MONTGOMERY FLOUR AND GENERAL MILLS LIMITED, LAHORE VS FEDERATION OF PAKISTAN
2002 P T D 155
[Lahore High Court]
Before Mansoor Ahmad, J
MONTGOMERY FLOUR AND GENERAL MILLS LIMITED, LAHORE
Versus
FEDERATION OF PAKISTAN through Chairman, Central Board of Revenue, Islamabad and 3 others
Writ Petition No. 255 of 1995, heard on 10/10/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
---S.52---Failure to deduct tax at source ---Assessee in default---On failure to make deduction at source the payer becomes an assessee in default to the extent of that much amount which he failed to deduct and it was by fiction of law that he was treated as "assessee in default" but if he continues making deduction out of the payment made by him to any other person, he would never fall within the ambit of assessee.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 5 & 52---Jurisdiction of Income-tax Authority---Deduction of tax at source---Concurrent jurisdiction---Withholding agent---Where a withholding agent being assessed at one station had a business place in the jurisdiction of another officer, the Assessing Officer having jurisdiction over the place of business (other than the place of assessment), will have concurrent jurisdiction to monitor the withholding tax deductions in respect of their recipients falling under his jurisdiction---Action under S.52 of the Income Tax Ordinance, 1979 in these cases shall be taken only by the Assessing Officer of the withholding agent.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.5---Jurisdiction of Income-tax Authorities---Concurrent jurisdiction not-barred---No bar is contained under S.5 of the Income Tax Ordinance, 1979 to confer concurrent jurisdiction in respect of persons, class of persons or distinct jurisdiction in specified cases, classified cases or specified persons or classified persons by the Central Board of Revenue and also by the Regional Commissioners, Commissioners of the respective Zones.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss. 50(1)(4)(4A), 52 & 5(a)(b)---C.B.R. Circular No. 6 of 1995, dated 12-7-1995---C.B.R. Circular No. 12 of 1996, dated 28-8-1996---Consti tution of Pakistan (1973), Art. 199---SRO 711(1)79, dated 4-8-1979-- Constitutional petition---Notice of assessee demanding challan of payment under S.50 of the Income Tax Ordinance, ' 1979 by the Assessing Officer having the jurisdiction over the place of business of the assessee---Assessee challenged such notices by a Constitutional petition on the ground that Assessing Officer had no jurisdiction to issue such notice as its registered office was located out of his jurisdiction where the assessee was being assessed---Validity---Assessing Officer merely issued notices to the assessee for monitoring the collection of tax under S. 50 of the Income Tax Ordinance, 1979 which jurisdiction was conferred upon him under the law---Jurisdiction vested with the Assessing Officer was of a limited nature only to the extent of monitoring collection/deduction at source---Officer never acted as an Assessing Officer in respect of the assessee nor he had issued any notice as such---Constitutional petition was dismissed by the High Court.
Commissioner of Income-tax, Rawalpindi Zone, Rawalpindi v. Malik Abdul Karim, Transport Company Limited, Gujrat 1993 PTD 508 distinguished.
Ahmad Shahzad Farooq Rana for Petitioner.
Chaudhry Sagheer Ahmed for Respondent.
Date of hearing: 10th October, 2001.
JUDGMENT
Montgomery Flour and General Mills Limited, Lahore filed the present writ petition whereby the issuance of a notice by the Deputy Commissioner of Income-tax/Wealth Tax, Circle-O1, Sahiwal issued under sections 50(1), 50(4) and 50(4a) of the Income Tax Ordinance, 1979 was put to challenge.
2. Learned counsel appearing for petitioner has argued that the petitioner is a Public Limited Company having its registered office at Lahore. By virtue of his office registered at Lahore the petitioner has been filing its tax returns in Lahore and its case was with Deputy Commissioner of Income-tax, Circle-17, Lahore. That in April, 1994 respondent No. 3, Deputy Commissioner of Income-tax/Wealth Tax, Circle-01, Sahiwal issued a notice to the petitioner demanding challan of the payments under sections 50(1), 50(4) and 50(4a) of the Income Tax Ordinance, 1979. The petitioner intimated to the, respondent No. 3 that it being a public company having its registered office at Lahore is an existing assessee of Circle 17, Lahore therefore, he lacks jurisdiction to issue such notices.
3. The respondents did not found the reply of the petitioner satisfactory as such they persisted with the notices which led to the filing of the present writ petition.
4. Relying on a case titled Commissioner of Income-tax, Rawalpindi Zone, Rawalpindi v. Malik Abdul Karim, Transport Company Limited, Gujrat reported as 1993 PTD 508 the learned counsel for the petitioner argued that the petitioner is a public limited company and in his case the jurisdiction under Income Tax Ordinance, 1979 would vest with the Assessing Officer having territorial jurisdiction vis-a-vis registered office of the company. Further in support of his argument the learned counsel relied on SRO 711(1)79, dated 4-8-1979 whereby the Central Board of Revenue (C.B.R.) notified the jurisdiction and in that it was provided that the public companies were to be assessed according to the location of their registered offices. On the basis of this SRO the learned counsel further submitted that the expression "place of business" as used in the Schedule given in this SRO meant in the case of public limited companies, the place where registered office was situated. The learned counsel appearing for the Revenue placed on reliance on Circle No. 12 of 1996 which was issued in supersession of Circle No. 6, dated 12-7-1995. It was contended by the learned counsel for the respondents that for deductions /collection of tax at source the jurisdiction of the respondent No. 3 was concurrent and there was no exclusion of his jurisdiction under section 50 of the Income Tax Ordinance, 1979.
5. I have considered the arguments of both the parties. Section 5 of the Income Tax Ordinance, 1979 provides for the jurisdiction of Income tax Authorities. Under section 5(a)(b) the Central Board of Revenue issued a notification describing the jurisdiction of various income-tax functionaries. This SRO relate to the general jurisdiction conferred on the Commissioner of Income-tax of various zones. At various point of time these SROs relating to the jurisdictional functions of the Income-tax Authorities are issued. In the present case the controversy is not relating to the assessment of the petitioner. As such the reliance placed by the, learned counsel for the petitioner on SRO No. 711(I)79 as well on case titled is not well placed. Under the scheme of Income Tax Ordinance the person who is obliged to make deductions of tax at source is not an assessee. He is merely a payer and he makes deduction of tax from the payment of recipients and the amount so deducted is deposited by the payer, the adjustment whereof is sought by the recipient at the time of his assessment. On failure to make deduction at source the payer becomes an assessee in default to the extent of so much amount which-he failed to deduct. It is by fiction of law that he is treated as assessee in default. In fact under section 52 of the Income Tax Ordinance, 1979 a person becomes an assessee in default if he fails to make deduction but if he continues making deduction out of the payment made by him to any other person, he would never fall within the ambit of assessee. Experience revealed that in case of various public companies where registered offices are situated in important commercial citizens but their factories are situated, somewhere else. The payments by the company to its Contractors, Suppliers and Dealers of various other kinds is made from the factory and those recipients are assessee normally in the vicinity of the area where the factories are situated. It appears that to facilitate the proper assessment of the recipient and monitoring of the deduction at source the C.B.R. has been issuing instructions from time to time and the last one was issued on 19-8-1996. It was provided that where a withholding agent being assessed at one station has a business place in the jurisdiction of another officer, the Assessing Officer having jurisdiction over the place of business (other than the place of assessment) will have concurrent jurisdiction to monitor the withholding tax deduction in respect of their recipients falling under his jurisdiction. B It was further provided that an action under section 52 of the Income Tax Ordinance, 1979 in these cases shall be taken only by the Assessing Officer of withholding agent. There is no bar contained under section 5 of the Income Tax Ordinance, 1979 to confer a concurrent jurisdiction in respect of persons, class of persons or distinct jurisdiction in specified cases, classified cases or specified persons or classified persons by the C.S.R. and also by the Regional Commissioners, Commissioners of the respective Zones. The respondent No. 3 merely issued notices to the petitioner for monitoring the collection of tax under section 50 which jurisdiction was conferred upon him under the law. The jurisdiction vested with, the respondent No. 3 was of a limited nature only to the, extent of monitoring collection/deduction at source. He never acted as an Assessing Officer in respect of the petitioner nor he has issued any notice as such. Therefore, I do not find any merit in the writ petition and the same is dismissed.
C.M.A./M.A.K./M-839/L Petition dismissed.