NATIONAL SECURITY COMPANY (PVT.) LTD., LAHORE VS INCOME TAX APPELLATE TRIBUNAL, LAHORE, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 2340 (2005)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-C, 136(1) & 136(2)---Appeal---Divergent opinions of Benches of Income Tax Appellate Tribunal---Larger Bench, constitution of---Plea raised by assessee was that there were divergent opinions of Benches in two other Provinces and the Bench deciding its case refused to constitute a larger Bench---Validity---When two divergent opinions on the same issue were brought to the notice of the Bench deciding the matter, in all fairness to the assessee its request for constitution of larger Bench ought to have been granted---Refusal on the part of Income Tax Appellate Tribunal resulted in anomalous situation inasmuch as one Bench of the Tribunal was refusing relief to the assessees on the basis of a view adopted by another Bench while the other Bench was allowing relief and accepting the appeals of assessees placed in similar situation---Well considered view of the Tribunal had not so far been formulated in order to create certainty both for guidance of the assessees as well as the Revenue---High Court set aside the judgment passed by Income Tax Appellate Tribunal and remitted the case to the Tribunal for consti tution of a Full or a larger Bench---Appeal was allowed accordingly.

2004 PTD (Trib.) 1029 ref.

Hammad Aslam for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 5th May, 2005.

JUDGMENT

NASIM SIKANDAR, J.---This reference application under section 136(2) of the late Income Tax Ordinance, 1979 claims that following questions of law arise out of the impugned consolidated order of the Income Tax Appellate Tribunal, dated 31-10-2001 whereby five appeals filed by the present petitioner were rejected;--

Questions of Law

"(a) Whether on the facts and in the circumstances of the case when there is a difference of opinion by the different Benches of the same Court then it become a mixed question of law and fact?

(b) Whether on the facts and in the circumstances of the case the ITAT was justified to uphold the reopening of the case of the Appellant under section 65 when the assessee had availed the Tax Amnesty Scheme, 2000 on the same undisclosed income?

(c) Whether on the facts and in the circumstances of the case mere execution of contract by the Appellant tantamount to a change in nature of business from services rendered to contractor?

(d) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified to uphold the point that the security guards supplied on contract by the assessee fall within the ambit of section 80C of the Income Tax Ordinance, 1979?

(e) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified to uphold the additions of receipts from the non-Company clients without any justification or any lawful evidence?

(f) Whether on the facts and in the circumstances of the case retrospective effect can be given on the basis of a unreported judgment by the Income Tax Appellate Tribunal of Pakistan, Lahore Bench for preceding years relying on Karachi Bench decision while ignoring the judgment of equal status Bench on the same point of law by a Peshawar ITAT'?"

2. Earlier these questions were proposed and submitted to the learned Tribunal under section 136(1) of the late Income Tax Ordinance for their reference to this Court. That request was declined by the learned Tribunal on 30-3-2002. While doing so the learned Members observed that Karachi Bench of the Tribunal had adopted a correct view on the issue in re: Messrs G.M.B. Rass Steel Town, Bin Qasim, Karachi v. IAC, Range-I, Zone-C, Karachi and that other Benches of the Tribunal over the country were following that view. Also that the questions as proposed by the petitioner did not arise out of their order.

3. According to the statement of the case the petitioner is a private limited company and during the relevant assessment years viz. 1994-95 to 1999-2000 derived income from providing security services in the form of security guards to different clients. The Assessing Officer treated its receipts from different corporate clients as contract receipts and subjected them to tax under section 80C (Tax on income of certain contractors and exporters) of the late Ordinance. The contention of the assessee that its receipts from rendering of services on which tax had been deducted at source was full and final discharge of the liability from the assessment year 2000-2001 was also not accepted. The Assessing Officer observed that the appellant had not earned receipts from rendering of services but as a contractor by providing persons for rendering security to different clients. CIT (Appeals) maintained the action of the Assessing Officer in bringing the total receipts of the petitioner to tax under section 80C (Tax on income of certain contractors and exporters).

4. On further appeal the learned members of the Tribunal also maintained the orders of the Revenue authorities by making reference to a judgment of the Karachi Bench of the Tribunal in re: Messrs G.M.B. Rass Steel Town, Bin Qasim, Karachi v. IAC, Range-I, Zone-C, Karachi.

5. Heard the learned counsel for the parties. We are informed by the learned counsel for the petitioner that the Tribunal after recording of the impugned order in a number of other cases has deviated from the view adopted by the Karachi Bench of the Tribunal in the above noted case. One of such judgments was recorded on 14-2-2003 by a Division Bench of the Tribunal at Lahore in I.T.As. Nos.2668-LB to 2672-LB of 2002. It is also stated that even at the time when the impugned order was recorded the attention of the learned Members of the Tribunal was drawn to a judgment of the Peshawar Bench in re: DCIT v. Pakistan Mobile Communication, in which a different view from the one adopted by the Karachi Bench of the Tribunal was followed in respect of companies rendering services. Learned counsel also takes exception to the distinction drawn by the Tribunal between the facts falling for adjudication before the Karachi Bench from those, which were considered by the Peshawar Bench.

6. After hearing the learned counsel for the parties, we have concluded that it is clear from the record and the various judgments referred to including the last mentioned, which now stands reported as 2004 PTD (Trib.) 1029 that different Benches of the Tribunal over the country have adopted divergent view with regard to taxability of receipts of the assessees engaged in providing security services. We are also of the view that where two. divergent opinion on the same issue were brought to the notice of the Bench, in this case the view of Karachi and A Peshawar Benches, in all fairness to the assessee its request for constitution of a larger Bench ought to have been granted. The refusal on the part of the Tribunal has resulted in anomalous situation inasmuch as one Bench of the Tribunal is refusing relief to the assessees no the basis of a view adopted by another Bench while the other Bench is allowing relief and accepting the appeals of the assessees placed in similar A situation. In other words a well-considered view of the Tribunal has not so far been formulated in order to create certainty both for guidance of the assessees as well the Revenue. Therefore, it is considered appropriate that the impugned judgment in all the five references is set aside and the matter is remitted to the Tribunal for constitution of a full or a larger Bench as the learned Chairman may consider appropriate to settle the issue in hand. The reason for our not taking up the questions of law for a decision being that the learned Members of the Tribunal in the impugned order had followed the view adopted by the Karachi Bench in the aforementioned case. However, the reasons which weighed with the learned Members of the Karachi Bench were neither discussed nor incorporated in the impugned order. Therefore, we cannot have the benefit of these reasons, which were made basis for a particular view adopted by that Bench. These reasons and justifications could have been gone through by us by having a copy of the judgment of that Bench at Karachi. However, to sit in judgment against the decision of that Bench being the privilege of the Sindh High Court in its appellate as well as referable jurisdiction, we have refrained from undertaking that exercise.

7. Impugned judgment is set aside and the matter is remitted to the Tribunal. The order will also govern PTR Nos. 68 to 71 of 2002.

M.H./H-52/LCase remanded.