be required to file the return of total income under section 55 of the Ordinance. Subsection (5) of section 80-C must, therefore, be considered in such perspective. Reference to subsection (5) of section 80-C shows that it begins with the words "while explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure, referred to in section 13". Therefore, provisions of the said subsection cannot be invoked without reference to the provisions of section 13 of the Ordinance.. Section 13(1) of the Ordinance indicates that in case an assessee during any income year has credited any sum to his account or has invested any money or has acquired any valuable article, etc. and is unable to offer any explanation regarding its nature of source, such excess amount or expenditure shall be deemed to be the income of the assessee. Subsection (2) of section 13 further indicates that notwithstanding the offering of such explanation by an assessee regarding the nature or source of such expenditure etc., the same is found to be too low, all the provisions of subsection (1) of section 13 shall have effect. It has been contended on behalf of the respondents that in every case of difference of opinion between the Assessing Officer and an assesee regarding taxability of any amount, section 13 would be attracted if such amount shown in books of account remains unexplained. Be that as it may, but reference to the provisions of section 80-C (5) and section 13 shows that any such excess credited in an assessee's account, as referred to in clauses (a) to (e.) or section 13(1) shall be deemed to be the income of the assessee for the relevant income year chargeable to tax. Further, reference to the words "takes into, account any source of income which is subject to tax in accordance with the provisions of this section" occurring in subsection (5) indicates that the provisions of the said subsection cannot be invoked unless an assessee takes into account a source of income to which the provisions of section 80-C apply. The subsection further provides that under such circumstances the assessee shall not be entitled to take credit of any sum as is in excess of an amount which if taxed at rate or rates other than rate applicable to income chargeable to tax under the said section, would have resulted in tax liability equal to the tax payable in respect of income under the said section. It, therefore, clearly follows that only in case when an assessee while explaining the nature or source of an excess as referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of section 80-C, the tax liability is to be determined in accordance with the provisions of section 80-C (5) of the Ordinance. There may be a case where an assessee while explaining such excess amount or expenditure etc., may take into account a source of income which is not subject to tax in accordance with the provisions of section 80-C. In such a case, the provisions of subsection (5) would not apply. Under such circumstances any such excess amount referred to in section 13 of the Ordinance can be assessed under the normal procedure provided by the Ordinance. It is, therefore, incumbent on the Assessing Officer to first identify the source of income before invoking the provisions of subsection (5) of the Ordinance. It is pertinent to point out that the only object behind incorporation of subsection (5) into section 80-C appears to be, to give effect to the provisions of section 13 of the Ordinance which otherwise was not possible without taking recourse to the provisions of subsection (5). Section 13 indicates that any unexplained excess shall be deemed to be the income of the assessee whereas according to the provisions of section 80-C, tax from an assessee is to be charged at a rate specified in the First Schedule on the whole of amount referred to in subsection (2) of section 80-C. The words "whole of such amount" refer to the gross receipts of an assessee, which are not synonymous with "income" referred to in section 13. Therefore, an artificial method of determining the assessee's income under the normal procedure, as laid down by the Ordinance, has been provided by subsection (5) which would also include the unexplained excess referred to in section 13 of the Ordinance to determine the liability of the assessees. The procedure provided by Example VI in Circular 12 of 1991 issued by the Central Board of Revenue which has been respectively followed by the Taxing Officers', in the present case provides as follows:---
"Example VI: Case of Private Limited Company:
| | Rs. |
| Contract payments received | Rs.2,000,000 |
| Presumptive tax paid | Rs.60,000 |
| Income, which if taxed at normal rates, would have resulted into a liability equal to the aforesaid amount ofRs.60,000. | Rs.109,000 |
In the explanatory note in the said example, it has been further observed: ,
"This company would be allowed a credit of Rs.109,090. Any sum in excess of that amount would be treated as its unexplained investment in accordance with the relevant provisions of section 13."
Although the above example appears to be in consonance with the provisions of subsection (5) of section 80-C of the Ordinance but nothing can be spelt out from the provisions of subsection (5) to indicate that Example VI would apply in every case where any sum in excess of the amount which if taxed at normal rates would have resulted in tax liability equal to the tax payable in respect of income determined under the provisions of section 80-C. As has been pointed out earlier, subsection (5) cannot be invoked by the Assessing Officer in every case, unless such income has first been isolated as', income to which the provisions of subsection (5) apply. The object behind. section 80-C of the Ordinance is not to impose a minimum tax liability on an assessee. When such was the intention, as in the case of section 80-D of the Ordinance, the same was manifested in unambiguous and clear terms by the Legislature.
7. In the present case, although it is a common ground between the parties that all the petitioners are manufacturers of goods and they have exercised their option under clause (9) of Part IV of the Second Schedule to the Ordinance, therefore, the whole of the income of the petitioners was to be governed under the provisions of section 80-C. Although there can hardly be any cavil with the said contention but nothing can be spelt out from the notices respectively issued by the Assessing Officers to the petitioners to indicate that the income which was purported to be taxed under the provisions of section 80-C(5) of the Ordinance had first been identified by the Assessing Officer as such income. The mere fact that the assessee's entire income was to be assessed under the provisions of section 80-C cannot necessarily lead to an inference that the source of such excess income taken into account by the assessee would also be subject to tax in accordance with the provisions of section 80-C of the Ordinance. Unless the nature and source is determined by the Assessing Officer the provisions of subsection (5) cannot apply. It would be erroneous to assume that subsection (5) is to be applied in every case where C the income of an assessee is subject to tax in accordance with the provisions of section 80-C. The conditions under which subsection' (5) shall apply, have been clearly spelt out in the said subsection and to apply them in every case, would certainly not be in consonance with the legislative intent.
8. In the result, the petitions are allowed and the case is remanded to the Assessing Officer for determination of the question afresh in accordance with the parameters laid down in this judgment. The parties are, however, left to bear their own costs.
M.BA./G/384/K Petitions allowed.