I.T.As. Nos. 2358/LB to 2360/LB of 2001, decided on 24th April, 2002. VS I.T.As. Nos. 2358/LB to 2360/LB of 2001, decided on 24th April, 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3006 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80 D & 2(6) (bb)‑‑‑Minimum tax on income of certain persons‑‑ Trust running a school‑‑‑Receipt, donation, tuition fee and other income‑‑‑Tax liability‑‑‑Taxation levied under S. 80‑D of the Income Tax Ordinance, 1979‑‑‑Appellate Authority deleted the tax levied under S.80‑D of the Income Tax Ordinance, 1979 on such receipts of the Trust‑.‑‑Validity‑‑‑Minimum .tax under S. 80‑D was chargeable on the turnover of a company and company included a trust as defined by S.2(16)(bb) of the Income Tax Ordinance, 1979‑‑‑Minimum tax was chargeable on the turnover even if the income of a company was otherwise exempt from tax under any provision of Income Tax Ordinance, 1979‑‑‑Tax under S.80D of the Income Tax Ordinance, 1979 would be charged on the turnover of the Trust even if its income or receipts had been allowed exemption under any of the clauses of the Second Sched. to the Income Tax Ordinance, 1979‑‑‑Word "turnover" has been defined by Explanation to S. 80‑D (2) of the Income Tax Ordinance, 1979 to mean gross receipts exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts‑‑‑Appellate Tribunal found that if assessee's receipts were seen in the light of the Explanation to S.80‑D which defined turnover, the donations did not represent turnover as the same had not been derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts hence donations were not chargeable to minimum tax under S. 80D of the Income Tax Ordinance, 1979, so far as tuition/admission fee and other income were concerned the same had been received by the school, which the assessee was operating, for rendering services in connection with education, and therefore, the same were chargeable to tax under S. 80D of the Income Tax Ordinance, 1979‑‑‑Appellate Tribunal held that donations received by the assessee/trust were exempt from the levy of minimum tax under S. 80D of the Income Tax Ordinance, 1979, however, assessee's other income and receipts on account of tuition/admission fee may be charged by the Assessing Officer to tax under S. 80D of the Income Tart Ordinance, 1979‑‑Appeals filed by revenue were disposed of accordingly by the Appellate Tribunal.

Manzoor Hussain Shad, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 20th April, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER). ‑‑‑These three appeals have been filed by revenue against combined appellate order dated 29-3‑2001 passed by Commissioner Income Tax Appeal Zone, Multan under section 132 of the I.T. Ordinance for the years 1995‑96 to 1997‑98. It has been contended in the grounds of appeal that the learned Commissioner was not justified to delete tax levied tinder section 80D on receipts of the trust.

2. Appellant's DR is present who has been heard and available records have been perused. None appeared for the assessee‑respondent who is, therefore, proceeded ex parte on merits under rule 20(2) of the ITAT Rules.

3. It has been contended by the learned DR that tax was charged in the instant case under section 80D by the Income Tax Officer as the CBR's Circular Letter No.4(19)TP‑1/91 PT 3, dated 17‑9‑1992 which had allowed exemption was withdrawn vide CBR' s Letter Circular No.80(1)DTP‑1/94(D) dated 10‑2‑1995. According to the learned DR, tax is chargeable on the turnover of a trust under section 80D of the I.T. Ordinance and in support of this contention the learned DR has produced a copy of the appellate order dated 27‑6‑2000 passed by ITAT in I.T.A. No.5138‑5326/LB of 1999 relating to assessment year 1995‑96.

4. We have gone through the assessment order of the DCIT passed under sections 62/132 dated 28‑1‑2000 and Commissioner's appellate order dated 29‑3‑2001 mentioned supra. We have also considered the view‑point of the assessee as represented by his AR before the DCIT and before the First Appellate Authority. We have also appraised the arguments given by the learned DR in favour of the case of the Revenue before us. Our‑decision is as follows.

5. So far as CBR's Circular Letter C. No.4(19)/TP.1/91, dated 17‑9‑1992 is concerned, the same stands withdrawn by the CBR later on by its another Circular Letter No.80(1)DTP‑1/94(D), dated 10‑2‑1995 and hence it need not be discussed being no longer relevant. So far as the appellate order dated 27‑6‑2000 passed by ITAT which has been produced by the learned DR in support of case of revenue is concerned, we agree with the learned ITAT that trust is a company as defined by section 2(16)(bb) of the Income Tax Ordinance and hence it is chargeable to minimum tax under section 80D. However; to determine whether the receipts of the respondent trust are chargeable to tax under section 80D or not, let us refer to section 80D of the income Tax Ordinance which `reads as follows:

80D. Minimum tax on income of certain (persons).‑‑‑(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, .where no tax is payable (or paid) by a company (or a registered firm) (an individual, an association of persons, an unregistered firm or a Hindu undivided family) resident in Pakistan or the tax payable (or paid) is less than one‑half per cent. of the amount representing its turnover shall be deemed to be the income of the said company (or a registered firm) an individual, an association of persons, an unregistered firm or Hindu undivided family [ ] and tax thereon shall be charged in the manner specified in subsection (2).

(Explanation. ‑‑‑For the removal of doubt, it is declared that the expressions "where no taxis payable or paid" and "or the tax payable or paid" apply to all cases where tax is not payable or paid for any reason whatsoever including any loss of income, profits or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including depreciation) admissible under any provision of this Ordinance or any other law for the time being in force.)

(2) The company (or a registered firm) (an individual, an association of persons, an unregistered firm or a Hindu undivided family [ ]) referred to in subsection (1) shall pay as income, tax‑‑

(a) an amount, where no tax is payable (or paid), equal to one -half percent. of the said turnover; and

(b) an amount, where the tax payable (or paid), is less than one half percent. of the said turnover, equal to the difference between the tax payable (or paid) and the amount calculated in accordance with clause (a).

Explanation.‑‑‑For the removal of doubt it is declared that "turnover" means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts.)

(3) Nothing in this section shall apply, to an individual, an association of persons, an unregistered firm or a Hindu undivided family in respect of any assessment year commencing on, or after, the first day of July, 2001.)

6. Keeping in. view the provisions of section 80D, as reproduced above, minimum tax under section 80D is chargeable on the turnover of a company and company includes a trust as defined by section 2(16)(bb). This minimum tax is chargeable on the turnover even if the income of a company is otherwise exempt from tax under any provision of Income Tax Ordinance. Thus tax under section 80D would be charged on the turnover of the respondent trust even if its income or receipts have been allowed exemption under any of the clauses of Second Schedule to the Income Tax Ordinance. The word turnover has‑ been defined by section 80D in, its Explanation to subsection (2) which has been reproduced supra. According to this Explanation, turnover means the gross receipts; exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts.

7. Total receipts which have been declared by the respondent‑trust for the years under appeal are as follows:

If assessee's above mentioned receipts are seen in the light of the Explanation which defines turnover, we find that the donations do not represent turnover as the same have not been derived from the sale of goods or from rendering, giving or .supplying services or benefits or from execution of contracts. Hence donations are not chargeable to minimum tax under section 80D. So far as tuition/admission fee and other income are concerned the Same have been received by the school, which the assessee is operating, for rendering services in connection with education, and therefore., the same are chargeable to tax under section 80D.

8. In view of the foregoing discussion, it would meet the ends of justice if the donations received by the assessee trust are exempted from the levy of minimum tax under section 80D. However, assessee's other income and .receipts on account of tuition/admission fee may be charged by the Assessing Officer to tax under section 80D. With these directions the appeals filed by revenue are disposed of.

9. Consequently appeals filed by revenue partly succeed.

C.M.A./M.A.K./443/Tax/(Trib.) Appeals partly succeeded.