ZAKIA BEGUM VS NIAZ AHMAD
1999PTD4147
[Lahore High Court]
Before Mian Allah Nawaz and Nasim Sikandar, JJ
COMMISSIONER OF INCOME-TAX/WEALTH TAX, COMPANIES-II, LAWRENCE ROAD, LAHORE
Versus
Messrs PRIME DAIRIES ICE CREAM LIMITED
I.T.A. No. 174 of 1997, decided on 23/09/1999.
Per Mian Allah Nawaz, J.---
(a) Income Tax Ordinance (XXXI of 1979)---
----S.50(4)---Advance income-tax, collection of---Object---Provision ofS.50(4), Income Tax Ordinance, 1979, embodies methodology of collecting tax before assessment---Object is efficient and quick collection of tax---Such deduction of income-tax is subject to the charging S.9, Income Tax Ordinance, 1979---Provision of S.50(4), Income Tax Ordinance, 1979, provides a strategy to collect advance tax and it amounts to assessment of liability.
(b) Interpretation of statutes---
---- Where a word is not defined in a statute, Court is to follow its general ordinary meaning given in dictionaries.
Hirijin Salt Chemicals (Pak.) Ltd. v. Union Council and others 1982 SCMR 522 and Abdul Hameed v. Secretary, Government of Balochistan, Local Government, Rural Development and Agrovilles Department, Civil Secretariat, Quetta PLD 1996 Quetta 21 rel.
(c) Words and phrases---
----Sale" and "supply"---Distinction---"Sale" means transfer of sold -agreed to be sold property from seller to buyer in future for payment of price---Such transfer is for a consideration/payment of money or promise thereto by the buyer---Expression means a transfer of title in property from seller to buyer---Sale and purchase are two phases of transaction of sale--If it is looked from the side of purchaser, it is a purchase of title in the property and if it is seen from seller's side, it is a sale or transfer of the title in the property from seller to purchasers---"Supply" is expression of general nature, and connotes the availability of aggregate of things needed or demand for a given use of purpose---Supply may include sale but this cannot be synonymous with such expression.
Black's law Dictionary, Fifth Edn. published by West 1'ublisinng Co., 1979; Webster's Comprehensive Dictionary Deluxe Encyclopaedia to Edn.; Corpus Juris Secundum, Vol. LXXVII, p.575, Vol. LXXXIII, p.903 published by The American Law Book Co. and Ex. P. Turner Re: Hardy (1948) 18 NSWSR 133 rel.
(d) Interpretation of statutes---
---- Statutes are to be construed with reference to plain language of such statutes and Courts are not required to add or unit, to clear the language of such statute.
(e) Income Tax Ordinance (XXXI of 1979)---
----S. 50(4)---Expression "supplies" ---Such expression included "sales".
Per Nasim Sikandar, J.---
(f) Income Tax Ordinance (XXXI of 1979)---
----S.50(4)---Advance income-tax, deduction of---Purchases of kind contemplated in S.50(4), Income Tax Ordinance, 1979, declaration of---?Burden to declare---Once the assessee had declared purchases of a certain volume then it was for the assessee to explain and deny that all or any of such purchases were not of the kind contemplated in S.50(4), Income Tax Ordinance, 1979 --'Where the assessee failed to explain: the same, the Assessing Officer was partly Justified in adopting all such purchases as supplies, in circumstances.
(g) Income 'Fax Ordinance (XXXI of 1979)---
----S.50(4)---Advance income-tax, deduction of---Inquiry whether purchases amounted to supplies---Procedure---Books of accounts of the assessee or an indepth inquiry by the Assessing Officer could determine whether the whole or any part of the purchases amounted to supplies and therefore, were liable to deduction of tax at source under S.50(4), Income Tax Ordinance, 1979.
Shafqat Mehmood Chohan for Appellant.
Syed Ibrar Hussain Naqvi for Respondent.
Date of hearing: 15th September, 1999.
JUDGMENT
MIAN ALLAH NAWAZ, J.---The only question, falling for consideration in eight instant Income Tax Appeals Nos. 174 to 181 of 1997 is whether purchases made by assessee/respondent in financial years 1990 to 1995 are "supplies" within the meaning of section 50(4)(x) of Income Tax Ordinance (XXXI of 1979) and so assessee was required to deduct advance income-tax from the suppliers at the- rate specified in the Schedule while making payment to them.
2. The facts, briefly stated, giving rise to these appeals are as follows: Messrs Prime Dairies Ice-cream Ltd. /respondent/assessee derives/derived income from manufacturing/marketing ice-cream. Respondent submitted its returns pertaining to years 1990-91, 1991-92, 1993-94 and 1994-95. During the course of assessment, Assessing Officer found that respondent had made purchase of huge quantities of fresh milk, milk-powder, sugar and other ice-?cream ingredients/valuing Rs.24,453,266 in year 1993-94 and Rs.33,308,629 in year 1994-95. He came to conclusion that these purchases were 'supplies' within the terms of section 50(4) of income Tax Ordinance, 1979 (hereinafter called 'Ordinance'): that assessee was required to deduct advance tax on rates specified in Schedule., while making payment to suppliers of the abovementioned articles under abovementioned provisions. Resultantly, he concluded that respondent was liable to be proceeded under section 52 of ibid. On these findings, he issued combined notice to respondent under section 52/62 of the Ordinance. The respondent/assessee was required to show cause as to why action should not be initiated against assessee. The notices related to financial years 1993-94 and 1994-95.
3. Pursuant to aforesaid, assessee entered appearance and moved an application for postponement of hearing/enabling it to prepare the reply and submit it. The request was acceded to and the proceedings were postponed from one date to another till 30th March, 1995 when the assessee failed to offer any explanation for non-deduction of the advance tax and so was assessed in default in following manner:
Assessment year: 1993-94 = 6,11,332
Assessment year: 1994-95 = 8,25,216
Against this order, the respondent filed four appeals which were allowed by learned Appellate Authority on 27-11-1996 by consolidated order/holding that Assessing Officer had proceeded with an unusual haste and not afforded the opportunity of hearing to the assessee, had not dealt with legal/factual contentions raised by assessee. On these conclusions he remanded all the causes to First Assessing Officer with a direction to hold de novo proceedings and assess liability of respondent by taking into consideration legal as well as factual contentions. It will be useful to reproduce operative portions of order of Appellate Authority pertaining to years 1993-94, 1994?95 and 1991-92 and 1992-93. The appeals relating to years 1993-94 and 1994-95 were accepted in following terms:
"After a careful consideration of all the facts of the case, I am of the view that in so far as the imports and purchases as well as fresh milk are concerned it needs further scrutiny in the light of ITAT's decision quoted by the learned A.R. Accordingly the Assessing Officer will after verification of the factual position should decide as per facts/legal position obtainingly on record. The order is set aside for a proper consideration in accordance with the facts and law. The appellant will be allowed a reasonable and proper opportunity to present its case, which it rightly complains was denied to it in the earlier proceedings. The appeals are disposed of accordingly."
The remaining two appeals were decided in following manner:
"In keeping with my decision in respect of the assessment years 1993-94 and 1994-95, 1 direct that imports made by appellant company together with purchases covered by exemption certificates as well as fresh milk purchases should be thoroughly scrutinized before any adjudication on this point is made. Therefore, the matter is sent back to the DCIT for a de novo consideration in accordance with law and facts. The appellant will be allowed a proper opportunity of being heard. The appeals are disposed of accordingly."
4. Feeling dissatisfied, the assessee filed four appeals I.T.A. No. 126/LB of 1997 (Assessment Year 1991-92), I. T. A. No. 127/LB of 1997 (Assessment Year 1992-93), I.T.A. No. 128/LB of 1997 (Assessment Year 1993-94) and I.T.A. No. 129/LB of 1997 (Assessment Year 1994-95). In these appeals, the learned Appellate Tribunal examined the meaning of expressions of "supplies" as embodied in section 50(4) of the Ordinance and held that the purchases made by assessee were in fact sales and were not supplies under section 50(4) of ibid. These appeals were accepted with following conclusions:
"For the foregoing reasons, we have no hesitation in holding that payments in respect of purchases fall outside the ambit of section 50(4). The orders under section 52 in respect of assessment years 1991-92 to 1994-95 are, therefore, cancelled. Appellants' other objections were not without merit. However, in view of our aforementioned findings, we need not, go into these objections. The four appeals succeed as above."
5. Mr. Shafqat Mehmood Chohan. Advocate, on behalf of Revenue, relied upon the meaning of expression "supplies" given in Black's Law Dictionary to contend that word "sale" included supplies made by the seller and so the assessee/purchaser was required to deduct advance tax from the seller. Continuing, he emphasized that learned Tribunal erred in law by saying that "supplies" were not sale and so were outside the ambit of section 50(4) of the Ordinance. On the contrary Mr. Ibrar Naqvi, learned counsel for the assessee/ respondent supported the view of the Tribunal.
6. Answer to abovenoted question depends upon interpretation of section 50(4) of Ordinance. It may be noticed that sections 50 to 54 occur in Chapter VI of ibid. This chapter pays down methodology for recovery/payment of advance tax before making the assessment. Relevant clause of section 50(4) is as follows:
"50(1) . . . . . . . . .
(2) ...........
(3) ...........
(4)??????? Notwithstanding anything contained in this 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 provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day 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.
Provided that the provisions of this clause shall, mutatis mutandis, apply to any payment made on or after the first day of July, 1992, to pay non-resident person as they apply to any payment made to a resident recipient on account of execution of a contract for construction, assembly or like project in Pakistan."
Manifestly, this provision embodies methodology of collecting tax before assessment. Its object is efficient and quick collection of tax. Briefly, this provides a strategy to collect advance tax and does amount to assessment of liability. This section is subject to the charging section 9 of the Ordinance. Plain reading of this provision will show that any person, who is responsible for making any payment in full or in part on account of supply of goods or for services rendered to the execution of contract with the Government or a company or a registered firm or any foreign contractor or consultant or consortium, is required to deduct advance tax at the time of making such payment at the rate specified in the Schedule. Naturally this section revolves round two persons namely payer of price or supplies and who is supplier of goods. It casts statutory duty on purchasers to deduct advance prescribed tax from recipient at the time of making payment to supplier at the rate fixed. Advance tax is to be deducted with regard to supply of goods or for services rendered or execution of contract, with Government so on and so forth. The controversy, so, hinges upon the meaning of "supply" and "sale". Undoubtedly, the aforesaid expressions have neither been defined in Ordinance nor in any Income-tax Rules. We had no option but to interpret it according to their general dictionary meaning. It is a cardinal rule that when a word is not defined in a statute, the Court is to follow its general/ ordinary meaning given in dictionaries. Reference may be made to Hirijin Salt Chemicals (Pak.) Ltd. v. Union Council and others 1982 SCMR 522 and Abdul Hameed v. Secretary, Government of Balochistan, Local Government, Rural Development and Agrovilles Department, Civil Secretariat Quetta (PLD 1996 Quetta 21). Guided by the above rule, we intended to proceed to notice the meanings of aforesaid expressions in various well-known legal as well as ordinary dictionaries. Black's Law Dictionary, Fifth Edition, published by West Publishing Co., 1979, defines the above two words in the following terms:
| ??????????? Sale???????????????????????????? A contract between two parties, called, respectively, the "sellers" (or vendor) and the "buyer" (or purchaser), by which?????????? the former in consideration of the payment or promise of payment of a certain price in money, transfer to the latter, the title and the Possession of property. Transfer of property for consideration either in money or Rs. Equivalent. Wade-Corry Com. Vs. Moseley 223 (Ga 474, 156. SE 2nd 64,65 Passing of title from seller to buyer for a price. U.C.C. & 2-106(1)." | ??????????? Supplies ??????????? Means of provision or relief; stores, available aggregate of things needed or demanded in amount sufficient for a given use or purpose, accumulated stores?? reserved for distribution, sufficiency for use or need; a quantity of something? supplied or on hand. In English law in parliamentary, proceedings the sums of money which are annually voted by the house of commons for the maintenance of the crown and the various public services." |
???????????????????????
Meaning of these expressions as given in Webster's Comprehensive Dictionary Deluxe Encyclopaedia Edition, are as follows:
| Sale???????????????????????????? The act of selling the exchange or transfer of property for????? money or its equivalent 2. An auction of selling off at bargain prices. 3. Opportunity of selling demand by purchasers market, stocks find no sale-for sale (or on sale) offered or ready for sale Homophone Sail OE sala Pref.????????????? ??????????????????????? | Supplies To given or furnish (something needful or desirable to supply milk for a city. 2. To furnish with what is needed: to supply an army with ammunition; 3. To provide for adequately, satisfy: to supply a demand. 4. To make up or make good or compensate for as a loss or deficiency. 5. To fill (the place of another) also to occupy (a pulpit) as a substitute 6. To take the place of another temporarily. See synonymous under accommodate, give, providen. Plies that which is or can be supplied: the available aggregate of things needed or demanded. 2. The amount of commodity offered at a given price or available for meeting demand. 3. Accumulated store reserved for distribution as far an army or a fleet; usually in the plural. He was cut off from his base of supplies. 4. A grant of money to the crown or for the public service appropriation usually???? in the plural. 5. An amountsufficient for a given use store or quantity on hand. 6. A substitute or temporary incumbent 7. Obs. Reinforcement????????? 8. The act of supplying. See synonymous under stock. |
Corpus Juris Secundum (Volume LXXVII), p. 575 and (Volume LXXXIII), Page 903, published by The American Law Book Co. defines these two words in following terms:
| Sale???????????????????????????? "Sale" in legal nomenclature, is a term of precise legal import, both at law and in equity, and has a well-defined legal signification, and has been said to mean, at all times, a contract between parties to give and to pass rights of property for money, which the buyer pays??????????? or promises to pay to the seller for the thing bought or sold. A definition to this or similar effect is sometimes expressly given by the statute regulating sales, such as by the Uniform Sales Acts. However, as used?? by the authorities 'sale' is not a word of fixed and invariable meaning, but may be given a narrow or broad meaning, according to the context or the?? surrounding circumstances and the conduct of the parties.???????????????????? | ??????????????????????? Supplies In their more general signification, the word "supply" and "supplies",as applied material objects, embrace anything required or furnished to meet????????? a need, and relate to those articles necessary for enabling an existing entity to function properly, and in this sense are defined as meaning that which is or can be supplied, that which supplies a want;??????????? anything yielded or afforded to meet a want; avail able aggregate of things needed or demanded in amount sufficient for a given use or purpose, sufficiency or things for use or want; sufficiency for use or need; and amount sufficient ????????? for a given use or purpose; and also as the act of furnishing with what is wanted." |
7. From the aforesaid examination, it is thus, clear that expression "supplies" is of wide amplitude. Manifestly, "sale" means transfer of sold or agreed to be sold property from seller to buyer in future for payment of I price. Such transfer is for a consideration/ payment of money or promise thereto by the buyer. Necessarily it so means a transfer of title in property from seller to buyer. Briefly, sale and purchase are two phases of transaction of sale. If we look it from the side of purchasers, it is a purchase of the title in the property and if we see it from seller's side, it is a sale or transfer of the title in the property from seller to purchasers. The supply on the other hand is expression of general nature. It connotes the availability of aggregate of things needed or demanded for a given use of purpose. Consequently, the supply may include sale but this cannot be synonymous with the aforesaid, expression. This view was taken in Exhs.P. Turner, Re: hardy (1948) 18 N.S.W.S.R. 133. It is settled that statute are to be construed with reference to plain language of such statutes and Courts are not required to add or omit to clear the language of such statute. Tested on the above touchstones, we are in no manner of doubt that the word 'supplies" is general in nature and inclusive of sale when the seller supplies his goods in lieu of their price to buyer. The interpretation of Tribunal, to our view is completely illegal, based upon totally irrelevant consideration and cannot be sustained. A bare reading of section 50(4)(a) of Ordinance shows that in order to eliminate any possibility of doubt the Legislature has used word supply of goods and further used the word maker of payment and recipient of payments/as "payer" and "recipient" Even the case if the recipient/recipients who were not liable to pay any tax under section 9 of the Ordinance, have been taken care of by Legislature in section 50(4)(b) of the Ordinance. This provision is as follows:
"(b) the Commissioner may, on an application made by any such recipient and after making such inquiry as he (hunks fit, allow, by an order in writing arty person responsible for snaking such payment not to deduct any tax from any payment or payments made to such recipient to any financial year, and where such order is made the person responsible for making any payment shall thereafter, and until such order is cancelled make such payment without deduction of tax under clause (a)."
This provision has two parts. In first part; the recipient has been equipped with a right to move the Commissioner for seeking certificate that he is not liable to pay any tax and so the payer/buyer be restrained from deducting the prescribed tax from him. The Commissioner is empowered to hold that necessary inquiry and if he finds that the recipient or the supplier is not liable to pay any tax under section 9 of the Ordinance, he may accept his application and grant him such certificate. Resultantly, thereafter, the payer/buyer will not deduct the amount of prescribed tax from such suppliers/sellers. On the above analysis, we have no difficulty in holding that the expression "supplies" as embodied in section 50(4) of Income Tax Ordinance (XXXI of 1979) does include "sales" and so the view taken by the learned Income Tax Appellate Tribunal is wholly illegal, erroneous on the face of record and so is hereby set aside. These income-tax appeals are so decided in the above terms.
As a result of our foregoing conclusions/ answer, we hereby allow all these eight appeals. Copy of this judgment shall be sent under the seal of the Court and signatures of the Registrar of this Court to learned Income Tax Appellate Tribunal, Lahore which shall pass such orders in conformity with our conclusion/answer. Resultantly, the order passed by the First Appellate Authority shall resurface and shall be in the field and First Assessing Officer shall determine the controversies between the parties afresh in consonance with the order of the First Appellate Authority and in the light of whatever has been concluded in these appeals.
Appeals allowed.
?? (Sd.) (Mian Allah Nawaz), Judge.
NASIM SIKANDAR, J.--I am in agreement with the reasons recorded by my learned brother Mian Allah Nawaz, J. as well as the result arrived at in the form of success of the Departmental appeals. However, I would like to add a few lines to further elaborate the conclusions drawn.
2. It will be seen that the contention of the Revenue that on being served with a notice under section 52 of the Income Tax Ordinance, 1979, the petitioner/appellant failed to reply remains uncontroverted. The Assessing Officer on account of default by the assessee picked up certain amounts from the declared results and balance sheet and held them to be the payments made at payer, and therefore, liable to deduction of tax at source under section 50(4) of the Ordinance. The learned First Appellate Authority/ CIT (Appeals) entertained the alleged explanations made for default in making reply to notice under section 52 of the Ordinance, 1979. However, before CIT (Appeals), it was not denied that part of the purchases made by the Company attracted the provisions of section 50(4) of the Ordinance. On the other hand it was maintained that exemption certificates were provided by the sellers and that part of the material used was imported or was otherwise exempted under C.B.R. notifications. A break-up such purchases including imports and supplies was placed before the Appellate Authority. Taking into account all these faiths including an affidavit of learned A.R. for the Assessee the C.I.T.(Appeals) concluded that the claim of the assessee-?company with regard to imports, purchases, supplies and exemption certificates should be scrutinized afresh after giving it an opportunity of being unheard. It was accordingly directed that "imports made by the appellant-company together with the purchases covered by exemption certificates as well as fresh milk purchases should be thoroughly scrutinized before any adjudication on this point is made. Therefore, the matter is sent back to the DCIT for a de novo consideration in accordance with law and facts".
3. The learned Tribunal on the other hand proceeded to decide the issue in favour of the appellant holding all their purchases to be outside the ambit of supply. The word "purchase" as used by the Assessing Officer in his notice served upon the assessee under section 5/2 of the Ordinance was picked up out of context to hold that these did not include supplies made to the appellant/assessee. An unnecessary emphasis was placed upon the use of the aforesaid phrase in order to hold that the Assessing Officer had treated the term supply and sale as synonymous. A bare reading of the contents of the notice as reproduced in the order of the CIT (Appeals) supports my view that the word "purchase" as used in the notice was picked up in isolation to justify a conclusion. It was clearly in appropriate inasmuch as the Assessing Officer properly confronted the assessee that he wished to take these purchases as supplies as these were hit by the mischief of section 50(4) of the Ordinance, 1979. The Assessing Officer was not at default by taking all the purchases as supplies inasmuch as the respondent avoided placing before him all its cards. Once the assessee had declared purchases of a certain volume I then it was for it to explain and deny if all or any of them were not of the kind contemplated in section 50(4) of the Ordinance. The learned Tribunal also ignored that the word 'supply" is not a phrase common to balance sheets and, therefore, the Assessing Officer had to point out the "purchases" mentioned by the assessee in the balance sheet. The assessee having failed to make any explanation, the justification for default made before the First Appellate Authority and break-up of various purchases given was quite late in the day to forestall an adverse inference against it.
4. Be that as it may, the Assessing Officer was partly justified in adopting all purchases as supplies. It was, however, more desirable if he had made an indepth enquiry as to the real nature of purchases. The assessee on the other hand attempted to cash on its default by pleading facts for the first time before the First Appellate Authority. The order of the CIT (Appeals), as observed earlier was perfectly in accordance with law as the determination of liability of the assessee with reference to section 50(4) of the Ordinance could not have been made without examining the accounts maintained by the assessee considering the volume of imports, tax deducted at source, the certificates allegedly submitted by the sellers under section 50(4)(b) of the Ordinance, the element of continuity of purchases form a single seller and their volume etc. It was only from the books of accounts of the assessee or an indepth inquiry by the Assessing Officer which could bring home that the whole or any part of the purchases amounted to supplies and, therefore, liable to deduction of tax at source under section 50(4) of the Ordinance. The Tribunal, as rightly observed by my learned brother Mian Allah Nawaz, J. attempted to view the proposition from purely a pedantic angle and rushed through the same by targetting a single word of "purchase" as used by the Assessing Officer in the notice served upon the assessee. It was ignored that the assessee never raised the plea that none of its purchase contained an element of supply. In other words the Tribunal decided in favour of the assessee and declared all its purchases to be outside the ambit of provision of section 50(4) of the Ordinance without there being any contention by the assessee to that-effect. I am ready to grant the distinction between the sale and supplies as made by the Tribunal. However, as observed earlier the application of such distinction on the facts before the Tribunal was totally in?appropriate as in fact it was not required. The thrusting of a general principle on unascertained facts was not in accordance with law. In ordinary circumstances at best the Tribunal ought to have directed the disposal of the appeal by the CIT (Appeals) himself if it disapproved that remand order. Instead it took upon itself the job of deciding the matter between the parties by assuming facts as cited by the assessee before the CIT (Appeals) to be correct. These facts, as noted by the CIT (Appeals) needed to be probed into. Therefore, the result arrived at by the Tribunal in para. 14 of the impugned order dated 9-9-1997 that payments made in respect of purchases fell outside the ambit of section 50(4) of the Ordinance though academically correct could not be sustained.
5. Accordingly I subscribe the proposed order made by my learned brother Mian Allah Nawaz, J. and concur that the order of CIT(Appeals) shall re-surface maintaining the remand order which requires the Assessing Officer to determine the controversy between the parties afresh.
Q.M.H./M.A.K./C-29/L ???????????????????????????????????????????????????????????????????? Appeals allowed