I.T.AS. NOS.749/LB AND 1823/LB OF 1997, DECIDED ON 27TH MAY, 1998. VS I.T.AS. NOS.749/LB AND 1823/LB OF 1997, DECIDED ON 27TH MAY, 1998.
1999 P T D (Trib. 14
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and Inam Ellahi Sheikh, Accountant Member
I.T.As. Nos.749/LB and 1823/LB of 1997, decided on 27/05/1998.
(a) Income Tax Ordinance (XXXI of 1979)
----Ss.80-C, 50(4), 99(3) & Third Sched., R.8(5)---Deduction of tax at sources---Refund---Buy and lease back arrangement between assessee and Leasing Company---Deduction of tax by Leasing Company under S.50(4) of the Income Tax Ordinance, 1979---Claim of refund by assessee on the ground that transaction was neither sale nor supply, was rejected by the Assessing Officer treating same as final discharge of tax liability---Order of Assessing Officer was set aside by the First Appellate Authority with the observation that buy back arrangement between Leasing Company and assessee wag not covered under the definition of sale---Validity---View of the First Appellate Authority was upheld by the Appellate Tribunal on the ground that deduction was not covered under S.50(4) of the Ordinance and provision of S-80-C of the Ordinance was also not applicable---Assessing officer was directed to issue refund of tax deducted on the sale and lease back transaction.
(b) Words and phrases---
------ Sale" and "supply" ---Meanings elaborately discussed and distinction between the two expressions highlighted.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.8---Functions of C.B.R.---Restriction on powers of C.B. A.---C.B.R. is neither vested with the right to create a charge nor it holds any place in the judicial hierarchy ---C.B.R. has no power to issue circular to withhold tax in the case of sale transaction.
1996 PTD (Trib.) 1013 rel.
Muhammad Iqbal Hashmi for Appellant (in I.T.A. NO. 749/LB of 1997).
Ahmad Kamal, D.R. for Respondent (in I.T.A. No. 749/LB of 1997).
Ahmad Kamal, D.R. for Appellant (in T.A. No. 1823/LB of 1997).
Muhammad Iqbal Hashmi for Respondent (in T.A. No. 1823/LB of 1997).
Date of hearing: 26th May, 1998.
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---The assessee a private limited company, filed its statement under section 143-B of the Income Tax Ordinance, 1979 being exporter covered under section 80-CC. The assessee also made a claim of refund amounting to Rs.30,81,275 earlier deducted by leasing/Modaraba companies namely NDFC, FCM and IML on buy back arrangement as per value of the sale invoices from the appellant on machinery which was imported by the impugned company and then transferred to the leasing company. The machinery subsequently was leased hack to the impugned Company. Other facts which require consideration as narrated by learned C.I.T. are as follows:---
"The brief facts of the case are that the assessee moved an application on 14-7-1994 to issue refund amounting to Rs.30,81,275 by allowing the credit of deductions made by the Leasing/ Modaraba Companies which was rejected on 4-12-1995 by passing the order under section 99(3) of the Income Tax Ordinance, 1979. In appeal the case was set aside by the Commissioner of Income Tax (Appeals), Zone-1, Faisalabad vide his order, dated 30-12-1995, Fresh order has been passed on 20-8-1996 which is under appeal, Brief facts of the case are discussed hereunder:---
"An application dated 14-7-1994 for issue of refund amounting to Rs.30,81,275 was filed by company. Out of the above refund a sum of Rs.24,85,862 consisted of tax allegedly deducted under section 50(4) of the Income Tax Ordinance, 1979 by the leasing companies i.e. N.D.F.C. F.C.M. and I.M.L. In addition to the above Rs.1,24,993 is tax deducted on prior year's sales of? Pyes etc Total refund thus comes to Rs.26,10,855.
These amounts were deducted on account of lease facility provided by the abovesaid leasing company. It was deducted on the basis of sale invoices prepared to secure the loan amount. It was not actual sale and as such was not covered under the definition of sale proceeds given under Rule 8 of Third Schedule to the Income Tax Ordinance, 1979 which reads as under:---
"Sale proceeds means:
(a) Where the asset is actually sold, the sale price thereof or the fair market value, whichever is the higher . ... "
On the basis of abovenoted facts the assessee filed appeal wherein the learned C.I.T. considered that the buy back arrangement between the Modaraba Company and impugned assessee is not covered under the definition of sale. While arriving at this conclusion the learned C.I.T.(A) relied upon following judgments:---
I.T.A. No.5128/KB of 1991-92, 1793/KB and 2238/KB of 1994-95 (Assessment years 1990-91 to 1992-93), decided on 4-2-1996 reported as 1996 PTD (Trib.) 1013 wherein it was held:--
"On consideration of entire facts we are of the considered opinion that the. so-called lease purchase agreement is in fact an arrangement of advancing loan by I.D.B. to N.R.L. on the security of said hire-purchase agreement. The transaction in truth is merely a loan transaction and the lender, i.e., I.D.B. is to be repaid its loan and to have a security upon the goods. It is an attempt to cloak the reality of the transaction by sham hire-purchase agreement. In fact N.R.L. was merely financed by I.D.B. and the N.R.L. has purchased the equipments according to its requirements and specifications from the supplier and as held by the Honourable Supreme Court of Pakistan in the case of Shewram Das PLD 1961 SC 321 the property in the equipments pass to the N.R.L. when the contract was made and it is immaterial if the time of payment of the price was postponed beyond the date of contract. We are of the considered opinion that the ownership in the goods become vested in the N.R.L. upon the making of the contract and the alleged hire purchase agreement was in fact not in the nature of hire-purchase agreement but in the nature of sale. "
The learned C.I.T.(A) set aside the case against which both the department as well as the assessee have approached the Tribunal for favour of consideration. Before we give our finding it will be more appropriate to go through the relevant definitions of the words impugned before us. The basic argument from the assessee is that impugned arrangement was actually a pledge of the machinery and not a supply. In his opinion 'sale' is a wide connotation and includes supply while every sale cannot be termed as supply with reference to Income Tax Law. He, however, accepted that no clear definition of the two words have been given by the Income Tax Ordinance hence he relied upon ordinary dictionary meanings. He produced before us Black's Law Dictionary, Fourth Edition of 1968, wherein word 'sale' has been defined as follows:---
"SALE; A contract between two parties, called, respectively, the seller (or vendor) and 'buyer', (or purchaser) by which the former, in consideration of the payment or promise of payment of a certain price in money, transfers to the latter the title and possession of property Pard. Droit Commer. 1, Butler v. Thomson, 92 U.S. 414, 23 L. Ed. 684. In re: Frank's Estate, 277 N. Y S. 573, 154 Misc. 472.
A contract whereby property is transferred from one person to another for a consideration of value, implying the passing of the general and absolute title, as distinguished from a special interest falling short of complete ownership. Arnold v. North America Chemical Co. 232 Mass 196, 122 N.E. 283, 284; Faulkner v. Town of South Bostan, 141 Va. 517, 127 S.E. 380, 381.
An agreement by which one gives a thing for a price in current money, and the other gives the price in order to have the things itself. Three circumstances concur to the perfection of the contract, to wit, the thing sold, the price, and the consent. Civ. Code La. art. 2439.
To constitute a "sale" there must be parties standing to each other in the relation of buyer and seller, their minds must assent to the same position, and a consideration must pass. Commissioner of Internal Revenue v. Freihofer, C.C.A. 3, 102 F 2d 787, 789, 790, 125 A. L. R. 761.
"Sale" consists of two separate and distinct elements; First contract of sale which is completed when offer is made and accepted and, second; delivery of property which may precede, be accompanied by, or follow, payment of price as may have been agreed on between parties. Inland Refining Co. v. Lang worthy, 112 Okl. 280,240 P.627,629.
An essential element of a "sale" is the money price, which must either be fixed by agreement or capable of being ascertained there from. Purvear Meyer Grocer Co. v. Carwell Bank, Mo. App. 4 S.W. 2d 489, 490.
"Sale", as applied to relation between landowner and real estate broker working to secure purchaser of land, means procuring purchaseable, ready, and willing to buy on terms fixed by seller. T. W. Sand ford & Co. v. Waring, 201 Ky. 169,256, S.W.9, 10."
Relying upon the definition of the dictionary he said that the word "supply" has been defined in the following words:---
"Supply: To furnish with what is wanted; available aggregate of things needed or demanded anything yielded or afforded to meet a want; and the act of furnishing with what is wanted. Clay ton v. Bridgeport Mach. Co. Tex. Civ. App; 33 S.W. 2d 787, 789."
Relying upon the above definition, he argued that the sale contract is between seller and the buyer and the cardinal principle in the agreement is the transfer of the corpus (absolute) in the name of buyer with all rights interests title including that of sale. The other important factor is transfer of the possession of the item to the buyer. Similarly the ingredients of supply are to pass on something to a willing buyer, which is wanted by him or things needed or demanded. The act of furnishing a thing demanded or wanted is supply. (Underlined for emphasis).
Keeping in view the definition of sale in mind and agreements, the A.R. says that the Modaraba Company is not a buyer. It is on account of request of financial assistance by the impugned Company that the Modaraba Company agreed to arrange capital and as a consideration of security the rights of the machinery have been transferred to the Modaraba Company.
The A. R. further added that since the assets available with the Company were in the shape of impugned imported machinery, the company opted to sell the same otherwise it could be some other asset and the transfer of right of ownership is just a matter of security.
The A.R. said that the other very important factor, which again skipped the mind of the subordinate officers is that the possession of the machinery was never transferred to the Modaraba Company. The right to use the machinery is with the impugned company and obviously the possession also. Advancing further he said that even if for argument sake some one considers this transaction to be a sale it would still not be covered in the definition of supply. The Modaraba Company never wanted this machinery and they never needed it. It was needed, wanted and demanded by the impugned Company and was imported by them. There was as such no legal obligation on the Modaraba Company to deduct taxes as the machinery which, was not sold or supplied to them on their demand, need or requirement. The amount they extended to the impugned Company was a financial assistance against which the machinery was mortgaged/pledged. He further added that the department itself subsequent to the impugned transaction issued the assessee an exemption certificate from tax deduction under section 50(4)(b) which also is pointer of the fact that department considered the transaction as not covered under section 50(4)(A) of the Income Tax Ordinance, 1979. He said that sales in some cases are chargeable to withholding tax but not generally. He made reference to section 50(7)(A) wherein sale by public auction is charged to withholding tax. He said that if this transactions was to be brought to withholding, tax, there was no bar on the Legislature to make a law for the same as in the case of transaction of sale by auction under section 50(7)(A).
The learned D.R. opened his arguments by making reference to the dates of the transaction entered between the two parties. He said that the transactions are five in number. His emphasis was on the argument that there being a regular arrangement among the two of them in respect of import of machinery, transfer of the same to the Modaraba Company and then by back facility transaction at 4 different continuous occasions, it formed a supply. He also challenged the reference given by learned C.I.T.(A) in respect of definition of sale and said that the same has been taken from Rule 8(5) of the Third Schedule which defines sale in a particular situation. He said that sale and supply are two synonymous words but, however, where a transfer is not a solitary transaction and is under some regular arrangement between the two parties, the same shall be covered under the definition of supply. He argued that the word has more elaborately been defined by Transfer of Property Act wherein section 33 speaks as follows:---
"33 'Sale' is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised. "
He also said that the case referred by A.R. is not relevant as it deals with one transaction while in the impugned case their is a series of contracts of supply among the two parties, While repeating his arguments that supply is synonymous to sale, he said that sales with regular intervals comes into the definition of supply. Besides, he repeated that corpus of the property has been transferred in the name of leasing company hence the transfer in all these contracts is fully covered under supply sales and thereby assessee was required to file a statement under section 143-B being covered under the provision of section 80(C)(2). On the basis of his arguments the learned L.A. wants us to cancel the order of set-aside of the learned C.I.T.(A) and restore the order of the I.T.O. wherein he refused to grant refund to the assessee under section 99(3). He brought our attention to page 4 of the order of learned C.I.T.(A) wherein he has given detail of transaction. The same is reproduced as under:---
NAME OF MACHINES
| Particulars | Babcock continuous preparation Range Machine | Washing Machine | Thermo- solizing Range | Testing Equipment |
| Name of Leasing Co. | N.D.L.C. | N.D.L.C. | F.C.M. | I. M. L. |
| Import Licence No. | B-883609 | B-883610 | B-883670 | B-884073 |
| Date of Issue | 18-12-91 | B-883642 18-12-91 04-01-92 | 29-1-92 | B-884074 3-11-92 3-11-92 |
| I/C No. | 554613 | 91.015 | 907/920083 | 555032 555031 |
| Date of Establishment | 22-10-1992 | 24-12-1991 | 11-2-92 | 4-11-92 4-11-92 |
| Bank Name | HBL | NDLC | Standard Chartered | HBL |
| Bill of Entry | 36 | 171 | 81 | 19 24-A |
| Date of Release of Machinery | 10-11-92 | 8-7-92 | 20-10-92 | 10-4-93 21-3-93 |
| Date of Lease Agreement | 17-10-92 | 4-12-91 | 20-8-92 | 10-3-93 |
| Lease Agreement No. | F-701/92/10 | NDLC-602 | --- | IML/CFPM/ 32/3/93 |
| Date of So-called Sale Invoice | 17-10-92 | 5-8-92 | 20-8-92 | 8-3-93 |
| Landed cost of Machinery | 56263601 | 33364162 | 25292966 | 4621501 |
| Amount of Lease Facility secured i.e. sale invoice | 46565690 | 28846681 | 20000000 | 4022123 |
| Income-tax deducted under section 50(4) a 2.5 % | 1164142 | 721167 | 500000 | 100553 |
The learned D. R. repeating his earlier argument and said that above picture shows the series of transaction between the two parties.
The learned A.R. in his rejoinder said that the landed cost of the machinery being higher than the sale price agreed with Modaraba Companies by almost 10% itself proves that it was a buy back arrangement and not a supply. He, therefore, urged for a speaking order for release of refund claimed by him. As per arguments of the learned A.R. of the assessee who also produced photocopies of various dictionaries, the necessary ingredients of sale are as follows:---
(i) There is a buyer and a seller.
(ii) That the buyer chooses to purchase an item of his choice.
(iii) The seller is willing to sell the same and the consideration is agreed upon.
(iv) The buyer takes over the possession in absolute terms with the right to use or further alienate or in his discretion may throw it away.
(v) That the possession of the property is transferred.
In the impugned case the situation is entirely different. The company imported some machinery and for its commercial operation asked for financial assistance to a financial institution which agreed to provide the same on production of certain securities. The securities were provided by the loaner company in term of machinery and the corpus of the same was transferred to the loaner as security and same is leased back to the assessee.
The transaction impugned before us between the two parties is on account of buy and lease back arrangement, which even if we consider to be a transaction of sale shall still not be a supply. The term supply and sale are not synonymous. The discussion supra on the basis of the dictionary meanings defines sale to be an exchange of a commodity for money without any prior arrangement, while supply presupposes a beforehand discussion with an arranged and controlled price for a period within certain prescribed and negotiated conditions. The Income Tax Ordinance has used the word sale purchase and supply deliberately with definite purpose and both are not meant to be interchangeable among the two distinct connotations. One involves expression of want by one party through a specific or general order and fulfillment of that requirement by a specified predetermined or approved party. The other i.e. sale commonly involve the element of certainty and legal continuity. The sale is a wider connotation and it includes supply but all sales are not necessarily supplies. Similarly a supplier is a seller but all sellers are not suppliers. If we agree to the arguments of the department, it would mean that all sales including window shopping shall become a supply so as to bring such transaction within the ambit of section 50(4) of the Income Tax Ordinance which shall practically make the working of the section as impossible. We need not mention here that Legislature never introduces a redundant provision and the duty of the Courts is to make a provision of law workable. At the sane time Courts cannot extend its ,jurisdiction by way of interpretation so as to declare a provision of law as redundant. This is where we would like to revert to the order of the I.T.O. In his brief order the learned Assessing Officer has relied upon the instruction of C.B.R. and says "that this case was referred to C.B.R. who referred the same to Law Division for necessary clarification. The C.B.R. vide its Letter C. No.4(10) Rev:Bud/94, dated 22-11-1994 available on record, has informed that as per opinion of Law Division the claim of the assessee-Company is not entertainable. The application of the assessee for issue of refund is therefore rejected."
The letter sent by Law and Justice Division stiltedly relied upon by the Assessing Officer, the copy of which has been produced by the assessee, speaks as follows:---
"Before we answer the query raised by the Central Board of Revenue, it would be necessary to recapitulate the facts of the case. Briefly, as transpired from the reference, a company imported machinery on a basis of the finances provided by a leasing institution. The machinery was thereupon transferred to the finance ?giving institution ostensibly as a sale. The leasing company while paying the sale price deducted the tax there from in accordance with subsection (4) of section 50 of the 1. T. Ordinance, 1979 (XXXI of 1979). The machinery was thereafter given on lease to the importer for installation in his premises. (Underlining is ours for emphasis).
7. The Central Board of Revenue have now raised the issue whether any tax was deductible under section 54(4) ibid. The Board is of the view that since the whole arrangement was made to seek finances, no tax was deductable. In this respect, they have referred to one Circular No.F/MKT/085/91, dated the 2nd December, 1991. In fact, it is not a circular within the meaning of subsection (2) of section 4 of the Ordinance as the clarification referred to in the letter was not made to any officer of the Income Tax but to a private individual. Hence, such letter for the present controversy shall have to be ignored.
8. The relevant provision in this respect is subsection (4) of section 50 of the Ordinance which does not empower an agency liable to deduct tax to examine the vires and nature of the supplies and to investigate into the profession of the person making supplies and his real intentions in making such sale or go behind the transactions. Nor an agency is empowered to declare any supplies as Performa sale only. Except subsection (3) of section 50 ibid, the provisions of section 50 of the Income Tax Ordinance, 1979, whereunder the tax collecting authority cannot delegate their powers to an agency? inquire into all these facts before making an3?deduction from sale price of the supplies made to it. Nor the agency deducting tax are competent to decline deduction of tax on plea that the supply was made to obtain finances by circumventing the provisions of law.
9. We understand that the payment made on Morabaha transactions made by Modaraba are also subject to taxation. Such facility of financing obtained is almost similar to the financial facilities extended by the leasing companies. Central Board of Revenue may, therefore, examine the taxability of the present case in the light of payments made under Modaraba
(Sd.)
?(Amjad Ali),
???? ?????Draftsman/Additional Secretary
??????????????????????????????????? 26-10-1994."
From the above opinion of the Ministry of law it is evident that the Ministry feels the Morabaha transaction of Modaraba Companies to be taxable. The Ministry, therefore, suggested further examination of taxability of the transaction and there is no clear proposal for deduction of tax as such. This is where the Circular letter issued by C.B.R. needs re-examination which is as follows:---
"It had earlier been clarified by the Board vide C. No. ITJI-1(7)/84 Vol-II, dated 27-3-88 and C. No. 1(42) WHT/91, dated 19-2-1992 that lease rentals were not liable to withholding but the payments made for the purchase of an asset (in buy and lease back arrangement or otherwise) were liable to deduction of tax under section 50(4).
2. Board's Circular No.24 of 1992, dated 30th July, 1992, while explaining the tax treatment of 'Modarabas' provided that Modarabas are under no legal obligation to collect or deduct tax at source under section 50 in respect of those financial transactions as are known by the name of "Morabaha" under the Islamic mode of financing.
3. It is, therefore, necessary to explain a 'Morabaha'. A Morabaha' transaction has two stages. .First in which the 'Morabaha company, being financer, purchases the asset for the finance or allows the financee to purchase the asset as an agent on its behalf. In the second stage the Modaraba company sells the asset to the financee and gets the price in instalments or otherwise. The first stage of the transaction amounts to purchase by the company and the second stage is similar to lease rentals.
4. Tax shall therefore, be deducted under subsection (4) of section 50 at first stage of 'Morabaha' transaction. Modarabas, if they undertake Morabaha transactions, shall be likewise subject to the provisions of subsection (4) of section 50.
5. It is also clarified that Modarabas engaged in leasing business will be treated at par with leasing companies. The payments made by them for the purchase of an asset (in buy and lease back situation or otherwise) will be liable to deduction of tax under section 50(4).
Above circular has equated the transaction of buy and lease back with the transaction of leasing companies for the purpose of deduction of tax. The issue which crops up from above circular is that under what authority the Circular letter noted above has been issued by the C.B.R. Before dealing this point let us go through section 50(4) which is as follows:---
"(4) Notwithstanding anything contained in the Ordinance---
(a) Any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person (being resident) (hereinafter referred to respectively as "Payer" and "recipient"), on account of the supply of goods or for service rendered to, or the execution of a contract with the Government, or a local authority, or (a company) (or a registered firm) or any foreign contractor or consultant or consortium shall, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provision of section 53 be given in 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, if any, in which the 'said date', as referred to therein, falls, whichever is the later."
The above provision of law speaks of deduction of tax at source and its subsequent credit for the tax while computing final tax liability of the recipient. For bravity we add that withholding tax under section 50(4) basically was not the final tax for all purposes of the persons on whose behalf the same has been deducted. Besides it strictly brings to charge withholding tax "On account of the supply of goods or for services rendered to or execution of a contract". The department says that it is a supply and, therefore, the deduction has rightly been made while we have discussed in detail that it is not at all a supply. The ingredients of supply are not applicable on this buy and lease back arrangement in any manner. The circular referred by us support our contention in the sense that the C.B.R. also treats this income similar to lease rental as in the case of leasing companies. Besides, C.B.R. does not have the power to charge to tax o person whom Legislature does not want to tax. Apparently when C.B.R. issued the instructions to charge withholding tax, the assessee was not bothered for the obvious reason that the same was to be adjusted against his Future liability on starting commercial production. The problem started when the deduction under section 50(4) was considered as full and final settlement under section 80(c). This created hardship as C.B.R. through above-noted circulars had brought to deduction the transactions, which was actually not spelt out from the language of law. The department's case completely revolves around the argument that this buy and lease back arrangement is covered by the term 'supply' while it is not, as is evident from the discussion supra. The fact that the leasing company never, needed this machinery and they never demanded it or showed any inclination to order for the same makes it clear that it is not a supply. The argument of the learned D.R. that there being more than one transactions the agreements come within the definition of supply is also of no help to the department. The leasing company never required this machinery. It has never been advertised or asked for in any manner and the impugned company is also not a specified predetermined or approved party for the purpose of such supplies. The fact that the leasing company does not desire to keep this machinery even for the future use, is evident from the lease agreement itself. This schedule of lease agreement No.IML/CFPM/32/03/93 speaks through ITEM No.12 -- as follows:---
ITEM 12. Supplementary provisions:
"In the event that if the lessee chooses to return the leased machinery to lessor at the end of the leased period or any renewal thereof, lessee shall indemnify lessor for any difference between sale proceeds to be collected by lessor and the Residual Value of Rs.422,123."
Above provision further supports our finding that, the leasing Company was and shall never be wanted the machinery impugned and the impugned assessee would not form the position of a supplier, so as to clothe the sale transaction impugned to be a supply. This is where we feel ourselves in agreement with the findings of the Tribunal given vide order mentioned the earlier part i.e. 1996 PTD (Trib.) 1013.
After holding that the transaction was not a supply, we now move ahead towards the legal position of the circular under which the deduction was directed by the C.B.R.
It is a settled fact that C.B.R. though hold the highest Administrative Authority has no place among the judicial forums. Its functions are restricted to the extent of interpretation of provisions but it cannot transgress its Authority by entering into the realm of creating a charge not provided by law. Similarly its circulars may be binding on its subordinate officers, but not on the functionaries having judicial authority including C.I.T.(A). The functions, of C.B.R. have authoritatively been explained in the famous judgment of Supreme Court of Pakistan titled as Central Insurance Company v. C.B.R. reported as 1993 SCMR 1232. In this known judgment the Apex Court have given following findings:---
"It is evident from the above provision that though the Central Board of Revenue has administrative control over the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue on a statutory provisions cannot be treated as a pronouncement by a forum competent to adjudicate upon such a acquisition judicially or quasi ?judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which may interfere with the judicial or quasi judicial functions entrusted to the various functionaries under a statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to the administrative matters. The interpretations of any provisions of the Ordinance can be rendered judicially by the hierarchy of the forums provided for under the above provisions of the Ordinance, namely, the Income-tax Officer, Appellate Assistant Commissioner, Appellate Tribunal, the High Court and this Court, and not by the Central Board of Revenue. In this view of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the Circular, can be treated as administrative interpretation and not judicial interpretation."
From the above detailed discussion it is evident that the C.B.R. is neither vested with the right to create a charge nor hold any place in the judicial hierarchy. In keeping view this situation we are inclined to hold that the issuance of the circulars to withhold tax in the case of the sale transaction impugned before us is nothing but a transgress of power not available under law. The deduction of tax by treating this sale as supply and refusal of IAC to issue refund as such cannot be supported by us.
The issue which also requires our attention is with special reference to application of section 80(c). On factual matrix the department has taken refuge under the language of this provision. The trumpet song played under the garb of full and final settlement of accounts can be analysed after going through the relevant provision which is as follows:---
80(C). Tax on income of certain contractors and importers:
(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to any person (?..), the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule."
Above section provides for presumptive tax in the case of contractors, suppliers and importers which are liable to deduction of tax under subsections (4) and (5) of section 50 in accordance with the relevant rates prescribed in the First Schedule constitutes their final tax liability. The key-words in the section is in 80(c)(2)(a) i.e. (a) where the person is a resident (i) the amount representing payments on which tax is deductible under subsection (4) of section 50, other than payments on account services rendered. (Word underlined for emphasis by us).
The word "deductible" has been used purposely by the law makers as Legislature never use the words unintendedly. It creates charge only on those contractors, suppliers and importers which are subject to deduction under section 50(4). Since we have already held that impugned transaction was not covered by the provisions of section 50(4) the deduction there from under the garb of C.B.R. Circular, therefore, is not full and final settlement in term of section 80(c). Section 50(4) is only meant for deduction from supply, import, contractor and services rendered. It does not include all other sale agreements. The term 'Expressio unius exclusio alterius' is also applicable in full force on the impugned facts. The rule explained in the form of this latin Maxim means, mention of one or more things of a particular class may be regarded as silently excluding all other members of the class'. In section 50(4) the usage of word "supply of goods" does not include an ordinary sale transaction and 80(c) also refers to tax on contractors and importers only.
In view of the foregoing discussion the learned D.C.I.T. was not justified in refusing to allow refund. Learned C.I.T.(A) also .gave a sketchy finding. He is fully convinced that the assessee deductions are not covered under section 50(4) and the provisions of section 80(c) are also not applicable. Under the circumstances he should have given a clear finding. We, therefore, while agreeing with his findings further direct the D.C.I.T. to issue assessee the refund of tax deducted on this sale and lease back transaction after verification of the relevant documents, and fulfillment of other necessary formalities.
The assessee appeal, therefore, succeeds in the manner and to the extent as mentioned above while the departmental appeal fails.
C.M.A./577/Trib. ??????????????????????????????????????????????????????????????????????????????? Order accordingly.