1996 P T D (Trib.) 1128
[Income-tax Appellate Tribunal Pakistan]
Present: Muhammad Mujibullah Siddiqui, Chairman
I.T.A. No.279/KB of 1994-95, decided on 04/06/1996.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 19 & 50(7-B)---Income from house property---Deduction of tax at source---Provisions of S.50(7-B), Income Tax Ordinance, 1979 is not an independent provision and has to be read with S.19 of the said Ordinance-- Expression "house property" used in S.50(7-B) is to be read in the same sense as defined in S.19(2) of the Income Tax Ordinance, 1979---Godown and factory occupied by the tenant is included in the expression "house property" as defined in S.19(2) and, therefore, assessee was under legal obligation to deduct the income-tax from rent paid under S.50(7-B) of the Ordinance and in default Assessing Officer would be justified to pass order under S.52 of the Ordinance---Deduction of advance tax under S.50(7-B), Income Tax Ordinance, 1979 is in fact towards the discharge of liability in respect of income from house property which is chargeable under S.19 of the said Ordinance.
Subsection (7-B) of section 50 of the Income Tax Ordinance, 197.9 is not an independent provision and has to be read with section 19 of the Income Tax Ordinance, 1979. On perusal of entire provisions contained in Chapter VI of the Income Tax Ordinance which deal with the payment of tax before assessment and provisions relating to the deduction of tax at source and advance payment of tax. These provisions are not independent in nature and have not to be read in isolation. The provisions contained in Chapter VI of the Income Tax. Ordinance, 1979 relating to deduction of tax at source and advance payment of tax are to be read with the relevant provisions in the Income Tax Ordinance whereby total income from various sources are determined and subjected to tax. The deduction at source and advance payment of taxes are to be adjusted from the final tax liability on completion of assessment. Coming to the provisions contained in subsection (7-B) of section 50 of the Legislature has provided that any person responsible for making any payment in full or in part to any person on account of the rent of house property including rent of furniture, fixture and services, if any, on behalf of Government or local authority, a company or diplomatic mission of foreign State shall, where the annual rent of such property exceeds one hundred thousand rupees, deduct advance tax at the time of making such payment and credit for the tax so deducted shall be given in computing the tax payable by the recipient of the annual rent. Thus, advance tax deducted under section 50(7-B) is to be adjusted towards the tax liability of the recipient. In order to find out as to where this advance tax deducted by the tenant is to be adjusted the adjustment is to be made in respect of an assessment pertaining to the income from house property which falls in the ambit of section 19 of the Income Tax Ordinance, 1979. Thus, the deduction of advance tax under section 50(7-B) is in fact towards the discharge of liability in respect of income from house property which is chargeable under section 19 only. The contention that the expression "house property" is independent of the definition contained in section 19 of Income Tax Ordinance, 1979 for the reason that advance tax is to be deducted under subsection (7-B) of section 50 from the payment made on account of rent of house property including rent of furniture, fixtures and services is without substance because the Legislature felt that at times, in order to avoid tax, separate agreements were entered with the tenants regarding services associated with the rent properties and thus subsection (7-B) of section 50 extended the deduction of advance tax to the rental receipts pertaining to furniture, fixture and services as well. However, it does not mean that the deduction of advance tax under subsection (7-B) of section 50 of the Income Tax Ordinance, 1979 is not to be read with the provisions contained in section 19 of the Income Tax Ordinance, 1979, and therefore, the expression "house property" used in subsection (7-B) of section 50 is to be read in the same sense as defined in subsection (2) of section 19. The godown and factory occupied by the assessee as tenant is included in the expression "house property" as defined in section 19(2) and, therefore, the assessee was under legal obligation to deduct the income-tax from rent paid under section 50(7-B). In the case of default the Assessing Officer rightly passed an order under section 52 of the Income Tax Ordinance to which no exception can be taken.
Agha Faquir Muhammad for Appellant.
Shaheen Aziz Niazi, D.R. for Respondent.
Date of hearing: 4th June, 1996.
ORDER
This appeal is directed against the order, dated 9-4-1995 by the learned C.I.T.(A). Hyderabad Camp at Karachi in I.T.A. No.125, relating to the Assessment year 1994-95.
2. Heard Mr. Agha Faquir Muhammad, Advocate for the appellant and Mr. Shaheen Aziz Niazi, learned representative for the department.
3. The sole objection raised on behalf of the appellant is that the learned two Officers below erred in passing order under section 52 and assessing income-tax of Rs.14,635 for not deducting the income-tax under section 50(7-B) of the Income-tax Ordinance on the rent of the factory.
4. The relevant facts are that the appellant is a private limited company and during the course of examination of annual statements the assessing officer observed that although the appellant has paid rent during the assessment year 1994-95 but no deduction has been made under section 50(7-B) of the Income tax Ordinance, 1979.
5. The learned counsel for the appellant was confronted on this point and subsequently a written notice was also served in this behalf. It was contended on behalf of appellant that deduction under section 50(7-B) is to be made while paying rent of house property and in support of this contention reliance was placed on' the dictionary meaning of the house property according to which the expression applies to a building used for dwelling purposes. It was, therefore contended that section 50(7-B) of the Income Tax Ordinance is applicable to the rent paid for a residential building only and not in the case of payment of rent for a factory as in the case of appellant. The assessing officer did not accept the contention and observed that the plea is not in consonance with the definition of house property given in the Income-tax Ordinance and for the purposes of levying tax the dictionary meaning is irrelevant in the presence of definition of the expression contained in the Income-tax Ordinance. The assessing officer thus held that the appellant committed a default of the requirement contained in section 50-(7-B) and, therefore, by virtue of the provisions contained in section 52 of the Income Tax Ordinance, 1979 he was liable to pay tax and thereby worked out the tax liability at Rs.14,635.
6. The appellant preferred first appeal reiterating the same contentions. It was pleaded that the appellant paid rent for godown and factory and, therefore, section 50(7-B) was not attracted for the reason that the house property was not defined in section 2 of the Ordinance and as such the ordinary dictionary meaning is to be considered. The learned C.I.T.(A) repelled the contention for the reason that the expression "house property" is defined in section 19(2)(a) according to which the rent paid for godown and factory is also included as income from house property and, therefore, the expression "house property" used in section 50(7-B) is inclusive of the rent paid for godowns and factories.
7. Still feeling dissatisfied the appellant has preferred this second appeal before the Tribunal. Mr. Agha Faquir Muhammad, learned counsel for the appellant has submitted that the definition of house property given in section 19(2) is restrictive in nature and shall be confined to subsection (1) of section 19 only. He has submitted that the Legislature has specifically stated in subsection (2) of section- 19 that the definition given therein is for the purposes of subsection (1) only. He has further submitted that the provision contained in section 50(7-B) is an independent provision and the expression "house property" used therein should not be read in the sense contained in subsection (2) of section 19. He has maintained that as subsection (7-B) of section 50 is an independent provision the expression house property should be taken in its literal sense and dictionary meaning. He has further contended that his view is supported with the provision that alongwith the house property rent of furniture, fixture and services are also included in section 50(7-B). On the other hand, the learned D.R. has submitted that section 50 and entire Chapter VI in which section 50 dealing with the deduction of tax at source is-contained are not independent provisions but they merely deal with the payment of tax before assessment, thus all the advance payment of taxes are deductions and collections of taxes before assessment which have been dealt with in Chapter VI of the Income-tax Ordinance, 1979. Deductions and collections under sections 50 to 54 are subject to the adjustment of taxes on income from various sources classified under section 15 of the Income Tax Ordinance. The learned D.R. has submitted that thus the provisions contained in sections 50, 51, 52 and 53 are to be read alongwith the other provisions contained in the Income-tax Ordinance, 1979 creating charge and dealing with various sources of income. He has vehemently argued that thus looking to the entire scheme contained in the Income-tax Ordinance section 50(7-B) is to be read with section 19 and thus the expression house property used in section 50(7-B) has to be assigned same meaning as defined in subsection (2) of section 19.
8. I, have carefully considered the contentions raised by the learned representatives for the parties. In order to appreciate the respective contentions it is necessary to reproduce the relevant provisions of law which read as follows:--
"Section 19. Income from house property.---(1) The annual value of the property shall be chargeable under the head 'Income from house property'.
(2) For the purposes of subsection (1).--
(a) 'house property' means any property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner, but does not include any such property (or any portion thereof) which is occupied by the assessee for purposes of any business or profession carried on by him the profits whereof are chargeable to tax under this
(b) 'annual value' of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year:
Provided that where the property is let on rent, the annual value shall not be less than the rent payable by the tenant. "
Section 50(7-B). Any person responsible for making any payment in full or in part (including a payment, by way of an advance) to any person, on account of the rent of house property (including rent of furniture, fixtures and services, if any) on behalf of Government, local authority. a company, or the diplomatic mission of a foreign State shall, where the annual rent of such property exceeds one hundred thousand rupees, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the 'said date', as referred to therein, falls, whichever is the later."
9. A perusal of above provisions shows that the contention of learned D.R. is correct that subsection (7-B) of section 50 is not an independent provision and has to be read with section 19 of the Income Tax Ordinance, 1979. On perusal of entire provisions contained in Chapter VI of the Income Tax Ordinance which deals with the payment of tax before assessment and provisions relating to the deduction of tax at source and advance payment of tax, I am of the considered opinion that these provisions are not independent in nature and have not to be read in isolation. The provisions contained in Chapter VI of the Income Tax Ordinance, 1979 relating to deduction of tax at source and advance payment of tax are to be read with the relevant provisions in the Income Tax Ordinance whereby total income from various sources are determined and subjected to tax. The deduction at source and advance payment of taxes are to be adjusted from the final tax liability on completion of assessment. Coming to the provisions contained in subsection (7-B) of section 50 we find that the Legislature had provided that any person responsible for making any payment in full or in part to any person on account of the rent of house property including rent of furniture, fixture and services, if any, on behalf of Government or local authority, a company or diplomatic mission of foreign State shall, where the annual rent of such property exceeds one hundred thousand rupees, deduct advance tax at the time of making such payment and credit for the tax so deducted shall be given in computing the tax payable by the recipient of the annual rent. Thus, we find that advance tax deducted under section 50(7-B) is to be adjusted towards the tax liability of the recipient. In order to find out as to where this advance tax deducted by the tenant is to be adjusted we find that the adjustment is to be made in respect of an assessment pertaining to the income from house property which falls in the ambit of section 19 of the Income Tax Ordinance, 1979. Thus, the deduction of advance tax under section 50(7-B) is in fact towards the discharge of liability in respect of income from house property which is chargeable under section 19 only. The contention of Mr. Agha Faqueer Muhammad that the expression "house property" is independent of the definition contained in section 19 of Income Tax Ordinance, 1979 for the reason that advance tax is to be deducted under subsection (7-B) of section 50 from the payment made on account of rent of house property including rent of furniture, fixtures and services is without substance because the Legislature felt that at times, in order to avoid tax, separate agreements were entered with the tenants regarding services associated with the rent properties and thus subsection (7-B) of section 50 extended the deduction of advance tax to the rental receipts pertaining to furniture, fixture and services as well. However, it does not mean that the deduction of advance tax under subsection (7-B) of section 50 of the Income Tax Ordinance, 1979 is not to be read with the provisions contained in section 19 of the Income Tax Ordinance, 1979, and therefore, the expression "house property" used in subsection (7-B) of section 50 is to be read in the same sense as defined in subsection (2) of section 19.
10. For the foregoing reasons and conclusions it is held that the learned two officers below have rightly held that the godown and factory occupied by the appellant as tenant is included in the expression "house property" as defined in section 19(2) and, therefore, the appellant was under legal obligation to deduct the income-tax from rent paid under section 50(7-B). It is further held that in the case of default the Assessing Officer has rightly passed an order under section 52 of the Income Tax Ordinance to which no exception can be taken.
11. The appeal at the instance of assessee stands dismissed accordingly.
M.B.A./218/Trib. Order accordingly.