I.T.A. NO. 10/KB OF 1998?99, DECIDED ON 6TH OCTOBER; 1998. VS I.T.A. NO. 10/KB OF 1998?99, DECIDED ON 6TH OCTOBER; 1998.
1999 P T D (Trib.) 1
[Income-tax Appellate Tribunal Pakistan]
Present: Muhammad Mujibullah Siddiqui, Chairman and Muhammad Mahboob Alam, Accountant Member
I.T.A. No. 10/KB of 1998-99, decided on 06/10/1998.
Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C, 50(4)(c), First Sched., Part 1, para. E(b) & Second Sched., Part IV, cl. (9), second proviso ---S.R.O. 600(1)/91, dated 2-7-1991-- S.R.O. 629/1/1994, dated 27-6-1994---Special rate of tax---Normal rate of tax ---Catagorisation---Assessment under presumptive tax regime ---Option-- Assessee a manufacturer of edible oil opted out of presumptive tax regime-- Assessing Officer refused to assess under normal law on the ground that supplies were being subject to deduction of tax under S.50(4)(c), Income Tax Ordinance, 1979 at special rate---First Appellate Authority directed the Assessing Officer to assess the case under normal law by excluding S.80-C of the Ordinance on the ground that case fell under normal rate of tax deduction under S.50(4) read with para. E(b) of Part I of the First Sched of the Ordinance and could not be hit by second proviso of cl. 9 of Part IV of the Second Sched of Income Tax Ordinance, 1979---Validity---Direction of the C.I.T.(A) was upheld by the Tribunal with the remarks that rate of tax deduction in respect of edible oil was normal rate and not a special rate particularly when there was ho concept of special rate after omission of S.50(4)(c) of the Ordinance and rates prescribed at para. E(b) to Part I of the First Sched. did not categorise any of the rates given therein as a special rate.
Shaista Abbas, D.R. for Appellant.
Z. A. Jafri for Respondent.
Date of hearing: 22nd August, 1998.
ORDER
MUHAMMAD MAHBOOB ALAM (ACCOUNTANT MEMBER).
---The Departmental appeal arising out of C.I.T.(A)'s order No.80 of 1998, dated 17-4-1998 has contested the directions of the learned C.I.T.(A) to make assessment as whole under the normal law by excluding it from the purview of section 80-C of the Income Tax Ordinance, 1979.
2. Briefly the facts of the case are that the respondent/assessee company was a manufacturer of Edible Oil and besides making sales was also making the supplies to various corporation i.e. Utility Stores Corporation and Canteen Stores Department, Karachi. For the year under appeal it opted out of presumptive tax regime and had submitted its return for being processed under the normal law in keeping with its past pattern of assessment up to the assessment year 1994-95. During the year of assessment proceedings for the year under appeal however, it was held by the Assessing Officer that according to the second proviso to clause 9 of Part IV of the Second Schedule, the respondent-company being manufacturer cannot be assessed under the normal law as supplies to Utility Stores Corporation and Canteen Stores Department were being subjected to deduction of tax under section 50(4) at special rate of 1.5 % in respect of supplies of Oil and Ghee to these parties. For facilities sake, the relevant provisions of the said Clause 9 are reproduced as under:
.... The provisions of section 80-C in so far as they relate to payments on account of the supply of goods on which tax is deductible under subsection (4) of section 50 shall nut apply in respect of any person, being a manufacturer of such goods, unless he opts for the presumptive tax regime:
Provided that a declaration of final and irrevocable option is furnished in writing alongwith the return of total income under section 55:
Provided further that nothing contained in this clause shall apply to any manufacturer of goods for which special rates of deduction of tax are specified under clause (c) of subsection (4) of section 50."
3. Relying upon the above provision, the Assessing Officer rejected the claim of the assessee to be assessed under the normal law and instead applied section 80-C on sales amounting to Rs.291,511,659 which according to the respondent/assessee was legally and factually incorrect as the same was assessable under the normal law and not as a separate block of income falling under section 80-C. When the matter, went to the C.I.T.(A) it was pleaded by the respondent/assessee that rate of tax deduction Q 1.5 % on Edible Oil is not a special rate as per clause (C) of subsection (4) of section 50 but normal rate of tax deduction under section 50(4) read with para. E(B) of Part 1 of the First Schedule. Accordingly it was submitted by the respondent/assessee that its case was not hit by second proviso of clause 9 of Part IV of the Second Schedule and as such it should have been assessed under the normal law as was being done by the Department all along up to the preceding year 1994-95 as the law had since remained unchanged. Agreeing with the contention of the respondent/assessee the learned C.I.T.(A) directed the Department to adhere to the case history and make assessment as a whole under the normal law by excluding section 80-C. It is against this direction of the learned C.I.T.(A) that the Department has come in the present appeal.
4. The learned D.R. and A.R. have been heard. While the learned D.R. has supported the order of the Assessing Officer, the learned A.R. has taken us to the provision of section 50(4)(c) which before its omission by virtue of Finance Act, 1994 provided for specification of special rates of tax deduction in respect of certain classes of recipients specified in this behalf by the C.B.R. by notification in official Gazette. The learned A.R. referred to Notification NO.S.R.0.600(1)/91, dated July 2, 1991 providing for a special rate of 0.75 % in respect of cotton seeds which again was omitted vide Notification No.S.R.O. 629/1/1994, dated 27-6-1994 with effect from July 1, 1994. It was submitted by the learned A.R. that with the omission of clause (c) of subsection (4) of section 50 by virtue of Finance Act, 1994, the question of applicability of any special rate particularly in respect of the items dealt with by the assessee-company namely edible oil was not particularly relevant for the income year beginning 1-7-1994 to 30-6-1995 relevant to assessment year 1996. The operative rate in this regard had been provided by para. E(B) of the Part I of the First Schedule a 1.5 % and it was normal rate for such deduction. The learned counsel has pointed out that various rates have been prescribed in the said Para. E(B), being @ 5 % for services rendered, 3.5 % for supplies of goods other than those referred to in sub-para. @ 5% for execution of contracts. Ail these were normal rates of tax deduction under section 50(4) and the prescribed rate of tax deduction 1.5 % in respect of supplies of rice, cotton seeds and edible oil was also in the nature of normal rate and not a special rates, the applicability of which made the case of the assessee fall under presumptive tax regime of second proviso to para. 9 of Part IV of the Second Schedule of the Income Tax Ordinance, 1979.
5. Having considered the matter and the relevant provisions of law as explained by the learned A.R. and discussed above, we are of the opinion that rate of tax deduction B 1.5% in respect of Edible Oil is a normal rate and not a special rate particularly when there is no concept of special rate after omission of sub-clause (c) to clause (4) of section 50 by virtue of amendment brought in by the Finance Act, 1994 and by virtue of the fact that rates prescribed at para. E(B) to Part I of the First Schedule do not categorise any of the rates given therein as a special ate. As such the directions of the learned C.I.T.(A) are considered to be proper and do not call for any interference.
6. The Departmental appeal accordingly fails
C. M. A./1/TribAppeal dismissed