BEFORE SHAHEEN IQBAL, ACCOUNTANT MEMBER AND S. HASAN IMAM, JUDICIAL MEMBER VS BEFORE SHAHEEN IQBAL, ACCOUNTANT MEMBER AND S. HASAN IMAM, JUDICIAL MEMBER
2002 P T D (Trib.) 303
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mahboob Alam, Accountant Member, Syed Kabirul Hasan and Junaid Masood Tahir Bhatti, Judicial Members
I.T.A. No. 432/KB of 2000-2001, decided on /01/.
th
April, 2001. (a) Words and phrases----
----"Any"---Meanings---Word "any" has a diversity of meaning as may be employed to indicate "all' or "every" as well as "some" or "one" and its meaning in a given statute depends upon the context and subject- matter of the statute.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 24(b) & 50(7D)---Inadmissible deduction---Expression "instrument of any kind" used in S.50(7D) of the Income Tax Ordinance. 1979-- Connotation---Lease business---Loan agreements---Financial charges-- Disallowance of---Financial charges were disallowed by the Assessing Officer on the ground that the tax was not deducted under S.50(7D) of the Income Tax Ordinance, 1979 which was confirmed by the First Appellate Authority---Validity---Loan agreements fall within the definition of "instrument of any kind" because the words used could not be restricted to only those instruments which were negotiable instruments---Loan agreements or T.F.Cs. are instruments which fall within the definition of "instrument of any kind" within the meaning of S.50(7D) of the Income Tax Ordinance, 1979, and therefore, the tax was deductible by the assessee---Orders of Authorities below were upheld by the Tribunal.
I. T. A. No. 154/KB of 1998-99 disapproved.
I. T. A. No. 1627/KB of 1998-99 approved.
1992 SCMR 563 and PLD 1995 SC 281 ref.
(c) Interpretation of statutes---
---- Word "any" used in an enactment---Connotation.
Khalik Waggan, A.C.A. and Irfan Saadat for Appellant Shaheen Aziz Niazi, D.R. for Respondent.
Date of hearing: 15th February, 2001.
ORDER
MUHAMMAD MAHBOOB ALAM (ACCOUNTANT MEMBER).---This appeal relating to assessment year is directed against the order of learned CIT(A), Zone---Karachi, dated 31-8-2000.
2. The brief facts are that the assessee is a public limited company and is engaged in the business of leasing being an approved company for the said purpose. During the assessment year, the assessee claimed financial charges amounting to Rs. 45,21,400. The said charges were disallowed by the Assessing Officer on the ground that the tax was not deducted under section 50(7D) at the time of making such payments at the rate specified in the First Schedule and also by invoking the provision of section 24(b) of the Ordinance. The learned CIT(A) confirmed the order of the DCIT.
3. On the request of learned A.R. for the assessee, the learned Chairman constituted a Full Bench to sort out the issue of the two contradictory Division Bench Judgments other assessees case passed by two different Branches vide I.T.A. No. 154/KB of 1998-99 (assessment year 1996-97) on 9-3-1999 and I.T.A. No. 1627/KB of 1998-99 (assessment year 1997-98) on 17-7-1999.
4. Heard Mr. Khalik Waggan, learned A.R. for the appellant/assessee and Mr. Shaheen Aziz Niazi, learned D.R.
5. Mr. Khalik Waggan, learned A.R. has contended that the' appellant/assessee has obtained long term loan from financial institution under mark-up arrangement against hypothecation of assets and corresponding receivable and deposit of title documents shown as "redeemable capital" in the balance sheet. According to him, it was a loan arrangement and was based on loan agreements which are filed by him. The DCIT has disallowed the entire amount of Rs. 45,21,400 for default of section 50(7D) read with section 24(b) of the Ordinance which is not applicable in the case of the assessee.
6. In support of his contention, the learned A.R. has relied upon the definition of the words "any" and "instrument" as mentioned in Black's Law Dictionary and Taxman's Interpretation of Taxing Statutes (5th Edition) and relevant provision of sections 50(2) and 50(7D) of the Ordinance.
7. Section 50(7D) reads as under:---
"50(7D). Any person responsible for making any payment by way of profit or interest on bonds, certificates, debentures, securities or instruments of any kind issued by any banking company, or any company referred to in sub-clause (a) or sub -clause (b) of clause (i6) of section 2, or any local authority, or any finance society shall deduct advance tax at the time of making such payment, at the rate specified in the First Schedule.
Provided that where the Deputy Commissioner gives a certificate in writing (which certificate he shall give in every proper case for a period of three years on the application of a recognized provident fund) that to the best of his knowledge and belief, it shall not be liable to pay any tax under the Ordinance or shall be liable to pay tax at the rate which is less than the rate specified in the First Schedule, the person responsible for paying any income referred to in this subsection to such recognized provident fund shall, until Commissioner, pay the amount involved without deduction or deduct tax at such less rate, as the case may be."
Since the DCIT has relied upon the words "instruments of any kind", therefore, we would like to refer to the definition of such words as mentioned in Black's Law Dictionary which is:
"Any. Some; one out of many; an indefinite number. One indiscriminately of whether kind or quantity. Federal Deposit Ins. Corporation v. Winton, C.C.A. Tenn., 131 F.2d 780, 782. One or some (indefinitely). Slegel v. Slegel, 135 N.J. Eq. 5, 37 A.2d 57,58. `Any' does not necessarily mean only one person, but may have reference to more than one or to many. Doherty v. King, Tax. Civ. App., 183 S.W. 2d 1004, 1007.
Word `any' has a diversity of meaning and may be employed to indicate 'all' or 'every' as well as `some' or 'one' and its meaning in a given statute depends upon the context and the subject-matter of the statute. Donohe v. Zoning Bd. of Appeals of Town of Norwalk, 155 Comm. 550, 235A. 21 543, 646, 647.
It is often synonymous with `either', 'every' or `all'. Its generality may be restricted by the context; thus the giving of a right to do some act `at any time' is commonly construed as meaning within a reasonable time; and the word `any other' following the enumeration of particular classes are to be read as `other such like' and include only others of like kind or character."
The word "instrument" -has been defined in Black's Law Dictionary as:
"Instrument. A written document; a formal or legal document in writing, such as a contract, deed, will, bond or lease. A negotiable instrument (defined in W.C.C. 3-104), or any other writing which evidences a right to the payment or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary-endorsement or assignment."
The learned A.R. has also relied on the definition of the word "security" which is mentioned in Black's Law Dictionary as:
"Security, Protection; assurance; indemnification. The term is usually applied to an obligation, mortgage, deposit, lien, etc., given by a debtor in order to assure the payment or per formance of his debt, furnishing the creditor with a resource to be used in case of failure in .the principal obligation. Document that indicates evidence of indebtedness. The name is also sometimes given to one who becomes surety or guarantor for another."
It is also mentioned in the same Dictionary as:
"The term `security' means any bond, debenture, note or certificate or other evidence of indebtedness, issued by a corporation or a government or political sub-division thereof, with interest coupons or in registered form, share of stock, voting trust certificate, or any certificate of interest or participation in, certificate of deposit or receipt for, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing; negotiable instrument; or money."
8. First we take up the contention of learned A.R., that it was the loan agreement entered into by the appellant for the obtainment of long term finance and as secured therewith, with financial institution, was not an "instrument of any kind" which falls within the meaning of section 50(7D) of the Ordinance. He has further contended that if it is presumed that it was instrument, then the instrument must be a negotiable one.
9. In our view, the contention of learned A.R. of the assessee is misconceived. In view of definition quoted above, the words used in section 50(7D) are "instruments of any kind", therefore, the meaning of "instrument" cannot be restricted to negotiable instruments only as the expression used is of wide amplitude. The term "any" according to Black's Law Dictionary means one out of many, an indefinite number and others. The word "any" has a diversity of meaning as may be A employed to indicate "all' or "every" as well as "some" or "one" and its meaning is in a given statute depends upon the context and subject- matter of the statute. Here, the words used are "instrument of any kind" which would plainly mean without qualification of instrument (1992 SCMR 563).
10. The word "many" has been further defined in a case reported as PLD 1995 SC 281 wherein it is held:---
"20. It seems difficult to subscribe to the view canvassed by Mr. Samdani that the expression `any law' as used in Article 8(1) does not encompass a Regulation made under Article 247(4) or that the term `State' as occurring in Article 7 does not include the President and the Governor, Article 8(1), (ibid) reads as follows:
`Any law, or any custom or usage having the force of law, in so far as it is inconsistent with the rights conferred by this Chapter, shall, to the extent of such inconsistency, be void.'
The word `any' is ordinarily used to enlarge the amplitude of the term to which it is attached and there seems to be no reason why the expression `any law' as occurring in Article 8(1) be so narrowly construed as to exclude from its purview a Regulation which possesses the efficacy of law in a part of Pakistan."
Therefore, the contention of learned A.R. that T.F.Cs. were not negotiable instruments but were merely loan documents and do not fall within the purview of section 50(7D) of the Ordinance is not tenable insofar as these loan agreements fall within the definition of "instruments of any kind" because the words used cannot be restricted to only those B instruments which are negotiable instruments, therefore, we are of the view that loan agreements or T.F.Cs. were instruments which fall within the definition of "instrument of any kind" and are covered by definition found in section 50(7D) of the Ordinance and are liable to prosecution for default, and they can be processed under section 52 of the Ordinance.
11. We would like to observe that the concept of withholding tax or tax before assessment is not a new one. These provisions are explained before assessment is not a new one. These provisions are explained in Chapter 6, sections 50 to 54. In section 50, deduction of tax at source is mentioned whereas sections 51, 52 and 52(A) relate to provisions which relate to liability of persons if tax is not paid and section 53 relates to advance payment of tax and section 54 relates to payment of tax with return. In short, these all provisions relate to payment of tax before assessment and this chapter is, therefore, headed as "payment of tax before assessment".
12. The concept of withholding tax signifies that in cases- where the payment is made by a person on account and it is not possible to collect tax from the person whom the payment is made or there is apprehension of evasion of tax through avoiding means, then these provisions help the Department. This is also significant that in collecting tax before assessment, it may affect the right of an assessees but still the basic fact is that when the money has been received by some person, then that would be accounted for, and these provisions have been made to cover such an eventuality. This is possible that if we strictly follow the definition mentioned in a dictionary or anywhere else, then the purpose of these provisions will be frustrated. Therefore, on the whole, these provisions do not prejudice the assessee or his rights as the person who is deducting tax from the amount being paid to another person would not be prejudiced with such an action. The interpretation of these provisions, in our opinion, should be made in such a manner that it would help the Department or in other sense the Revenue.
13. It would frustrate the purpose of withholding tax if this plea is allowed to be raised by the assessee that the final tax has been paid by the person on whom the tax is payable, therefore, any deduction which is required to make under section 50 or the penalty in section 52 may not be made on the person who did not deduct the tax as we have already observed that the provision contained in Chapter 4 comprising sections 52 and 54 deals with recovery of tax before the assessment and the tax is being deducted before the final assessment has been made. Therefore, they are not equivalent to charging section as they do not create any liability on the person who is deducting tax is different from the one who is charged with such a tax liability. The collection under section 50 is the payment made on behalf of the assessee, therefore, the person finally assessed if allowed to take the plea that the person to whom some payment was made has finally paid the tax, would frustrate the provision under section 52 of the Ordinance.
14. Mr. Khalik Waggan, learned A.R. of the assessee has taken us to the history of provisions of subsection (7D) of section 50 to convince us that these provisions will not be applicable to any company other than banking company. But in view of our observations mentioned above, we are not convinced.
15. In view of whatever stated above, we are of the view that the loan agreement was the instrument and was covered by "instrument of any kind" within the meaning of section 50(7D) of the Ordinance, therefore, the tax was deductible by the assessee. The order of learned CIT(A) was proper and is upheld. The order in I.T.A. No. 154/KB of 1989-90 is not approved whereas the order in I.T.A. No-1627/KB of 1996-97 basically spells out the correct law for the reason recorded by us, therefore, this order is approved.
C.M.A./M.A.K./162/Tax(Trib.)Order accordingly.