Messrs BAIG SPINNING MILLS LTD. VS FEDERATION OF PAKISTAN
2005 P T D 1102
[Karachi High Court]
Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ
Messrs BAIG SPINNING MILLS LTD.
versus
FEDERATION OF PAKISTAN and others
Constitutional Petition No.203 of 1999, decided on /01/.
19th November, 2004. Income Tax Ordinance (XXXI of 1979)---
----Ss.80-D, 88, 89, 54 & 62---Assessee had failed to pay minimum tax under S.80-D, Income Tax Ordinance, 1979 along with the return---While passing the assessment order under S.62, Income Tax Ordinance, 1979 the Income Tax Officer ordered to pay minimum tax along with additional tax under S.88 of the Ordinance and called upon the assessee to pay the same on or before a specifieddate---Income Tax Officer, on failure of assessee to pay the amount, held, had rightly passed the order for the payment of additional tax under S.89 of the Income Tax Ordinance, 1979---Principles.
The assessee was required to pay in terms of section 80D of Income Tax Ordinance, 1979 minimum tax @ 0.5 per cent of the amount representing its turnover from all sources. The assessee did not pay minimum tax as required under section 80-D with its return as per explanation of section 54 of the Income Tax Ordinance. Assessing Officer levied additional tax under section 88 of Income Tax Ordinance, 1979 for the assessment years in question. On failure of the assessee to pay minimum tax and additional tax under section 88 of the Ordinanceafter demand theAssessing Officer in exercise of his power under section 89 of the Ordinance he levied additional tax at the rate of 15 per cent.
Chapter VI of the Income Tax Ordinance, 1979 deals with the payment of tax before the assessment whereas Chapter VII deals with the matter pertaining to the assessment and Chapter VIII deals with the tax liability in special cases.
Section 89 of the Ordinance stipulates payment of additional tax by an assessee who fails to pay the tax levied under Chapter VII (sections 55 to 67) or the penalty levied under Chapter XI (sections 108 to 116).ChapterVIIdealswiththeassessmentandtheassessmentunder section 62 is to be made on the basis of the total income of the assessee. The conceptoftotalincomeintermsofsection 2(44) readwithsection11isaltogetherdifferentfromincomeasdefinedinsection 2(24). Section 80-D, on the other hand, contemplates a minimum amount of tax payable on income of certain companies or persons who are otherwise not liable to pay any tax on their total income for that year or whose tax liability is less than 0.5% of their turnover from all sources.
A person required to pay tax under section 80-D does not escape process of assessment under Chapter VII and his total income continues to be liable to be assessed. Nevertheless such assessment has to be undertaken initially for the purpose of determining whether total income of assessee exceeds 0.5% of the minimum of amount payable under section 80-D or not. Indeed if it exceeds same would be subjected to the payment of normal tax but if it does not, he could only be required to pay the minimum amount of tax contemplated under section 80-D which fallsin Chapter VIII. No doubt such persons were required to pay the amount of tax under section 80-D along with their return through a specific amendment in section 54 but no corresponding amendment was made in section 62 or section 89. Such persons may be liable to penalty for non-payment of tax under section 88 of the Ordinance.
The terms pay used in subsection (2) of section 80-D and charge used in section 80-C or tax levied under Chapter VIII and Chapter XI of the Income Tax Ordinance, 1979 used in section 89 are interchangeable connotations and have to be given meaning with reference to the context in which they areused. The word levied includes the act creating charge, levy tax as well as process of assessment.
The question which required consideration is whether demand for payment of tax in terms of section 80-D under Chapter VIII can be termed as levy of tax under Chapter VII of the Income Tax Ordinance, 1979 or not. Normally tax liability can be created under the Ordinance in pursuance of an assessment order and not otherwise. Therefore, whenever, any tax is levied then such is levied under Chapter VII of the Ordinance and not otherwise. Tax under section 80-D can be levied only after the assessment of income and total turnover under Chapter VII of the Ordinance. Whentheconcernedofficercomestotheconclusionthat the income of assessee does not exceed 0.5%, he can order for payment of minimum tax equal to half (1/2) of the turn over from all sources.
On comparison of section 80-C with 80-D of the Income Tax Ordinance, 1979 reply to question became easier. Section 80-C does not require filing of return and as such any tax paid under section 80-C does not require any assessment order in terms of section 62 of Chapter VIIwhereas under section 80-D of the Ordinance the assessee ought to have filed his return and on the basis of the said return concerned officer has to assess under Chapter VIIof the Income Tax Ordinance, 1979 and thenpassorderincasethesaidpartysatisfiedtherequirementofsection 80-D. Sections 80-D, 80-C and 80-CC cannot be equated with each other as they are founded on different basis.
A demand of tax under section 80-D can be created under the OrdinancepursuanttoanassessmentorderandthereferencetoChapter VIImeans only that in the matter an assessment order has been passed. The difference between 80-C and 80-D is that in the latter there is no need of filing of return or assessment whereas in former return has tobefiled,assessmentunderChapterVIIhastobeundertaken.
In case of default in payment of tax under sections 9 and 10 of Chapter III of the Ordinance section 80-D in Chapter III of the Ordinance the assessee can be asked to pay additional tax on the amount of such tax when assessee failed to pay.
In the present case admittedly assessee had failed to pay minimum tax under section 80-D along with return. Accordingly while passing the assessment order under section 62 of the Income Tax Ordinance, 1979 the concerned Income Tax Officer ordered to pay minimum tax along with additional tax under section 88 and called upon the assessee to pay the same on or before December, 1991. On failure of the assessee to pay the amount the Deputy Commissioner of Income Tax, rightlypassedtheorderforthepaymentofadditionaltaxundersection 89 of the Income Tax Ordinance, 1979.
The payment of tax under section 80-D required assessment of the return submitted by the party under Chapter VII of the Income Tax Ordinance, 1979. In case of default in payment of whole or any part of the tax levied, the assessee can be held liable to pay additional tax under section 89 of the Income Tax Ordinance, 1979.
Elahi Cotton Mills and others v. Federation of Pakistan PLD 1997 SC 582 fol.
Rehan Hassan Naqvi for Petitioner.
Nadeem Azhar Siddiqui, D.A.-G. for Respondents Nos.1 & 2.
Jawaid Farooqui for Respondents Nos. 3 to 6.
Date of hearing: 2nd September, 2004.
JUDGMENT
KHILJI ARIF HUSSAIN, J.---The petitioner questioned the levy of additional tax under section 89 of the Income Tax Ordinance, 1979, on tax payable under section 80-D of the Act.
The facts for the purpose of deciding the issue can be summarized as that the petitioner filed return of income tax for the assessment years 1994-95, 1995-96 and 1996-97 declaring loss in each year. The petitioner was required to pay in terms of section 80D of Income Tax Ordinance, 1979 minimum tax @ 0.5 per cent of the amount representing its turnover from all sources. The petitioner did not pay minimum tax as required under section 80-D with its return as per explanation of section 54 of the Income Tax Ordinance. Respondent No.6 levied additional tax under section 88 of Income Tax Ordinance, 1979 for the assessment years in question. On failure of the petitioner to pay minimum tax and additional tax under section 88 of ITO after demand therespondent No.6 in exercise of his power under section 89 of the Ordinance levied additional tax at the rate of 15 per cent vide his order, dated 15-1-1998.
Aggrieved by the said order the petitioner preferred revision under section 138 of the Income Tax Ordinance, 1979 before respondent No.4, Commissioner of Income Tax which was dismissed and now impugned in this petition.
Heard, Mr. Rehan Hassan Naqvi, learned Advocate for the Petitioner. Mr. Nadeem Azhar, learned DAG for respondents Nos. 1 and 2andMr.JawaidFarooqui,learnedAdvocateforrespondentsNos.3 to 6.
Mr. Rehan Hassan Naqvi, learned Advocate for the petitioner, only questioned the imposition of additional tax under section 89 of the Income Tax Ordinance, 1979 on the ground that the additional tax under section 89 of the Income Tax Ordinance, 1979 can be levied only in the cases where any assessee fails to pay the whole or any part of tax levied under Chapter VII or of whole or any part or any penalty levied under chapter XI or has been allowed stay of the payment or payments instalments of the tax under subsection (2) of section 85 and not otherwise. Learned Advocate argued that admittedly the petitioner had paid tax under Chapter VIII in terms of section 80-D of the Income Tax Ordinance, 1979 and as such the petitioner was not liable for the payment of additional tax and the impugned orders passed by the respondents are without any lawful authority.
Mr. Nadeem Azhar, learned DAG, and Mr. Jawaid Farooqui, learned advocate for respondent Nos. 3 to 6 argued that as the petitioner has failed to pay the tax even under section 80 of the Income Tax Ordinance, 1979 along with the return and the assessment in any case has been made under Chapter VII of the Income Tax Ordinance, 1979 the impugned order was passed by the authority is in accordance with law.
We have carefully taken into consideration the respective arguments advanced by the learned Advocates for the parties. Chapter VI of the Income Tax Ordinance, 1979 deals with the payment of tax before the assessment whereas Chapter VII deals with the matter pertaining to the assessment and Chapter VIII deals with the tax liability in special cases.
Section 89 stipulates payment of additional tax by an assessee who fails to pay the tax levied under Chapter VII (sections 55 to 67) or the penalty levied under Chapter XI (sections 108 to 116). It is worth-noting that Chapter VII deals with the assessment and the assessment under section 62 is to be made on the basis of the total income of the assessee. The concept of total income in terms of section 2(44) readwithsection 11isaltogetherdifferentfromincomeasdefinedinsection 2(24). Section 80-D, on the other hand, contemplates a minimum amount of tax payable on income of certain companies or persons who are otherwise not liable to pay any tax on their total income for that year or whose tax liability is less than 0.5% of their turnover from all sources.
Mr. Jawaid Farooqui appears to be right in contending that a person required to pay tax under section 80-D does not escape process of assessment under Chapter VII and his total income continues to be liable to be assessed. Nevertheless such assessment has to be undertaken initially for the purpose of determining whether total income of assessee exceeds 0.5% of the minimum of amount payable under section 80-D or not. Indeed if it exceeds same would be subjected to the payment of normal tax but if it does not, he could only be required to pay the minimum amount of tax contemplated under section 80-D which fallsin Chapter VIII. No doubt such persons were required to pay the amount of tax under section 80-D along with their return through a specific amendment in section 54 but no corresponding amendment was made in section 62 or section 89. Such persons may be liable to penalty for non-payment of tax under section 88.
The terms pay used in subsection (2) of section 80-D and charge used in section 80-C or tax levied under Chapter VIII and Chapter XI used in section 89 are interchangeable connotations and have to be given meaning with reference to the context in which it is used. The phrase levied includes the act creating charge, levy tax as well as process of assessment.
The question which required consideration is whether demand for payment of tax in terms of section 80-D under Chapter VIII can be termed as levy of tax under Chapter VII of the Income Tax Ordinance, 1979 or not. Normally tax liability can be created under the Ordinance in pursuance of an assessment order and not otherwise. Therefore, whenever,anytaxisleviedthensuchisleviedunderChapter VIIofthe Ordinance and not otherwise.Taxundersection 80-Dcanbelevied only after the assessment of income and total turnover under Chapter VII of the Ordinance. When the concerned officer comes to the conclusion that the income of assessee does not exceed 0.5%, can order for payment of minimum tax equal to half (1/2) of the turn over from all sources.
When we compared section 80-C with 80-D of the Income Tax Ordinance, 1979 reply to question became easier. Section 80-C does not require filing of return and as such any tax paid under section 80-Csame does not require any assessment order in terms of section 62 of Chapter VIIwhereas under section 80-D of the Ordinance the assessee ought to have filed his return and on the basis of the said return concerned officer has to assess under Chapter VIIof the Income Tax Ordinance, 1979 and then pass order in case the said party satisfied the requirement of section 80-D. In the case of Elahi Cotton Mills and others v. Federation of Pakistan, PLD 1997 SC 582, Hon bleSupremeCourtheldthatSections 80-D, 80-C and 80-CC cannot be equated with each other as they are founded on different basis.
A demand of tax under section 80-D can be created under the OrdinancepursuanttoanassessmentorderandthereferencetoChapter VIImeans only that in the matter as assessment order has been passed. The difference between 80-C and 80-D is that in the latter there is no need of filing of return or assessment whereas in former return has to be filed, assessment under Chapter VIIhas to be undertaken.
In our view that in case of default in payment of tax under sections 9 and 10 of Chapter III of the Ordinance section 80-D in Chapter VIII of the Ordinance the assessee can be asked to pay additional the assessee can be asked to pay additional tax on the amount of such tax when assessee failed to pay.
In the instant case admittedly petitioner had failed to pay minimum tax under section 80-D along with return. Accordingly while passing the assessment order under section 62 of the Income Tax Ordinance, 1979 the concerned Income Tax Officer ordered to pay minimum tax along with additional tax under section 88 and called upon the assessee to pay the same on or before December, 1991. On failure of the assessee to pay the amount the Deputy Commissioner of Income Tax, respondent No.6 rightly passed the order for the payment of additional tax under section 89 of the Income Tax Ordinance, 1979.
For the foregoing reasons, we are of the view that the payment of tax under section 80-D required assessment of the return submitted by the party under Chapter VII of the Income Tax Ordinance, 1979 accordingly. In case of default in payment of whole or any part of thetax levied, the assessee can be held liable to pay additional tax under section 89 of the Income Tax Ordinance, 1979.
For the foregoing reasons, the petition has no merit and is accordingly dismissed however with no order as to costs.
M.B.A./B-20/KPetition dismissed.