BEFORE INAM ELLAHI SHEIKH, CHAIRMAN AND SYED NADEEM SAQLAIN. JUDICIAL MEMBER VS BEFORE INAM ELLAHI SHEIKH, CHAIRMAN AND SYED NADEEM SAQLAIN. JUDICIAL MEMBER
2002 P T D (Trib.) 532
[Income-tax Appellate Tribunal Pakistan]
Before Inam Ellahi Sheikh, Chairman and Syed Nadeem Saqlain. Judicial Member
I.T.As. Nos.6872/LB of 1996. 1930/LB and 4265/LB of 2000, decided on 04/07/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----5.12(18)--.-Deemed income- --Assessment year 1991-92---Addition made under S.12(18) of the Income Tax Ordinance, 1979, was deleted by the Tribunal on the ground that the said provision was not attracted in the assessment year 1991-92.
I.T.A. No.853/LB of 1999 rel.
(b) Finance Act (XII of 1991)---
----S.12(8)---Corporate Assets Tax--Additional tax---Additional tax levied was deleted by the First Appellate Authority being time-barred-- Deletion was maintained by the Tribunal on account of confusion created in the minds of taxpayers as a result of multiple Circulars issued by the Central Board of Revenue and not for the reasons recorded by the First Appellate Authority.
I. T. A. No. 1872/LB of 1997 and I.T.A. No.2411 of 2001 rel.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.80-C,50(5) & 50(4)---Presumptive tax---Import---Double taxation---Deduction of tax at import stage as well as on supply of same goods---Validity---Appellate Tribunal upheld the deduction of tax under S.50(5) read with S.80-C of the Income Tax Ordinance, 1979 and directed to delete the tax deducted under S.50(4) of the Income Tax Ordinance, 1979 for the reason that assessee could not be subjected to taxation twice.
2000 PTD (Trib.) 2853 rel.
Khawaja Muharnmad Iqbal for Appellant.
Anwar ul Haq, D.R. for Respondent
Date of hearing: 30th May, 2001.
ORDER
SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---Titled three map M for the assessment years 1991-92, 1992-93 and 1999-2000 are being disposed of together through this consolidated order. In the assessee's appeal for the assessment year 1991-92 the assessee/appellant has challenged the impugned order, dated 29-9-1996 passed by the learned CIT(A), Zone-I, Faisalabad. Assessee feels aggrieved with the findings recorded by the learned CIT(A) confirming the assessment order of D.C.I.T. on the issue of addition made under section 12(181 of the Income Tax Ordinance, 1979 amounting to Rs.20,00,000. However, right from the outset, the learned A.R. of the assessee made a statement that he does not want to press the Ground No.2 relating to the issue of disallowance of Rs.189,276 under the head of depreciation account.
2. For the assessment years 1992-93 and 1999-2000, it is the Revenue which has come up in appeal assailing two separate orders dated nil and 18-9-2000 recorded by the learned CIT(A), Zone-I, Lahore. In respect of assessment year 1992-93, Department objects to the cancellation of the order passed under sections 12(5) and 12(18) of Corporate Asset Tax on the ground that it was hit by the limitation, when there is no time limit prescribed for passing the order under Corporate Asset Tax (CAT). As regards assessment year 1999-2000, the Department contests the impugned order in treating the purchase/sales of acrylices and viscose under normal law instead under section 80C of the Ordinance.
3. Learned counsel for both the parties were present and have been heard. Appeals are decided as under:
Assessee's appeal for the year 1991-92
4. Facts of the case are that the assessee, a public limited company derives income from manufacturing and sale of jute yarn and gunny bags. Assessment in this case was made under section 62 of the Income Tax Ordinance, 1979. An amount of Rs.20,00,000 which was shown as deposit in the balance sheet from sponsor was added under section 12(18) since the assessee failed to produce evidence in this regard. Assessee's appeal did not find favour with the learned First Appellate Authority, hence instant appeal before us.
5. The learned A.R. vehemently argued the case and contended that section 12(18) of the Ordinance was suspended and was .not in operation in 1991-92. He further submitted that the impugned order is not a speaking order. In support of his contention he relied upon an unreported judgment of the Tribunal passed in I.T.A. No.853/LB/1999 (Assessment year 1991-92) in the case of Messrs Tulip Leather Products (Pvt.) Limited. Learned D.R. has strongly contested the assertion made by the learned A.R. at bar and pleaded for maintaining the impugned order.
6. We have looked into the matter and are of the considered view that the arguments put forth by the learned A.R. carry weight. Bare perusal of the impugned order shows that the order passed by the learned First Appellate Authority is a sketchy one. The issue raised by the assessee was not dilated upon on the legal plane and it seemed that the order was passed without adverting to any cogent reason based on legal premises. On the issue of addition made under section 12(18) we find ourselves in full agreement with the arguments of the learned A.R. section 12(18) was not attracted in the assessment year 1991-92. Learned A.R. also finds support from the judgment of the Tribunal cited by him before us.
7. In view of above, we vacate the impugned order, appeal of the assessee is allowed and addition made under section 12(18) of the Ordinance by the Assessing Officer is directed to be deleted.
8.Appeal of the assessee stands accepted.
Departmental appeal for the year 1992-93
9. Present appeal for the assessment year 1992-93 at the instance of the Revenue has been directed against the impugned findings recorded by the learned CIT(A), Zone-I, Lahore. Following grounds have been urged by the Revenue:
"(i)That the Commissioner of Income-tax (Appeals) was not justified to cancel the order under sections 12(5)/12(8) of Corporate Asset Tax on the ground that it was hit by limitation when there is no time limit prescribed for passing order of the Corporate Asset Tax and levy of additional tax under section 12(18)."
10. Facts leading to the institution of the instant appeal are that the Assessing Officer vide notice, dated 18-11-1996 called upon the assessee to file return for CAT. In reply thereto, the assessee intimated that it had already been filed on 29-3-1992. It was admitted by the learned Assessing Officer that as per evidence available on record, the said return was filed on 29-3-1992 as required under section 12(3) of the Finance Act, 1991. The admitted tax liability amounting to Rs.5,00,000 was not paid at the time of filing of return. However, the said amount was later on deposited on 1-11-1997. The Assessing Officer proceeded to levy additional tax amounting to Rs.711,781 @ 24% on a total demand of Rs.5,00,000 which remained unpaid for 2165 days (from 1-1-1992 to 31-10-1997).
11. On appeal, the learned First Appellate Authority while agreeing with the contentions raised by the assessee, deleted the aforementioned additional tax levied by the Assessing Officer for the default committed by the assessee in late depositing of CAT, The Department is before us impugning the, same.
12. The learned D.R. has vehemently argued the case and contended that no time limit has been provided for framing the assessment under section 12(6) of the Finance Act, 1991 which reads as under:
"The Deputy Commissioner shall, by an order in writing determine the tax payable, and serve upon the company a notice of demand specifying the sum payable, and the time within which it shall be paid, and thereupon 'such sum shall be prescribed, within the time specified in the notice."
13. He further argued that the enactment has been made by the Legislature in its own wisdom and in such-like cases, Courts are not empowered to substitute their own interpretation against what was intended by the Legislature. It was also stressed that. CAT, being one time levy cannot be equated with other provisions of law warranting imposition of taxes which were levied annually. Conversely, the learned A.R. has opposed the arguments advanced by the learned D.R. at the bar. He reiterated all of his contentions which were raised by him before the learned First Appellate Authority. He pleaded that impugned order does not call for any interference since it has been passed after due deliberation, and taking into account relevant case-law. To further substantiate and supplement his arguments, he placed reliance on the judgment of this Tribunal reported as LT .A. No. 1872/LB of 1997' (Assessment year 1992-93) passed in the case of Messrs Aslam Textile Mills.
14. Arguments heard, relevant orders perused. We are of the considered view that moot point which warrants resolution by us is levying of additional tax and not the imposition of actual Capital Asset Tax. It is for the reason that CAT was deposited by the assessee which was confirmed by the learned First Appellate Authority. However, additional tax was deleted by the learned CIT(A) being time barred, which has been challenged by the Department in this further appeal.
15. Coming to the crux of the matter, we are constrained to hold that tire learned CIT(A) justifiably deleted the additional tax imposed by the Assessing Officer, though for different reason. In this regard, we stand fortified by the supra judgment (1.T.A. No. 1872/LB of 1997) E relied upon by the assessee. It is pertinent to mention that the levy of additional tax was deleted by the Division Bench of the Tribunal including Mr. Mujeebullah Siddiqui, ex-Chairman, now elevated to the Bench at Honourable High Court, Karachi holding:
"On the basis of these provisions he has submitted that the additional tax is to be levied when the assessee fails to pay the tax and the word fail contains an element of deliberate act. He has further submitted that penalty is in the nature of criminal proceeding and in the case of any doubt it is to be resolved in favour of assessee we are persuaded to agree with the submission of Mr. Saghir Tirmizi. We are of the opinion that because of misleading circulars and letter issued by the C.B.R. the assessee was misled and he honestly believed that the return was not required to be filed by it. In these circumstances we are of the opinion that in the facts and circumstances of the case the additional tax should not be levied. The cancellation of additional tax is, therefore, maintained but not for the reason assigned by the learned CIT(A). The cancellation of penalty is upheld for the reasons stated by us above."
16 It is worth mentioning that the supra judgment was followed by the Division Bench of the Tribunal vide order I.T.A. No.2411 of 2001 (Assessment year 1992-93) in which one of us was also signatory to the judgment wherein it was held:
"Coming now to additional tax and penalty, we agree that the B Tribunal in its order I.T.A. No.1872/LB of 1997 (Assessment year 1992-93), dated 26-5-1998, has held that additional tax/penalty not be charged in the context of CAT due o confusion created in the minds of taxpayers as a result of multiple circulars issued by the C.B.R. We, therefore, maintained order of the CIT(A) with regard to levy of CAT (Rs.20 lacs) but levy of penalty/additional tax is deleted."
17. For the foregoing reasons, we do hereby uphold the impugned order passed by the learned First Appellate Authority on the issue with the observation that deletion is being maintained in the light of findings given in the judgments of the Tribunal in I.T.A. No.1872/LB of 1997 and I.T.A. No.2411 of 2001 and not for the reasons recorded by the learned First Appellate Authority.
18. Departmental appeal stands dismissed for the above stated reasons.
Departmental appeal for the assessment year 1999-2000
19. The instant appeal for the assessment year 1999-2000 has been directed by the Revenue against the impugned order, dated 18-9-2000 passed by the learned CIT(A), Zone-1, Lahore. Feeling aggrieved the Department has agitated for the following issues:
(i)That the learned CIT(A) was not justified in directing to treat the purchase/sale of acrylics and viscose in normal law instead of under section 80C of Income Tax Ordinance, 1979.
(ii) That the CIT(A) was not justified in directing to treat the expenses to replace silver canes as Revenue expenses.
20. Relevant facts necessary for the disposal of present appeal are that the assessee as unlisted public company derives income from manufacturing of jute products and also sale of viscose and acrylics. Return was filed by the assessee declaring total income of Rs.12,544,374. The trading results were accepted. However, the Assessing Officer levied tax under section 80C of the Ordinance on total value of imports @ 5% at Rs.31,76,604. Feeling dissatisfied with the treatment accorded to the assessee, he assailed the assessment order on this issue before the learned First Appellate Authority who vide impugned order deleted the same. Hence, the department has come up in further appeal seeking our indulgence on the issue in question.
21. The learned D.R. has strongly assailed the impugned order. He submitted that -the goods imported were sold and not consumed by the assessee himself in the manufacturing process. Further argued that being a commercial sale, it was to be considered deemed income of the assessee under section 80C of the Ordinance, so as to be charged to tax @ 5 % of the value of the imports. He further averted that option envisaged in clause 9 of Part IV of the 2nd Schedule to the Ordinance can be exercised only by a manufacturer who utilizes the goods for his own manufacture. He stated that in the case of assessee, the imported goods were not used for manufacturing of jute products rather were commercially sold. Adopting the observation made by the Assessing Officer in the assessment order, he contended that in the case of assessee tax payable under section 50(5) of the Ordinance on imports was to be treated as final discharge of liability under section 80C of the Ordinance and proportionate expenses amounting to Rs.41,11,724 (on the basis of ratio of sale of Jute Products to sale of imported goods) were to be disallowed against normal income.
22. The learned A.R. of the assessee controverted the arguments advanced by the learned D.R. at the bar. He submitted that assessee opted out of presumptive tax regime being importer. In this regard, he asserted that assessee has clearly mentioned this fact on the face of return. Further argued that after amendment in the relevant clauses in Part IV of the 2nd Schedule to the Ordinance the provisions of presumptive tax regime would come into play only when an assessee opted for tax regime. It was also contended that sales of viscose and acrylic are part of other sales and so should be assessed under section 62 of the Ordinance only. It was stressed that tax had been properly deducted by the purchasing parties to whom viscose and acrylic had been sold/supplied. He stated that for the verification of these deductions, names of the parties with relevant details were furnished to the Assessing Officer. In support of*his contention, the learned A.R. has relied upon a judgment of the Tribunal reported as 2000 PTD (Trib.) 2853. He emphasized that the facts of supra judgment are same on all fours to the facts of the case under appeal.
23. We have heard the learned counsel for both the parties and also have perused the relevant orders alongwith cited case law at the bar. Before we embark upon discussing the rival arguments addressed at the bar, we would like to reproduce the relevant provisions of law which are involved in the instant case i.e. section 80C, clauses (9) and 9-B of the Part IV of the 2nd Schedule to the Ordinance:
"Section 80C: Tax on income of certain contractors and imports.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where, any amount referred to in subsection (2) is received by or accrues or arises-or is deemed to accrue or arise to any person the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule.
(2)The amount referred to in subsection (1) shall be the following, namely:---
(ii)The amount as computed for the purpose of collection of tax under subsection (5) of section 50 in respect of goods imported, not being goods imported by an industrial undertaking as raw material for its own consumption:--
Clause (9): "The provisions of section 80C insofar as they relate to payments on account of the supply of goods on which tax is deductible under subsection (4) of section 50 shall not apply in respect of any person, being a manufacturer of such goods, unless he opts for the presumptive tax regime. "
Clause (9-B): "The provisions of section 80C insofar they relate to the payments on account of the supply of goods on which tax is deductible under subsection (4) of section 50 shall not apply to any person, being an importer of good, from whom tax is collectable under subsection (5) of section 50 if supplies are made by the same importer under the same name and title and he opts out of the presumptive tax regime. "
24. Perusal of clause (9-B) read with section 80C of the Ordinance reveals that the assessee's case is covered by clause (9-B). It is manifestly clear that the abovementioned clause will only be attracted in cases where the assessee is manufacturer unless he opts for the presumptive tax regime. It is worth mentioning here that in the present case the assessee is a manufacturer of goods involving jute but as far as viscose and acrylic is concerned he is an importer. It is clear that the assessee wanted to opt out of the tax regime while mentioning the same on the return but cannot be allowed to do so, being importer of goods sold.
25. The assessee also relied upon the judgment of the Tribunal reported as 2000 PTD (Trib.) 2853. The facts of the cited case are almost identical to the case, which is subject of present appeal. In the supra case, the assessee public limited company enjoyed income from manufacture and sale of manmade fiber yarn. The assessee imported raw material for trading purpose, and the Assessing Officer held that import and sale of raw material was commercial import, which attract section 800. The Assessing Officer further held that imports (purchases) were liable to tax under subsection (5) of section 50 of the Ordinance read with section 80C and the supply of said imported goods were also chargeable to tax under section 50(4) read with section 80C. The assessee assailed the above findings of the Assessing Officer contending that once tax under section 50(5), read with section 80C and the supply of said imported goods were also chargeable to tax under section 80C and the supply of said imported goods were also chargeable to tax under section 50(4) read with section 80C. The assessee assailed the above findings of the Assessing Officer contending that once tax under section 50(5), read with section 80C was levied, the tax liability, under section 80C stood finally discharged and, therefore, the supply of same goods could not be subjected to the levy 'of tax for second time under section 50(4) read with section 80C. The learned First Appellate Authority accepted the assessee's assertion and allowed the relief to the assessee. Departmental appeal was dismissed by the Tribunal, through a majority view of two to one. It would not be out of place to reproduce the relevant para. of the supra judgment which is as under:
"Once an assessee had paid tax at import stage, he acquired a right as per scheme of presumptive taxation, and not to be bothered with any other charge under the Income Tax Ordinance. Assessee had chosen to remain within the presumptive fold as protection, by not opting out, the right could not be taken away or violated... Once the assessee was finally discharged of his tax liability under section 50(5) read with section 80C of the Income Tax Ordinance, 1979, he could not be charged again on supply of same goods second time under section 50(4) read with section 80C of the Income Tax Ordinance, 1979... Relief allowed by the First Appellate Authority was upheld by the Appellate Tribunal and appeal of the Department was dismissed."
26. After hearing the, arguments rendered by both the parties, specially in the light of case cited at the bar, we are of the considered view that the arguments advanced by the learned A.R. carried weight. We, therefore, allow the appeal partially. We uphold the deduction of tax under section 50(5) read with section 80C, if he has already suffered incidence of taxation under section 50 of subsection (5) read with section 80C of the Ordinance. However, we direct to delete the tax) deducted under section 50(4) of the Ordinance, for the reason, that assessee could not be subjected to taxation twice. The assessee is at liberty to get the deleted amount to tax, either adjusted against the tax due if any or claim refund as per provisions of law.
27. Appeals stand disposed of accordingly.
C.M.A./M.A.K./177/Tax(Trib.) Appeals disposed of.