I.T.AS. NOS.2286/KB AND 2287/KB OF 1996-97, DECIDED ON 5TH JANUARY, 1998. VS I.T.AS. NOS.2286/KB AND 2287/KB OF 1996-97, DECIDED ON 5TH JANUARY, 1998., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1201 (1998)

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

----S.80-C---Income covered under S.80-C, Income Tax Ordinance, 1979-- Taxability---Procedure---No order under S.62, Income Tax Ordinance, 1979 is to be made in respect of income covered under S.80-C of the Ordinance-- Principles.

No order under section 62 of the Income Tax Ordinance, 1979 is to be made in respect of income covered under section 80-C. In fact, neither any return of income is to be filed in respect of income covered under section 80-C nor any assessment order is to be framed by the Assessing Officer It is clearly provided under subsection (4) of section 80-C that in respect of income covered under subsection (1) of section 80-C no return of total income is required to be filed under section 55 and the tax deducted or elected under section 50 shall be deemed to be final discharge of tax liability. It is further provided in subsection (7) of section 80-C that 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). Thus, in respect of income covered under section 80-C neither any return of income is envisaged nor any assessment order is to be made by the Assessing Officer. Under the scheme of presumptive tax regime envisaged under section 80, an assessment order has been deemed and, thus, any assessment order made by Assessing Officer is without jurisdiction.

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

----Ss.80-C, tit & 143-B---Assessing Officer had levied Workers Welfare Fund while making order under S.62/80-C, Income Tax Ordinance, 1979 on the basis of statements under S.143-B of the Ordinance treating the same as return of income---Such action of Assessiag Officer, held, was illegal and without Jurisdiction---Statement under S. 143-B of the Ordinance would not be treated as return of total income under S.55 of the Ordinance.

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

----S.80-C---Workers Welfare Fund Ordinance (XXXVI of 1971), S.4-- Concept of total income and filing of return having been done away with respect. of income under S.80-C, Income Tax Ordinance, 1979, Assessing Officer acting under Income Tax Ordinance, 1979, had no authority to calculate the total income without any jurisdiction vesting in him and then levy the Workers Welfare Fund ---Assessee whose income is covered with the presumptive tax regime under S.80-C, is not required to pay the Workers Welfare Fund and in any case Assessing Officer has no jurisdiction to levy the same---Principles.

1997 PTD (Trib.) 1143; Cape Brandy Syndicate v. I.R. (1921) 1 KB 64; Canadian Eagle Oil Co. Ld. v. King 27 TC 205; Fernandez v. State of Kerala AIR 1957 SC 657 and F. L. Smidth and C. v. Greenwood 8 TC 193 ref.

Rehmatullah Wazir, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 1st November, 1997.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeals at the instance of department are directed against the order dated 28-2-1997 by the learned C.I.T. (A), Hyderabad in I.T.As. Nos.158 and 159 relating to the assessment years 1995-96 and 1996-97.

2. The sole grievance of the department is that the learned C.I.T. (A) was not justified in canceling the order levying worker's welfare fund.

3. None present for the respondent though duly serve with the notice of hearing. The service of notice on the respondent is held good and the appeals are heard ex party with the assistance of learned D.R. Mr. Rehmatullah Wazir. A perusal of record shows that the assessing officer has absolutely failed to comprehend the scheme of presumptive tax regime and the law as contained in section 80-C of the Income Tax Ordinance. The misconception of law on the part of Assessing Officer is evident from the title of the assessment orders to the concluding part thereof. In the assessment year 1995-96 the assessment order has been allegedly made under section 62/80-C. The Assessing Officer has failed to realize that no order under section 62 is to be made in respect of income covered under section 80-C. In fact, neither any return of income is to be filed in respect of income covered under section 80-C nor any assessment order is to be framed by the Assessing Officer. It is clearly provided under subsection (4) of section 80-C that in respect of income covered under subsection (1) of section 80-C no return of total income is required to be filed under section 55 and the tax deducted or collected under section 50 shall be deemed to be final discharge of tax liability. It is further provided in subsection (7) of section 80-C that 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). Thus, in respect of income covered under section 80-C neither any return of income is envisaged nor any assessment order is to be made by the Assessing Officer. Under the scheme of presumptive tax regime envisaged under section 80, an assessment order has been deemed and, thus, any assessment order made by Assessing Officer is without jurisdiction. The Assessing Officer has levied workers' welfare fund in respect of assessment year 1995-96 while making order under section 62/80-C on the basis of statements under section 143-B treating the same as return of income which is absolutely illegal and without jurisdiction. There is no provision in the Income Tax Ordinance under which a statement under section 143-B can be treated as return of total income under section 55. In the assessment year 1996-97 the assessing officer has charged workers' welfare fund by separate order which says that the assessee is an industrial organization engaged in manufacturing and as such was liable to charge of workers' welfare fund at 2 % of the income assessed. It further says that "on examination of cage record it was noticed that workers' welfare fund was not charged at the

time of original assessment, Hence workers' welfare fund of Rs.75,230 charged/levied through this order". The assessee being aggrieved in both the assessment years under appeal assailed the levy of workers' welfare fund in first appeal contending that after the discharge of final tax liability under section 80-C(4) the tax liability could not be enhanced. Further, plea was taken that the assessee was a cotton ginning factory and therefore it was not an industrial undertaking liable to the payment of workers' welfare fund. The second contention was repelled by the learned C.I.T. (A), however, the first contention was accepted. The orders levying the workers' welfare fund were, therefore, cancelled.

4. During the course of arguments before us we have drawn the attention of learned D.R. to the provisions contained in section 4 of the others' Welfare Fund Ordinance, 1971. It is provided in subsection (1) of section 4 of the Workers' Welfare Fund Ordinance (hereinafter referred to as the said Ordinance) that every industrial establishment, the total income of which in any year of account is not less than one lakh of rupees shall pay to the fund in respect of that year a sum equal to 2 % of so much of its total income as is assessable under the Ordinance or would have been so assessable but for the exemption made by section 48 thereof. Thus, a condition precedent is that there should be a total income which is assessable under the Ordinance. A perusal of various provisions contained in the income Tax Ordinance, 1979 shows that under section 55 a return of total income is required to be filed. Second proviso to subsection (1) of section 55 further states that the persons otherwise not required to file return of total income under the first proviso, or section 80-C or section 80-CC shall, except in the case of firms, association of persons, or bodies of individuals, whether incorporated or not, and companies which are otherwise not chargeable to wealth tax under the Wealth Tax Act, 1963 and persons whose declared income for the relevant year or the last declared or assessed income is less than one hundred thousand rupees file return of wealth along with the certificate of statement of their income in lieu of such return of total income.

5. The above proviso clearly contains that the persons covered under section 80-C are not required to file return of total income and the firms, association of persons and body of individuals are not required to file even the return of wealth. A perusal of sections 59, 59-A, 59-B, 60, 62 and 63 shows that the assessing officer is required to assess the total income of an assessee. On the other hand, under section 80-C a concept of deemed income has been introduced and the tax on the deemed income is to be charged at the rate specified in First Schedule. In entire section 80-C the expression total income has not been used anywhere. On the other hand, it is specifically provided under subsection (4) of section 80-C that, "where the assessee has no income other than 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 65". Thus, the presumptive tax regime under section 80-C is at complete variance with the scheme of income-tax under the normal law envisaged under the Income Tax Ordinance, 1979. The departure is so complete that the income-tax under section 80-C is to be levied on the income of a person on the rates specified in the First Schedule which are different from the rates of income-tax to be levied on the total income and it has been further clarified that no return of total income under section 55 is required to be filed. Even subsection (7) of section 80-C where an assessment order is deemed under section 59-A it is not provided that it shall be an assessment order in respect of total income but it is provided that 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) (emphasis provided by us).

6. A resume of the above provisions shows that in respect of income covered under section 80-C neither there is any concept of total income nor it is assessable under the Ordinance. Under section 80-C of the Income Tax Ordinance, 1979 there is a concept of deemed income which has been subjected to tax without going through the process of assessment by any assessing officer and without determining the total income. Thus, the very first condition envisaged in subsection (1) of section 4 of the said Ordinance is not available in case of presumptive tax regime.

7. It is further provided in subsection (3) of section 4 of the said Ordinance that the industrial establishment shall, on or before the date on which it is required to furnish a return of income under section 55 of the Ordinance, pay the amount due from it under subsection (1) calculated with reference to the total income reported in the said return. As already discussed an assessee is not required to file any return of total income under section 55 of the Income Tax Ordinance and, thus, the condition prescribed under subsection (3) of section 4 of the said Ordinance is not applicable to the income of an assessee covered under section 80-C. An assessee under subsection (3) of section 4 of the said Ordinance is required to pay the amount due from it under subsection (1) of section 4 of the said Ordinance which is calculated with reference to the total income reported in the said return. When there is no concept of total income in respect of the income covered under section 80-C and the total income is not required to be reported in the return of income the entire basis and formula for calculation of workers' welfare fund is not available. When the provisions contained in section 80-C of the Income Tax Ordinance and subsection (3) of section 4 of the said Ordinance are read together the only conclusion which can be drawn is that the workers' welfare fund can be calculated with reference to the total income reported in the return of income and when the concept of total income and filing of return has been done away with in respect of income under section 80-C the Assessing Officers acting under the Income Tax Ordinance, 1979 have no authority to calculate the total income without any jurisdiction vested in them, and then levy the workers' welfare fund.

8. When we proceed further we find that in subsection (4) of section 4 of the said Ordinance it is provided that, "at the time of making an assessment under the Income Tax Ordinance, 1979 or as soon as, thereafter, as may be, the Income Tax Officer shall, by order in writing, determine the amount due from industrial establishment under subsection (1), if any, on the basis of the income so assessed after taking into account the amount paid by the industrial establishment under subsection (3) in respect of the year and the industrial establishment shall pay the amount so determined on or before the date specified in the order".

9. The above provision clearly envisages the making of an assessment order by the Income-tax Officer (Deputy Commissioner of Income-tax) under the Income Tax Ordinance, 1979. On the basis of income so assessed, the payment is to be made by the assessee in respect of amount so determined on or before the date specified in the order. If no assessment order is to be made by any Assessing Officer as already discussed above and as explained in detail in the order of this Tribunal reported as 1997 PTD (Trib.) 1143, there is no question of making of any order by the assessing officer leaving workers' welfare fund.

10. Subsections (5) and (6) of section 4 of the said Ordinance further envisage normal assessment under the Income Tax Ordinance. It is provided in these subsections that if there is any change by way of enhancement or reduction in the assessed income subsequent to the assessment order under the Income Tax Ordinance, adjustment shall be allowed in respect of the amount due under subsection (1) of section 4 and if any amount paid under subsection (3) is found to be in excess on the basis of an order in appeal or revision the said excess amount shall be refunded to the assessee by the income-tax Officer. It is further provided in subsection (7) of section 4 that the payment made by an industrial establishment to the fund, under subsection (1) shall be treated as expenditure for the purposes of assessment of Income-tax. The above provisions are directly in conflict with subsection (3) of section 80-C of the Income Tax Ordinance according to which nothing contained in this Ordinance shall be so construed as to authorize 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 the Ordinance.- It is very important to note that under subsection (7) of section 4 of the said Ordinance the workers' welfare fund paid by industrial establishment is an expenditure for the purposes of assessment of income-tax but under subsection (3) of section 80-C of the Income Tax Ordinance no allowance or deduction is to be allowed. The result is that due to absence of the concept of total income and a clear provision that no allowance or deductions are to be allowed in respect of an income covered under section 80-C of the Income Tax Ordinance the assessee is deprived of the benefit allowed to it under subsection (7) of section 4 of the said Ordinance. The result is that if the workers' welfare fund is charged it will create additional burden on an assessee while the corresponding relief is not available to him. The Legislature while enacting presumptive tax regime under section 80-C and section 80-CC has not deemed fit to enact any provision in respect of workers' welfare fund and thus no assessee can be saddled with a tax liability merely by implication or intendment. It is cardinal principle of the law of taxation that the tax is to be levied on an assessee by clear and unambiguous provision and not on mere presumption and intendment. The observation of Rowlatt Judge in the case of Cape Brandy Syndicate v. I.R. (1921) 1 KB 64 and approved by the House of Lords in the case of Canadian Eagle Oil Co. Ltd. v. King 27 T.C. 205, has attained the status of classical and basic principle which is as follows:

"In a taxing act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."

11. Mr. Justice Bhagwati of the Indian Supreme Court has observed in the case of Fernandez v. State of Kerala AIR 1957 SC 657 as follows:

"It is, no doubt, true that in construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the Legislature and by considering what was the substance of the matter. "

12. Lord Buckmaster, in the case of F.L. Smidth and C. v. Greenwood 8 TC 193 held as follows:

"It is important to remember the rule, which the Courts ought to obey, that, when it is desired to impose a new burden by way of taxation, it is essential that this intention should be stated in plain terms. The Courts cannot assent to the view that, if a section in a taxing statute is of doubtful and ambiguous meaning, it is possible out of that ambiguity to extract a new and added obligation not formerly cast upon the taxpayer. "

13. The above principles have been approved by superior Courts in Pakistan also and, therefore, we are of the considered opinion that when all the necessary requirements and conditions contained in subsection (4) of the said Ordinance are lacking in the case of presumptive tax regime contained in section 80-C of the Income Tax Ordinance coupled with the fact that under subsection (4) of section 80-C of the Income Tax Ordinance a deduction or collection of tax under section 50 is deemed to be the final discharge of tax liability under the Income Tax Ordinance, no further liability can be created until and unless a clear provision is made in this behalf by the Legislature.

14. The learned D.R. has submitted that there is lacuna in law. We are not persuaded to agree with the submission that there is any lacuna in law on this point. We are of the opinion that the Legislature never intended to saddle an assessee with additional burden of workers' welfare fund if income is covered under the presumptive tax regime. However, even if it is conceded for the sake of arguments that there is lacuna in law, then it is for the Legislature to consider it. It is not for the Courts to remove any lacuna in law by way of interpretation and more particularly when it is bound to create additional liabilities on an assessee. It is one of the established principles of taxation that if there is any ambiguity in law interpretation favourable to the assessee is to be made.

15. For the foregoing reasons it is held that an assessee whose income is covered with the presumptive tax regime under section 80-C, is not required to pay the workers' welfare fund and in any case the Deputy Commissioner of Income-tax has no jurisdiction to levy the workers' welfare fund because under the law he is required to charge the workers' welfare fund at the time of making assessment order or as soon as, thereafter, as may be, and in the absence of jurisdiction to make any assessment order in respect of income covered under section 80-C no such authority can be exercised. The result is that the impugned direction of learned C.I.T. (A) is hereby maintained and the appeals at the instance of Department stand dismissed. .

M. B.A./471/Trib. Order accordingly.