Messrs LEGHARI BEVERAGES (PVT.) LTD., LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2002 P T D 1834
[Federal Tax Ombudsman]
Before Justice (R) Saleem Akhtar, Federal Tax Ombudsman
Messrs LEGHARI BEVERAGES (PVT.) LTD., LAHORE
versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint 'No.1364 of 2001, decided on 07/01/2002.
(a) Income-tax---
----Every assessment year has an independent identity and has to be treated on the facts and circumstances prevailing or relevant to that year.
(b) Income Tax Ordinance (XXXI of 1979)---
---S. 5---Jurisdiction of Income Tax Authorities---Place of assessment--No provision exists in Income Tax Ordinance, 1979, offering a tax-payer to choose the place for his assessment---Taxpayers were previously assessable with reference to their head offices /regional offices, but after change in Notification, dated 4-8-1979 issued under S.5 of Income Tax Ordinance, 1979, all taxpayers except public companies became assessable with reference to their "place of business" ---Taxpayer has first to declare his "place of business or profession" or the "place of his residence", then Department has to entrust his case to Deputy; Commissioner of Income-tax on the basis of jurisdiction assigned through notification under S.5 of Income Tax Ordinance, 1979.
(c) Income Tax Ordinance (XXXI of 1979)---
-----S.5 -Establishment of Office of Federal Tax Mmbudsman Ordinance (XXXV of 2000), Ss. 2(3)(c) & 9---Maladministration---Bottling activity, carried on by complainant-company at place R came to halt after sale of factory during assessment year 2000-2001---Complainant filed its return for that year at place L, where its registered office was located, but the same was transferred' to place R---Representation filed by complainant was rejected by Central Board of Revenue on the ground that assessment in case of private companies was to be made at a place, where their business was carried on---Validity--Complainant during assessment year 2000-2001 had carried on business activity and for that activity, the "place of business or profession" was R, thus, their place of assessment had to be R as per Notification, dated 4-8-1979 issued under S.5 of Income Tax Ordinance, 1979---Arguments of the representative of Revenue had considerable force that after assessment at place R for year 2000-2001, record would be transferred to jurisdiction to which the case would belong on the criteria for jurisdiction prescribed under S.5 of Income Tax Ordinance, 1979 and notifications in this behalf--Complainant would face some inconvenience in attending hearings at place R, but no discrimination was involved, because taxpayers had to' undergo such hassle, when jurisdiction was specially assigned---Central Board of Revenue had rejected the request of complainant on valid, ground and had not transgressed any parameter of law---Such rejection had not resulted in "maladministration "---Complaint was dismissed in circumstances.
Hassan Mehmood Sial for the Complainant.
Muhammad Ali Khan, DCIT for Respondent.
DECISION/FINDINGS
This complaint agitates against refusal to transfer complainant s place of assessment from Rahirn, Yar Khan to Lahore.
2. At the tine of hearing Mr. Karim Fateh Ali, F. C. A. and Mr. Hassan Mehmood Sial, Bar-at-Law appeared for the Complainant Mr. M.A. Khan, DCIT, Rahim Yar Khan attended to represent the respondent.
13. The facts (in brief) are that the Complainant-Company is a bottler of soft drink known as Coca Cola. They were operating a factory at R.Y. Khan where the head office of the company was located. In Decembers, 1999, Coca Cola International decided to take over the bottling activity which compelled Complainant to sell their factory alongwith plant and machinery, to Coca Cola International. Since bottling of Coca Cola was the only operation undertaken by the Complainant, their business came to a halt except that in the period falling in the assessment year 2000-2001 (i.e. 1-7-1999 to 30-6-2000), bottling activity was carried on for almost half the year; and for the rest of the year the sales of assets yielded a "gain". For the income generated by these two heads, return of income was filed at Lahore for the reason that the registered office of the company had since been shifted to this town of which due intimation had already been given to the office of the Registrar of Companies. The Directors also had shifted their residences to Lahore as there was no engagement for them at R.Y. Khan. The Returns of Income filed at Lahore by the Directors were duly accepted but the Return filed by the Company was transferred to R.Y. Khan. This was agitated again before the C.B.R. (with copies to R‑CIT and CIT concerned), who vide their Letter No.2(1) S. Asstt/2000, dated 7‑9‑2001 turned down the representation for the reason; "assessment in the case of private limited companies is to be made at a place where their business is carried on ". With this the Complainant is aggrieved.
4. It was argued by the learned counsel that business had literally ceased hence it was wrong to insist that they were "carrying on business" at R. Y. Khan. A contradiction in the dispensation by the Department was highlighted by submitting that the shifting of residence by the Directors, from R.Y. Khan to Lahore, was accepted by way of framing their assessments (both for income‑tax and wealth tax) at Lahore whereas. the Department is adamant that the company is carrying on business at R.Y. Khan and should be assessed there. Mr. Hassan Mehmood Sial, Bar‑at‑Law placed reliance on Black's Law Dictionary (5th Edition) to plead that the Place of Business is the place where a company carries on business or employment for profit. It was zealously advocated that the registered office of the company was in Lahore, accounts were maintained in Lahore, Corporate office was in Lahore, Directors resided in Lahore, the Corporate Consultant is in Lahore and so also the Tax Consultant. Therefore, it was highly unreasonable to allege' that the company had anything to do, or was "carrying on business", at R.Y. Khan ignoring that in actual fact business had been practically wound up after handing over the bottling operation to Coca Cola International. According to the learned counsel, the unjustified resolve to retain jurisdiction of the company at R.Y. Khan in total disregard of taxpayer's request and without dislodging the veracity of the reasons for such a request, is covered by the definition of "mal administration" because it is based on "irrelevant grounds" hence covered by clause (c) of subsection (3) of section 2 of the Federal Tax Ombudsman Ordinance, 2000.
5. The Representatives of Revenue played up the admission by the Complainant that for some period in the assessment year 2000‑2001, the bottling activity was carried on at R.Y. Khan, thus justifying retention of jurisdiction, at least for this year, with the Assessing Officer at R.Y. Khan. It also was pointed out by Mr. M.A. Khan (the D‑CIT) that the declaration for TAS‑2000 was filed by the Complainant at R.Y. Khan and certain other companies of the 'group' were located and assessed at R.Y. Khan.
6. To resolve the issue of jurisdiction, it would be prudent to recall the provisions of section 5 of the Income Tax Ordinance regarding jurisdiction of Income Tax Authorities. These are to the effect that personwise, classwise, or areawise jurisdiction is to be assigned by
(i) the C.B.R. to R‑CITs, DGs, CITs and AACs,
(ii) the CITs to IACs and DCITs.
(iii) if jurisdiction overlap between two tax authorities, the C.B.R. or the immediate supervisory authority has to allocate the same.
(iv) DCIT in his own realm has jurisdiction over persons whose place of business or profession is situated within his area and those who reside in the area of his jurisdiction.
(v) Dispute between two DCITs is to be sorted out by the CIT, between two DICTs by the RCIT and between two RCITs by the C. B. R.
Subsection (6) of section 5 reads as under:‑‑‑ .
"(6) Notwithstanding anything contained in this section, every Deputy Commissioner shall have all the powers conferred by, or under, this Ordinance on Deputy Commissioner in respect of any income accruing or arising or received or demand, under any provision of this Ordinance, to accrue or arise or be received within the area assigned to him."
7. (a)It is denied by the complainant that they earned 'income' from the bottling activity and 'gain' on sale of assets both of which did accrue or arise and were. received by them within the area assigned to the DCIT, R. Y. Khan.
(b) The same DCIT had held jurisdiction over their case in the past by virtue of jurisdiction assigned to him vide 'clause (c) of subsection (2) of section 5 of the Ordinance.
There is no disagreement between the DCITs as respects jurisdiction over the case of the Complainant which may require resolution under subsection (4) of section 5.
8. There is no provision in the Income Tax Ordinance offering a' taxpayer to choose the place for his assessment. All that a taxpayer has to do is to declare his "place of business or profession" or the "place of his residence' whereafter it is the responsibility of the Department to entrust the case to the DCIT on the basis of jurisdiction assigned through notification under section 5 of the Ordinance. It also is to be kept' in mind that after the promulgation of the Income Tax Ordinance, 1979 Notification issued on 4‑8‑1979 under section 5 carried a major departure as respects assignment of jurisdictions. Previously taxpayers were assessable with reference to the location of their head offices/regional offices. Now, except for pubic companies all other taxpayers are assessable with reference to their "place of business". This change has been consciously made to preclude tax evasion. It is accepted on all hands that every assessment year has an independent identity and is to be treated on the facts and circumstances prevailing or relevant, to that year alone. Looked at with this principle in mind, the undeniable position is that in the period covered by the assessment year 2000‑2001, the complainant did carry on business activity and for that activity the 'place of business or profession' was R.Y. Khan. Therefore, their place of assessment has to be R.Y. Khan as per Notification, dated 4‑8‑1979 issued under section 5 of the Ordinance and published in (1979) 40 Tax 242 (Statutes). There is considerable force in the argument by the ,Representative of Revenue that after assessment in R.Y. Khan for the year 2000‑2001 the record would be transferred to the jurisdiction to which the case would belong on the criteria for jurisdiction as prescribed in section 5 of the Ordinance and read with notifications in this behalf. May be, due to change of Registered Office and transfer of record to Lahore, the Complainant would face some inconvenience in attending hearings at R.Y. Khan yet no discrimination is involved because at times taxpayers have to undergo such hassle when jurisdictions are especially assigned. In the past, Commissioner Investigation Zone had posted officers only in principal towns and taxpayers assigned to this Zone on classwise basis had to travel to these major towns for assessments. A more recent example is the creation of Special Zones at Karachi and Lahore were all Textile, or Cement cases are assigned classwise. Taxpayers of these classes thus travel for their assessments (for example) from Peshawar to Lahore or Quetta to Karachi. The Complainant is fortunate in the sense that they would have to take the trouble of travel from Lahore to R.Y. Khan, just for one assessment.
9. The upshout of the foregoing discussion is the C.B.R. having already rejected the request of the complainant on valid ground has not transgressed any parameter of law and rejection has not resulted in "maladministration" as such. The complaint is consequently held tot contain no merit and hence filed.
S.A.K./250/FTOOrder accordingly.