Messrs PAKTEL LTD., ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2002 P T D 1861
[Federal Tax Ombudsman]
Before Justice (R) Saleem Akhtar, Federal Tax Ombudsman
Messrs PAKTEL LTD., ISLAMABAD
versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No. 1365 of 2001, decided on 15/11/2001.
(a) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑S.136‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Complaint‑‑‑Maintainability‑‑ Complaint could not be entertained in respect of an issue already under reference before High Court on the date of its filing, and further there was no other allegation of maladministration independent of the issue before High Court.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑Ss.66(1)(c), 134 & 136‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Maladministration‑‑ Appellate Tribunal partly set aside the assessment framed for specified years‑‑Department after filing reference before High Court refused to take decision on set aside issues‑‑‑Complainant pleaded that S.66(1)(c) of Income Tax Ordinance, 1979, provided a period of limitation for making fresh assessment in case, where assessment had been set aside: order passed Dy Tribunal partially setting aside the assessments was received by Assessing Officer in April, 1999, as such fresh assessment on such issues had to be made before 1‑7‑2000; and as no reference had been filed before High Court in respect of issues set aside limitation would not stand extended‑‑‑Validity‑‑‑Assessment was to be made for the whole year and not piecemeal‑‑‑Where appeal was filed in respect of particular year(s) and an assessment had been partly set aside, the provisions of S.66(1)(c) of Income Tax Ordinance, 1979, would not be attracted‑‑ Fresh assessment would be made after the decision of High Court‑‑ Complaint was dismissed in circumstances.
DECISION/FINDINGS
Present complaint filed by Messrs Paktel Ltd., a public limited company. arises out of the refusal of the department to give effect to the order in appeal passed by the Income‑tax Appellate Tribunal in consequence whereof assessments framed for the charge years 1995‑96 to 1997‑98 were partly set aside and could not be completed within the period of limitation prescribed under section 66(1)(c) of the Income Tax Ordinance '(hereinafter called "the Ordinance"). The complainant is of the view that irrespective of the fact whether appeals have been filed in respect of these years, since these do not cover the set aside issues assessments thereof should have been completed within the limitation period prescribed under section 66(1)(c) of the Ordinance.
2. Facts in brief are, that the complainant‑Company derives income from the provision of cellular telephone connections and also from the sale of mobile telephone sets. The receipts from telephone connections comprise of airtime revenue, monthly access fee and connection fee. In the opinion of the Assessing Officer these receipts fell within the mischief of section 80C of the Ordinance, while the complainant- Company was of the view that its main business activity consisted of developing and providing mobile cellular phone services. Billing against these services, based on the time for usage of facilities, is divided under various heads comprising airtime revenue, monthly access fee, line rentals and. connection fee. The company, therefore, feels that there is no contract in the nature of civil, mechanical electrical works as envisaged in the provisions of withholding. or presumptive tax regime. The assessments were, therefore, to be made under the normal provisions of the law, rather than section 80C as done by the Department.
3. The Assessing Officer treated the value of import of equipment and sale of telephone sets as income under section 80C and charged tax at 4 per cent. And tax was levied at 2.5 per cent. of the total sale, of telephone sets on 90 per cent. of total sales, considering them as covered under contracts with the client.
4. When the matter reached the learned CIT (Appeals), he upheld the treatment of receipts from airtime revenue, monthly access fee and connection fee under section 80C. With regard to the import and sale of equipments, he set aside the assessments for the years 1995‑96 to 1997‑98 with the direction to calculate the taxability on sale of imported equipments arising at the time of import and on sale to tax deducting agency, and any tax deducted at these taro points may be treated as full and final discharge of tax liability.
5. The assessee went in second appeal before the Income Tax Tribunal. After carefully considering the arguments of both the contesting parties, the Tribunal came to the conclusion that section 80C clearly excludes a receipt on account of services rendered as in the case presently and the issue whether there was a contract involved or not was an extraneous matter. The Tribunal further directed the Assessing Officer to recompute the income from receipts on account of airtime revenue and ancillary charges like monthly access fee, connection fee and line rentals under the normal law.
6. As regards the taxability of imported equipment and sale thereof, the order of the learned CIT (Appeals), was upheld that it was covered under section 80C(2)(a)(ii).
7. While taking up the application of section 80C of the sales of all imported equipments, it was held that sale of telephone sets to the subscriber cannot be treated as "supply". However, if the company has made any supply of telephone sets, which are liable to deduction of tax under section 50(4), the provisions of section 80C of the Ordinance, would be attracted. The Tribunal accepted the contention of the complainant‑Company that receipts from airtime revenue and ancillary charges are on account of services rendered and as such outside the presumptive tax regime under section 80C. Additions on account of P&L expenses were ordered to be done de novo.
8. The department feeling aggrieved of the judgment of the learned Tribunal filed a reference to High Court under section 136 of the Ordinance. It reads as under:
"Whether on the facts and circumstances of the case the learned Tribunal was justified in holding that the receipts on account of air time revenue and ancillary charges like access fee, connection fee, line rentals are for services rendered and as such not liable to be taxed under the provision of section 80C of the Income Tax Ordinance, 1979?"
9. On the date of hearing fixed today on 18‑10‑2001, for 10‑00 a.m. Mr. Mian Tauqir Aslam, DCIT Circle‑II, Company Zone, Islamabad, appeared for the department. None appeared for the complainant at the time fixed ,for hearing. It was, therefore, decided to proceed in the matter on the basis of record available.
10. The complainant‑Company has pleaded that section 66(1)(c) provides a period of limitation for making fresh assessment in case, where assessment has been set aside. The order passed by the Tribunal partially setting aside the assessment was received by the Deputy Commissioner in April 1999, and as such, fresh assessments on these issues involved was to be made before. 1‑7‑2000. As no reference has been filed in High Court in respect of issues set aside, the limitation would not stand extended.
11. The Department has submitted that since appeal is pending before the Lahore High Court, decision on set aside issues could not be taken. Further limitation prescribed under section 66(1)(c) would not be applicable, as partial assessment cannot be made.
12. After perusal of the record and hearing the parties to the dispute it is evident that the following issues are involved:‑‑
(i) Whether receipts from sale of airtime charges and other ancillary receipts fall within the ambit of section 80C or is to be treated under the normal law?
(ii) Whether a partly set aside assessment can be completed within limitation period prescribed under section 66(1)(c), irrespective of the fact whether an appeal has been filed covering the same issues?
13. The first issue was under reference before the High Court on the date this complaint was filed and further as there is no other allegation of maladministration independent of the issue before the High Court, the complaint cannot be entertained.
14. With regard to the second issue it is clear that where an appeal is filed in respect of a particular year or years and an assessment has been partly set aside, the provisions of section 66(1)(c) are not attracted. An assessment is to be made for the whole income year and not in piece meal. Fresh assessments would be made after the verdict is announced by the High Court.
15. For reasons recorded above, there is no substance in the complaint and the same is rejected.
S.A.K./248/FTO
Complaint rejected.