Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S:80‑D‑‑‑Workers Welfare Fund Ordinance (XXXVI of 1971), S.4‑‑‑Industrial. establishment covered by the provisions of S.80‑D, Income Tax Ordinance, 1979 was not liable to charge of the Fund contemplated in S.4, Workers Welfare Fund Ordinance, 1971‑‑ Principles.

Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot v. Messrs Thapur (Pvt.) Sialkot 2002 PTD 2112 and C.Ps. Nos.38 of 2000, 156 to 180, 199 to 276, 278 to 283, 285 to 320, 323 to 411 and 518 to 534 of 2000 ref.

Mian Yousaf Umar for Appellant.

Date of hearing: 4th November, 2004.

JUDGMENT

NASIM SIKANDAR, J.‑‑‑This application under section 136(2) of the late Income Tax Ordinance, 1979 on behalf of the Revenue claims that following questions of law arise out of the impugned order of the Tribunal dated (sic):‑‑

(1) "Whether under the facts and circumstances of the case, the learned Tribunal was justified to hold that the Workers Welfare Fund is not chargeable in the case falling under presumptive tax regime?

(2) "Whether the scope of tax as defined under section 2(43) of the Income Tax Ordinance, 1979 can be enlarged by inclusion of Workers Welfare Fund?

2. After hearing the learned counsel for the Revenue, we are of the view that the issue as to chargeability of Workers Welfare Funds in respect of the cases falling under presumptive tax regime already stands decided by this Court in re: Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Silakot v. Messrs Thapur (Pvt.) Sialkot (2002 PTD 2112).

3. In that judgment the provisions of section 80CC (tax on income of certain exporters) of the late Income Tax Ordinance, 1979 were considered at length and finally it was concluded that an industrial establishment covered by the provisions of section 80‑CC of the late Ordinance was not liable to charge of the fund contemplate in section 4 of the Workers Welfare Fund Ordinance, 1971.

4. In process not only the provisions of section 80‑CC but also similar other provisions falling under the presumptive tax regime were considered by this Court. Some of the reasons for our conclusion as said above are stated in paras, 17, 19 and 21 of that order/judgment. These paras are reproduced for facility of reference.

Para. 17. Learned counsel for the Revenue are correct only to the extent that the charge contemplated under section 4 of the Workers' Welfare Fund Ordinance, 1971 has riot undergone any change and is therefore, still a valid levy. However, there is no answer to the contention put forth by the assessees that the charge is leviable only with reference to the income returned by an assessee and then determined by an Assessing Officer in accordance with the provisions of the Income Tax Ordinance. The presumptive tax regime having done away with the concept of assessment of "total income: of an assessee, the levy contemplated in section 4 of the W.W.F. has necessarily faltered away in respect of the assessees covered by such regime. In matters of taxation a literal approach, if it does not lead to a manifest absurdity, has to be followed. In income tax law, the words "total income" as well as "assessment" have their peculiar meanings. In re: CIT West Bengal‑III v. Balkrishna Malhotra (1971) 81 ITR 759, their Lordships of the Supreme Court of India observed that since the judgment of Madras High Court in Viswanathan Chettiar v. Commissioner of Income Tax (1954) 25 ITR 79 no other High Court in India had interpreted the word "assessment" as used in the proviso to section 34(3) of the late Act in a different way. The Madras High Court in that judgment had concluded that the word "assessment" meant not merely the computation of the income of the assessee but also the determination of the tax, payable by him. In re: Commissioner of Income‑tax, West Bengal v. Blackwood Hedge (India) (P.) (1971) 81 ITR 807, the Calcutta High Court re counted the three well‑known stages of imposition of tax, namely, (a) liability to pay tax, (b) computation of tax payable and (c) recovery of tax. It was accordingly observed that every order which contemplated computation of income or determination of the amount of tax payable was not an order of assessment within the meaning of late Income Tax Act 1922. In the next case relied upon by Mr. Ibrar Hussain Naqvi, Advocate, re: CIT Madras (Central)v. N.D. Georgopoules (1980) 125 ITR 630 the Madras High Court expressed the view that the word "assessment" normally connoted the entire process connecting from the submission of the return till the determination of tax liability. In re. CIT KERALA v. Datpathe (1972) 83 ITR 823, it was found that the word "total income" used in sections 66 and 110 of the Indian Income Tax Act, 1961 meant total income computed as envisaged by these sections and in accordance with the other provisions of the Act. The Supreme Court of India in re. CIT (Central) Delhi v. Harprashad and Co. (P.) Ltd. (1975) 99 ITR 118 was considering the definition of the word "income" as well as "total income" as used in various provisions of the late Income Tax Act, 1922. Their Lordships finally concluded that an income in order to come within the purview of definition must satisfy two conditions. Firstly, it must comprise the total amount of income, profits and gains referred to in section 4(1) of the Act. Secondly, it must be "computed" in the manner laid down in the Act." "In the view of their Lordships if either of these conditions failed, the income will not be part of the total income that can be brought to charge. It will be noted that the‑words "income" and "total income" as defined respectively in section 2(24) and section 2(44) of the Income Tax Ordinance bear almost the same meaning assigned to them under the late Act, 1922. Therefore, the ratio settled in the aforesaid judgment is clearly attracted to understand their meaning in the context of the Income Tax Ordinance as well.

Para. 19. The difficulty simply remains that the basic form and the meaning in which the levy was required to be computed has completely vanished in respect of a certain class of assessees due to introduction of presumptive tax regime.' To the extent of that class there is no basis whatsoever to compute the total income and then to charge the levy equal to 2 % of such total income. It will also be noted that the Fund is charged at 2% of the total' income of an Industrial Concern. In presumptive tax regime the, receipts are deemed to be total income and subjected to tax at a particular rate. Now if all receipts are taken as total income and subjected to a rate of 2% thereupon the charge will be excessive and disproportionate to the purpose for which it has been levied. Secondly, the deeming provisions of section 80CC cannot be read into Workers Welfare Fund Ordinance to convert a simple receipt into total income to form basis for computation of the charge. It is settled law that deeming provisions in a statute cannot spill over to other provisions in a statute and are to be construed strictly within the four corners of their objects. The deeming provisions of section 80CC, therefore, are confined only to the kind of receipts and the assessees mentioned therein. Neither the receipts nor the assessees mentioned therein are relevant for any other purpose including the charge of the Funds.

Para. 21. It is correct' that introduction of presumptive tax regime through section 80CC and other similar provisions has not rendered invalid the charging provisions of section 4 of Workers Welfare Fund Ordinance in any manner. However, as noted earlier, an income presumed to have been accrued to an assessee can neither be taken .to be his total income nor the same can be said to have been assessed or assessable under the provisions of the Income Tax Ordinance, 1979. The basis ford computation of the fund has vanished and with such change the levy of the fund in case of class of assessees covered by section 80CC is no more possible. The prayer of the Revenue for a liberal construction of the provisions of section 80CC read with section 4 of the Workers Welfare Fund Ordinance if granted in the manner it is being sought, a manner of blanks will have to be filled in and many deficiencies supplied to justify computation of the fund is not for the Courts to supply for deficiency in the language of law as framed. Where law expressly holds out to an assessee that in case of particular receipts the deduction made at source in respect thereof shall be his final discharge of liability under the Income Tax Ordinance, any further charge with reference to the provisions contained in another legislation cannot justify a further charge. Even by employing the most liberal rules of construction of machinery provisions we have not been able to support the working back of presumptive income by the Assessing Officer and then its subject to charge of Workers `Welfare Fund. The provisions of section 4 of Workers' Welfare Fund lay out the stage at which the levy of the fund has to be made. It is firstly at the time of filing of a return and in case of any change in the income return and the income assessed, at the time when the income is assessed although subsection (4) of section 4 further contemplates that an order for levy of fund can be made after an assessment has been framed yet the reference still remains to the framing of an assessment. There is no other incident or stage to which the levy of the fund can be linked. In order to grant the prayer of the Revenue not only this Court will have to lay down a rule which would amount to legislate but also a number of lacunas will have to be supplied. The charging provisions of section‑ 4 of Workers' Welfare Fund Ordinance and those of presumptive tax regime ‑under section 80CC to our mind cannot be reconciled or be interpreted in a way to justify a charge. The charge as noted earlier necessarily bears a reference to and follows pattern of a regular assessment framed on observation of usual formalities and following computation of income keeping in view the different provisions of Income Tax Ordinance. Since that does not happen in cases covered by section 80CC, the charge and computation of Fund in such cases is neither legally justified nor otherwise possible; The charging provisions of section 4 of Workers' Welfare Fund Ordinance are clear that the Legislature intended the charge on the real income of an industrial concern. There is nothing in these provisions which can possibly be extended, enlarged or stretched to hold that they levy was contemplated on presumptive income as well. "

5. In the case in hand there is another additional reason to hold that Workers Welfare Fund is not chargeable to the assessees covered by the provisions of section 80D (Minimum tax on income of certain persons). It. is that provisions of section 80D of the late Income Tax Ordinance, 1979 came into play only where neither any tax was paid or was payable by an assessee. In such cases an assessee was required to pay certain fixed amount on its turnover and the aggregate, of the declared turnover was deemed to be the income of the assessee to be charged to tax at the said specific rates. On the other hand the provisions of section 4 of Workers Welfare Fund Ordinance were attracted only where an industrial establishment either declared or an assessment in its respect was framed at an income of not less than Rs.1,00,000.

6. Since in the case of the assessees/industrial establishments covered by section 80D of the late Income Tax Ordinance, 1979 no tax was either payable by the assessee or was actually paid, the application of provisions of section 4 did not arise at all. Of course, there would generally be two situations in which an assessee did not pay income tax or it was not payable in its respect.. The first category could very well be of the assessees which had declared losses and these were accepted by the Revenue though with some variation as to the extent of actual losses. The second is the category where although an. income exceeding rupees one lac accrued to an assessee during the assessment year but was not subjected to levy of income tax on account of an exemption granted by law. That part of the issue already stands resolved by the Hon'ble Supreme Court of Pakistan against the Revenue in C.Ps. Nos. 38 of 2000, 156 to 180, 199 to 276, 278.to 283, 285 to 320, 323 to 411 and 518 to 534 of 2000.

7. Therefore, for the aforesaid as well as other reasons discussed by us in our judgment re: Commissioner of Income Tax and Wealth Tax Sialkot Zone v. Thapur (Pvt.) (supra), we will answer the first question in the affirmative to the effect that an industrial establishment covered by the provisions of section 80D of the late Income Tax Ordinance, 1979 was not liable to charge the Fund contemplated in section 4 of the Workers Welfare Fund Ordinance, 1971.

8. As far the second question is concerned, it does not arise out of the order of the Tribunal inasmuch as the scope of tax as defined in section 2(43) of the late Income Tax Ordinance, 1979 was neither discussed nor 'ruled upon by the learned Members of the Tribunal. Therefore, we will decline to answer the same.

9. Question No.1 answered in the affirmative. The reply to question No.2 is declined.

10. This judgment will also dispose of PTR Nos. 223 to 226 of 2003 in which the aforesaid two questions have been proposed for our answer and consideration.

M.B.A./C‑41/L Order accordingly