(a) Interpretation of statutes---

---- Definition clause---When a term is used in a statute then the same necessarily is to be defined in the definition clause of that law in order to avoid any ambiguity, complication or difficulty which may likely to arise while it is being interpreted and applied to a situation in the context of its literal and ordinary dictionary meanings in order to construe the same for arriving at a logical conclusion.

(b) Interpretation of statutes---

---- Definition clause---If no definition is given in the main law then, any such terms or phrase or word used in the provisions of law may be given a possible harmonious meaning conveying a sense to the said provisions of law while seeing to its plain, literal and ordinary dictionary meanings.

(c) Interpretation of statutes-----

----Definition---Function---Main function of the definition or a term is to remove vagueness and to provide a degree of definiteness to the said term of phrase or word so defined.

(d) Interpretation of statutes---

---- Definition clause---Word "include"---Connotation---Word "include" whenever is given' in-any definition is often used in interpretation clause in order to enlarge the meaning of that word or phrase occurring in the provisions of the statute/law and when it is so used then that word and phrase must be construed as comprehending not only such things it signifies according to its nature and import but also things which the interpretation clause declares that it shall include meaning thereby that the definition of a word or phrase when it says 'includes' then it would amount to include alongwith what has been so given in its plain, literal and ordinary dictionary meaning---Word used in an inclusive definition implies extension of that term and phrase and they cannot be treated as restrictive in nature.

(e) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 80-C, 50(4), 59(A) & 66-A---C.B.R. Circular No.11 of 1991, dated 30-6-1991---C.B.R. Circular No.8 of 1999, dated 27-7-1999-- Finance Act (IV of 1999), Preamble---Tax on income of certain contractors and importers---Term "services" ---Connotation---Contract-- Rendering services under execution of contract---Assessment under Self Assessment Scheme---Creation of refund---Cancellation of assessment by the Inspecting Additional Commissioner on the' ground that nature of receipts of contract were assessable under presumptive tax regime arid tax deducted was full and final discharge of tax liability ---Validity-- Services rendered whether through contract or otherwise were trot covered by the presumptive tax-regime as laid down in S.80-C of the Income Tax Ordinance, 1979---Restricted meaning could not be given to the expression 'services'---Assessments were rightly framed under normal law and provisions of S.80-C of the Income Tax Ordinance, 1979 were not applicable at all---Cancellation of assessments was not sustainable in law---Order of Inspecting Additional Commissioner was vacated and that of the Assessing Officer was restored by the Appellate Tribunal.

2002 PTD (Trib.) 228 and I.T.A. No.672/IB of 1998-99 rel.

Asim Zulfiqar Ali, F.C.A. for Appellant.

Ashraf Ahmad Ali, D.R. for Respondent.

Date of hearing: 25th January, 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The captioned five appeals pertaining to the assessment years 1995-96 to 1999-2000 at the instance of the assessee have been filed assailing the impugned order, dated 14-3-2002 passed by the learned IAC in his revisional jurisdiction conferred upon him under section 66A of the Repealed Income Tax Ordinance, 1979 (hereinafter called the Repealed Ordinance). Since the issues involved in the five appeals are identical, therefore, all appeals are being disposed of through this consolidated order.

2. The relevant facts leading ,to the filing of instant appeals are that the assessee is a sole proprietor working under the name and style of Messrs National Cleaning Services entered into a contract, dated 12-1-1993 with Capital Development Authority (CDA); Islamabad whereby he was engaged to provide cleaning services to CDA: The assessee filed returns under normal law and assessments were framed under section 59(A) of the Repealed Ordinance for all the years under consideration, and the declared results were duly accepted by the Department. However, after having examined the assessee's record, the learned IAC observed that the assessee worked as sanitation contractor and income tax was deducted @ 5 %, he was of the view that the assessee received payments from CDA and. the amount paid to him was on account 'of contract which was not covered under the head of services rendered and thus governed by presumptive tax regime covered by section 80C of the Repealed Ordinance. The learned IAC further came to the conclusion that the income tax deducted at source was full and final discharge of liability whereas at the time of completion of assessment the Assessing Officer had wrongly accepted the returns under normal law and refund was wrongly created. In the opinion of the learned IAC, since the Assessing Officer failed to take the cognizance of the above facts; the assessments framed were not only erroneous but also prejudicial to the interest of Revenue and attracted the provisions of section 66A of the Repealed Ordinance. In pursuance thereof the learned IAC issued requisite statutory show-cause notices stating that income of the appellant being in the nature of receipts of contract executed with CDA were assessable under the presumptive tax regime covered. by section 80-C of the Repealed Ordinance and tax deducted thereon by the CDA was full and final discharge of tax liability. According to the learned IAC, the refund was erroneously created by the Assessing Officer while finalizing the assessment under normal law as whatever tax was deducted by CDA while making payments under the above contract was final discharge of tax liability in terms of section 80C of the Repealed Ordinance.

3. The assessee/appellant while responding the show-cause notice served upon him, objected, to the proceedings initiated by the learned IAC under section 66A of the Repealed Ordinance by referring to Circular No.11 of 1991 issued by the C.B.R. as well as certain amendments made by Legislature vide Finance Act, 1999. Before the learned IAC, the assessee/appellant submitted that provisions of section 50(4) of the Repealed Ordinance are applicable both to `contracts' and `contract for services'. It was further added that while the former comes into the ambit of section 80C, the latter is outside the scope of section 80C of the Repealed Ordinance. However, the learned IAC was not satisfied with the explanation preferred by the assessee. Considering the assessments framed under section 59(A) by the Assessing Officer to be erroneous insofar as prejudicial to the interest of Revenue, the same were accordingly modified by the learned IAC in exercise of his revisional powers granted under section 66A and directed to issue revised demand notice for all the years under appeal. The assessee is in appeal before us impugning the same.

4. Both the parties have been heard and relevant orders perused: The learned A.R. vehemently argued the case and pleaded that section 50(4) is applicable not only to the execution of contract but to the contract of services as well. The deduction of tax at source from payment on account of performance is covered under presumptive tax regime while that on account of latter it is considered only advance tax adjustable to be computed under normal law. He urged that there is a obvious distinction between the above referred two situations and the C.B.R. through Circular No. 11 of 1991 recognized this fact that there are certain services which are rendered under some contracts. In this respect-he referred to the relevant provisions provided in the above said Circular which are that "this includes the services rendered whether through ' a contract or otherwise by professional such as Medical Practitioner, Legal Practitioner, Accountants and Consultants etc.' While commenting upon the said provision of Circular No. 11 of 1991, the learned AR emphasized that services can be rendered. through contract and the terms "includes" and "etc." which referred to existence of many other services as have not been expressively provided in the clarification. He also referred to the text of section 80C as applicable to the assessment year 2000-2001 whereby services rendered by those other than Doctors, Lawyers, Accountants, Auditors, Architects, Surveyors, Engineers, Advisors and Consultants were excluded from the purview of presumptive tax regime. He contended that in these circumstances it is quite clear that execution of contracts and rendering of services through a contract are two entirely different transactions which are not independently recognized in the Ordinance but for which tax is to be computed on a completely different basis. Further argued that neither the term "contract" and nor. the term "services" have been defined in the Ordinance, therefore, these are to be understood in their common parlance. It is further elaborated that the term "services" is applied where a person is dictated in respect of "what to do and how to do", whereas under the strict definition of "contract", a person is only explained for "what to do". He is not explained that how ate has to do his work. Proceeding further, it was argued that purposes of reducing such rendering of services into contractual form is primarily to facilitate its operation. The terms, condition and overall performance can then be monitored more professionally and accurately. Such contract do not change or alter the substance of the transaction because the nature of the transaction remains unchanged. In support of his contention, the learned A.R. relied upon a judgment of the Tribunal reported as (2001) 84 Tax 183 (Trib.) and another unreported judgment of the Tribunal passed in ITA No.672/IB/1998-99.

5. The facts in the supra cited case are somewhat identical to the facts of the case which is the subject-matter of the present appeal. In the above cited case the assessee derived income from providing stevedoring services and other labour services to various shipping lines. The payments received by the assessee were subject-matter of deduction of tax under section 50(4) of the Income Tax Ordinance. The assessee filed statement under section 143B of the Ordinance. However, the Assessing Officer found that the total tax was deducted at 5 % whereas according its him the tax should have been deducted at 6% as the total receipts exceeded Rs. 30 million. The learned CIT (A), however, gave a finding that the tax at 6% could only be levied on the three contracts which exceeded Rs.30 million each thus he directed the reduction in the tax charged. It was contended before the Tribunal that entire amount of the receipts on account of contracts should be charged at 5 % excluding the supplies. It was held by the Division Bench of the Tribunal that C.B.R. has itself clarified in its Circular No.8 of 1999, dated 27-7-1999 that services rendered under contract would remain services within the meaning of subsection. (4) of section 50 of the Ordinance Thus, the payments on account of services should not have been taxed under section 80-C. It was further observed that even-if the assessee had filed statement under section 143B of the Ordinance and the income is not properly chargeable under the said section, a proper course for the Assessing Officer was to summon the return under section 56 of the Ordinance and then to make the assessment under the normal law. After having made the supra observations, the learned Division Bench of the Tribunal annulled the orders of the departmental official holding that these have been passed without proper jurisdiction.

6. In the other judgment where the assessee entered into a contract for providing certain services including provision of accommodation, medical aid, transportation, luggage handling, loading and unloading, ticketing acid security etc. for Hajis also filed statement under section 143B on the grounds that tax deducted by the contractor was full and final discharge of tax liability. The Department in the case assessed the income under normal law by stating that since the service were outside the ambit of section 80C, therefore, tax liability was computed under normal law. The learned Bench of ITAT rejected the assessee's appeal with the following observations:--

"The restrictive interpretation of C.B.R.'s Circular No. 11 of 1991 is not correct as also held by the ITAT in ITA Nos. 728 to 733 (IB) of 1998-99 (Assessment years 1994-95, 1996-97 anti 1997-98 and ITA Nos. 609 and 610 (IB) of 1997-98 (Assessment years 1995-96 and 1996-97) the relevant part of which reads as under:--

"The above definition of services rendered has left a lot of room for including any act which may be near in the nature to the ordinary dictionary meaning of `service'. Although, the C.B.R. tried to restrict the definition by giving class of professions in its definition but the very tenor of definition was not restricting am other possible interpretation because the definition itself was to the form of an inclusive definition and as such was opening room to include the act falling in the literal and ordinary dictionary meaning of the words `service' and `services'.'

We would like to observe here that when a term is used in a statute then the same necessarily is to be defined in the definition clause of that law in order to avoid any ambiguity or complications or difficulty which may likely to arise while it is being interpreted and applied to a situation in' the context of its literal and ordinary dictionary meanings in order to construe the same for arriving at a logical conclusion. What predominates in the main statute/law and the definition given in the provisions of that main law. If no definition is given in the main law then any such term or phrase or word used in the provisions of law may be given a possible harmonious meaning and conveying a sense to the said provisions of law while seeing to its plain, literal and ordinary dictionary meaning.

It is an established principle that main function of the definition or a term is to remove vagueness and to provide a degree of definiteness to the said term of phrase or word so defined. It is also an established principle of interpretation of law that the word `include' whenever is given in any definition ig often used in interpretation clause in order to enlarge the meaning of that word or phrase occurring in the provisions of the statute/law and when it is so used then that word and phrase must be construed as comprehending not only such things it signifies according to its nature and import but also things which the interpretation clause I declares that it shall include. It clearly means that the definition of a word or phrase when it say `includes' then it would amount to include along with what has been so given in its plain, literal and ordinary dictionary meaning. Obviously the word used in an inclusive definition imply extension of that term and phrase and they cannot be treated as restrictive in nature ..: We, therefore, do not find any merit in the AR's contention that this receipt is covered by section 80C."

7. We have heard the learned counsel for both the parties and also have gone through the relevant orders alongwith the case-law cited at the bar. We are of considered view that the submissions made by the learned AR carry weight. Assessee's assertions also stand supported by two cases relied upon by the learned AR, which are on all fours to the assessee's case. The nutshell of the above two orders of the ITAT is that services rendered whether through contract or otherwise are not covered by the presumptive tax-regime as laid down in section 80-C of the Ordinance. Also, restricted meaning cannot be given to the expression `services' in view of above exhaustive finding of ITAT on the subject in the cited case.

8. Following the ratio settled by the Tribunal and keeping in view the facts and circumstances of the present case, we have no hesitation in holding that the assessments were rightly framed under normal law and provisions of section 80C were not applicable at all. Therefore, action of the learned IAC to cancel the assessments while resorting to section 66A of the Repealed Ordinance is not sustainable in the eye of law. Hence the order of the learned IAC for all the years under consideration is vacated and that of the Assessing Officer are restored.

9. Appeals of the assessee succeed accordingly.

C.M.A./947/Tax (Trib.)Appeals accepted.