2008 P T D (Trib.) 493
[Income-tax Appellate Tribunal Pakistan]
Before Rasheed Ahmed Sheikh, Judicial Member and Mian Masood Ahmad, Accountant Member
I.T.A. No.234/LB of 2007, decided on 07/12/2007.
Income Tax Ordinance (XLIX of 2001)---
----Ss.233(3), 115(4), First Sched., Part-IV, Division-II, First Sched., Part-II, Division-IV, Second Sched., Part-II Cl. (5) & Seventh Sched., Part-II---Brokerage and Commission---Indenting commission---Rate of tax---Statement under S.115(4) of the Income Tax Ordinance, 2001 was filed giving rise to a claim of refund on the ground that leviable rate of tax was 1.25% on indenting commission derived on export of cotton yarn as per Cl. (5) of Part-II of the Second Sched. read with Part-II of the Seventh Sched. as also Division-IV of Part-II of the First Sched. to the Income Tax Ordinance, 2001---Assessing Officer assessed rate of tax as 5% in terms of S.233 read with Part-IV of the First Sched., to the Income Tax Ordinance, 2001 as final discharge of liability giving rise to no refund on that account---Validity---Clause (5) of the Part-II of the Second Schedule to the Income Tax Ordinance, 2001 provides that the tax chargeable in respect of commission received by an export Indenting Agent shall be at the rate equal to the rate of tax applicable to the exporter on export of goods to which such commission related---Assessee had earned indenting commission on export of cotton yarn---Cumulative reading of Division-IV of Part-III of the First Sched. and Part-III of the Seventh Sched. of the Income Tax Ordinance, 2001 clarified the point that rate of deduction of tax in respect of export of cotton yarn was 1.5% at the relevant point of the time -Tax was deductible from the indenting commission receipts of the assessee at the rate of 1.5% whereas it was deducted at 5%---Excess of tax deducted was refundable---Appeal was allowed and the Assessing Officer was directed to issue refund representing the excess of tax deducted.
(2007) 96 Tax 180 (Trib.); I.T.A. No.319/KB of 2006; PLD 1950 Lah. 111, PLD 1956 FC 157; PLD 1957 SC 219 and 1999 PTD 4138 ref.
Siraj Khalid for Appellant.
S.A. Masood Raza Qazalbash, D.R. for Respondent.
ORDER
The titled appeal, filed by an individual, is directed against the appellate order dated 27-2-2007 which was passed by the learned C.I.T.(A) Zone-I Lahore in appellant's case for the tax year 2005; Sections' referred to in this order are those of the Income Tax Ordinance,2001 unless otherwise specified.
Facts of the case lie in. a narrow compass. The appellant, who statedly earns income from indenting commission, declared his receipts of Rs.2,353,254 on which total tax was paid at Rs.112, 860. In the statement filed under section 115(4) tax liability was worked out at Rs.29,416 giving rise to a claim of refund amounting to Rs.83,444. It was explained to the Assessing Officer that the appellant derived indenting commission on export of cotton yarn. It was pointed out that rate of tax leviable was 1.25% as per clause (5) of Part-II of the Second Schedule read with Part-II of the Seventh Schedule as also Division IV of Part-II of the First Schedule to the Ordinance.
The Assessing Officer did not agree. He was of the opinion that rate of tax in appellant's case is 5% in terms of section 233 read with Part-IV of the First Schedule to the Ordinance and that too was final discharge of liability' giving rise to no refund on that account. The learned First Appellate Authority agreed with the Assessing Officer. Hence the present appeal.
Opening his case, the learned counsel points out that the assessing officer has in fact attempted to rectify the assessment deemed to have been completed in respect of statement under section 115(4) filed by the appellant. Placing reliance upon the ratio settled in the case, cited as (2007) 96 Tax 180 (Trib.) dated 11-4-2007, he asserts that while dealing with refund application the Taxation Officer cannot undertake any action partaking of action under sections 120, 122 or 221. It is emphasized that the learned Division Bench, delivering the judgment dated 11-4-2007 supra quoted with favour and earlier decision of ITAT dated 17-6-2006 in I.T.A. No.319/KB of 2006 and held:--
(12) In the above case the finding of the C.I.T. (A) is with regard to chargeability of various amounts shown by the assessee in his return. The discussion with regard to the chargeability has been done in consequence to the filing of the application for refund. The Assessing Officer while rejecting refund application has made the assessment also after discussion as to whether various amounts received by the assessee were subject to charge of various provisions or not. His action of treating the application a return and discussion of various claims of the assessee speaks of entering into a jurisdiction available only to the Assessing Authority which this Tribunal has already disapproved in the judgment decided vide I.T.A. No. 319/KB of 2006, dated 17-6-2006.
(13) In the aforementioned judgment this Tribunal has held that the duty of the Refunding Authority is controlled to the extent of the cross check of the documents for calculation of the amount of refund only and to satisfy that no other tax is outstanding against him before issuance of the said refund. The validity and legality of the various claims of the assessee in his return which practically is the deemed assessment' order is not his responsibility hence he is not supposed to check the vires thereof. Since the issue has been discussed by us in detail in the earlier part of this judgment, we hereby hold that the departmental appeal in this case is without any merit and the entire proceedings from the stage of the Refunding Authority and onwards are under a misunderstood procedure of law. The appeal therefore, is dismissed and direction is hereby given for issuance of refund to the taxpayer if no other proceedings are pending against him on this day.
Adopting another line of reasoning, he argues that Part-II of the Second Schedule, containing provisions relating to reduction in tax rates, is in the nature of special provision which overrides the general provision as contained in section 233 read with Part-IV of the First Schedule. Reliance in this regard is placed upon the judgment cited as PLD 1950 Lah. 111, PLD 1956 FC 157 and PLD 1957 SC 219. Lastly it is argued that a provision which is earlier in time has to give way to the one later in time. It is also his contention that when two equal reasonable constructions of a provision of law are possible, the one which is beneficial to the interest of the taxpayer is to be adopted. The ratio settled in the case cited as 1999 PTD 4138 is quoted with favour in this regard.
The learned DR supports the orders of the two authorities below and vehemently contends that section 233 overrules any other provision of law in as much as the tax collected under subsection (1) is declared to be final tax in term of subsection (3).
The provisions of law referred to by the learned representatives of the parties are reproduced below for convenience of reference:--
A. Section 169(1)(b). Tax collected or deducted as a final tax.--(1) This section shall apply where- (b) the deduction of tax is a final tax under clauses (a), (b) and (d) of subsection (1) of section 151 subsection (1B) of section 152, subsection (6) of section 153, subsection (4) of section 154, section 155, subsection (3) of section 156, subsection(2) of section 156A or subsections (1) and (3) of section 233 or clause (a) and clause (b) of subsection (1) of section 233A on the income from which it has been deducted.
B. Section 53. Exemptions and tax concessions in the Second Sched.---(1) The income or classes of income, or persons or classes of persons specified in the Second Schedule shall be--
(a) exempt from tax under this Ordinance, subject to any conditions and to the extent specified therein.
(b) subject to tax under this Ordinance at such 'rates, which are less than the rates specified in the First Schedule, as are specified therein;
(c) allowed a reduction in tax liability under this Ordinance, subject to any conditions and to the extent specified therein; or
(d) exempted from the operation of any provision of this Ordinance, subject to any conditions and to the extent specified therein.
C. 233. Brokerage and Commission.---(1) Where any payment on account of brokerage or commission is made by the Federal Government, a Provincial Government, a local authority, a company or an association of persons constituted by, or under, any law (hereinafter called the principal) to any person other than travel agents and insurance agents (hereinafter called the agent), the principal shall deduct advance tax at the rate specified in Part-IV of the First Schedule from such payment.
(2) If the agent retains commission or brokerage from any amount remitted by him to the principal,
he shall be deemed to have been paid the commission of brokerage by the principal and the principal shall collect advance tax from the agent.
(3) Where any payment on account of brokerage or commission is made by the principal to a travel agent or an insurance agent, the principal shall deduct advance tax at the rate specified in Part-IV of the First Schedule from such payment.
Where any tax is collected from a person under subsection (1) or subsection (3), the tax so collected shall be the final tax on the income of such persons."
D. FIRST SCHEDULE
PART IV
DIVISION II
Brokerage and Commission
(a) The rate of collection of tax under subsection(1) of section 233in respect of indenting commission agents, advertising agents,' and year dealers shall be 5% of the amount of payment.
(b) The rate of collection of tax under subsection (1) of section 233 in respect of other commission income other than (a) above, shall be 10% of the amount of payment.
(c) The rate of collection of tax under sub-section (3) of section 233 shall be 10% of the amount of payment."
E. Division IV of
Part-III of First Schedule
(1) The rate of tax to be deducted under subsection (1A) of section 153 and subsections (1),(3),(3A) or (3B) of section 154 shall be as set out in the following table, namely:--
| S. No. | Nature of goods exported | Rate of deduction of tax |
| 1. | Exports listed in Part-I of the Seventh Schedule | 0.75% of the proceeds of the export |
| 2. | Exports listed in Part-II of the Seventh Schedule | 1.0% of the proceeds of the export |
| 3. | Exports listed in Part-III of the Seventh Schedule | 1.25% of the proceeds of the export |
| 4. | Exports listed in Part-IV of the Seventh Schedule | 1.50% of the proceeds of the export |
(2) The rate of tax to be deducted under subsection (2) of section 154 shall be 5%.
F. PART-II
REDUCTION IN TAX RATES
Incomes or classes of income, or persons or classes of persons, enumerated below, shall be liable to tax at such rates which are less than the rates specified in the First Schedule, as are specified hereunder:
(5) The tax chargeable in respect of commission received by an export indenting agent or an export buying house shall be at the rate equal to the rate of tax applicable to the export on export of goods to which such commission relates.
G. PART-III OF SEVENTH SCHEDULE
1. All other goods not covered under Part-I, Part-II and Part-IV of this Schedule.
2. The following goods or class of goods produced or manufactured in Pakistan, namely:--
(ii) rice
(iii) rice bran
(iv) wheat bran
(v) lamb skin
2A. Following types of goods not covered by other provisions of this Schedule, namely:-
(i) leather and articles thereof
(ii) textile and textile articles thereof
(iii) carpets
(iv) Surgical goods
3. Such other goods as may be notified by the Central Board of Revenue.
Having considered the arguments of the learned representatives of the two parties, we are of the opinion that the answers to the following question would help to resolve the controversy in hand:--
(i) Whether the taxpayer receiving indenting commission is obliged to file a return of income or statement under section 115(4)?
(ii) Whether tax paid or deducted in respect of/from indenting commission receipts constitute final discharge of tax liability?
(iii) What is the rate of tax applicable in respect of commission received by an export indenting agent?
Requirements of filing of return are laid down in section 114 whereas section 115 specifies the incomes where the recipients are not required to furnish a return of income. Through an amendment in subsection (4) of section 115, by virtue of Finance Act 2004, the recipients of income referred to in section 233(3) were allowed to file a statement showing the prescribed particulars.
What follows is that the appellant was not required to file a return of income under section 114 rather it was obliged to file the statement in terms of section 115.
Section 169 lays down that where the deduction of tax is a final tax under, inter-alia, subsection (3) of section 233, there shall be no refund of the tax collected or deducted unless the tax collected or deducted is in excess of the amount for which the taxpayer is chargeable under the Ordinance. The tax deducted or deductable, collected or collectable in the case of the appellant was, therefore, final discharge of its tax liability and ordinarily it would not have been entitled to any refund, except for the situation where the tax is collected or deducted in excess of the amount which was collectable or deductable under the Ordinance.
This brings us to the third question posed above i.e. as to what was the rate of deduction applicable in the instant case. As per Division-II of Part-IV of the First Schedule; reproduced above, the rate of deduction in case of indenting commission, etc. was, at the material time 5%. Now we have to examine as to whether the Ordinance provided for any reduction in this tax rate or not. We note that the Ordinance has however specifically provided for certain exemptions and tax concessions in the Second Schedule. Section 53 is the authorizing provision.
Part-I of the Second Schedule enlists the income which have been exempted from levy of tax and Part-II of the said Second Schedule provides for reduction in tax rates. As reproduced above, clause (5) of Part-II of the Second Schedule provides that the tax chargeable in respect of commission received by an export indenting agent shall be at the rate equal to the rate of tax applicable to the exporter on export of goods to which such commission relates. It is not disputed that the appellant has earned indenting commission on export of cotton yarn. The cumulative reading of Division-IV of Part-III of the First Schedule and Part-III of the Seventh Schedule clarifies the point that rate of deduction of tax in respect of export of cotton yarn was 1.5% at the relevant point of time. It can, therefore, be safely concluded that tax was deductable from the indenting commission receipts of the appellant at the rate of 1.5% whereas it was deducted at 5%. As we have discussed in pre-paras. the excess of tax deducted is refundable in appellant's case. The appellant had rightly claimed refund of Rs.83,444 which included a sum of Rs.3381 representing deduction of tax under section 236 of the Ordinance. As per assessing officer's order dated 25-7-2006 refund amounting to Rs.3381 has already been issued. As a result of above discussion, the appeal is allowed and the Assessing Officer is directed to issue refund representing the excess of tax deducted in appellant's case.
C.M.A. /3/Tax(Trib.)Appeal allowed.