I.T.A. NO. 1145/IB OF 1995-96 VS I.T.A. NO. 1145/IB OF 1995-96, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2437 (2000)

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

----S. 2(f)---Income Tax Ordinance (XXXI of 1979), Preamble---Industrial establishment ---Assessee was engaged in fabrication of bus/truck bodies---Workers Welfare Fund levied by the Assessing Officer was deleted by the First Appellate Authority on the ground that assessee did not fall within the definition of "industrial establishment" as the making of bus bodies mainly involved labour and the use of electrical, mechanical or any other form of energy was minimal---Validity---Workers Welfare Fund Ordinance, 1971 and the definition of "industrial establishment" contained therein covered every factory, workshop or other establishment in which articles were produced, adapted or manufactured with the aid of electrical, mechanical, thermal nuclear or any other form of energy transmitted mechanically---Said definition, however, excluded only that form of energy which was generated by human or animal agency and all other forms of energy transmitted mechanically were included in the said definition for the purpose of treating any concern as an industrial establishment---Question of determining the extent of such energy or stating that manual labour was mainly involved in the making of bus bodies was not relevant for that purpose---Whether such industrial establishment was big or small or the use of human energy was greater than the other forms of energy was also not a relevant factor for correct interpretation of the term "industrial establishment"-- -Once it was admitted that the assessee was manufacturing bus/truck bodies with the aid of electrical and mechanical energy along-with human labour, there was no reason to hold that the assessee did not fall within the definition of "industrial establishment" ---Deletion of Workers Welfare Fund was, therefore, not justified in circumstances.

(b) Income Tax Ordinance (XXXI of 1979)----

----Ss. 88 & 54---Additional tax for failure to pay tax with the return-- Assessee filed return declaring loss--Return was revised during the course of assessment proceedings declaring an income which was accepted by the Department but additional tax was charged in the assessment order on the ground that tax under S.54 of the Income Tax Ordinance, 1979 was not paid correctly as .the assessee had accepted the rejection of declared version filed originally ---Assessee challenged the order on the ground that no separate order was passed and an opportunity of being heard was also not provided-- First Appellate Authority set aside the order under S.88 of the Income Tax Ordinance, 1979 with the direction to issue a proper notice of hearing and then to decide the case on merits---Validity---No tax was payable under S.54 of the Income Tax Ordinance, 1979 when the return of loss was filed and was only after an agreement was reached with the assessee that revised return was filed and the tax due on that basis was paid---Additional Tax under S.88 was not chargeable in such a situation and apparently, there was no failure to pay tax under S.54 of the Income Tax Ordinance, 1979---Record did not make it clear that the assessee had agreed to pay any additional tax under S.88 on the basis of revised return, even if it were so, such an agreement against the provisions of law was not enforceable---Direction given m the impugned order for proper notice of hearing and decision of the case on merits was not interfered with by the Appellate Tribunal.

Nadir Mumtaz, D.R. for Appellant.

Nasir Ahmed Sahi, I.T.P. for Respondent.

Date of hearing: 19th January, 2000.

ORDER

JAMEEL AHMED BHUTTO (ACCOUNTANT MEMBER).---This department appeal is directed against the order dated 15-10-1995 (hereinafter referred to as the impugned order) passed by the learned CIT(A), Islamabad, in respect & the assessment year 1990-91.

2. The first ground of appeal pressed before us by the leaned D.R. is that the CIT(A) was not justified on deleting the charge of Workers Welfare Fund (WWF) on the plea that the use of electrical, mechanical or any other form of energy was minimal in the case of the assessee, manufacturing bus/truck bodies. It was contended before the, learned CIT(A) that the assessee was engaged in fabrication of bus/truck bodies and that the process was carried out by human agency and no goods were produced; adapted or manufactured. The learned CIT(A) gave the finding that the assessee did not fall within the definition of "industrial establishment" as the making of bus bodies mainly involved labour and the use of electrical, mechanical or any other form of energy was minimal. The D.R. has pointed out that the assessee had shown itself as a manufacturer of vehicle bodies in the return and in the impugned order also it was mentioned that the assessee derived income from manufacturing bus/truck bodies.

3. We have given thoughtful consideration to the definition of the term industrial establishment" on the basis of which it was held by the learned CIT (A) that the assessee did not fall within its ambit because making of bus bodies mainly involved labour and use of electrical mechanical or any other form of energy was minimal. We find that the Workers Welfare Fund Ordinance and the definition of "industrial establishment" contained therein covers every factory, workshop or other establishment in which articles ate produced, adapted or manufactured with the aid of electrical, mechanical thermal, nuclear or any other form of energy transmitted mechanically. This definition, however, excludes only that form of energy which is generated by human or animal agency. All other forms of energy transmitted mechanically are included in the side definition for the purpose of treating any concern as an industrial establishment. The question of determining the extent of such energy or stating that the labour was mainly involved in the making of bus bodies was not relevant for that purposes, as erroneously held by the learned CIT(A). Whether such industrial establishment was big or small or the use of human energy was greater than the other form of energy, as argued before us by the learned A.R. or the assessee, was also not a relevant factor for correct interpretation of the term "industrial establishment". Once it was admitted that the assessee was manufacturing bus/truck bodies with the aid of electrical and mechanical energy along-with human labour, there was no reason to hold that the assessee did not fall within the definition of "industrial establishment". The deletion of Workers Welfare Fund charged at, Rs.5,882 was, therefore, not justified.

4. The other ground of appeal stressed before us is that the learned CIT(A) was not justified in setting aside the issue regarding charging of additional tax under section 68 due to the fact that the assessee itself agreed to pay such tax on its revised return. The arguments advanced by both sides have been considered. It is clearly brought out that on the basis of return declaring loss of Rs.40,610 filed on 31-12-1990, no tax was payable under section 54 of the Income-tax Ordinance, 1979. It was during the course of assessment proceedings that the return was revised by declaring an income of Rs.3,00,000 which was accepted by the Department. In the assessment order, it was stated that since the assessee had accepted the rejection of declared version filed originally. Additional tax under section 88 was being charged on the ground that the tax under section 54 was not paid correctly. This was challenged on the ground that no separate order was passed and an opportunity of hearing was also not provided to the assessee. The learned CIT(A) set aside the order under section 88 with the direction to issue a proper notice of hearing and then to decide the case on merits.

5. We have considered the facts and circumstances and find that no tax was payable under section 54 when the return of loss was filed on 31-12-1990. It was only after an agreement was reached with the assessee that revised return (deemed to have been filed under section 57) was filed and the tax due on that basis was paid. In that situation, it was doubtful if additional tax under section 88 was chargeable. Apparently, there was no failure to pay tax under section 54. It is also not clear from the record that the assessee had agreed to pay any additional tax under section 88 on the basis of the revised return. Even if it were so, such an agreement against, the provisions of Jaw would not have been enforceable. The learned A.R. of the assessee has requested that the direction given in the impugned order for proper notice of hearing and decision of the case on merits may not be interfered with. We accede to his request accordingly. No other ground of appeal or point is pressed before us for consideration.

6. In the result, the departmental appeal succeeds to the extent and in the manner indicated above.

C.M.A./M.A.K./26/Tax(Trib.)Order accordingly.