I.T.A. NO. 1091/IB OF 1998-99 VS I.T.A. NO. 1091/IB OF 1998-99
2001 P T D (Trib.) 2969
[Income-tax Appellate Tribunal Pakistan]
Before Jameel Ahmed Bhutto, Accountant Member and
Syed Masood-ul-Hassan Shah, Judicial Member
I.T.A. No. 1091/IB of 1998-99, decided on 29/05/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.80-C(2)(a)(i)---Expression "services rendered" has not been defined in the Income Tax Ordinance, 1979 but has to be understood in the context in which it is used in the provision of -the Income Tax Ordinance, 1979.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 80-C---C.B.R. Circular No.11 of 1991, dated 30-6-199.1---Term "services rendered"---Interpretation---Central Board of Revenue had not restricted interpretation of word "services rendered" by use of word. "includes" in its Circular No.11 of 1991 but it was only by way of illustration that "services rendered" by professionals like legal and medical practitioners, accountants were mentioned in the said circular---Intention 'was not to restrict or limit the application of expression "services rendered" only to the doctors, lawyers, accountants, auditors, architects, surveyors, actuaries, engineers, advisors and consultants.
(c) Income. Tax Ordinance (XXXI of 1979)---
----Ss. 80-C & 50(4)----Expression "services rendered' ---Interpretation-- Intention of Legislature---Intention of Legislature was expressed by unrestricted use of expression "services rendered" to mean that all recipients of payments on which tax is deductible under S.50(4) of the Income Tax Ordinance, 1979 on account of services rendered would fall outside the purview of presumptive tax regime under S.80-C of the Income Tax Ordinance, 1979 and the tax deducted in their case would not be final discharge of their tax liability.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 80-C---C.B.R. Circular No.11 of 1991, dated 30-6-1991---Difference between other contractors, suppliers and those who "rendered services"---Tax deducted under S.50(4) in case of other contractors and suppliers was intended to be their full and final discharge of tax liability, being covered under the presumptive tax regime of S.80-C, the recipients of payments on account of services rendered were intended to be kept outside the presumptive tax regime of S.80C of the Income Tax Ordinance, 1979---Such persons had to be treated differently from suppliers and contractors, otherwise even contractors and suppliers could claim to have rendered services in one way or the other, either by using man and material for others or working as middleman by making supplies of goods produced by others and was in that context that the intention of the Legislature had to be gathered from the use of expression "services rendered" which could not be as large and unrestricted as in the dictionaries and not as restricted as shown by way of illustration in C.B.R. Circular No. 11 of 1991, dated 30-6-1991.
(e) Income Tax Ordinance (XXXI of 1979)---
----Ss. 80-C & 50(4)---Expression "services rendered"---Reliance on dictionary meaning of the words "services rendered" cannot be placed by ignoring the context in which these words are used in S.80-C read with S.50(4) of the Income Tax Ordinance, 1979.
(f) Income Tax Ordinance (XXXI of 1979)---
----Ss. 80-C & 50(4)---Expression "services rendered"---Explanation-- Expression "services rendered" relates to all resident persons who are not contractors or suppliers of goods mentioned in S.50(4)(a) of the Income Tax Ordinance, 1979---Distinction could only be made when the facts and circumstances of each case were properly appreciated on the basis of supportive material and a definite conclusion was drawn to maintain the desired difference between the payments made to a resident person on account of services rendered by him and the payments on which tax was deductible under S.50(4) on account of supply of goods or for the execution of other contracts.
(g) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 80-C---C.B.R. Circular No.11 of 1991, dated 30-6-1991-- C.B.R. Circular No.25 of 1980, dated 23-9-1980---C.B.R. Letter No. C. No.1(10) WHT-92, dated 7-4-1992---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Assessee declared his income from providing security services---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner observed that the aspect of application of S.80-C of the Income Tax Ordinance, 1979 was ignored and nature of business carried out by the assessee did fall within the ambit of "services rendered" in view of Circular No.11 of 1991---Assessment was cancelled and Assessing Officer was directed to reframe the assessment by scrutinizing the Bank statement, book of accounts and other details and further, to assess those receipts on which tax was deductible under Ss.50(4) and 80-C of the Income Tax Ordinance, 1979 and the remaining receipts under normal law ---Assessee contended that it was only a manager to the principals, charging fixed amount as its administrative charges and all powers of hiring firing of workers rested with principals---Contention of the Department was that assessee was not a consultant because of its actual physical involvement and active undertaking of the job as a contractor and activities of assessee were not "services rendered" within the meaning of expression used in S.80-C of the Income Tax Ordinance, 1979---Validity---Assessee's plea was not borne out from the material brought on file---Claim that there was no other contractual income and all payments were received for "services rendered" was also not substantiated---Inspecting Additional Commissioner was justified in considering that the assessment was erroneous insofar as it was prejudicial to the interest of revenue---Direction to make a fresh assessment in the manner suggested in the order, however, was not fully justified---Bank accounts were not carefully scrutinized by the Inspecting Additional Commissioner and mistake in working out total deposit could influence the independent application of mind by the Assessing Officer---Assessing Officer could not be directed to assess those receipts on which tax was deductible under S.50(4), and S.80-C of the Income Tax Ordinance, 1979 and remaining receipts under normal law---Not all receipts of assessee on which tax was deductible were on account of execution of contracts and not for services rendered under the contracts---Payment on which tax was deductible under S.50(4) had to be scrutinized independently in order to determine the nature of payment vis-a-vis the terms of agreement or, contract on the basis of which such payments were made to the assessee---If Assessing Officer found that payments were made for services rendered within the meaning of expression used in S.80-C, he would have made fresh assessment under normal law as income from business or profession under S.22 of the Income Tax Ordinance, 1979-- Only those payments on which tax under S.50(4) of the Income Tax Ordinance, was deductible would fall within the ambit of S-80-C under the presumptive tax regime of the Income Tax Ordinance, 1979--Re-assessment had to be made by the Assessing Officer independently and without being influenced by the observation of Inspecting Additional Commissioner and keeping in view the observation of the Tribunal after providing full opportunity to assessee to produce books of accounts and other supportive material/evidence.
1965 PTD 373; 1975 PTD (Trib.) (sic); 1967 PTD 156; Black's Law Dictionary, 7th Edn., p. 1372; Chamber's Twentieth Century Dictionary; Glaxo Laboratories v. IAC 1992 SCC 910; Southern Travels (Pvt.) Ltd., Rawalpindi's case I.T.As. Nos. 672 and 941(IB) of 1998-99 ref.
Mirza Muhammad Wasim, I.T.P. for Appellant.
Abdul Jaleel, D.R. for Respondent.
Date of hearing: 19th May, 2001.
ORDER
JAMEEL AHMED BHUTTO (ACCOUNTANT MEMBER).---The above captioned appeal at the instance of the assessee-company is directed against the order, dated 30-11-1998 (hereafter the impugned order) passed by the learned Inspecting Additional Commissioner of Income Tax (IAC), under section 66A of the Income Tax Ordinance, 1979 (hereafter the Ordinance) whereby the original assessment order, dated 16-7-1998 made under section 62 of the Ordinance has been cancelled with certain directions to the Assessing Officer to make reassessment.
2. The impugned order has been assailed on the ground which are reproduced as under:---
"(1) That the order of the learned Inspecting Additional Commissioner of Income Tax/Wealth Tax, Companies Range-I is bad both in law and against facts of the case.
(2) That the learned Inspecting Additional Commissioner of Income Tax/Wealth Tax, Companies Range-I, Islamabad was not justified in cancelling the assessment order passed by Deputy Commissioner of the Income Tax/Wealth Tax, Circle-0,2, Company's Range 01, Islamabad for the assessment year 1997-98 under section 66-A of the Income Tax Ordinance, 1979. '
(3) That the learned Inspecting Additional Commissioner of Income Tax Companies Range-I was explained the exact business activity and was informed that company in fact is consultant to different multinational organizations and all powers of hiring, firing of labours are with principals and company is managers to the principals. Company is charging fixed amount as its admin charge and that is its income which has accurately been shown. Moreover, these organizations also deduct tax on the amount of its management charges very correctly.
(4)That assessee was submitted all documents and information during hearing and assessment was finalized. Had there been any information called by the Assessing Officer, assessee can submit the same. Therefore, cancellation of assessment is not justified.
(5) That the Inspecting Additional Commissioner disregarded the contents of Circular No.25 of the 1980, dated September 23, 1980 which stipulate deduction of tax on the amount earned by company as consultancy fee.
(6) That the learned Inspecting Additional Commissioner was not justified in. supporting the application of provisions of section 80C of the Income Tax Ordinance, 1979 in case of your appellant and treating the entire receipts as contractual income, while there is no contractual income instead of assessee-company provide services to the client and such service are not covered within the meaning of 'Service Rendered' in the light of C. B.R.'s Circular No. l l of 1991, dated June 30, 1991 as well.
(6.1)That section. 80-C deals with deemed income in case of certain supplier, contractor and importers. The assessee-company does not fall within the purview of contract as defined and clarified in the above and circular. Item (iii) of the above referred circular is reproduced below:
Contract: "This include all types of contracts including civil, mechanical and electrical works, labour contracts and carriage contracts, etc. But does not include contracts for supply of goods and service rendered which have been separately provided in the subsection (4) of section 50. "
The additional ground of appeal admitted by the Tribunal reads as under:--
"Section 80C (2)(a)(i) of the Income Tax Ordinance, 1979 clearly excludes payments for 'services' of all types from the scope of the said section 80C. There was, therefore, no justification for the I.A.C. to adopt a restricted meaning of the word 'services' merely on the basis of a circular of the Central Board of Revenue."
3. We have heard the arguments of the learned representatives of both parties and considered the facts and circumstances of the case in light of the orders passed by the authorities below and the material brought on the file.
4. Briefly stated, the relevant facts leading to this appeal are that the assessee, a private limited company, showing income from providing security services, filed return declaring net income of Rs.3,62,802, after deducting administrative expenses (Rs.14,85,285), selling expenses (Rs.77,400) and financial expenses (Rs.60,350) against the gross security service income of Rs.19,85,846. The return of income was accompanied by computation chart and copies of accounts. The Assessing Officer issued statutory notices which were complied with by the Accountant of the assessee-company who furnished the details/documents, books of accounts consisting of cash book, ledger and salary register and the case was discussed with him by the Assessing Officer. The declared receipts of Rs.19,85,846 were shown to have been routed through the banking channel and, therefore, accepted. However, all the expenses were found to be not completely vouched and, therefore, additions to the tune of Rs.1,18,343 were made under different heads resulting in the assessment of net income at Rs.4,81,145 under section 62 of the Ordinance.
5. During the course of inspection by the office of the learned I.A.C., it was observed that the Assessing Officer did not consider the, aspect of application of section'80C of the Ordinance. The observation of the I.A.C. was that the nature of the business carried out by the assessee did not fall within the ambit of "services rendered" in view of C.B.R's. Circular No. l l of 1991 and, therefore, the treatment meted out to the assessee-company by the Assessing Officer was considered to be not in accordance with the provisions of the Ordinance. Another observation was that the total bank deposits appearing in A/c No.2001824, Deutche Bank, were worth Rs.12.549 million whereas the assessee-company had declared total receipts from all sources at Rs.19,85,846 only. The bank deposits were mostly clearing entries and appeared to be representing various business transactions. The learned I.A.C. issued show-cause notice, dated 22-10-1998, under section 66A(1) of the Ordinance calling upon the assessee-company to explain as to why the assessment for the charge year 1997-98 may not be cancelled being erroneous in law and prejudicial to the interest of revenue. In response to the said show-cause notice, the assessee -company filed its reply, dated 11-11-1998 stating that it was working as consultant to different multinational organizations who used to appoint the staff at their own and just intimated the assessee-company for the appointment of staff with the direction to include these persons in the pay roll and to pay the salary as directed by them. It was further pleaded that the organizations deducted tax only on the portion of admin charges claim by the assessee. The reply of the assessee-company was considered by the learned I.A.C. and not found satisfactory for a number of reasons specified at page 3 of the impugned order. The assessment order, dated 16-7-1998 was thus declared to be erroneous in law insofar as it was prejudicial to the interests of revenue on the following grounds:---
"(i) That in the instant case, as per clarification issued by C.B.R. vide Circular No.11 of 1991, the services provided are termed as 'professional services' which inter alia includes the services like medical professionals, legal professionals and accountant etc. which entails the exercise of mental and intellectual capabilities, but the type of business activities carried on by assessee cannot be brought in the ambit of above definition. It appears that 'services' meant to cover Circular No.11 of 1991 are such that involves the use of mental capability and not physical capability or every kind of activity which may be broadly termed as services in the ordinary dictionary meaning. Although this definition is not exhaustive but it is a general principle of law that in such situations only similar things be brought in the scope of definitions and not dissimilar things. Thus, services rendered involving mental faculty would be included in the scope of the Circular and not the unrelated ones as are carried out by assessee involving physical activities.
(ii) Circular No.7 of 1982, dated 18-3-1982 is also relevant and clarified the position. According to this Circular the services rendered by the workshops are not included in the definitions of services rendered and are subject to withholding tax under section 50(4) of the Ordinance and are assessable under section 80C. In this case although in ordinary meanings the jobs undertaken can be said to be services rendered but it was not the intention of legislature and C.B.R. has not recognized such services as to be such which can be taken to be covered under Circular No.11 of 1991. These services have been treated as work done liable to tax under section 80-C.
(iii) The business of stevedoring is also not included in the definitions of services rendered by the C.B.R. vide Letter No. C. NO.1(10)WHT 92, dated 7-4-1992.
(iv) Even cartage services provided by oil tankers' are not treated as services rendered and are liable to special withholding tax @ 2% which is assessable under section 80-C of the Income Tax Ordinance, 1979.
(v) Credit entries appearing in the Bank statement escaped taxation as the assessee failed to disclose the receipts in the income and expenditure statement. The arguments of the assessee that those credits represent salaries received from various organizations do not carry force because the employees are on the company's roll and the credit entries in the bank statement represent the amount of revenue earned by , the company resulting from its business activities.
(vi) Various credit entries appearing in the bank statement also escaped chargeability of tax under section 50(4) as tax was not withheld by various payers."
The learned I.A.C., therefore, cancelled the assessment order under section 66(A)(1) of the Ordinance and directed the Assessing Officer to reframe the assessment by carefully scrutinizing the bank statement, books of accounts and calling for other details as required. At the same time, the Assessing Officer was directed to assess those receipts on which tax was deductible under section 50(4), under section 80C of the Ordinance and the remaining receipts under normal law by allowing proportionate profit and loss expenses relating to that part of the business of the assessee-company. Hence this appeal against the impugned order.
6. The learned A.R. of the assessee-company appearing before us has argued that section 80C of the Ordinance has specifically excluded from its purview the payments on account of services rendered. The expression "services rendered" could not be given any special meaning merely on the basis of C. B.R. Circular No. 11 of 1991, dated June 30, 1991. According to this Circular, services rendered included services of professionals such as legal and medical practitioners, accountants etc., rendered through a contract or otherwise. The activities of the assessee-company were, therefore, not excluded from "services rendered" because the word used in C.B.R. Circular is "includes". If the C.B.R's. intention was considered to be otherwise, then C.B.R. could not legislate or change the meaning of a statute as held in the case reported as 1965 PTD 373 (SC Pak.) and 1975 PTD (Trib.) (sic) wherein it was clarified that the departmental instructions have no legal force in interpreting statutes and if the C.B.R. issued orders in excess of their authority or against the law, the same would not be binding even on subordinate officers. It is argued that unless there is a clear intention of the legislature to the contrary, the words in a statute are to be given their ordinary meaning as per the golden rule stated in the "Maxwell" on The Interpretation of Statutes, 12th Edition, page 43, as relied upon in the case reported as 1967 PTD 156 (H.C) wherein it was held that effect should be given to plain language of statute. In this context, reference has also been made to Black's Law Dictionary (7th Edition P. 1372) which defines "service" as "The act of doing something useful for a person or company for a fee" and also as "An intangible commodity in the form of human effort such as labour, skill or advice". In Chamber's Twentieth Century Dictionary, the meaning given is "performance of a duty or function". Thus, the activities of the assessee-company are claimed to be clearly covered by these definitions. It is argued that the intention of the legislature to give a wide meaning to the words "services rendered" was obvious from the amendment made to section 80C in 1999 which added the words "by doctors, lawyers, accountants, ,auditors, architects, surveyors, actuaries, engineers, advisors and consultants". The words so added were, however, omitted by the Finance Ordinance, 2000. Thus, it was only in one year (1999) that a restricted meaning was applied to the expression "services rendered". In that case, it is an accepted principle that a change in law means that the changed position did not exist earlier. As an example, Supreme Court's decision in Glaxo Laboratories v. I.A.C. (1992 SCC 910) has been quoted in the context of 1991 amendment made in section 66A of the Ordinance. In the case of Southern Travels (Pvt.1 Ltd., Rawalpindi decided by the Islamabad Bench of this Tribunal (vide I.T.As. Nos. 672 and 941(IB) of 1998-99 decided on 19-5-1999), the earlier decision of Islamabad Bench was quoted in support of the view that C.B.R. Circular No. 11 could not be considered as restricting the meaning of "services" only in respect of professionals. It is further argued that I.A.C's. observation that there are deposits of Rs.12.549 million in A/c No.2001824 with Deutsche Bank is incorrect because according to the bank A/c statement placed on file, the total of all credit entries is only Rs.839,129. Finally, it is contended that the prejudice could be considered as caused to the revenue only if the salaries of personnel credited in the bank account of assessee-company were not shown to have been distributed among the concerned staff, for whom the assessee-company served as a conduit for employment in various organizations, and the salaries were not the receipts of the assessee-company so as to apply section 80C of the Ordinance.
7. The learned I.A.C./D.R. representing the department has reiterated the grounds of cancellation of original assessment order reproduced in para. 2 above. However, it has been argued that there is a thin line of distinction between the contractor and services provided. The contractor does not require any special skills, mental faculties or specialization in his field whereas the service provider such as a doctor has skills and developed manual faculties. A contractor, such as the one for the P.W.D., merely gathers and mobilizes the skill/manpower for a particular task without having the requisite qualifications such as those of a civil engineer. The assessee- company was not a consultant, advisor or manager so as to fall within the ambit of the expression "services rendered" used in section 80C of the Ordinance. The assessee-company had executed contract with United States Information Service (USIS), PIA, American Express Bank Ltd., Deutsche Bank and. other foreign based companies. According to these contracts. employees for the organizations had to be hired, supervised and fired by the assessee-company. As a contractor, the assessee-company presented bills to the payer company of the organization utilizing the services of security guards, drivers and other staff in which not only amounts of salaries, were specified but contributions for pension (EOBI), workman compensation, group insurance, provident fund etc. were also claimed for payment to the assessee-company. Over and above these payments, admin expenses were also shown in the bills for payment by the organizations concerned. It is further stated that the dictionary defines the word "consultant" as a person providing advice, conferring, deliberating only for a fee. The assessee -company was not a consultant because of its actual physical involvement and active undertaking of the job as a contractor. Therefore, the activities of the assessee-company were not "services rendered" within the meaning of the expression used in section 80C of the Ordinance.
8. We have given anxious consideration to the arguments advanced by both parties in light of the material placed on the file. It is an admitted fact that the assessee-company has been providing various services under different contracts executed with a number of organizations. Thus, in the contract made between the assessee-company and the USIS on I-11-1995, the services agreed to be provided by the assessee-company included supply of skilled staff to maintain and operate air-conditioning and heating system, electrical installations, stand by generators, hydraulic ballot system, water pump and all related equipments at the American Center. The contract also provided for ground maintenance through qualified staff to plant and lightings at the American Center. In the agreement, dated 1-12-1985 executed with American Express Bank Ltd., the assessee-company acted as contractor to provide services of guardsmen and drivers for which the bank had to reimburse monthly charges for guards and drivers and additional service charges for the assessee-company. Bill No. 27 of 1996, dated 12-8-1996 for an amount of Rs.2,86,582.45 was paid to the assessee -company by PIA (after deducting 5 % income tax) for providing Agro Services to PIA Horticulture, Karachi, which not only include salaries paid to the employees but also service charges at 9% and employees benefit at 12% on salary amount. The persons employed were horticulture officer, coordination officer, horticulture supervisors, drivers, storekeeper, pump operator, plumber, chowkidars and other labour. Bill issued to Deutsche Bank Ltd. dated 4-6-1996, claimed reimbursement on account of cost of wooden frame, iron sheet, signboards etc. and steel nails for which payment of Rs.615 was received by the assessee-company on 10-6-1997. Bill No.308 of 1996; dated 30-6-1996 for an amount of Rs.38,827 issued to Sumitomo Corporation included salaries of receptionist, drivers and telex operator together with pension (EOBI) workmen compensations, group life insurance, provident fund alongwith admin charges of Rs.1,000 for each employee. In addition thereto, over time, Ref charges and taxi charges were also paid to the assessee-company for these employees. The various details placed on the file also show that in many cases, income tax was deducted at the rate of 5% under section 50(4) of the Ordinance on the total amount of bills submitted by the assessee-company. The contention that in fact it was consultant to different multinational organizations and all powers of hiring firing of labours rested with principals and the assessee-company was only a 'manager to the principals, charging fixed amount as it admin charge and that these organizations also deducted tax on the amount of its management charges, is not borne out from the material brought on the file. Reliance also cannot be placed by the assessee-company on C.B.R. Circular No.25 of 1980, dated 30-9-1980 because the same related to payments received by advertising and travel agents on behalf of their principals and not any consultancy fee paid to them by the principals. The claim that there was no other contractual income and all payments were received for "services rendered" is also not substantiated.
PM 9. We are also of .the considered view that C.B.R: Circular No. 11 of 1991, dated June 30, 1991 was issued merely for the purpose of clarification. It was not in any manner in conflict with the provisions of section 80(c)(a)(i) which stipulated that the payments on account of services rendered on which tax was deductible under section 50(4) were not to be treated as presumptive income under section 80C and the tax so deducted for services rendered had not to be deemed as the final discharge of tax liability under the Ordinance. The expression "services rendered" has not been defined in the Ordinance but has to be understood in the context in which it is used in the said provision of the Ordinance. By using the word "includes" in Circular No.1 of 1991, dated June 30, 1991, the C.B.R. had not given any restricted interpretation. It was only by way of illustration that the services rendered by professionals' like legal and medical practitioners, accountants were mentioned in C.B.R. Circular No.11 of 1991. The intention was not to restrict or limit the application of the expression "services rendered" only to the doctors, lawyers, accountants, auditors, architects, surveyors, actuaries, engineers' advisors and consultants. Had it been so, the amendment made through the Finance Act, 1999, would have continued to remain on the statute book and would not have been deleted by the Finance Ordinance, 2000. Except for the year 1999, the intention of the legislature was thus, clearly expressed by the unrestricted use of the expression "services rendered"; to mean that 'all recipients of payments on which tax is deductible under section 50(4) on account of services rendered would fall outside the purview of presumptive tax regime under section 80C and the tax deducted in their case would not be the final discharge of their tax liability. There was difference between the other contractors, suppliers and those who rendered services. Whereas in the case of other contractors and suppliers, tax deducted under section 50(4) was intended to be their full and final discharge of tax liability, being covered under the presumptive tax regime of section 80C, the recipients of payments on account of services rendered were intended to be kept outside the presumptive tax regime of section 8oC of the Ordinance. Such persons had to be treated differently from suppliers and contractors, otherwise even contractors and suppliers could claim to have rendered services in one way or the other,, either by using man and material for others or working as middleman by making supplies of goods produced by others. It was in that context that the intention of the legislature had to be gathered from the use of the expression "services rendered" which could not be as large and unrestricted as in the ordinary dictionaries and not as restricted as shown by way of illustration in C.B.R. Circular No.11 of 1991, dated June 30, 1991. The golden rule of interpretation explained in Maxwell on the Interpretation of Statutes (12th Edition Page 43) .has its significance but in the context of interpretation of the expression "services rendered" used in section 80C of the Ordinance, the intention of the legislature could only be collected from the Ordinance itself as explained at page 44 of the Maxwell's same edition. In this case, reliance on dictionary meaning of the words "services rendered" cannot be placed by ignoring the context in which these words are used in section 80C read with section 50(4) of the Ordinance. Taking into consideration the object and purpose of the Ordinance and the intention to keep the professionals and similar other service provide outside the presumptive tax regime under section 80C of the Ordinance, we have no hesitation in holding that the expression "services rendered" relates to all resident persons who are not contractors or suppliers of goods mentioned in clause (a) of subsection (4) of section 50 of the Ordinance. This distinction can only be made when the facts and circumstances of each case are properly appreciated on the basis of supportive material and a definite conclusion is drawn to maintain the desired difference between the payments made to a resident person on account of services rendered by him and the payments on which tax is deductible under section 50(4) on account of supply of goods or for the execution of other contracts.
10. In this regard, the learned A.R's. reference to decision of ITAT Islamabad Bench in the case of M/s Southern Travels is not helpful to the assessee-company. In that case, the learned A.Rs. of the company, including Mirza Muhammad Wasim now appearing before us, had argued that the amount in question had been received in lieu of performing multiple .duties for Hajis including provision of accommodation, medical aid, transportation, luggage handling, loading and unloading, ticketing and security etc. The nature of such contract did not fall within the broad definition of "services" because the C.B.R. had limited the definition of "services" vide Circular No.11 of 1991, dated 30-6-1991. It was also contended that contract executed by Southern Travels was not of a type of the professional services envisaged in the C.B.R. Circular and that the Assessing Officer had tried to circumvent the unambiguous language of Board's Circular by saying that the definition given by the Board used the word "includes". It was further argued that this interpretation negated the very purpose of the Circular because if the scope of the "service" was intended to be wide, there could be no purpose behind the clarification issued by the Board. These arguments were considered by the Islamabad Bench of this Tribunal and were rejected by holding that CIT(A) had rightly maintained the assessment order on this point because restrictive interpretation of C.B.R. Circular No.11 of 1991 was not correct. It was further observed by the learned Tribunal that there was no difference in the nature of functions performed by the company as general sales agent to Saudi Arabian Airlines and the services rendered in the execution of the agreement; so even if the services rendered were in the execution of the agreement and were deemed to have been covered by the term "services rendered" as clarified by the C.B.R. 'the fact remained that the commission received under the agreement was in no way different from the other commission of the company and, therefore, the learned Tribunal did not find any merit in the contention of the A.Rs. that this receipt was covered by section 80C of the Ordinance. .
11. Having considered all aspects of the case, we hold that the learned I.A.C. was justified in considering that the assessment order, dated 16-7-1998 was erroneous in so far as it was prejudicial to the interests of revenue. However, the circumstances of the case did not fully justify the direction to the Assessing Officer to make a fresh assessment in the manner suggested in the impugned order. The bank accounts were not carefully scrutinized by the learned I.A.C. and the mistake in working out total deposits in Deutsche Bank A/c No,2001824 could influence the independent application of mind by the Assessing Officer. Besides, the contention that the assessee-company, only retained admin or management charges as its income and its claim of making all payments to the employees whose services were` provided to other organizations also required consideration. The Assessing Officer could not be directed to assess those receipts on which tax was deductible under section 50(4) under section 80C of the Ordinance and the remaining receipts under normal law. Not all receipts of the assessee company on which tax was deductible under section 50(4) were on account of execution of contracts and not for services rendered under the contracts. Therefore, each payment on which -tax was deductible under section 50(4) has to be scrutinized independently in order to determine the nature of payment vis-a-vis the terms of agreement or contract on the basis of which such payments were made to the assessee-company. If the Assessing Officer finds that the payments were made for services rendered within the meaning of the expression used in section 80C, he would make the fresh assessment under normal law as income from business or profession under section 22 of the Ordinance. In the final analysis, only those payments on which tax under section 50(4) was deductible which were for the supply of goods or execution of contracts (other than for services rendered) would fall within the ambit of section 80C under the presumptive tax regime of the Ordinance. The impugned order is, therefore, varied to this extent and the Assessing Officer is directed to make re-assessment keeping in view these observations, after providing full opportunity to the assessee-company to produce books of accounts and other supportive material/evidence. This' re-assessment shall be made-by the Assessing Officer independently and without being influenced by other observations contained in the impugned order.
12. As a result of these discussion, the impugned order stands varied to the extent indicated above and the appeal of the assessee-company is disposed of accordingly.
C. M. A. /M. A. K./117/Tax(Trib.)Appeal disposed of.