I.T.AS. NOS.349/KB TO 351/KB OF 1998-99, DECIDED ON 19TH DECEMBER, 1998. VS I.T.AS. NOS.349/KB TO 351/KB OF 1998-99, DECIDED ON 19TH DECEMBER, 1998.
1999 P T D (Trib.) 1351
[Income-tax Appellate Tribunal Pakistan]
'Before Muhammad Mujibullah Siddiqui, Chairman and Muhammad Mehboob Alam, Accountant Member
I.T.As. Nos.349/KB to 351/KB of 1998-99, decided on 19/12/1998.
Income Tax Ordinance (XXXI of 1979)---
----Ss.2(6) & 129---Assessee---Appeal---Assessee, a company- --Assessment was framed in the name of assessee who was one of the companies in a group of companies---Appeal was preferred in the name of group of companies and decided by the First Appellate Authority---Maintainability---Appeal could only be filed by the assessee and not any other person---First Appellate Authority fell into error in entertaining the appeal filed in the name of group of companies---Order ,of the First Appellate Authority was annulled being without jurisdiction and void.
Kikabhai Abdulali y. Income-tax Appellate Tribunal (1957) 32 ITR 762; TatawarthyNarayana Murty v. Commissioner of Income-tax, Andhra Pradesh (1963) 49 ITR 766 and (1958) 33 ITR`360 distinguished.
Ashrafuddin Bhatti, D.R. for Appellant. Sirajul Haque Memon for Respondent.
Date of hearing: 19th December 1998.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeals have been preferred at the instance of the department against the order, dated 6-6-1998 by the learned Commissioner of Income Tax (Appeals), Zone-I, Karachi.
2. Heard Mr. Ashrafuddin Bhatti, the learned representative and Mr. Riaz Hussain, Deputy Commissioner of Income-tax, the assessing officer, on behalf of the department. Mr. Sirajul Haque Memon, has been heard on behalf of the respondent.
3. A preliminary objection has been raised on behalf of the department that the learned Commissioner of Income Tax (Appeals) was not justified to entertain the first appeal which was preferred by M/s. G.D. Express Worldwide NV Holland, Australia, Netherlands. The contention of the departmental representative is that the assessee in this case is M/s. T.N.T. Express Worldwide Australia. The assessment was made in the name of said assessee, while the first appeal was preferred by M/s. G.D. Express Worldwide NV Holland Amsterdam Netherlands. It is urged that M/s. TNT Express Worldwide Australian is separate company and taxable entity in whose name the order was passed and also accepted by the assessee's counsel M/s. Taseer Hadi Khalid & Company vide Letter No.KT-SL-2268, dated 9-6-1997. It has been vehemently argued that appeal can be filed by an assessee only and not by any person other than assessee. Reliance in this regard has been placed on the provisions contained in section 129 of the Income Tax Ordinance, 1979, according to which any assessee objecting to an order made by the Deputy Commissioner of Income Tax under sections specified in section 129, may appeal to the Appellate Additional Commissioner against such order.
4. A perusal of the first appellate order shows that the authorised representative of the assessee vide its letter, dated 12-10-1996 stated that T.N.T. Express Worldwide was a business name owned by G.D. Express N.V. a corporation established in Amsterdam, Netherlands. Subsequently a plea was taken that the T.N.T. Worldwide Australia was a separate incorporated entity and it had no relation with TNT Express Worldwide Pakistan (Pvt.) Limited. The learned Commissioner of Income Tax (Appeals) has held on page 8 of his order that, "it is, therefore, apparent that the impugned assessments were framed on the wrong assessee". He has further held that, "considering all these facts, it appears to me to be a case of initiation of the wrong proceedings against the wrong person". However, in concluding para. The learned Commissioner of Income Tax (Appeals) has held that. "In the result, the impugned assessments framed on the present appellant are held to be void and a nullity in the eyes of law. They are accordingly annulled".
5. Thus, it appears that on one hand the learned CIT(A) has held that the assessments have been made in the name of T.N.T. Express Worldwide Australia and, therefore, the assessments were framed on the wrong assessee and on the other hand he has held that "the assessments framed on the present appellant are held to be void and a nullity in the eyes of law." The findings are contradictory on their face, as the assessments were admittedly framed in respect of T.N.T. Express Worldwide Australia and the appellant before the learned CIT(Appeals) was G.D. Express Worldwide NV Holland Amsterdam, Netherlands. There was no assessment framed on the appellant before the learned C.I.T. (Appeals) and as such the finding in the operative part of the impugned order contradicts the finding of the earlier part of the impugned order.
6. We asked Mr. Sirajul Haq Memon to clarify the factual and legal position. Mr. Sirajul Haq Memon stated that originally Sky-pak Australia (Pvt.) Ltd. was incorporated somewhere in the year 1979-80 which was taken over in 1991 by T.N.T. Express Worldwide Australia (Pvt.) Ltd. and in the same year the T.N.T. Express Worldwide was taken over by G.D. Express Worldwide. He has submitted that in this manner the entire assets and liabilities of T.N.T. Express were taken over by G.D. Express, and thus, the ultimate tax liability was to be borne by G.D. Express. Mr. Sirajul Haq has contended that since the ultimate tax liability was to be discharged by G.D. Express, therefore, they preferred appeal before the learned C.I.T. (Appeals). However, he has not denied the fact that T.N.T. Express Worldwide has not been wound up and the company is still existing. The assessing officer has produced a report prepared by G.D. Express Worldwide, which shows that 87 companies were included in the group as on 30-6-1996. T.N.T. Express Worldwide in respect of whom assessments have been framed in the present case is one of the companies in the group. This report does not show that all the companies in the group were either merged or all the companies were wound up and a new company in the name of G.D. Express Worldwide was incorporated. A perusal of this report shows that the G.D. Express Worldwide Netherland) B.V. is one of the companies in the croup. G.D. Express Worldwide has been incorporated in various countries of the world and they are included in the group of companies. Likewise T.N.T. Express is also one of the members of the group and this company has also been incorporated in various countries such as Belgium, Luxemboug, Austria, Switzerland, Italy etc. and all these companies are members of the group. Similarly Skypak Australia (Pvt.) Ltd. is also one of the Members in the group. The assessing officer has further produced minutes of the meeting held by T.N.T. Worldwide Luxembourg on 16-6-1992 wherein certain business arrangements were made between T.N.T. S4pak international Pakistan and T.N.T Worldwide. There is another letter on record, dated 27-10-17 by KPMG Meijburg & Co. of Tax Lawyers Amsterdam Netherlands addressed to the Deputy Commissioner of Income Tax, Circle G-12, Range-III Companies I, Karachi, wherein it has been intimated, that the business interest in the Pakistan Associate was transferred from Skypak Holdings (Pvt.) to G.D. Express Worldwide N.V., the Netherlands. It is further clarified in the letter that this transfer was effected for income recognition and accounting purposes as per 1st October, 1991. It was confirmed that the Company Skypak Holding (Pvt.) Ltd. is a separate Australian Company from the company T.N.T. Express Worldwide Australia (Pvt.) Ltd.
7. All the above documentary evidences clearly show that TNT Express, the assessee is an existing company and the G.D. Express Worldwide is a group as shown in the report prepared by G.D. Express Worldwide itself and G.D. Express Worldwide N.V. has not taken over TNT Express as alleged by Mr. Sirajul Haq Memon. In support of his contention that the ultimate liability was to be discharged by G.D. Express Worldwide N.V. on behalf of TNT Express Worldwide Australia, and therefore, G.D. Express Worldwide N.V. could file appeals before the learned Commissioner of Income Tax (Appeals), Mr. Sirajul Haq Memon, placed reliance on two judgments from Indian jurisdiction. The first is in the case of Mikabhai Abdulali v. Income Tax Appellate Tribunal (157) 32 ITR 762 (Bombay H.C.) and the second in the case of Tatawarthy Narayana Murry v. Commissioner of Income Tax, Andhra Pradesh 163) 49 ITR 766 (Andhra Pradesh H.C.). However, on perusal of both the judgments we-have found that the facts of the cited cases are distinguishable from the facts of the present case. In the cited cases the persons who were conceded the right of appeal fell within the purview of assessee as by virtue of very assessment orders they were saddled with the responsibility of paying tax. In the case of Kikabhai Abdulali it was held by Chagla, C.J. that:
"The right of appeal to the Tribunal or the right to apply for reference is not confined technically to the party who is a party to the appeal, but is a much wider right which can be exercised by, any person who becomes liable to pay tax by any order against which the appeal is preferred."
In the second case the Andhra Pradesh High Court placed reliance on an earlier judgment reported as (1958) 33 ITR 360, in which Tendolkar, Judge held as follows:
"Equally the only persons who could appeal on behalf of the Hindu undivided family would be the erstwhile coparceners of that Hindu ^. :' undivided family who are in law liable to pay any tax imposed on tt;., i the Hindu undivided family; and this is why the coparceners of the divided Hindu family got the locus standi to appeal against an order under the Excess Profit Act against a disrupted Hindu family "
8. In the first case on which Mr. Sirajul Haq Memon placed reliance the right of appeal was conceded to partner in a U.R. firm and in the second case coparceners of the disrupted Hindu family.
In the present case Mr. Sirajul Haq is not able to show that the G.D. Express Worldwide, the respondent which filed appeal before the learned Commissioner of Income-tax (Appeals) was liable to pay tax in pursuance of the assessment orders made in respect of M/s. TNT Express Worldwide Australia. Thus, notwithstanding the fact that the G.D. Express Worldwide N.V. is a group in which 87 companies incorporated in various parts of the world ware included, the assessee was TNT Express Worldwide Australia Pvt. Ltd. and not the G.D. Express Worldwide N.V. Mr. Sirajul Haq Memon has submitted that on the point of technicality the first appeal should not be held to be not maintainable before the learned Commissioner of Income Tax (Appeals). We would like to clarify that it is not a mere question of technicality but, first, it is a question of correct application of law. It is specifically provided in section 129 that any assessee objecting to an order made by Deputy Commissioner of Income Tax may appeal to the Additional Appellate Commissioner against such order. Thus, the right of appeal has been specifically conferred on an assessee and not on every person on the (ace of earth. The ' assessee' is defined in section 2(6) as follows:
2(6) "assessee" means a person by whom any tax or any other sum of money is payable under this Ordinance, and includes---
(a) every person in respect of whom any proceeding under this Ordinance has been taken for the assessment of his income or the income of any other person in respect of which he is assessable or of the, amount of refund due to him or to such other person.
(b) every person who is required to file a return of total income under section 55, section 72 or section 81; and,
(c) every person who is deemed to be an assessee, or an assessee in default under any provision of this Ordinance.
The perusal of the above definition shows that the respondent G.D. Express Worldwide N.V. does not come within the purview of 'assessee' under any of the above categories. Thus, it is not a mere question of technicality but it is a very important fundamental question of law relating to the right of appeal and ultimately to the jurisdiction of appellate authority. It is a fundamental principle of law that things should be done as they are required to be done or not at all. In addition to the question of right of appeal conferred on a particular person it pertains to the authority vested in a Appellate Court/Tribunal. If it is conceded that any person can file appeal in respect of any assessment order it would not only be mainfestly against the specific provisions of law but would be destruction of the entire judicial discipline. Secondly the appeal is the continuation of an original proceeding and if any person who is not an assessee, as such; and is not liable to pay tax under an assessment order is conceded the right of appeal, then necessarily such person has to be conceded a right to make any statement during the course of appellate proceedings and we fail to understand as to how any statement by or on behalf of any person other than the assessee itself can be binding on an assessee. Moreover, if such right is conceded in appeal, a similar right has to be conceded in the original proceedings also on the analogy that appeal is the continuation of the original proceedings and we are of the considered opinion that no such right can be allowed to be exercised in the original proceedings. Nobody except the assessee or its authorised representative can participate in the assessment proceedings and give any statement of binding nature. It will be seen that the consequences of allowing such course would be violative of several substantive and procedural laws and would be of far reaching undesirable consequence. Thirdly, it is bound to create anomalies and confusing consequences. For instance, in the present case the respondent G.D. Express Worldwide N.V. is Netherlands based and in itself it is not a company, it is a group only which consists of 87 companies which are incorporated and based in Netherlands, Germany Belgium, Luxembourg, Austria, Switzerland, Italy, France, Denmark, Finland, Norway, Sweden, Yogoslavia, Czech Republic, U.K. Spain, Ireland, Greece, Turkey, Poland, Hungary, Slovakia, Russia, Estonia Portugal, Bulgaria, Thailand, Singapore, Malaysia, Philippines, Japan, Hongkong, Australia, Newzealand, Vietnam, South Africa, Egypt, Bahrain, U.A.E. Cyprus, India, Tanzania, Zimbabwe, Canada, Brazil, U.S.A. Mexico and Chile. The Islamic Republic of Pakistan has entered into agreements for Avoidance of Double Taxation and various countries, at different points of time, and all the Treaties are not uniform. According to law every company and its business transaction with relation to Pakistan Revenue are to be considered in accordance with the provisions contained in respective Treaties for Avoidance of Double Taxation. If G.D. Express Worldwide N.V. the respondent is allowed to contest the tax liability of every component company, on the plea of ultimate responsibility of the group, the G.D. Express Worldwide being Netherlands based would placed reliance on the Treaty for the Avoidance of Double Taxation between Pakistan and Netherlands, while the company who is actual assessee may be resident of Germany, France, Denmark, Australia, J.K. etc. The assessee, which is resident of a country other then Netherlands would not be governed by the Treaty between Islamic Republic of Pakistan and the Netherlands. In such situation the legal difficulties and possibilities of application of wrong law is manifest.
9. In the end we would like to observe that Mr. Sirajul Haq has submitted that although TNT Express Worldwide N.V., the respondent is excisting company but for all practical purpose the TNT Worldwide Express is being run by G.D. Express Worldwide. Even on this scope, the right of appeal cannot be conceded to G.D. Express Worldwide for the simple reason that so long a company is existing it has its own entity. It is a person in law, which has to be assessed and is required to pay the tax under the Income Tax Ordinance, 1979.
10. For the foregoing reasons, it is held that the assessee in all the three (3) assessments years under appeals in the case before us is M/s. T.N.T. Express Worldwide Australia and the appeal could be filed by the said assessee and not any other person including the respondent G.D. Express Worldwide N.V. It is further held that the learned CIT(A) fell in error in entertaining the appeal filed by the G.D. Express Worldwide N.V. assailing the assessment in respect of TNT Express Worldwide Australia. The learned CIT(A) has further fallen in error by giving contradictory finding. On one hand he has held that the assessments were framed on the A wrong assessee by which he means M/s. TNT Express Worldwide Australia and on the other hand has held that the impugned assessment framed on the present appellant by which he means G.D. Express Worldwide N.V., is held to be void and a nullity in the eyes of law. When on his own showing the assessment was framed on TNT Express Worldwide, it could not be assessment framed on G.D. Express Worldwide N.V. As we have held that the appeal before the learned CIT(A) was not competent in law, the logical conclusion is that the entire first appellate order is without jurisdiction and void. The impugned first appellate orders are, therefore, hereby annulled. The assessment orders in all the three assessment years under appeal stand restored. The appeals at the instance of Department are allowed as above.
C.M.A./19/(Trib.)Appeals allowed.