I.T.AS. NOS.899/I13 TO 905/113 OF 1998-99 VS I.T.AS. NOS.899/I13 TO 905/113 OF 1998-99, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1815 (1999)

(a) Workers Welfare Fund Ordinance (XXXVI of 1971)---

----Ss. 2(f)(vi) & 4(4)---Income Tax Ordinance (XXXI of 1979), Preamble-- Industrial undertaking owned by Government Corporation--Workers Welfare Fund---Levy of ---Assessee a public limited company---Assessing Officer levied Workers' Welfare Fund after completion of assessment-- Assessee contended that company was owned by. a Corporation which- was wholly owned by the Government, therefore, under S.2(t)(vi) of the Workers' Welfare Fund Ordinance, 1971; it was excluded from the purview of industrial undertaking and was, therefore, not liable to Workers' Welfare Fund under S.4 of the Workers' Welfare Fund Ordinance, 1971---Validity Word "owned" means the exclusive ownership or complete title to a thing exclusive of all others---Contention that the word "owned" was used in relation to having the majority of shares and, thus, having an administrative control over that concern, was not plausible as in such a case the Legislature should have not used the word "owned" but "partly owned"---Word "owned" therefore, was used to denote the exclusive ownership or complete title to the exclusion of all others ---Assessee Company was not wholly owned by a Corporation in circumstances and, therefore, same was not exempt from the levy of Workers' Welfare .Fund under the provisions of Income Tax Ordinance, 1979.

Black's Law Dictionary, p. 996 ref.

(b) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4(4)---Income Tax Ordinance (XXXI of 1979), Preamble---Levy of Workers' Welfare Fund---Limitation---Expression "as soon thereafter as may be" used in S.4(4) of Workers' Welfare Fund Ordinance, 1971-- Connotation---Assessee was a public limited company---Assessing Officer levied/charged Workers' Welfare Fund after lapes of more than 90 days from the date of assessment ---Assessee contended that orders levying workers welfare fund were made after the lapse of 90 days, therefore, the levy was illegal, being barred by time---Validity---Orders for levy of Workers' Welfare Fund were to be passed within 90 days after making the assessment orders---Levy of Workers' Welfare Fund having been made after the expiry of 90 days from the date of assessment same was time-barred and, thus, not sustainable in law.

1987 PTD (Trib.) 580; 1990 PTD (Trib.) 1014 and, 1997 PTD (Trib.) 3 rel.

Naeem Akhtar Sheikh, F.C.A. for Appellant.

Maqsood Khan, D.R. for Respondent.

Date of hearing: 23rd December, 1999.

ORDER

KARAMAT HUSSAIN NIAZI (JUDICIAL MEMBER). ---These appeals at the instance of the appellant-assessee, are directed against the combined order dated 28-9-1998 recorded by the learned CIT(A), Range-IV, Company Zone, Islamabad, in respect of assessment years 1987-88 to '1990-91 and 1994-95 to 1996-97. In all these appeals, the assessee has questioned the levy of Workers Welfare Fund (hereinafter referred to as Fund). We intend to dispose of all. these appeals by this single order.

We have heard Mr. Naeem Akhtar Sheikh, F.C.A.---the learned A.R. of the assessee and Mr. Maqsood Khan, the learned DR on behalf of the Department and have perused the relevant orders.

3. The relevant facts in brief are that the appellant-company is a public limited company, quoted on stock exchanges of the country. It deals in the manufacture and sale of cement. The assessment in respect of assessment year 1987-88 was finalized on .20-7-1988. At the time of making of assessment or soon thereafter no order of levy of Fund under the provisions of subsection (4) of section 4 of the Workers Welfare Fund Ordinance, 1971 (hereinafter called the. Ordinance) was passed. However, at the time of giving appeal effect to the decision of the honourable ITAT, the Assessing Officer levied Fund vide order dated 24-2-1998. The appellant-company filed application for rectification by contending that the levy of Fund was against facts and law and was liable to be deleted. The rectification application was rejected on 29-4-1998 which order was confirmed in appeal.

4. For the, assessment years 1988-89, .1989-90 and 1990-91 the assessments were finalized on 19-6-1989, 30-6-1992 and 12-4-1993 respectively. The Fund was levied for the above assessment years at the time of finalizing the assessment. Upon the application for rectification filed by the assessee under section 156 of the Income Tax Ordinance, 1979, the levy of Fund was deleted vide combined order dated 20-2-1995. The Fund was relieved for all these years vide order dated 24-4-1998 while giving appeal effect to the order of the ITAT. The assessee-company filed rectification application which was refused vide order dated 29-4-1998. The assessee company remained unsuccessful before the first appellate forum.

5. For the assessment year 1994-95 the assessment was completed on 10-6-1995. The Fund was not levied at the time of completion of assessment or soon thereafter. The Fund was levied' on 16-5-1998 by rectifying the order under section 156 of the Ordinance. For the assessment -years 1995-96 and 1996-97 the assessments - were made on 21-4-1998 and 30-6-1998 respectively. The fund was charged in the assessment made by the Assessing Officer. The order of levy of Fund was confirmed in -appeal.

6.Hence, the above appeals.

7. The learned A.R. of the assessee has assailed the impugned orders mainly on two grounds; firstly, that the assessee-company is owned by a Corporation; the majority of shares of which are owned by the Government, hence it is not an industrial establishment within the meaning of section 2(f) of the Ordinance and is, therefore, exempt from the levy of Fund; and secondly that the order of levy of fund was not made within 90 days of the finalization of the assessments, therefore, the Fund levied for the assessment years 1987-88 to 1990-91 and 1994-95 is time-barred. In order to fully appreciate the arguments advanced by the learned A.R. of the assessee it is desirable to reproduce the provision of section 2(f) of the Ordinance, which reads as under:---

2(i) "industrial establishment" means--

(i) any concern owning or managing a factory, workshop or other establishment in which articles are produced, adapted or manufactured with the aid of electrical, mechanical, thermal, nuclear or any other form of energy transmitted mechanically and not generated by human or animal agency;

(ii) any concern working a mine or quarry or natural gas are oil field;

(iii)any concern, running a tramway or motor omnibus service;

(iv) any concern engaged in the carriage of men and goods by inland mechanically propelled vessels;

(v) any concern engaged .in the growing of tea, coffee, rubber or, cinchona; and

(vi) any other concern or establishment which the Federal Government may, by notification in the Official Gazette, declare to be an industrial establishment for the purposes of this Ordinance, but does not include any concern or establishment which, is owned by the Government or by a Corporation established by Government or by Corporation the majority of the share of which is owned by Government. " (underlined for emphasis) ,

The learned A.R. has admitted that the assessee-company is an industrial establishment, as is defined under the provisions of section 2(f) reproduced hereinabove. But as it is owned by a Corporation namely State Cement Corporation, which in turn, is wholly owned by the Government, therefore, under the above exemption clause it is excluded from the purview of the industrial establishment and is, therefore, not liable to be subjected to Fund under section 4 of the Ordinance. The plain reading of the provisions of section 2(f) `as reproduced hereinafter, makes it clear that the following establishments or concerns are excluded from the definition of industrial establishment, which are;---

(1) owned by the Government, or

(2) owned by a Corporation established by the Government, or

(3) owned by a Corporation, the majority of the shares of which is owned by the Government .

The contention of the learned A.R. is that the assessee company falls under category-III (supra) as it is owned by a Corporation, namely, State Cement Corporation which in turn is wholly owned by the Government.

8.As is stated earlier, the assessee-company is a public limited company: It is stated that 85% of the shares of the appellant-company are held by the State Cement Corporation and the investment companies, insurance companies and general stock companies. The learned A.R. of the assessee has laid much stress upon the meaning of the word "owned":' He refers to Black's Law Dictionary, page 996 wherein the word "own" means "to have a good legal title; to hold as property; to have a legal or rightful tide to; to have; to possess". He has also referred the meaning of word "owner" which means "the person in whom is vested the ownership, dominion, or title of property; proprietor. He who has dominion of a thing, real or person, corporeal or incorporeal, which he has a right to enjoy and to away with as he pleases, even to spoil or destroy it, as far as the law permits; unless he prevented by same agreement or covenant which restrains his right".

9. It is contended that the assessee-company is incorporated under the Companies Ordinance, 1984. The company is owned by its members i.e. shareholders. The control and management of the company is being run by the Board of Directors which are to be elected by the majority of the share r holders. It is, therefore, argued that as the majority shares of The assessee, company are held by the State Cement Corporation, therefore, virtually the State Cement Corporation is the owner of the assessee company. The State Cement Corporation is in turn owned by the Government: In these circumstances, it is, the appellant-company that, is excluded from the definition of an industrial establishment and is not liable levy of Fund.

10.The learned D.R. defends the impugned order. It is stated that the word "owned" as used in The above provisions, means the exclusive ownership of that industrial concern and not having or holding the majority of the share of that concern, or controlling shares. Hence, it is liable to be subjected to Fund, being an industrial establishment or concern not wholly owned by the corporation the majority of the shares of which is owned by the Government.

11. We cannot agree with the interpretation placed by the learned A.R. of -the assessee on the word . "owned". The word "owned" means the exclusive ownership or complete title to a thing exclusive of all others. The contention that the word "owned" is used in, relation to having the majority of shares and, thus, having an administrative control over that concern, is not plausible as in that case the legislature should have not used the word "owned" but "partly owned". Here the word "owned" is used to, denote the exclusive ownership or complete title to the exclusion of all others. In these circumstances we are of the view that the assessee company, is not wholly owned by a Corporation, therefore, it is not exempt from the levy of Fund under the provisions of Ordinance. The first objection of the learned A.R. of the assessee, is therefore, not tenable and is overruled.

12.The second objection of the assessee is' with regard to the limitation. The learned A.R. of the, assessee has relied upon the cases reported as 1987 PTD (Trib.) 580, 1990 PTD (Trib.) 1014 and 1997 PTD (Trib.) 3 = (1997) 75 Tax 12 (Trib.). It is stated that where the Assessing. Officer failed to-levy Fund in the assessment, he could do so by rectifying the mistake within a period of 90 days. Further stated, that the order of levy of fund for the assessment years 1987-88 to 199Q-91 and 1994-95 were made after the lapse of 90 days, therefore, the levy of Fund was illegal, being barred by time and was rightly deleted.

13. the facts of the case reported in (1987) PTD (Trib) 580-weie that the assessment in respect of assessment year 1973-74 was completed on 23-12-1974. The fund was not levied at the time of the making of the assessment. It was levied on 30-6-1980. It was held by the Tribunal that the "expression 'as soon thereafter as may be' occurring in subsection (4) of section 4 of the Ordinance should be only in number of days and not in years" and accordingly the levy of fund was held to be illegal and it was deleted. In a case reported as (1990) PTD (Trib) 1014, the Assessing Officer omitted in levy the Fund at the time of the making of the assessment for the assessment years 1983-84 and 1984-85 on 11-2-1984 and 16-5-1984 respectively. It was held by the Tribunal that:---

"The charge of Fund after three years from the making of the assessment order could not be said to have been made as soon after making of the assessment order as interpreted by the Tribunal in its decision reported as 1987 PTD (Trib.) 580."

The facts relating to the case cited as 1987 PTD (Trib) the Assessing Officer omitted to determine the amount of Fund at the time of the making of the assessment relating to assessment years 1987-88 to 1991-92 which were made on 29-2-1990, 27-6-1991, 26-6-1998,'9-9-1992 and 27-3-1998 respectively. The order of the charge of Fund was made for all the years under consideration on 14-2-1993 i.e. after the lapse of a period ranging from 5 and a half months to 5 years and 6 months. The Tribunal while relying upon the previous decision of the Tribunal cited above held:

"We are of the view that the levy of Fund after lapse of years was not a reasonable time."

It was further held that the period of 90 days shall be the reasonable time in which the Assessing Officer can levy the Fund if he has omitted to levy Fund while making the assessment order. Accordingly, the order of levy of the Fund passed after the expiry of 90 days was held to be illegal and was vacated.

14. Finding ourselves in full agreement with the contention raised by the learned A.R. of the assessee and relying upon the above cited case, we are of the view that the order of the levy of Fund is to be passed within 90 days after making of the assessment order. The levy of Fund in respect of assessment years 1987-88 to 1990-91 and 1994-95 was made after the expiry of 90 days from the. making of the assessment order, therefore, the order is not sustainable being time-barred. However, the orders of the levy of Fund in respect of assessment years 1995-96 and 1996-97 are within time.

15. As a result of what has been discussed above, the assessee's appeal in respect of assessment years 1987-88 to 1990-91 and 1994-95 (sic). The levy of Fund is deleted in respect of (sic) assessment years being time barred.

The appeals in respect of assessment years 1995-96 and 1996-97 fail and are. hereby rejected.

C.M.A./M.A.K./17/Tax(Trib.) Order accordingly.