PAKARAB FERTILIZERS (PVT.) LIMITED VS INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN
2006 P T D 42
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
PAKARAB FERTILIZERS (PVT.) LIMITED
Versus
INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN and others
Income Tax Appeals Nos.134, 133, 135 and 136 of 2000, decided on /01/.
th
April, 2005. (a) Workers' Welfare Fund Ordinance (XXXVI of 1971)---
----Ss.2(f), proviso & 4---Income Tax Ordinance (XXXI of 1979), First Sched. Part IV, para. B(2)---Private limited company---Exemption from levy of Worker's Welfare Fund, claim of---Validity---Such company not falling in three specified categories of companies qualifying for exemption---Legal position would not change, if such company, though wholly owned by a. Corporation created by Federal Government, was not directly managed by such Corporation---Such company was, not exempt from levy of Fund.
(b) Interpretation of statutes---
----Fiscal statute---Exemption provisions would be construed strictly and in favour of Revenue. (Taxation).
Imtiaz Rashid Siddique and Imran Anjum for Appellant.
Muhammad Ilyas Khan for Respondents.
Date of hearing: 28th April, 2005.
ORDER
NASIM SIKANDAR, J.---These further appeals (I.T.As. Nos. 134, 133, 135 and 136 of 2000) under section 136 of the late Income Tax Ordinance, 1979 by a private limited company engaged in manufacture and sales of fertilizers seek to challenge an order of a Division Bench of the Income Tax Appellate Tribunal, Lahore dated 30-11-1999.
2. Following questions of law are claimed to have arisen out of the impugned order of the Tribunal:---
"(I) Whether the lower forums have erred in law by misinterpreting the scope of para. B(2) of Part IV of the First Schedule to Income Tax Ordinance, 1979 by failing to appreciate that the status of company as "public company" within the meaning of said provision, is dependent on holding of requisite shares by the Government, irrespective of title thereof?
(II) Whether the lower forums have fallen in error by misreading the provisions of exclusion clause to section 2(f) of the Workers' Welfare Fund Ordinance, 1971 whereby concern owned by the Government or by a Corporation established by Government or by a Corporation the majority shares of which are owned by the Government, is not liable to the charge of 2% in terms of the referred Ordinance?
(III) Whether the lower forums have erred to appreciate that the appellant is a concern owned by the Government or by a Corporation established by the Government and as such it is excluded from the purview of Workers' Welfare Fund Ordinance, 1971 in terms of section 4 read with section 2(f) thereof?
(IV) Whether the lower forums have erred in law by failing to appreciate that long standing practice and departmental conduct, of the income-tax officials, of treating the appellant as a "public company" within the meaning of para. B(2) of Part IV of the First Schedule to Income Tax Ordinance, 1979 and as a "concern" falling within the exclusion clause of section 2(f) read with section 4 of the Workers' Welfare Fund Ordinance, 1971 over the years, has created a vested right which cannot be undone unilaterally vis-a-vis the status of the appellant?
(V) Whether the respondent No.1 has erred in law by ignoring the settled law that it is bound by its own judgments and the same cannot be undone in the absence of any due cause?"
3. During the pendency of these appeals it appears that after setting aside and remand of certain issues by the Tribunal by way of the impugned order these issues again came up for hearing before them in the second round in cross-appeals decided on 30-5-2003. According to the learned counsel for the appellant after the said decision of the Tribunal only the issue levy of Workers' Welfare Fund charged under the provisions of Workers' Welfare Fund Ordinance, 1971 remains to be decided. Therefore, states that only Questions Nos.2 to 4 as reproduced above need to be considered and answered.
4. Learned Members of the Tribunal in their earlier order dated 30-11-1999, which is now being assailed by way of these appeals, decided the issue of levy of Workers' Welfare Fund on the income of the appellant in the following words, contained in para. 9 of their order:---
"9. We have considered the contentions of both the parties and have evaluated the arguments of their learned representatives. In our view the learned Commission has rightly upheld the orders of the Assessing Officer regarding the levy of W.W.F. by placing reliance on the judgment of the ITAT mentioned above. In its above mentioned judgment the learned ITAT has thrashed out the issue of application of W.W.F. to the assessee threadbare before restoring the order of the Assessing Officer on his issue in the assessment year 1991-92. The observations of the learned Tribunal are worth mentioning and hence re-produced as under:---
"It is noted that exemption from W.W.F. is available to all industrial establishment which is owned:
(1) by Government; or
(2) by a Corporation established by the Government; or
(3) by a Corporation, the majority of shares of which is owned by the Government.
In the present case, the industrial establishment is owned by the assessee-Company and by the N.F.C. or the Government, and therefore does not fall in any of the above categories. Even otherwise, the shares of the assessee-Company are not entirely held by the N.F.C. Therefore, it cannot be said that industrial establishment is wholly owned by the N.F.C. The order of the learned C.I.T.(A) on this point is, therefore, vacated and that of the Assessing Officer restored."
Since the facts of the case as adjudicated upon by the ITAT in its above mentioned judgment have not materially changed during the period under consideration, so we do not feel persuaded to interfere with the impugned appellate order of the learned Commissioner. Therefore, assessee's appeals on the levy of W.W.F. are rejected".
5. After hearing the learned counsel for the parties we are- not persuaded to interfere with the impugned order. The learned Members of the Tribunal were correct in finding that the industrial establishment was owned by the appellant, a private limited company, namely Pak-Arab Fertilizers (Pvt.) Limited, Lahore, which did not fall in the three categories qualifying for exemption as enumerated by the learned Members in their order. The proviso to sub-clause (f) of section 2 of the Workers' Welfare Fund Ordinance, 1971 excludes the charge and the charging provisions of section 4 of that Ordinance to a concern or establishment "which is owned by Government or by a Corporation established by Government or by a Corporation, the majority of the shares of which is owned by the Government." In the case in hand even in earlier years the learned Members of the Tribunal had refused to allow the claimed exemption in the assessment year 1991-92 by way of their order dated 13-1-1998. The factual situation since then has not changed. The industrial establishment or the manufacturing concern is owned by the private limited company and, therefore, not being owned by a Government, or a Corporation established by Government or by a Corporation majority of shares of which are owned by the Government, it is clearly not covered by the proviso (f) to section 2 of the said Ordinance. The fact that the appellant private limited company is wholly owned company of Messrs National Fertilizers Corporation will not change the legal position inasmuch as the concern is not directly being managed by the National Fertilizers Corporation.
6. Besides the above in our considered opinion the purpose of the Fund will be defeated in case the interpretation of the appellant is accepted. The purpose of establishment of the Fund is to provide residential accommodation and other facilities for the workers or matters connected therewith or incidental thereto. A private limited company managing an establishment comprising of hundreds of workers cannot escape the levy merely for the reasons that it is owned by a Corporation created by the Federal Government. The proviso to section 2(f) of the Ordinance is in nature of creating an exemption in favour of certain kinds of concerns and establishments. It is settled preposition of law that exemption provisions are to be construed strictly and in favour of the Revenue. In the case in hand there is absolutely no doubt that their appellant does not fall in any of the three categories as contemplated in the proviso. Therefore, it cannot claim an exemption from the levy of the Fund. Even if there was any doubt, which we do not see in this case, the matter had to be resolved in favour of the Revenue.
7. Therefore, our answer to the aforesaid Questions Nos.2, 3 & 4 as given in the opening part of the order, is in the negative. The rest of the questions have not been pressed.
S.A.K./P-90/L???????????????????????????????????????????????????????????????????????? Order accordingly.