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

----S. 3 & Chaps. VII, XIII---C.B.R. Circular No. 2(98)ITJ/94, dated 11-12-1997---C.B.R. Circular, scope of---Interpretation of provisions of Ordinance could be rendered judicially by hierarchy of the forums provided for therein i.e. from Income-tax Officer up to Supreme Court and not by Central Board of Revenue---Interpretation placed by Central Board of Revenue could, at best, be treated as administrative interpretation and not judicial interpretation---Any clarification from Justice and Law Division of the Government would also not curtail powers vested in the adjudicating Authorities provided in the Income Tax Ordinance.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 rel.

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

----S. 80-D & Second Sched., Cl.(118-D)---S.R.O. 1283(1)/90, dated 13-12-1990---C.B.R. Circular No.2(98)ITJ/94; dated 11-12-1997-- Protection of Economic Reforms Act (XII of 1992), S.6---Constitution of Pakistan (1973), Art.199---Exemptiop---Exemption was allowed to the assessee under cl. (118-D) of Second Sched., Income Tax Ordinance, 1979 but assessee was declared to be liable to pay turn over tax under S.80-D of the Income Tax Ordinance, 1979 as mentioned in C.B.R. Circular No.2(98)ITJ/94---Partial payment was made on the compulsion of the Income-tax Authorities---Application by assessee for waiver and refund of tax deposited was refused by the Assessing Officer---Validity---Act of refusal to, consider the case of the assessee for the waiver of tax demand and refund of the amount deposited, in view of C.B.R. Circular Letter No.2(98)ITJ/94, dated 11-12-1997 was declared illegal and without lawful authority by the High Court--Circular issued by Central Board of Revenue could, at best, be treated as administrative interpretation and had no effect on the provisions of Income Tax Ordinance, 1979---Assessing Officer was directed to decide the question of waiver of tax demand and refund of amount deposited without being influenced by the circular letter.

PLD 1997 SC 582 and 1997 PTD 1555 ref.

Naveed A. Andrabi for Petitioners.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 24th April, 1998.

JUDGMENT

The petitioner in this Constitutional petition is aggrieved by the refusal of respondents to consider their request for waiver of charge of minimum tax in terms of section 80-D of Income Tax Ordinance end for refund of the payments made in lieu thereof.

2. The petitioner-company was incorporated for setting up an industrial undertaking for spinning of yarn and claims the benefits of the economic reforms and incentives announced by the Federal Government. According to the petitioner, the profits and gains were allowed exemption of tax in terms of clause 118-D of Second Schedule to the Income Tax Ordinance, 1979 for a period of five years from commencement of production i.e. 1-4-1993 which clause was inserted vide Notification No.S.R.O. 1283(1)/90, dated 13-12-1990. It is further claimed, that incentives were also protected by Federal Government under Schedule to the Protection of Economic Reforms Act, 1992.

3.It is the case of petitioner, that returns of total income for assessment years 1994-95 and 1995-96 were filed before respondent No.l who completed the same vide orders, dated 20-12-1995 and 25-2-1996. In the body of orders, the respondents allowed exemption to the profits and gains of the petitioner-company in terms of clause 118-D of the said Schedule but the petitioner was declared to be liable to pay tax under section 80-D of Income Tax Ordinance, 1979 @ 0.5 % of turn over and consequently demands of Rs.3,03,204 and Rs.12,61,599 for both the years was created. In pursuance thereof, the petitioner was compelled to make partial deposits. The grievance of petitioner is, that charging of minimum tax under section 80-D in cases where exemption was allowed by S.R.O. dated 13-12-1990 read with protection granted under Protection of Economic Reforms Act, 1992 was contrary to the law and also the order of the Hon'ble Supreme Court of Pakistan in the case of "Elahi Cotton Mills Ltd. v. Federation of Pakistan" (PLD 1997 SC 582).

4. The petitioner maintains that the provisions of Act XII of 1992 were held to prevail over the provisions of section 80-D of the Income Tax Ordinance and that the imposition of minimum tax will be contrary to the incentives under the Protection of Economic Reforms Act, 1992 and will be, therefore, illegal. The petitioner requested the respondents for waiver of charge of minimum tax being inconsistent with the order of Hon'ble Supreme Court and for refund of the payment in lieu thereof but referring to the Circular Letter C. No.2(98)/ITJ-94, dated 11-12-1997 issued by respondent No. 3, the respondent refused to waive of the demand or issue refund voucher to the extent of amount paid to the extent of turn over.

5. Learned counsel for the petitioner submitted, that the Circular/letter issued by Central Board of Revenue on an alleged clarification from Law and Justice Division, could not either curtail the powers vesting in the adjudicating authorities under the Income Tax Ordinance nor it could be treated as a pronouncement by a forum competent to adjudicate upon a question judicially or quasi-judicially. He further submitted, that the interpretation of law could be rendered judicially by the hierarchy of the forums provided in law and not by Central Board of Revenue or by Ministry of Law and Justice. Lastly it was submitted, that in view of the order passed by the Hon'ble Supreme Court the petitioners are entitled to the refund and the refusal to waive off tax demand by the respondents is illegal and that the matter has to be decided by the authority concerned, in accordance with law and on its own merits keeping in view the rule referred to supra.

6. Learned counsel for the respondents, did not seriously oppose the principle of law, that interpretation of law can be made by the forum, delegated with the jurisdiction of deciding questions judicially and any circular or interpretation, coming from the Board of Revenue or from the Ministry of Law and Justice, will not debar independent adjudication of the issue by the adjudicating authority, and that the petitioner shall pursue `the matter before the authority concerned which will decide the issue, on its own merit's.

7. In para. 54 of the judgment of the Hon'ble Supreme Court, in the case of "Elahi Cotton Mills Ltd. v. Federation of Pakistan" (PLD 1997 SC 582), it was ruled as follows:---

"In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a general statute. In this view of the matter, assessees who fulfil the condition of the notifications referred to in the Schedule to section 6 of Act XII of 1992, are entitled to the protection. The question, as to whether a particular assessee fulfils the conditions of the above notifications, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance, and not by this Court. However, in order to eliminate multiplicity of litigation and to avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal.

8. Similarly, in para. 57 of the judgment, it was ruled by the Hon'ble Supreme Court as follows:---

"That assessees who are covered by the notification mentioned in the Schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992), are entitled to the protection in terms thereof as per paras.52 to 54 hereinabove. They may approach the Income Tax Department. "

9. From the abovenoted paragraphs of the judgment, it becomes absolutely clear, that the assessees who were not covered by the notification mentioned in Schedule to section 6 of Protection of Economic Reforms Act, 1992 are entitled to the protection in terms thereof, as per paras. 52 to 54 of the judgment and they could approach the Income Tax Department. It was observed, that since, the question as to whether a particular assessee fulfilled the conditions of the above notification, was a question of fact, the same should be left for determination by the hierarchy under the Ordinance.

10. The respondents also, in their parawise reply, admit that the assessees who were covered by notification mentioned in Schedule of section 6 of the Protection of Economic Reforms Act, 1992 were entitled to the protection in terms thereof and could approach the Income Tax Department and it has been pleaded, that the petitioners were directed to contact the Department for relief. This being so, in principle, it is not denied, that the petitioner could approach the Department for appropriate order, towards waiver of demand and refund of the amount charged in lieu thereof, and that the Department would be legally bound, to consider the matter in the light of the observations made by the Hon'ble Supreme Court. The difficulty has only arisen, because of the circular of the Central Board of Revenue, purportedly issued by seeking clarification from Law and Justice Division. In view of the rule laid in the case of "Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others (1993 SCMR 1232), the interpretation of any provision of the Ordinance can be rendered judicially by the hierarchy of the forums provided for under the provisions of the Ordinance, namely, Income-tax Officer, Appellate Assistant Commissioner, Appellate Tribunal, High Court and Supreme Court and not by the Central Board of Revenue. The interpretation placed by the Central Board of Revenue can at best be treated as administrative interpretation and not judicial interpretation. Likewise, any clarification from the Justice and Law Division, will not curtail the powers vesting in the adjudication authorities under the Income Tax Ordinance, 1979 for decision of the issue, in accordance with law and in the light of the observations made by the Hon'ble Supreme Court.

11. The request of learned counsel for the respondent, that the matter be kept open for adjudication by respondent No. 1, appears to be reasonable.

12. This petition is, therefore, allowed and the act of refusal of respondents to consider the case of the petitioner for the waiver of tax demand and refund of the amount already deposited, in view of Circular Letter C. N0.2(98)ITJ/94, dated 11-12-1997 is declared to be illegal and without lawful authority.

13. Respondent No.1 shall proceed to decide immediately, the question pertaining to the waiver of tax demand and for refund of the amount already deposited, without being influenced by the circular and the matter will be decided, strictly, in the light of the observations made by the Hon'ble Supreme Court, in the case noted supra.

C.M.A./R-72/LPetition accepted.