Income Tax Ordinance (XXXI of 1979)---

----Ss.2(24), 15, 500)(5) & 53---Government of Balochistan Notification No.5-182/81 (PLGB) ACIV, dated 8th April, 1982---Constitution of Pakistan (1973), Art.199---Constitutional petition---Income---Demand of octroi after computing and adding 5 % advance income-tax, in value of goods---Validity---Petitioners imported unserviceable ships. from abroad for purpose of dismantling/scrapping---After dismantling ships when scrap thereof was presented at octroi post, respondent/octroi contractor intended to add 5 % advance income-tax in value for purpose of charging octroi on scrap of ships considering same to be one of components for determining the value to collect octroi---Income-tax was not to be recovered on the goods, but it was to be charged on the personal income of the importer at the time of submitting the income-tax returns according to S.53 of Income Tax Ordinance, 1979---Not necessary that amount of advance income-tax temporarily recovered by Customs Collector should be finally deducted because if on filing of income-tax return, importer could make out a case that income-tax could not be recovered from him, for any lawful reason, then already temporarily deducted amount was to be returned by the Department-- Such tax the fate of which was yet to be determined in subsequent proceedings by Income-tax Department, could not be considered to be the payment of final tax---Advance income-tax paid by importer on the value of goods calculated by Customs Collector, subject to final adjustment of income-tax by concerned Department, could not be considered, one of the components of value or ad valour cost for the purpose of recovery of octroi---Respondent /Octroi Contractor, in circumstances, had no lawful authority to treat advance income-tax to be one of components of value of imported goods---Directions were issued to respondent/Octroi Contractor to refund proportionate amount of octroi charged from petitioner.

PLD 1995 SC 423 and 1997 MLD 3142 ref.

Zahid Alvi, Akhtar Ali Mehmood, H. Shakil Ahmed and Ayaz Sawati for Petitioners (in all Petitions).

Advocate-General, Balochistan, Ashraf Khan Tanoli and Pervaiz Khan Tanoli for Respondents (in all Petitions).

Date of hearing: 11th June, 1998.

JUDGMENT

IFTIKHAR MUHAMMAD CHAUDHRY, J.---In Constitutional Petitions 132 to 135, 147, 149 and 150 of 1998,

petitioners have challenged, the demand of respondent-Messrs Shehbaz Traders, Octroi Contractor, for payment of octroi, after computing 5 % Advance Income Tax, in the value of goods; therefore, we have proposed to dispose of all the petitions jointly, by this common Judgment. Since reliefs claimed in these petitions are identical therefore. it would be appropriate to reproduce here in below para. pertaining to Relief, from C. P. No.132/98:

"Petitioners pray that this Hon'ble Court may be pleased to declare and to hold that:

(i)The vessel described above and imported by the petitioners and or the scrap recovered from its dismantling is not liable to octroi in the Province of Balochistan. .RH;

(2)In any case, for computing the value of the said goods, Advance Income Tax payable by the petitioner is not liable to be added.

(iii)Pending disposal of the case in the Supreme Court of Pakistan and during subsistence of stay granted by the ;aid Court, Regulatory Duty is also not liable to be included in the value of the goods for assessment of the octroi.

(iv)To direct the respondents to refund the amount of Rs.77.750.00, which the petitioner has already paid in respect of income-tax 'on octroi under duress.

The above relieves are without prejudice to each other.

(v)Costs of this petition are also prayed."

Mr. Akhtar Ali Mehmood, learned counsel for petitioners, at the commencement of hearing, contended that under instructions, he is not pressing the Reliefs enlisted at Serial Nos.(i) and (iii) for the time being and reserves his right to claim these Reliefs, at subsequent appropriate stage, if need be, therefore, he be allowed to confine himself, to the extent of Reliefs noted at Serial Nos.(ii), (iv) and (v).

We order accordingly.

. Briefly the facts are that petitioners imported unserviceable vessels named herein below from different countries, for the purpose of dismantling/scrapping at Gaddani Beach, District Lasbella:---

(i) Theodore A (C.P.132/98).

(ii) M.V. Art. 54 of 19,506.88 LDT. (C.P.133/98)

(iii) United-V of 14651.6 LDT. (C.P.134/98).

(iv) M.T. Khark 4 of 40658.46 LDT. (C.P.135/98).

(v) (a) M.V. Aziz of 5027.70 LDT.

(b) M.V. Filipos of 7310.00 LDT.

(c) Sugar of 6889.76 LDT.

(C.P. No.147/98).

(vi) Ocean Wisdom of 7045.40 LDT. (C.P.149/98).

(vii) M. V. Sol of 19,916 LDT. (C. P. No.150/98).

After dismantling, when the scrap was presented at octroi post, the respondent No.3, intended to add 5 % Advance income-tax in the value, for the purpose of charging octroi. In this behalf, bills in all the matters, have been placed on record, indicating that 5 % Advance Income Tax has been considered to be one of the component, for determining the value to collect the octroi. However, till filing of petitions, petitioners, had been paying said amount to the contractor, statedly under objection. However, later on when instant petitions were filed, subject to furnishing indemnity bonds, in different sums, in each petition, the contractor was restrained from demanding the octroi. Accordingly in all the petitions, indemnity bonds were furnished.

Mr. Akhtar Ali Mehmood, learned counsel, on behalf of petitioners, argued that the amount of Advance Income-tax under section 50(5) of the income Tax Ordinance, cannot be added on the value of goods for the purpose of recovery of octroi, because, as per Notification No.50182/81 (PLGB) AO-IV dated 8th April, 1982, issued by the Government of Balochistan, the Advance income-tax, cannot be added for calculating the value of goods to charge octroi. He further emphasised that under clause (a) of section 50(5) of the Income Tax Ordinance, the Collector of Customs has been authorised to collect/recover Advance income-tax on the value of imported goods, subject to creditable in the account of importer in any financial year, in terms of section 53 and other relevant sections of the Income Tax Ordinance. Therefore, the Income-tax which is subject to adjustment, cannot be treated to be one of the component of the value under Notification, referred to hereinabove, for the purpose of recovery of octroi. Learned counsel stated that in this behalf in C.P. No.431/97 (Ahmad Steel (Pvt.) Limited v. Government of Balochistan and others), this Court vide judgment dated 31st March, 1998, has already held that payment of Advance Income-tax by Importer to Customs Department. cannot form, one of the component of the value, defined in Notification referred to hereinabove, for the purpose of collecting/charging octroi from petitioners.

On the other hand, Mr. Ashraf Khan Tanoli, learned counsel for respondent No.3, argued that as far as the earlier judgment referred to by petitioners' counsel passed in C.P. No.431/97 is concerned, its operation has been stayed by learned Single Judge of Hon'ble Supreme Court in Chamber vide order dated 12th May, 1998, passed on C.M. No.430/98 filed in Civil Petition No.453/98. Therefore, after suspension of judgment, its reference, as a precedent, cannot be made. Learned counsel further contended that he also relies on the Notification dated 8th April, 1982, which defines the words valour cost including taxes, duties, freight charges and penalties'. According to him, this Court while interpreting said Notification in the case of AI-Hamza Ship Breaking Company v. Government of Balochistan and 2 others (C.P.No.86/96) has held that payment of Central Excise Duty to the Customs Department, constitutes one of the component of the value for purpose of recovery of octroi. Similarly Advance Income-tax, can also be treaded to be one of the component of the value, for the recovery of octroi.

Mr. Noor Muhammad Achakzai, learned Additional A.-G. and Mr. Pervez Tanoli, learned counsel for respondents l and 2, respectively, followed the arguments, advanced by learned counsel for respondent No.3.

It may be noted that Mr. Akhtar Ali Mehmood, learned counsel, stated that the earlier judgment pronounced by this Court in C. P. No.431/97, wherein the same question has been decided, has got binding effect on this Bench, as incidentally this very Bench has heard that case. To substantiate his view-point he made reference to PLD 1995 SC 423 and 1997 MLD 3142. Learned counsel was also of the opinion that Hon'ble Supreme Court by suspending the operation of judgment, in fact has not set aside the judgment and according to his wisdom only to the extent of considering Advance Income-tax as one of the component of value, for the purpose of recovery of octroi, the operation of the judgment has been suspended. He further pointed out that in the order passed by Hon'ble Supreme Court, petitioners in these matters are not party, therefore, despite suspension of operation of judgment of this Court passed in C.P. No.431/97, petitioners can claim the relief, on the same principles, which have been highlighted therein.

We have heard the parties' counsel and also perused the record of case.

In our opinion, there is no necessity to make reference of earlier judgment dated 31st March, 1998, passed in C.P. No.431/97, because the matter can be disposed of independently, in view of the arguments, put forth by parties' counsel.

To clinch the controversy, it is noteworthy that in the following Notification dated 8th April, 1998, the Government of Balochistan has defined the 'ad velorem cost for the purpose of determining the value of imported goods, to collect octroi:

"Dated Quetta, the 8th April, 1982. No.5-182/81(PLGB) AOIV.-- In exercise of the powers conferred by subsection (2) of section 137 of the Balochistan Local Government Ordinance, 1980 (II of 1980) read with section 70 of the said Ordinance, the Government of Balochistan is pleased to direct that the Town Committee, Gaddani shall impose a tax on the import of ships, boats and floating structure, on the basis of ad valorem, at the rate of Rs.1.50 (Rupees one and paisas fifty) per import of Rs.100 value, under the West Pakistan (Town Committees) Octroi Rules, 1984, with immediate effect.

(2) The Government of Balochistan is further pleased to direct that ad valour cost shall also include taxes, duties, freight charges and penalties.

By order

Governor Balochistan. "

There is no dispute between the parties that Collector of Customs, has been authorized under section 50(5)(a) to add Advance Tax for the purpose of determining the value of the imported goods, to collect the Custom duties, etc. For sake of convenience, relevant portion is reproduced herein below:

"Section 50. (1)... ... . . .. .. . ... .. . .. . .. . ..

(2) .......................................

(3) .......................................

(4).......................................

(5) Notwithstanding anything contained in any law for the time being in force---

(a) the Collector of Customs shall, in the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increased by the Customs duty and sales tax, if any (levied) thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer 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, in which the 'said date' as referred to therein, falls, whichever is the later;

b ...................... .

Explanation .

(i)

(ii)

Before dilating upon the above provisions of law as well as the import of Notification, it is necessary to keep in view the definition of word 'income' under subsection (24) of section 2 of the Income Tax Ordinance, which includes any income, profits or gains from whatever source derived, chargeable to tax under any provision of the Ordinance, under any head specified under section 15, in loss of such income profits or gains and any sum deemed to be income or income occurring or arising or received in Pakistan under any provision of the Ordinance, but does not include in the case of shareholder of a domestic Company the amount representing the face value of any bonus shares or the amount of any bonus declared, issued or paid by the Company to its shares holders with a view of increasing its paid up share capital. In view of the definition of word ' Income' it may be seen that as per clause (a) of subsection (5) of section 50 of the Income Tax Ordinance, which has been reproduced hereinabove, Collector of Customs is authorised to collect Advance tax in the case of import of every goods on the basis of value of such goods, as increased by the Customs Duty and Sales Tax, if any, levied thereon, at the rate specified in the First Schedule and the Advance Income tax, so collected shall be credited in the account of Importer in any financial year cubic to the provisions of section 53 etc. (Emphasis supplied by underlining). The underlining portion of clause (a) of section 50(5) categorically lays down that the Collector of Customs is authorised to recover the Advance Income-tax, which shall be credited in the account of Importer. It means that recovery of this amount has not been authorised to Income Tax Department by treating it as Advance payment of income-tax towards the final payment of Income tax, because it remains with the concerned department till the time, it has not been adjusted under section 53 of the Income Tax Ordinance. As far as clause (b) of section 50(5) is concerned, it has laid down procedure for the recovery of Income-tax at the time, when the duty is recovered from the Importer on such goods, in accordance with the provisions of Customs Act.

Now comparing the deduction/recovery of Advance Income-tax, by the Collector of Customs with the word 'value' used in the Notification dated 8th April, 1982, it would be determined; whether Advance Income tax, which has been paid, subject to adjustment by the department in terms of section 53 of the Ordinance, can be considered, as one of the component of value for the purpose of charging/ collecting the octroi. A careful perusal of the Notification, reproduced hereinabove, suggest that the ad valour cost of imported goods for purpose of assessing the value to collect octroi, shall be at the rate of Rs.1.50 per import of Rs.100 value, which would also include taxes, duties, freight charges and penalties.

Mr. Ashraf Khan Tanoli, learned counsel, stated that because payment of Central Excise duty by the Importer to the Customs Department, has been treated by this Court being one of the component of the value/ad valour cost of imported goods to collect octroi, therefore, under the expression of taxes, duties, the advance income tax can also be added to determine the value. It may, be noted that in C.P. No.86/96 (Al-Hamza Ship Breaking Company v. Government of Balochitan and 2 others) it was held that as 5 % ad valorem excise duty was added in the value of ship, which was paid alongwith other duties as such, Octroi Contractor can add this amount in the ad veloram cost of goods/ship, adding the excise duty in its value for the purpose of charging the octroi. Judgment delivered in this case has also been maintained by Hon'ble Supreme Court, because C.P.L.A. filed by Al-Hamza Ship Breaking Company, was dismissed on 14th November, 1997.

We are, afraid the contention put forth by learned counsel is not acceptable, despite the observations made in the case of Al-Hamza Ship Breaking that Central Excise Duty can be added in the imported value, for the purpose of collecting the octroi, because in our opinion, as far as the recovery of central Excise Duty is concerned, it is finally charged on excisable goods, specification whereof, has been given in the 1st Schedule, annexed with the Central Excises Act, 1944, which also includes goods, manufactured or produced in non-tariff area and brought for composition to Tariff area. Whereas Income tax is not to be recovered on the goods, but it is to be charged from the personal income of the Importer, at the time of submitting the Returns, according to section 53 of the Ordinance. It is not necessary that the amount of Advance Income-tax temporarily recovered by the Customs Collector, shall be finally deducted, because if on filing the Returns. Importer makes out a case that income-tax cannot be recovered from him, for any lawful reasons then already temporarily deducted amount is to be returned by the department, therefore, such tax, whose fate is yet to be determined in subsequent proceedings by the Income Tax Department, cannot be considered to be the payment of final tax, as it has been mentioned in para. 2 of the Notification dated 8th April, 1982.

Thus, we are inclined to conclude that Advance Income-tax paid by the Importer on the value of goods calculated by the customs Collector, subject to final adjustment of the Income-tax by the concerned department, cannot be considered, one of the component of value or ad valour cost, in the notification, for the purpose of recovery of octroi.

Learned counsel for petitioner, lastly made reference to the Instructions issued by the Central Board of Revenue, wherein it has been stated that the tax withheld under section 50(5) at the rate of 2% on all imported goods is treated as final discharge of tax liability in the case of commercial Importers. But the learned counsel failed to demonstrate that what is the legal status/value of these Instructions and it has been approved by the competent authority, responsible to decide the fate of Income Tax Returns filed by the Importer under section 53 of the Income Tax Ordinance therefore, without dilating upon this aspect of the case, we keep it open for decision in some other matter, when a proper assistance in this behalf is provided to us.

Thus, for the foregoing reasons, petitions are allowed, declaring; that respondent No.3 had no lawful authority to treat the Advance Income tax to be-one of the component of the value of imported goods, in terms of Notification dated 8th April, 1982, issued by the Government of Balochistan for collecting the octroi. As a consequence, directions are issued to Octroi Contractor-respondent No.3, to refund the proportionate amount of octroi charged from petitioners respectively by adding the amount of Advance Income-tax, in the value of imported goods from time to time. No order as to costs.

H.B.T./719/QPetitions allowed.