2001 P T D 778

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry and Mian Muhammad Ajmal, JJ

COMMISSIONER OF INCOME-TAX, PESHAWAR

versus

Messrs GUL COOKING OIL AND VEGETABLE GHEE (PVT.) LTD, and others

No.918 and Civil Miscellaneous Application No.1511 of on 30th November, 2000.

(On appeal from the judgment, dated 4-1-2000 passed by Peshawar High Court, Peshawar in Writ Petition No.i278 of 1999).

Income Tax Ordinance (XXXI of 1979)-

----Ss.50(5), 56 & 63---Constitution of Pakistan (1973), Arts. 185(3) & 247- Notification No. S.R.O. 593(1)/91, dated 30-6-1991--Advance income-tax, exemption of---Deducting of such. tax on the goods imported by assessee to be used in Tribal Area ---Assessee-company was pinning a plant of cooking oil in Tribal Area---Income-tax Authorities issued notices under Ss.56 & 63 of Income Tax Ordinance, 1979, for the recovery of advance income-tax-- High Court in exercise of Constitutional jurisdiction, declared the notices illegal and against the provisions of Art.247 of the Constitution ---Validity-- Leave to appeal was granted by Supreme Court to consider, whether the assessee was not entitled for exemption of advance income-tax under S.50(5) of Income Tax Ordinance, 1979, on the raw material which was imported for the purposes of manufacturing cooking oil and vegetable ghee in the factory situated in Tribal Area where admittedly the Ordinance had not been made applicable within the purview of Art.247 of the Constitution; whether the income arising out of the products of the assessee was not taxable if the finished product was sold by it in the open market where the Ordinance was applicable; and whether certificates issued in favour of the assessee by the Income-tax Authority exempting same from the payment of the tax were not in consonance with ,the provisions of S.R.O. 593(1)/91, dated 30-6-1991.

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record (absent) for Petitioner.

Mansoor Ahmed, Deputy Attorney-General, Sardar Khan, Advocate Supreme Court and M. S. Khattak, Advocate-on-Record (absent) for Respondents.

Date of hearing: 30th November, 2000.

ORDER

IFTIKHAR MUHAMMAD CHAUDHRY, J.---Petitioner seeks leave to appeal against the judgment, dated 4th January, 2000 passed by Peshawar High Court whereby Writ Petition No. 1278 of 1999 filed by M/s. Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd., Dargai, Malakand Agency has been allowed. Concluding para. from the judgment is reproduced herein below:---

"As a sequel to the above discussion, it is held that the Income Tax Ordinance, 1979 is not applicable to, inter alia, Malakand Division with in the contemplation of Article 247 of the Constitution; that the notices purporting to be issued under sections 56 and 63 of the Income Tax Ordinance, 1979, are illegal, without jurisdiction and without lawful authority. The respondents are hereby directed to release the raw material in dispute forthwith without deducting two percent. of withholding tax, the levy whereof is unlawful as well as without jurisdiction. The writ petition is accordingly accepted."

Learned counsel for the petitioner contended that exemption from payment of tax is available to the respondent only in respect of the taxable income if it had accrued in the Tribal Area where Income Tax Ordinance, 1979 (hereinafter referred to as the "Ordinance") has not been extended in terms of Article 247 of the Constitution but as the product of Ghee Mill is sold in the open market not situated in the Tribal area, therefore, income accruing on such trade is taxable under the Ordinance. He further argued that the Collector of Customs is bound to deduct income tax from the petitioner within the contemplation of section 50(5) of the Ordinance at the dry port where bill of entry is filed for the purposes of declaring the raw material being imported by respondent company from outside Pakistan for the purposes of manufacturing of cooking oil and vegetable ghee. However, the adjustment/refund of advance payment of income tax can always be claimed by the respondent while submitting return under section 53 of the Ordinance. He further contended that the certificates issued by the Income Tax Authorities in favour of the respondent company mentioning therein that the respondent company is not liable to income tax were not issued strictly in consonance with the provisions of S.R.O. 593(1)/91, dated 30-6-1991 which deals with the exemption of income tax from the assessees, therefore, on basis of such certificates the respondent company cannot claim exemption from payment of income tax in pursuance of section 50(5) of the Ordinance.

In response to notice learned counsel appearing for respondent No. 1 stated that the Commissioner Income-tax/Petitioner himself had been issuing certificates from time to time declaring that the income of the petitioner arising from the factory installed in Tribal area is exempted from the tax, therefore, on the basis of same the respondent company is not liable to make payment of tax to the Collector at the time of clearance of goods within the meaning of section 50(5) of Ordinance.

Learned Deputy Attorney-General contended that admittedly the Ordinance has not been extended to the Tribal areas in accordance with the provisions of Article 247 of the Constitution but as far as deduction of tax is concerned it has not been exempted because such tax is to be deducted at the time when raw material is imported for the purposes of manufacturing of cooking oil and vegetable ghee. However, after making payment of the tax the petitioner can claim adjustment/refund if it is proved that the income arising out of such imported goods into Pakistan was not taxable.

We have heard learned counsel for the parties as well as learned Dy. A.-G. In our opinion the instant case involved following questions for consideration:--

(i) As to whether respondent No. 1 is not entitled for exemption of advance income tax under section 50(5) of the Ordinance on the raw material which is imported from foreign country for the purposes of manufacturing cooking oil and vegetable ghee in the factory situated in Tribal area where admittedly the Ordinance has not been made applicable within the purview of Article 247 of the Constitution of Islamic Republic of Pakistan?

(ii) As to whether the income arising out of the products of the respondent is not taxable if the finished product is sold by it in the open market where the Ordinance is applicable?

(iii) As to whether certificates issued in favour of the respondent by the Income-tax Authorities exempting it from the payment of the tax were not in consonance with the provisions of SRO 593(1)/91, dated 30th June, 1991?

Thus, inter alia to consider the above points leave to appeal is granted.

C.M.A No.1511 of 2000.---Pending decision of the appeal the operation of the impugned judgment .passed by Peshawar High Court is suspended. Office may fix this case at an early date.

Q.M.H./M.A.K./C-24/SCLeave granted.