I.T.A. No. 1613/KB of 2005, decided on 8th July, 2006. VS I.T.A. No. 1613/KB of 2005, decided on 8th July, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1687 (2006)

(a) Income Tax Ordinance (XLIX of 2001)---

---Ss. 221, 152(6)(2.) & 159---Rectification of mistake---Payment to non-residents---Exemption or lower rate certificate---Refusal to rectify order passed under S.152(6) of the Income Tax Ordinance, 2001 confirming the order directing the assessee to deduct tax from the payment in accordance with S.152(2) of the Income Tax Ordinance, 2001---Validity---Finding recorded in respect of status of the foreign based company had nothing to do with the provision of S.159 of the Income Tax Ordinance, 2001 where the affecting person may exercise its rights for the determination of its status---Purpose of S.152 of the Income Tax Ordinance, 2001 was served through a restricted interim order to save the deducting person from further chargeability---Finding recorded so far as the status was concerned, would not affect while determining the issue under S.159 of the Income Tax Ordinance, 2001 as the same had been recorded without affording an opportunity to the affecting person whose status had been declared---Order directing to deduct tax was elaborate, clear, unambiguous, free from errors, containing sufficient reasons to believe that the assessee was liable to deduct tax---Order passed on rectification application did not warrant interference besides being beyond the scope of rectification---Appeal was dismissed by the Appellate Tribunal.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 221, 152(6) & 127---Income Tax Ordinance, (XXXI of 1979), Ss.87 & 129---Rectification of mistake---Request for non-deduction of tax was refused---Application for rectification---Rejection of---Department contended that since initial order under S.152(6) of the Income Tax Ordinance, 2001 was not appealable, the same issue could not be re-agitated in appeal taking benefit of S.221 of the Income Tax Ordinance, 2001---Such was an administrative order, no appeal was provided and as such, mere filing of rectification application, would not make the actual controversy appealable---Validity---Order under S.152(6) of the Income Tax Ordinance, 2001 was not appealable under the provision of appeals to Commissioner (Appeals)---Section 221 of the Income Tax Ordinance, 2001 contrary to 5.127 of the Income Tax Ordinance, 2001, provide rectification of mistake by amending any order passed by the Commissioner, the Commissioner (Appeals) or the Appellate Tribunal under the statute---Since every order was appealable order on rectification application, the assessee having no recourse under S.152(6) of the Income Tax Ordinance, 2001, diverted towards rectification in order to resolve the issue/controversy up to the level of appeals taking benefit of the fact that all orders of rectification were apparently appealabe---Any order which was not appealable, became appealable in circumstances, by virtue of invoking jurisdiction under S.221 of the Income Tax Ordinance, 2001---Appeal at the instance of assessee was maintainable so far as- the order of rectification was concerned, subject to restrictions laid down in order reported as 2002 PTD 570.

2002 PTD 570 ref.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 152(6), 159, 160 & 161---Payments to non-residents---Non- deduction of tax---Nature of relief---Relief provided to the tax deducting person under the statute, from the face of it was interim in nature simply to avoid consequence of non-deduction of tax under the provision of S.152(6) of the Income Tax Ordinance; 2001 and to save skin from clutches of Ss.160 and 161 of the Income Tax Ordinance, 2001---Since affected person based outside Pakistan was a necessary party for all such findings and in his absence, no definite finding regarding his status could be recorded under S.152(6) of the Income Tax Ordinance, 2001 instead of S.159 of the Income Tax Ordinance, 2001---Section 152(6) of the Income Tax Ordinance, 2001 provides an interim relief in the absence of affected person and for this reason, no appeal had been provided from the order and the finding recorded in the order was of the nature that it was mere a judicial process in the absence of affected person whereby parties ordered to 'do or not to do a particular act to avoid consequences hereof.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 152(5) & (6)---Payments to non-residents---Word "believe" is different from "view", "opinion" or "any specific finding"---By using the word "believe" in S.152(5) and (6) of the Income Tax Ordinance, 2001, the intention of the legislature was to gather from phraseology implied in a particular statutory provision.

(e) Income Tax Ordinance (XLIX of 2001)---

----S. 152(5) & (6)---Payments to non-residents---Non-deduction of tax---Law referred in S.152(5) & (6) of the Income Tax Ordinance, 2001, did not impose condition or any burden on the Commissioner to prove his finding by positive evidence, which apparently otherwise was not possible in the absence of person whose tax was being deducted.

(f) Income-tax---

--Discretion-Belief-Discretion had been judicially exercised in arriving at a belief and if it was once found to be so exercised, no interference would be possible.

(g) Income Tax Ordinance (XLIX of 2001)---

----S. 152---Payments to non-residents---Word "believe"---Definite evidence---Requirement of law in terms of meaning of the word "believe" was that the order should be passed to the best of the knowledge of Commissioner without indulging into the direct or definite evidence---Commissioner could not be required to undertake re-appraisal of evidence or interpretation of any provision of law for coming to an opinion refusing or allowing the relief under S.152 of the Income Tax Ordinance, 2001 taking into consideration status of third party without affording him an opportunity of hearing.

(h) Income Tax Ordinance (XLIX of 2001)---

----Ss. 159 & 152(6)---Exemption or lower rate certificate---Payments to non-residents---Request for non-deduction of tax---Rejection of---Validity and effect---Finding of, the Commissioner would not disentitle the company based outside the Pakistan to agitate the issue invoking S.159 of the Income Tax Ordinance, 2001 which provides remedy in terms of exemption of deduction of tax under S.159 of the Income Tax Ordinance, 2001--If the Commissioner is satisfied that an amount was exempt from tax, the Commissioner shall, upon application from a person whose income was not likely to be chargeable to tax, issue an exemption certificate irrespective of the order under S.152(6) of the Income Tax Ordinance, 2001 as remedy under S.152(6) of the Income Tax Ordinance, 2001 could not determine the status of foreign based person for all purposes under the statute.

(i) Income-tax---

----Assessee---Status, determination of---Opportunity of being heard---Status of the parties could not be determined unless the person, whose tax was being deducted, was not heard---No one could be condemned unheard---Would be improper and illegal to declare the status of a person without affording an opportunity of hearing and any order in this context, without hearing of the concerned person, would be of no consequence.

Farogh Nasim with Fasihuz Zaman, Chartered Accountant for Appellants.

Aqeel Abbasi, D.R. and Ayaz Mahmood D.R. for Respondents.

Date of hearing: 15th June, 2006.

ORDER

The appellant has through this appeal challenged the order of the CIT(A), dated 28-9-2005 confirming the order of the Commissioner of Income Tax Companies Zone-IV, Karachi, refusing to rectify the order under section 152(6) vide section 221 of the Income Tax Ordinance, 2001, consequently confirming the order directing the appellant to deduct tax from the payment in accordance with subsection (2) of section 152 of Ordinance, 2001.

2. The following objections have been taken by the appellant to the order, dated 28-9-2005:--

"2. The learned CIT Appeal has erred in confirming the rejection on application of the appellant under section 221 of the Income Tax Ordinance, 2001 by the learned Commissioner of Income Tax IV, Karachi.

(3) The learned CIT Appeals has further erred in confirming the decision of the learned Commissioner of Income Tax that Messrs Independent Media Corporation (Pvt.) Ltd. is a Permanent Establishment of Messrs International Media Corporation FZLLC.

(4) The learned CIT Appeals has again erred in confirming the direction given by learned Commissioner of Income Tax, Zone IV, Karachi in her order to Messrs Independent Media Corporation (Pvt.) Limited to deduct tax from the payment to be remitted to Messrs International Media Corporation FZLLC. Dubai.

(5) The learned CIT(A) so also the learned CIT have erred in not allowing the benefit available to the appellant under the Avoidance of Double Taxation Treaty between Pakistan and the U.A.E, hence violating section 107 of the Income Tax Ordinance, 2001.

(6) The learned Authorities below have erred in not appreciating that the income of Messrs International Media Corporation FZLLC, Dubai, neither accrues nor arises in any manner in Pakistan thus absolving the appellant from deducting tax at source.

(7) The learned Authorities below have erred in omitting the provisions of Chapter VII of the Income Tax Ordinance, 2001."

3. The brief facts are that the appellant Messrs Independent Media Corporation (Private) Limited, hereinafter referred to as "IMC" is a private limited company incorporated in Pakistan. The "IMC" is a production house, which produces and develops software and programmes for television channels. The "IMC" has necessary expertise not only to produce the programmes, but also obtaining advertisements for the same.

4. In this backdrop, the appellant entered into an agreement with a Dubai based non-resident company Messrs International Media Corporation FZLLC in Dubai on 25-9-2002 for purchase of their airtime. Messrs International Media Corporation FZLLC hereinafter called as "FZLLC", is a Free Zone Limited Liability Company, incorporated in Dubai. According to the agreement entered into between Messrs "IMC" and Messrs "FZLLC" on 22-9-2002, the appellant (IMC) purchased airtime from Messrs FZLLC for transmission of its programme, contents and advertisements for a consideration of US$ 180,000 per month to be remitted to the credit of FZLLC Dubai latest by 30-6-2005.

Since, in view of the appellant, the income of Messrs FZLLC is not chargeable to tax in Pakistan, therefore, before remitting the airtime charges to Messrs FZLLC, permission of the learned Commissioner of Income Tax, Companies IV, Karachi, was sought in terms of section 152(5) of the Income Tax Ordinance, 2001, to make the payment to Messrs FZLLC without deduction of income tax. The learned Commissioner of Income Tax, Companies IV, Karachi, did not agree with appellant's contention that income of Messrs FZLLC is not chargeable to tax in Pakistan. She, therefore, vide her order under section 152(6) of the Income Tax Ordinance, 2001, passed on 13-6-2005, regretted to accede to the request of appellant and instead directed it to deduct income tax before making payment of airtime charges to Messrs FZLLC. According to the worthy Commissioner of Income Tax, Companies IV, Karachi, the appellant constitutes a "PE" and is 'the agent of Messrs FZLLC in Pakistan, therefore, income of Messrs FZLLC is chargeable to tax in Pakistan. Therefore, an application within the meaning of section 221 of the Income Tax Ordinance, 2001 was filed with the Commissioner of Income Tax. Companies IV, Karachi requesting her to modify her order under section 152(6) of the Income Tax Ordinance, 2001 in the light of relevant provisions of law, the agreement of avoidance of double taxation and fact of the case as mistake apparent from record because of incorrect appreciation of fact and allow the appellant to make payment to Messrs FZLLC without deduction of income tax. Detailed reasons have been recorded in the application under section 221. The learned Commissioner of Income Tax Companies IV, Karachi, however, did not find them convincing. She declined to accede to the request of the appellant to modify her order under section 152(6) in favour of the appellant.

5. Since we are dilating on the issue involving rectification of the order, the detailed finding recorded in the order under section 152(6) of the Ordinance, 2001 is reproduced hereunder being necessary:

"As per the said agreement, International Media Corporation FZLLC, Dubai, has sold the entire 24 hours airtime per day solely to one party i.e. Messrs Independent Media Corporation (Pvt.) Ltd., (IMC) and International Media Corporation; FZLLC Dubai, is entitled to 5 minutes commercial advertising per hour at a time or combination of times to be chosen by International Media Corporation FZLLC, Dubai. In these 5 minutes, Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) inserts commercials for International Media Corporation FZLLC, Dubai, into the daily transmissions schedule at no cost to International Media Corporation FZLLC, Dubai, Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) thus manages advertisements from Pakistani companies for International Media Corporation FZLLC, Dubai.

(2) The entire amount of airtime sold to Messrs Independent Media Corporation (Pvt.) Ltd., (IMC) results in business activity of International Media Corporation FZLLC Dubai and contributes to the earning of the profits or gains. Selling of entire airtime to one party i.e. Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) by International Media Corporation FZLLC Dubai in Pakistan points to their business collaboration. Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) is not only airing its programmes but also managing advertisements from other companies in Pakistan for itself and for International Media Corporation FZLLC Dubai. There is thus a business connection between' the business carried on by International Media Corporation FZLLC Dubai a non-resident and Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) that yields profits or gains and activity in Pakistan. Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) yields activity in Pakistan and contributes to the earnings of the profits or gains.

The statement of accounts attached with the income tax return of the taxpayer i.e. Messrs Independent Media Corporation (Pvt.) Ltd., (IMC) show that out of total claim, trading expenses of Rs.210,349,794, the deduction claimed on airtime expenditure (purchased from International Media Corporation FZLLC Dubai) is Rs.93,879,000 i.e. 44.63% of the total trading expense. This airtime expenditure of Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) has increased to Rs.126,295,200 during the year 1-7-2003 to 30-6-2004 (tax year 2004). The major business expense is thus on account of utilization of telecommunication facilities.

(3) It has also been observed that the address of Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) reflected on its letter head as 323, 324, Building No.2, Dubai Media City, is the same as that of International Media Corporation FZLLC, Dubai, as given in the agreement between Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) and International Media Corporation FZLLC Dubai, dated 25-9-2002. Fax number of the two companies is also the same i.e. 0097-14-918935 as shown in the letter head of Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) and the same shown to be of International Media Corporation FZLLC Dubai in the said agreement between the two parties, dated 25-9-2002.

(4) The perusal of the above exclusive or almost exclusive agreement between Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) and International Media Corporation FZLLC Dubai reveals that there is exclusive right for Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) for 24 hours a day. Thus, the International Media Corporation FZLLC has no other agent or broker or commission agent in Pakistan to look after their interest in Pakistan except Messrs Independent Media Corporation (Pvt.) Ltd., who apart from earning of their income, also provides a facility free of cost to International Media Corporation FZLLC for the transmission of commercials from Pakistan.

(5) The perusal of Para. 5 of Article 5 of the Treaty with UAE shows that if there is an agent who WHOLLY OR ALMOST WHOLLY work on behalf of the non-resident enterprise, it could be inferred that the agent in Pakistan is not an independent one but he is fully dependent on the business relationship with the enterprise based at UAE. For the sake of facility, the relevant para is reproduced as under:--

"An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status provided that such persons are acting in the ordinary course of their business. However, when the activities of such an agent are devoted whole or almost wholly on behalf of that enterprise, he will not be considered as agent of an independent status within the meaning of this paragraph."

Considering that the business of International Media Corporation FZLLC Dubai is wholly or- partly carried on through Messrs Independent Media Corporation (Pvt.) Ltd. (IMC) and there is a business relation, business connection between the two, International Media Corporation (Pvt.) Ltd. is the Permanent Establishment (PE) of a non-resident i.e. International Media Corporation FZLLC, Dubai under section 2(41) of the Ordinance.

In view of the above position, the income of a non-resident is not exempted as per Article 7 of Convention between Islamic Republic of Pakistan and United Arab Emirates for the Avoidance of Double Taxation and the Prevention of tax on income which reads as under:--

"The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable directly or indirectly to that permanent establishment.

As the non-resident company has a Permanent Establishment (PE) in Pakistan, hence the request of the taxpayer cannot be accepted.

In view of the above discussion, the undersigned, in exercise of the powers vested under subsection (6) of section 152 of the Income Tax Ordinance, 2001, hereby directs that independentMedia Corporation (Pvt.) Ltd. shall deduct tax in accordance with law on the said payments to be made to International Media Corporation FZLLC, Dubai."

6. Since no appeal is provided from the order under section 152(6) of the Ordinance, 2001 the IMC appellant being aggrieved and dissatisfied from the order, selected an alternate form, whereby moved an application under section 221 making request to rectify the order on the point that the non-resident company is not chargeable to tax in Pakistan in view of the different status and the agreement, dated 25-9-2002 between Messrs Independent Media Corporation (Pvt.) Limited and Messrs International Media Corporation FZLLC, Dubai, and because of Avoidance of Double Taxation Treaty. The Commissioner of Income Tax, Companies Zone-IV, Karachi, dismissed the rectification application. In continuation of the litigation, the appellant preferred first appeal before the CIT(A), who was pleased to confirm the order of the Commissioner with the observation that since the concept of "Permanent Establishment" was the decisive factor in establishing whether tax levied on the non-resident was legitimate or not, and further holding the appellant to have a "Permanent Establishment" and, therefore, upheld and confirmed the order of the assessing authority under section 152(6) read with section 221 for the levy of withholding tax.

7. We have heard the learned representatives of the two parties at length. Mr. Farogh Nasim, learned counsel for the appellant, vehemently argued that the learned CIT(A) has erred in confirming the rejection of application of the appellant under section 221 of the Ordinance, 2001, confirming the decision that Messrs Independent Media Corporation (Pvt.) Limited is a Permanent Establishment of Messrs International Media Corporation FZLLC, Dubai, and confirming the direction to deduct tax from payment to be remitted to Messrs International Media Corporation FZLLC, Dubai. It is added that the Avoidance of Double Taxation Treaty between Pakistan and the United Arab Emirates has been totally ignored whereby section 107 of the Ordinance, 2001 has been violated, besides income of Messrs International Media Corporation FZLLC, Dubai, neither accrues no arises in any manner in Pakistan.

8. The learned counsel for the Department Mr. Aqeel Abbasi, rebutted the appellant's version arguing that no reason appears to rectify the order under section 221, as such the learned CIT(A) was justified not to interfere with the order refusing request of non-deduction of tax. It is added that since initial order under section 152(6) was not appealable, hence the same issue cannot be re-agitated in appeal taking benefit of section 221 of the Ordinance, 2001. The learned D.R. also urged that it is an administrative order, hence no appeal is provided and as such, mere filing of rectification application, would not make the actual controversy appealable.

9. Before taking into consideration the arguments of the learned counsel for the appellant, we would prefer to refer section 127 of the Ordinance, 2001, which deals with the provision of appeals to the Commissioner (Appeals). Perusal of the appellate provision leaves no c doubt that order under section 152(6) is not an appealable order. However, section 221 contrary to section 127, provides rectification of mistake by amending any order passed by the Commissioner, the Commissioner (Appeals) or the Appellate Tribunal under the statute and since every order is an appealable order on rectification application, the appellant having no recourse under section 152(6), diverted towards rectification in order to resolve the issue/controversy upto the level of appeals taking benefit of the fact that all orders of rectification are apparently appealable, hence in the circumstances, any order which is not appealable, becomes appealable by virtue of invoking jurisdiction under section 221 of the Ordinance, 2001. In this context, we would refer to the Ordinance, 1979 wherein the provisions of section 87 have been made appealable although having no coverage under section 129 of the Repealed Ordinance, 1979. The time limit provided for rectification of the order is also extended for passing an order under section 87. We are, therefore, of the considered opinion that the appeal on the instance of the appellant is maintainable so far as the order of rectification is concerned, subject to restrictions laid down vide para. 3 Page 575 of the order reported as 2002 PTD 570.

10. The next discussion is leading to the provisions of sections 152 and 159 of the Ordinance, 2001. Both the provisions are independent in nature providing distinct and independent remedy respectively to appellant/deducting person and the person whose tax is being deducted. The relevant provisions of the Ordinance, 2001 in this context are reproduced hereunder:--

152. Payments to non-residents.---(1) Every person paying an amount of royalty or fees for technical services to a non-resident person that is chargeable to tax under section 6 shall deduct tax from the gross amount paid at the rate specified in Division IV of Part I of the First Schedule.

(2) Subject to subsection (3), every person paying an amount to a non-resident person (other than an amount to which sub-section (1) applies) shall deduct tax from the gross amount paid at the rate specified in Division II or Part III of the First Schedule.

(4) Where a person claims to be a representative of a non-resident person for the purpose of clause (c) of subsection (3), the person shall file a declaration to that effect with the Commissioner prior to making any payment to the non-resident person.

(5) Where a person intends to make a payment to a non-resident person without deduction of tax under this section, the-person shall, before making the payment, furnish to the Commissioner a notice in writing setting out:--

(a) the name and address of the non-resident person; and

(b) the nature and amount of the payment.

(6) Where a person has notified the Commissioner of a payment under subsection (5) and the Commissioner has reasonable grounds to believe that the non-resident person is chargeable to tax under his Ordinance in respect of the payment, the Commissioner may, by order in writing, direct the person making the payment to deduct tax from the payment in accordance with subsection (2).

159. Exemption or lower rate certificate.---(1) Where the Commissioner is satisfied, that an amount to which Division II or III of this Part or Chapter XII applies is

(a) exempt from tax under this Ordinance; or

(b) subject to tax at a rate lower than that specified in the First Schedule.

The Commissioner shall, upon application in writing by the person, issue the person with an exemption or lower rate certificate.

(1A) The Commissioner shall, upon application from a person whose income is not likely to be chargeable to tax under this Ordinance, issue exemption certificate for the profit or debt referred to in clause (c) of subsection (1) of section 151.

(2) A person required to collect advance tax under Division II of this Part or deduct tax from a payment under Division III of this Part or deduct or collect tax under Chapter XII shall collect or deduct the full amount of tax specified in Division II or III or Chapter XII, as the case may be, unless there is in force a certificate issued under subsection (1) relating to the collection or deduction of such tax, in which case the person shall comply with the certificate."

So far as section 152 is concerned, it specifically provides that every person paying an amount or fees for technical services to a non-resident person that is chargeable to tax under section 152(6) (tax on certain payments to non-residents); shall deduct tax from the gross amount paid at the rate specifically provided in. Division IV of Part-I of the First Schedule. Looking into the various circumstances, a relief has been provided to a deducting person vide subsection (5) of section 152 in the terms that where a person, who intends to make a payment to a non-resident person without deducting tax, shall furnish to the Commissioner the particulars and nature of payment. Subsection (5A) provides that the Commissioner shall pass an order accepting the contention or in case of refusal, shall pass an order refusing the relief if reasonable grounds are there to believe that non-resident person is chargeable to tax under this Ordinance in respect of such payment and in that case, the Commissioner shall direct to deduct tax from the payment in accordance with sub-section (2). The matter does not end here as alternate remedy is provided vide section 159, which provides that the person whose tax is being deducted may also apply for exemption in the same circumstances. However, no relief is asked for under section 159 and the appellant has exercised jurisdiction vested in section 152(5) and (6) and due to denial of relief, the appellant again invoked jurisdiction under section 221 which is also refused, hence the initial point for determination in the circumstances, would be whether the order directing to make payment is suffering from errors requiring correction invoking section 221 of the Ordinance, 2001, which is exactly the subject-matter of the appeal before us.

11. A perusal of the order, dated 13-6-2005 in this context shows that the request of the taxpayer was duly considered in the context of Permanent Establishment as per section 2(41) of the Ordinance, 2001, the Convention between the Islamic Republic of Pakistan and the United Arab Emirates for Avoidance of Double Taxation and Prevention of Tax on Income and further other details. The Commissioner of Income Tax, Companies Zone-IV, Karachi, taking into consideration the ingredients of the agreement, obligations and responsibilities' of the IMC, transmission time and frequency, recorded the finding that Messrs International Media Corporation FZLLC, Dubai, has sold the entire 24 hours airtime per day to Messrs Independent Media Corporation (Pvt.) Limited except that 5 minutes commercial' advertising per hour at a time or combination of times on the selection of Messrs International Media Corporation FZLLC, Dubai, has been left with Messrs International Media Corporation FZLLC, Dubai at no cost to Messrs International Media Corporation FZLLC, Dubai and for this reason, it is held that the appellant manage advertisement from Pakistani companies for Dubai based Messrs International Media Corporation FZLLC and thus, the entire amount of airtime results in business activity of Messrs International Media Corporation FZLLC, Dubai and contributes to the earning of the profits or gains. It is added that selling of entire airtime to one party in Pakistan means business collaboration and therefore, it is presumed that IMC is not only airing its programmes but also managing advertisements from other companies in Pakistan for itself and for Messrs International Media Corporations FZLLC, Dubai. In these circumstances, it cannot be ruled out that there is a business connection between a non-resident and Messrs Independent Media (Pvt.) Limited resulting into profits or gains and activity in Pakistan.

12. The learned Commissioner vide order, dated 13-6-2006, further considered the statement of accounts attached with the income tax returns and also noted that the address of Messrs Independent Media (Pvt.) limited reflecting on its letterhead is the same as that of Messrs International Media Corporation FZLLC, Dubai, as given in the agreement. Besides, the fax number of the two companies is also the same as per letterhead of Messrs Independent Media (Pvt.) Limited and the same shown to be of Messrs International Media Corporation FZLLC, Dubai in the said agreement between the two parties. It is further noted that 24 hours airtime has been sold, as such there is no other agent or broker or commission agent in Pakistan to look after their interests in Pakistan except the appellant and in such circumstances, the agent in Pakistan is not an independent one who is fully dependent on the business relationship based on UAE. In this context, the Commissioner has relied upon the relevant para, which is reproduced below:--

"An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status provided that such persons are acting in the ordinary course of their business. 'However, when the activities of such an agent are devoted wholly or almost wholly on behalf of that enterprise he will not be considered an agent of an independent status within the meaning of this paragraph."

And lastly it is held:--

"In view of the above position, the income of a non-resident is not exempted as per Article 7 of Convention between Islamic Republic of Pakistan and' United Arab Emirates for the Avoidance of Double Taxation and the Prevention of tax on income which reads as under:

"The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in other Contracting State through a permanent

establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable directly or indirectly to that permanent establishment.

As the non-resident company has a Permanent Establishment (PE) in Pakistan, hence the request of the taxpayer cannot be accepted.

In view of the above discussion, the undersigned in exercise of the power vested under subsection (6) of section 152 of the Income Tax Ordinance, 2001, hereby directs that independent Media Corporation (Pvt.) Ltd. shall deduct tax in accordance with law on the said payments to be made to International Media Corporation FZLLC, Dubai."

13. The above finding based on thy: discussion thereof is very much clear that there were reasonable grounds to believe that the non-resident person is chargeable to tax. In fact, the relief provided to the tax deducting person under the statute, from the face of it is interim in nature simply to avoid consequence of non-deduction of tax under this provision of law and to save skin from clutches of sections 160 and 161 of the Ordinance and since the affecting person based outside Pakistan is a necessary party for all such findings and in its absence, no definite finding regarding his status be recorded under section 152(6) instead of section 159, hence we are of the considered opinion and find that section 152(6) provides an interim relief in the absence of affected person and for this reason no appeal has been provided from the order and the finding recorded in the order is of the nature that it is mere a judicial process in the absence of affected person whereby parties ordered to do or not to do a particular act to avoid consequences thereof. It is a settled or maxim of law that no one could be condemned unheard, hence in the absence of the affected person, any order without adhering to the principle of audi alteram partem could not sustain, therefore, the statute has provided an interim relief based on prima facie case neither perpetual nor permanent. For this reason, the statute has used the word 'believe" which is different from "view", "opinion" or "any specific finding." By using the word "believe" in .section 152(5) and (6), the intention of the legislature is to gather from phraseology implied in a particular statutory provision. In the circumstances, the law referred to above, does not impose condition or any burden on the Commissioner to prove hi finding by positive evidence, which is apparently even otherwise not possible in the absence of person whose tax is being deducted. What has to be seen in such cases, is to restrict to the fact that discretion has been judicially exercised in arriving at a belief and if it is once found to be so exercised, no interference would be possible. The dictionary meaning of the word "believe" would show "its acceptance of fact based on at least assumed facts. It is a conclusion arrived at from external sources after weighing probability, conviction of the mind arising not from actual perception or knowledge but by way of inference." In fact, the requirement of law in terms of meaning of the word "believe" is that the order should be passed to the best of the knowledge of Commissioner without indulging into the direct or definite evidence. The Commissioner, therefore, would not be required to undertake re-appraisal of evidence or interpretation of any provision of law for coming to an opinion refusing or allowing the relief under section 152 taking into consideration status of third party without affording an opportunity of hearing.

Irrespective of the above discussion, a detailed order has been passed although the relief is of interim nature open to further litigation only by a foreign based company under section 159 of the Ordinance wherein its status is to be looked into. The perusal of the order hardly shows any ambiguity besides not suffering from any omission, error or defect, on the contrary, a detailed order has been passed irrespective of spirit of section 152 declaring status of foreign based company without affording an opportunity of hearing.

14. In the circumstances, supra, the finding of the Commissioner under this provision of law would not disentitle the Dubai based Messrs International Media Corporation FZLLC to agitate the issue invoking section 159 of the Ordinance, which provides remedy in' terms of exemption of deduction of tax under section 159. If the Commissioner is satisfied that an amount to which Division II or III of this Part applies, is exempt from tax under this Ordinance, the Commissioner shall, upon application from a person whose income is not likely to be chargeable to tax under this Ordinance, issue an exemption certificate irrespective of the order under section 152(6) as remedy under section 152(6) cannot determine the status of foreign based person for all purposes under the statutes. It is worth-mentioning that remedy available to the Dubai based Messrs International Media Corporation FZLLC is still alive for the reason that the status of the parties cannot be determined unless the person, whose tax is being deducted, is not heard. As held above, no one can be condemned unheard, it would be improper and illegal to declare the status of a person without affording an opportunity of hearing and any order in this context, without hearing of the concerned person, would be of no consequence.

15. As a result of above discussion, we are of the further considered opinion that the findings recorded vide order, dated 13-6-2005 in respect of status of the foreign based company, is nothing to do with the provisions of section 159 where the affecting person may exercise its rights for the determination of its status. The purpose of section 152 is served through a restricted interim order to save the deducting person from further chargeability, therefore, the finding recorded, so far as the status is concerned, would not affect while determining the issue under section 159 of the Ordinance, 2001 as the same has been recorded without affording an opportunity to the affecting person whose status has been declared.

16. However, the order directing to deduct tax is elaborate, clear, unambiguous, free from errors, containing sufficient reasons to believe that the appellant is liable to deduct tax, thus does not warrant interference. We have, therefore, no hesitation in holding that the order passed on rectification application, dated 18-5-2005 does not warrant interference besides being beyond the scope of rectification, as a result thereof the appeal on the instance of Messrs Independent Media Corporation (Pvt.) Limited stands dismissed.

17. Before parting with the order, we would refer to the letter, dated 11-6-2006 written by Messrs International Media Corporation FZLLC to the appellant. The last two paras being most relevant, are reproduced hereunder:--

"In any event, in order to maintain our business relationship with you, we request you to make full payment without any deduction of tax or further delay. If you wish to deduct tax at source, then the entire gross amount as per our contract is to be paid by you to us and the deduction of tax at source will have to be borne by you failing which we shall be left with no option but to seriously re-consider our arrangements with you and take necessary legal action to recover our fees for airtime charges.

We have also mentioned earlier that we have a number of customers approaching us from India, Bangladesh and other countries who have already clarified that there shall be no deduction of tax at source for providing airtime from Dubai. Therefore, we feel it is unreasonable for you to deduct any taxes for our services for the aforementioned reasons, and request you to make the payment in full at the earliest."

18. The learned counsel stressed that in case the relief is not allowed, the appellant will loose his business, hence the appellant has no other course except to make the payment in full. We are, however, not in agreement with the learned counsel for the reason that the contents of the letter may not abolish the statutory provisions, besides it will amount to ask for a. relief under threat. The authorities acting under a statutory provision, are nothing to do with the business terms of the parties and its continuation. As such, any such letter may not be helpful to restrict the course of statute.

19. Order accordingly.

C.M.A./28/Tax (Trib.)Appeal dismissed.