I.T.A. NO-6815/LB OF 1992-93, DECIDED ON 18TH AUGUST, 1998. VS I.T.A. NO-6815/LB OF 1992-93, DECIDED ON 18TH AUGUST, 1998.
1999 P T D (Trib.) 811
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and Nazeer Ahmad Saleemi, Accountant Member
I.T.A. No-6815/LB of 1992-93, decided on 18/08/1998.
Income Tax Ordinance (XXXI of 1979)---
----Ss.80-D & 107---Minimum tax liability---Tax credit---Assessing Officer while charging turnover tax under S.80-D, Income Tax Ordinance, 1979 did not allow the replacement, balancing and modernization tax credit under S.107 of the Income Tax Ordinance, 1979 and application for rectification in respect of reduction of the tax to the extent of such credit, was also turned down---First Appellate Authority confirmed the order of the Assessing Officer--Validity---Provisions of S.80-D, Income Tax Ordinance, 1979 have the overriding effect and nothing contained in the Income Tax Ordinance, 1979 or any other law for the time being in force could be so construed as to authorise any exemption, concession or relief in respect of Income-tax-- Overriding effect of S.80-D of the Ordinance prevails notwithstanding the allowance of rebate under S.107 of the Ordinance---Action of the two subordinate officers was confirmed by the Appellate Tribunal.
Javed Iqbal Khan, F.C.A. for Appellant.
Farooq Tahir, D.R. for Respondent.
Date of hearing: 25th July, 1998.
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---This assessee appeal is against disallowance of BMR tax credit under section 107 while calculating tax under section 80-D.
2. The appellant is a Public Limited Company and is involved in the" _ business of manufacturing and sale of yarn. The company being party to y appeal C.A. 781 of 1995 in respect of levy of tax under sections 80-CC and 8-D, the issue regarding charge of turn over tax under section 80-D is now settled.
3. The point now assailed is that the assessing officer while charging turn over tax under section 80-D did not allow the tax credit under section 107 and an application filed by the assessee for rectification and reduction of the tax by this credit has also been turned down. The fact that the assessee is entitled to BMR under section 107 is not disputed. The issue is whether the credit of the same is to be allowed from the tax chargeable under section 80-D while calculating final liability or not. Before proceeding further we consider it more appropriate to first go through the relevant provision of law which speaks:---
"(1) Section 80-D was inserted by the Finance Act, 1991 which provided that;
80-D Minimum Tax on Income of Certain Companies (and registered firm).---Notwithstanding anything contained in this Ordinance or any other law for the time being in force where no tax is payable (or paid) by a company (or registered firm) resident in Pakistan or the tax payable (or paid) is less than one-half per cent of the amount representing its turnover from all sources, the aggregate of the declared turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income, of the said company (or a registered firm) and tax thereon shall be charged in the manner specified in subsection (2).
(Explanation: For the removal of doubt, it is declared that the expression "Where no tax is payable or paid" and "or the tax payable or paid" apply to all cases where tax is not payable or paid for any reason whatsoever including any loss of income, profits or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deduction (including depreciation) admissible under any provision of this Ordinance or any other law for the time being in force).
(2) The company (or a registered firm) referred to in subsection (1) shall pay as income-tax.
(a) an amount, where no tax is payable (or paid) equal to .one-half per cent., of the said turnover; and
(b) an amount, where tax payable (or paid) is less than one-half per cent, of the said turnover equal to the difference between the tax payable (or paid) and the amount calculated in accordance with clause (a).
As per above provision which was introduced by the Finance Act, 1991, the assessee is liable to pay 0.5 % tax on its turn over if the tax payable by him otherwise is less than the said amount as minimum liability.
On the other hand, section 107 of the Income Tax Ordinance, 1979 while providing credit for investment for the purposes of the replacement, balancing or modernizing of the machinery and plant already installed, speaks in the following manner:---
Section 107. Tax Credit for replacement, Balancing and Modernistation of Machinery or Plant.---(1) Where an assessee Being a Pakistan company invests any amount in the purchase of punt and machinery for installation at any time between the first day of July, :976, and the thirtieth day of June (1988) (or between the first day of July, 1990 and the thirtieth day of June (1991) in an industrial undertaking set up in Pakistan and owned by it, the purposes of replacement, balancing or modernisation of the machinery and plant already installed therein, credit at the rate of fifteen per cent of the amount so invested shall be allowed against the tax payable by it in the manner hereinafter provided.
6. The A.R. has argued that from the above it will be noted that the tax credit has intentionally been kept distinct from tax payable and is to be given separately after determining the tax payable. The term credit has also been used in various subsection of section 50 (withholding tax provisions) by virtue of which the assessees claim adjustment of the tax deductions against the tax levied/determined, payable for the relevant assessment years.
He added that credit in all universally accepted accounting practices denotes as adjustment which equates with payment. In other words it is to be considered as payment towards the tax liability. This credit does not negate the levy of minimum tax under section 80-D but is only to be considered as a credit against the said demand. The learned A.R. added that similar distinction in explaining the meaning of tax credit has been made in the following reported judgments: (1987) 56 Tax 25 (Trib).
"Let us also mention here that both tax credit and deduction or allowance stand on altogether different footing because the former is deducted from the tax payable either in the relevant assessment year or future year or years, as the case may be whereas the allowances or deductions are made from the total income. "
The above view has again been fortified by the learned ITAT again in its decision reported at (1996) 74 Tax 121 (Trib.).
The learned A.R. further argued that the learned CIT(A) has presumably relied upon the explanation inserted after clause (1) of the section 80-D by virtue of which tax payable or paid is to be considered after tax credits and rebates. In this connection it is submitted that this explanation has been introduced by the Finance Act, 1992, and is not applicable to the assessment year 1991-92 relevant to this appeal. Before the insertion of the explanation the assessee had acquired the vested right which cannot be taken away with retrospective effect. The principles of vested rights have time and again been decided by the appellate forums and does not require further elaboration.
7. The last argument of learned A.R. with regard to explanation of any provision gives the clear impression that he himself is conscious of application of this provision in the manner, the learned I.T.O. has applied. He has only one exception to the rule in his mind i.e., applicability of the same. In this opinion the explanation is applicable from the relevant assessment year 1992-93 keeping in view the fact that the same was inserted by Finance Act, 1992. The learned A.R. has ignored that the legislature added this explanation vide Finance Act VII of 1992 with retrospective effect using following language:---
"and shall always be deemed to have been so inserted."
Further, we have no doubt in our mind that the explanation of a provision of law is always retrospective unless a new charge is created through such an explanation. The impugned provision, however, having been made retrospective by the legislature itself is binding in letter and spirit. It does not need one who referred:---
The legislature can define its own language and prescribe rules for its construction which will generally be binding on the Courts:---
"53 Collins v. Texas, 223 U.S. L.Ed. 439, 32 S.Ct. 286; State v. Schlenkar, 112 lowa 642, 84 N.W. 698, 51 L.R.A. 347; St. Louis v. Nash 266 Mo, 523, 181 S.W. 1145; State v. American Surety Co., 90 Neb. 154, 91 Neb, 22, 133 N.W. 235, 135, N.W. 365; Rossmiller v. State, 114 Wis. 169, 89 N.W. 839, 58 L.R.A. 93."
8. The learned D.R. argued that in view of clear and unequivocal instructions from the legislature, is no doubt regarding application of the provisions of section 80-d with effect from 1-7-1990. He added that there is no concept of vested right having been acquired prior to the explanation as the same is only on interpretation of a provision of law which already existed in the statute. Coming back to section 80-D, the argued that the, same was inserted in the Ordinance to create a charge where no tax otherwise is payable by any company, body corporate or trust resident in Pakistan for any "reason", including tax holiday or accounting concession or the tax paid by it is less than 0.5 % of the turn-over.
The above language is extracted from C.B.R. Circular No.8 of 1991, dated June 30, 1991. The circular also while explaining the spirit of the charge as used in the words for any reason' have included the accounting concessions, tax holidays etc. ` '
9. Above discussion leaves no doubt that the explanation was so added with the intention of charging 0.5 % tax as minimum liability against the turn-over. It was added only to clarify that the provision is applicable on all the cases where no tax was payable or the tax paid for any reason whatsoever including loss of income, profits and gains or set-off of loss of earlier years, exemption from tax, credits or rebate in tax and allowances and deductions "including depreciation" admissible under the provision of this or any other law for the time being in force", is less than 0.5%. The provisions of section 80-D, therefore, have the overriding effect and nothing contained in the Income Tax Ordinance, 1979 or any other law for the time being in force can be so construed as to authorise any exemption, concession or relief in respect of the said income-tax. The provision has been added as a non obstante clause and its overriding effect is beyond any doubt. The minimum tax payable is on deemed income representing the total income of the declared turn-over from all sources. Deemed income also is a known device of charging tax and the learned -Supreme Court of Pakistan have already supported the action of creating such charge and have considered it well within the right of the legislature.
As a result thereof, there is absolutely no merit in the arguments of the learned A.R. The overriding effect of the impugned provision of law, therefore, is notwithstanding the allowance of rebate under section 107. As a result thereof, we confirm the action of the two subordinate officers of charging tax @ 0.5 % on the turn-over.
10. The assessee's appeal being devoid of any merit, fails.
C.M.A./10/Trib.Appeal dismissed.