COMMISSIONER OF INCOME TAX/WEALTH TAX MULTAN ZONE, MULTAN VS REHMAN ENTERPRISES, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 1897 (2008)

Income Tax Ordinance (XLIX of 2001)---

---Ss. 153(1)(b), 170 & First Sched., Part (IV), Division III, Clause 2(a)---C.B.R. Circular No.11 of 1991---Refund of income tax---"Services"---Carriage contractor---Grievance of income tax authorities was that Appellate Authority was not justified in directing them to issue refund to assessees, who were carriage contractors---Validity---Carriage contractors were providing services for their principal company, therefore, their returns were to be adjudged from such angle only---Carriage contractors were covered under First Schedule, Part (IV), Division III, Clause 2(a) of Income Tax Ordinance, 2001, and the same had sufficiently conveyed intention of legislature that carriage contractors would fall within the purview of "services" as envisaged in S.153(1)(b) of Income Tax Ordinance, 2001---Order of appellate authority was rightly upheld by Income Tax Appellate Tribunal---Provisions of Circular No.11 of 1991, had no application to matters falling under Income Tax Ordinance, 2001, and word "providing" service had rightly been interpreted by Income Tax Appellate Tribunal---High Court declined to interfere with the orders passed by two forums below---Reference was rejected in circumstances.

Syed Khalid Javaid Bukhari for Applicant.

Date of hearing: 8th April, 2008.

JUDGMENT

SYED HAMID ALI SHAH, J.----This single order will, dispose of Tax References Nos.12, 17, 18, 33 to 41 of 2008, 6 of 2006, 5, 6 and 7 of 2007, as common questions of law, statedly arisen out of the order of learned Income Tax Appellate Tribunal in these Tax Reference Applications are as under:--

"(i) Whether on the facts and in the circumstances of the case ITAT was justified in upholding the CIT (Appeals) order ignoring the statutory provisions as laid down in section 234(5) read with section 153(1)(b)(9) of the Income Tax Ordinance,. 2001?

(ii) Whether under the facts and in the circumstances of the case the learned ITAT was justified in ignoring the Circular No.11 of 1991 wherein a carriage contract is clearly included in the definition of contract?

(iii) Whether "providing of service" and "rendering of service" are two situations as also given in Central Excise Service and Sindh Sales Tax and Excise Ordinance, 2000?"

2. The respondents are carriage contractors. They claim of refund for the relevant year but refund order was not passed under section 170 of the Income Tax Ordinance, 2001 which gave cause to the respondents/taxpayers to invoke provisions of section 170(5)(b) of the Ordinance. Commissioner of Income Tax (Appeals) decided the appeals in favour of the taxpayers holding therein that the tax deducted was adjustable. An appeal before the Income Tax Appellate Tribunal brought no fortune for the revenue and all the appeals were dismissed through various orders of learned Tribunal, hence these Tax Reference Applications.

3. Learned counsel for the appellant has mainly agitated the following grounds in these Tax Reference Applications:--

(a) That the learned CIT(A), Multan was not justified to ignore the statutory provisions of law as laid down in section 234(5) read with section 153(1)(b)(9) of the Income Tax Ordinance, 2001.

(b) That the learned CIT(A), Multan was not justified to ignore C.B.R's Circular No.6 of 2003, dated 9-7-2003 read with Circular No.1 of 2005, dated 5-7-2005 whereby services rendered include only that of Accountants, Architects, Dentists, Doctors, Engineers, Interior Decorators and Lawyers as provided in explanation in section 153.

(c) That the learned CIT(A) Multan was not justified to ignore Circular No.11 of 1991 wherein a carriage contact is clearly included in the definition of contract.

Along with these grounds following additional grounds of appeal of each year were also filed:--

(i) That the CIT(A) was not justified in directing to issue refund for the tax years 2003 to 2005 ignoring the fact that the taxpayer rightly filed statements under section 115(4), the tax deducted on carriage receipts being the final discharge of tax liability.

(ii) That the CIT(A) was not justified in ignoring the admitted history/filing of 143-B/115(4) statements since year 1997-98.

(iii) That the learned CIT(A) was not justified in ignoring that there is no provisions in Income Tax Ordinance, 2001 for filing of return against the earlier statements filed under section 115(4) which had attained finality.

(iv) That the learned CIT(A) while deciding the issue of refund, was not justified in ignoring the special rates for goods transport receipts under S.R.O. 600(I)/91, dated 2-7-1991 duly saved under section 239 of the Income Tax Ordinance, 2001.

(v) That the learned CIT (A) has erred in law by ignoring that the tax deducted being special rate: for goods transport, is not under clause 2(a), Division III, Part-III of the 1st Schedule and as such not covered under section 153(1)(b) of the Income Tax Ordinance, 2001.

4. The respondents entered appearance in response to the notices and have submitted that services of the carriage contractors are covered under clause (b) of subsection (1) of section 153 read with withholding tax to such services which are provided under clause (a) of sub-clause (2) of Division III of Part-IV of the First Schedule to the Income Tax Ordinance, 2001. The deduction of tax on transport services is provided at the rate 2%, which is indicative of the fact that deduction of tax on transport services, falls within, the purview of section 153(1)(b). They have submitted that the tax deducted on source is required to be refunded as the same is adjustable.

5. Heard learned counsel for the parties and record perused.

6. The provisions of section 153(1)(b) of the Income Tax Ordinance relate to "rendering or providing" of services. Deletion/ omission of the word "professional" through Finance Ordinance, 2002 enlarges the scope of the enactment. The tax deducted under section 153(1)(b) by virtue of proviso to subsection (6) is not final to discharge of tax liability. It does not, therefore, fall within the presumptive tax regime. Section 153(1)(b) has to be read in conjunction with subsection (9) where the enactment has itself defined by the term "service". Term "includes" has consciously been used to enlarge the scope of services to other services, i.e. which have not specifically mentioned. The provisions of section 153(9) read with clause 2(a) of Division III of Part-IV of the First Schedule to the Income Tax Ordinance, 2001, convey the intention of the legislature that the services of carriage contractor fall within the ambit and scope of section 153(1)(b). The Tribunal was right in observing that Circular No.11 no more holds the field, with repeal of the Income Tax Ordinance, 1979. It was rightly held that Circular No.11 is neither relevant nor applicable, in respect of matters falling under Income Tax Ordinance, 2001, as the same (Circular 11) explains the relevant law under Repealed Ordinance, 1979. The taxpayers/carriage contractors are providing services for its principal company, therefore, their returns are to be adjudged from this angle only. No scholarly interpretation is required in these Tax Reference applications. For the carriage contractor is covered under clause 2(a) Division III of Part-IV of the First Schedule to the Income Tax Ordinance, 2001 and that sufficiently conveys the intention of the legislature that carriage contract falls within the purview of "services" as envisaged in section 153(1)(b).

7. For what has been discussed above, we have no hesitation to hold that the order of CIT(A), was rightly upheld by the Income Tax Appellate Tribunal, Circular No.11 of 1991 has no application to the matters falling under Ordinance, 2001 and the word "providing" service has rightly been interpreted by the Tribunal. Questions framed and referred, are accordingly answered. Resultantly, these Tax Reference Applications have no merit and are accordingly rejected.

M.H./C-16/L?????????????????????????????????????????????????????????????????????????????????????? Reference rejected.