2009 P T D (Trib.) 1187
[Income-tax Appellate Tribunal Pakistan]
Before Javed Iqbal, Jawaid Masood Tahir Bhatti, Judicial Members and Shahid Azam Khan, Accountant Member
I.T.As. Nos.591/KB, 592/KB, 593/IB of 2005 and 326/KB & 69/KB of 2004, decided on 13/08/2008.
Per Javed Iqbal, Judicial Member
(a) Income Tax Ordinance (XXXI of 1979)---
---S.80-D---Income Tax Ordinance (XLIX of 2001), S.169--Minimum tax on income of certain persons---Charging provisions---Provision of law has to be construed strictly, and tax can only be levied if it has unequivocally been levied under the charging section and there is no question that S.80D of the Income Tax Ordinance, 1979 and S.169 of the Income Tax Ordinance, 2001 are charging sections.
(b) Income Tax Ordinance (XXXI of 1979)---
---Ss.107AA, 8000 & 80D---Income Tax Ordinance (XLIX of 2001), S.113---Tax credit for investment---Tax credit under S.107AA of the Income Tax Ordinance, 1979 was allowable and adjustable against the tax demand of Ss.80D & 80CC of the Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001.
I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005 and I.T.A. No. 522/IB of 2005 rel.
(c) Income Tax Ordinance (XXXI of 1979)---
---Ss.107AA, 80CC & 80D---income Tax Ordinance (XLIX of 2001), S.113 & 169(2)(d)---Tax credit for investment --Assessment years 2001-2002, 2002-2003 and tax year, 2003---Tax credit under S.107AA of the Income Tax Ordinance, 1979 was not only available to Ss.80D & 80CC of the Income Tax Ordinance, 1979, but likewise available against tax under S.113 of the Income Tax Ordinance, 2001, as S.169(2)(d) of the Income Tax Ordinance, 2001 did not prohibit adjustment of tax credit, allowed under the Income Tax Ordinance, 1979---Department was directed to give credit for assessment years 2001-2002, 2002-2003 against the demand of tax under Ss.80D, 80CC of the Income Tax Ordinance, 1979 while for tax year, 2003 under S.113 of the Income Tax Ordinance, 2001.
I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005 and I.T.A. No. 522/IB of 2005 rel.
1999 PTD (Trib.) 811; PLD 1997 SC 582 = 1997 PTD 1555 (Para 54); I.T.A. No.250/IB of 2004; 66 Tax 132; CIT v. Abdul Majeed 81 Tax 317= 2000 PTD 359; 2004 PTD 2352; CIT v. M. Iqbal Saigol PLD 1976 Lah. 547 = 1976 PTD 11; Pakistan Medical Stores's 15 Tax 157 = 1967 PTD 339; Pakistan Electric Fittings Manufacturing Co. Limited's case 2000 PTD 2407; 2005 PTD (Trib.) 960; 2005 PTD (Trib.) 1061; 2004 PTD 1071 and 2009 PTD 2380 ref.
(d) Income Tax Ordinance (XXXI of 1979)---
---Ss.80C & 80D---Tax on income of certain contractors and importers---Tax paid under S.80C of the Income Tax Ordinance, 1979 was to be excluded from total tax paid under the provisions of S.80D of the Income Tax Ordinance, 1979.
2003 PTD 622 rel.
(e) Income-tax---
----Gratuity---Provision of gratuity---Neither the gratuity had been got approved as per requirement of law nor actually it had been paid---First Appellate Authority had rightly disallowed the same which was confirmed by the Appellate Tribunal.
(f) Income Tax Ordinance (XXXI of 1979)---
----S.80-D---Minimum tax on income of certain persons---Other income---Scrap sales---Chargeability of minimum tax on other income, which largely represent scrap sales could not form the part of turn over, therefore, tax under S.80D of the Income Tax Ordinance, 1979 was not chargeable over the other income.
1999 PTD (Trib.) 811 rel.
Per Shahid Azam Khan, Accountant Member---[Minority view].
Per Jawaid Masood Tahir Bhatti, Judicial Member agreeing with Javaid Iqbal, Judicial Member
(g) Income-tax---
----Correct application of law---Jurisdiction of Appellate Tribunal---Rectification---Appellate Tribunal as well as all the judicial forums have to correctly apply the law and if the law has not been correctly applied due to any mistake, on the application of the aggrieved parties as well suo motu action should be taken and that illegality should be rectified---Appellate Tribunal is well as all other judicial forums are very much within the jurisdiction to rectify the order where law had not been properly applied.
(h) Income Tax Ordinance (XLIX of 2001)---
---S.221---Rectification of mistake---Scope---Section 221 of the Income
Tax Ordinance, 2001 could be invoked only to handle the situation where a mistake is apparent from and floating on the surface of the record---Such is precise scope of S.221 of the Income Tax Ordinance, 2001 which could not be transgressed--If in the course of rectification some findings were to be made and the matter involved needs debates and arguments, then application of S.221 of the Income Tax Ordinance, 2001 was ousted.
(i) Income Tax Ordinance (XXXI of 1979)---
----Ss. 107AA, 80CC & 80D---Income Tax Ordinance (XLIX of 2001), S.113 & 154--Tax credit for investment---Credit under S.107(AA) of the Income Tax Ordinance, 1979 was duly available against tax under Ss.8000 and 80D of the Income Tax Ordinance, 1979 and against tax under Ss.113 and 154 of the Income Tax Ordinance, 2001.
I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005; 2004 PTD 2479 and PLD 1997 SC 582 = 1997 PTD 1555 rel.
2004 P'AI'D 2479 ref.
(j) Income Tax Ordinance (XXXI of 1979)---
----S.107AA---Income Tax Ordinance (XLIX of 2001), S.169(2)(d)---Tax credit for investment---Credit under S.107(AA) of the Income Tax Ordinance, 1979 was available against S.154 of the Income Tax Ordinance, 2001---Section 169(2)(d) of the Income Tax Ordinance, 2001 prohibits adjustment of tax credits under the Income Tax Ordinance, 2001 but no such provision existed in the Income Tax Ordinance, 1979.
I.T.A. No.249/IB of 2004; I.T.A. No.250/IB of 2004; I.T.A. No.521/IB of 2005; 2004 PTD 2479 and PLD 1997 SC 582 = 1997 PTD 1555 rel.
90 Taxation 191 ref.
(k) Income Tax Ordinance (XXXI of 1979)---
----S.80D---Minimum tax on income of certain persons---Conflict between two laws---Preference---Mode---If a later law is in conflict with S.80D of the Income Tax Ordinance, 1979, the later law shall prevail and entire S.80D of the Income Tax Ordinance, 1979, shall not apply; it logically follows that tax under S.80D of the Income Tax Ordinance, 1979 could be reduced as well, to less than half per cent, by a later law, if the later law can render the whole section, of no effect, and thereby reduce the tax under S.80D of the Income Tax Ordinance, 1979 to zero.
CIT v. M. Iqbal Saigol PLD 1976 Lah. 547 = 1976 PTD 11 rel.
(l) Income-tax---
----Scrap sale---Turnover---Sale of scrap, by no spread of reverie, is turnover---Once it is not turnover, it obviously cannot be part of business turnover and it is not income---Once it is not income it cannot be assessed under any provision as income.
(m) Words and phrases---
---'Turnover'-Connotation-Expression "turnover" denotes buying and selling, processing and selling, with an aim to earn profit.
(n) Income-tax---
----Scrap sale---Turnover---Such sale is no turnover as the phenomena of buying and selling or buying, processing and selling are not involved and even there is no intention, to earn income or to make profit, therefore, it is not the business of the assessee to earn profit from selling scrap and for all these reasons no maximum tax can be levied on sale of scrap--Legislative intent is to levy tax on business turnover and not an fractional recovery of cost---It would be akin to levying tax on purchase return, for practical retrieval of cost can be equated with purchase return---If the sale return cannot be taken as turnover, the purchase return cannot be treated as turnover---`Returns' connote reversals and there cannot be any tax thereon---Business turnovers are intended to and in actual fact, in the main, produces income---Scrap sales are neither meant to produce income, nor they supply any income whatsoever.
(o) Income Tax Ordinance (XXXI of 1979)---
---Ss. 80D & 8000---Minimum tax on income of certain persons---Sections 80D and 80CC of the Income Tax Ordinance, 1979 are identical in some ways---Comparison of the provisions---Both these sections were under `presumptive Tax Regime' and regardless of actual income, there was some income fictionally presumed and tax was computed and levied thereon---In case of S.80D of the Income Tax Ordinance, 1979, the tax so computed was minimum tax and a higher tax was further chargeable, if tax on income, under other pertinent provisions of law was more than the minimum tax---On the other hand, tax levied under S.80CC of the Income Tax Ordinance, 1979 was final tax, and once this tax was levied, no other tax was levy-able on the other relevant income.
(p) Income Tax Ordinance (XXXI of 1979)---
----Ss.107(AA), 80CC & 80D---Tax credit for investment---Section 80D and S.80CC of the Income Tax Ordinance, 1979, in the context of subject matter of appeal, have similarity in the sense, that tax credit allowed under S.107(AA) of the Income Tax Ordinance, 1979 was adjustable against tax under Ss.8000 and 80D of the Income Tax Ordinance, 1979, for the reasons that S.107(AA) of the Income Tax Ordinance, 1979 was a later law and both Ss.8000 and 80D of the Income Tax Ordinance, 1979 represent earlier law and it was a trite rule of law, that the former legislation shall give way to the following legislation.
(q) Interpretation of statutes---
----Later law shall prevail over earlier law.
PLD 1997 SC 582 1997 PTD 1555 rel.
(r) Income-tax---
----Appeal to Tribunal---Legal plea can be raised, at any stage of the appeal, and it is incumbent upon the Appellate Tribunal to appropriately implement the law.
PLD 1997 SC 582 = 1997 PTD 1555 rel.
(s) Income Tax Ordinance (XXXI of 1979)---
----Ss. 107(AA), 8000 & 80D---Tax credit for investment-Acceptance of fresh plea---Judicial Member had accepted the fresh plea raised, in relation to adjustment of tax credit under S. 107(AA) of the Income Tax Ordinance, 1979 against under S.80CC of the Income Tax Ordinance, 1979 S.154 and in relation to non levy of tax under S.113 of the Income Tax Ordinance, 2001 and had adjudicated the same in accordance with law.
Gohar Ali, D.R. for Appellant (in I.T.As. Nos.591/KB to 593/KB of 2005 and 326/KB of 2004).
Sheikh Jalaluddin, FCA and Mr. Saifuddin Adeeb for Respondents (in I.T.As. Nos.591/KB to 593/KB of 2005 and 326/KB of 2004).
Sheikh Jalaluddin, FCA and Mr. Saifuddin Adeeb for Appellants (in I.T.A. No.69/KB of 2004).
Gohar Ali, D.K. for Respondent (in I.T.A. No.69/KB of 2004).
ORDER
Through this order we intend to dispose of the captioned four appeals instituted by Department for assessment years 2001-2002, 2002-2003 tax year, 2003 and appeal for assessment year 2002-2003 instituted by assessee as well by the Department.
2. The department has mainly contested the L/CIT(A) conclusion on admissibility on the tax credit under section 107AA and its judgment against the tax demand under section 80D of the repealed Income Tax Ordinance, 1979 and deletion of WWF.
Briefly stated the facts of the case-giving rise to the above appeals are as follows:--
Assessee is a Public Limited Company, principally engaged in production of PET Resin, which is used, for making PET Packages. The sales of the company include, both exports and local sales.
Assessee filed returns of income for assessment year 2001-2002, 2002-2003 and TY 2003, inter alia, claiming adjustments, for tax credit, under section 107AA of the repealed Ordinance, against, the tax under section 80D of repealed Ordinance and under section 113 of the Ordinance of 2001, in the following manner:--
Assessment year 2001-2002
Tax credit was claimed at Rs.533,523, being 10% of investment in plant and machinery of Rs.5,335,230, against tax under section 80D of the Repealed Ordinance.
Assessment year 2002-2003
Tax credit was claimed at Rs.46,376,276, being 10% of investment in plant and machinery of Rs. 463,762,760, against tax payable under section 80D of repealed Ordinance, of Rs.11,973,685 and the balance credit of Rs.34,402.591 was carried forward to succeeding year.
Tax year 2003
The aforesaid brought forward tax credit of Rs.34,402.591, was claimed, as adjustable, against tax under section 113 of Ordinance of 2001, at Rs.2,786.905.
For all these years, the aforesaid tax credit under section 107AA of the repealed Ordinance, was first allowed, as claimed, in Order under section 59(1) of the repealed Ordinance, for Assessment year 2001-2002, and in order under section 62 of the repealed Ordinance, for assessment year 2002-2003 and in deemed Order under section 120 of the Ordinance of 2000 for Tax year, 2003.
Later on, the Taxation Officer, Income Tax, Medium Taxpayer Unit, (Enforcement) Quetta, rectified all the aforesaid three Orders, under section 221 of the Ordinance of 2001, through separate Orders, for all the aforesaid three years, dated 3rd November, 2004, and deleted the aforesaid tax credit under section 107AA, of repealed Ordinance, earlier allowed vide original orders.
Likewise, through Rectificatory Orders, in relation to Assessment year 2001-2002, and Tax Year 2003, WWF was also charged, on the taxable income, before adjustment of brought forward assessment depreciation losses, rejecting the claim of assessment that WWF was payable, on taxable income alter adjustment of brought forward assessed depreciation losses.
Assessee preferred appeals, against the aforesaid orders passed by taxation officer under section 221 of the Income Tax Ordinance, 2001 for all the aforesaid three years before Commissioner Income Tax (Appeal) Hyderabad. The learned Commissioner income tax Appeals, allowed the appeals vide the Combined Order, dated 26th February, 2005 holding that the tax credit under section 107AA is allowable in accordance with Law, as claimed. Likewise, he also accepted the contention of assessee, that WWF was leviable, on taxable income, after adjustment, of the brought forward assessed depreciation loss, therefore, deleted the demand for WWF, created through the orders, under section 221 of Ordinance of 2001. Department being dissatisfied from treatment accorded by L/CIT(A), now through the present appeals has contested the impugned order before us.
For assessment year 2002-2003, in order under section 62 of the repealed Ordinance, dated 20th May, 2003, taxation officer made disallowances from the deductions claimed, on account of certain expenditure and WWF of Rs.2,055,167, was charged.
Feeling dissatisfied assessee's company filed appeal against the aforesaid disallowances, and levy of WWF and minimum tax, before Commissioner of Income Tax (Appeals), Hyderabad.
The learned Commissioner of Appeals, partially accepted the appeal, maintained the inadmissibility of gratuity provision and levy of minimum tax on other income, deleted the WWF and reduced the aforesaid disallowance, as detailed hereunder, through this Order, dated 30th December, 2003.
| Repairs and Maintenance | 40,000 |
| Material Loading charges | 2,500,000 |
| Communication Charges | 30,000 |
| Other expenses | 700,00 |
Against the impugned finding further appeal has been filed before us by assessee and has contested that Commissioner appeals was not justified in upholding the inadmissibility of gratuity provision, and levy of minimum tax and not wholly allowing the expenses claimed as deduction, while CIT, MTH, Quetta has objected that Commissioner appeals was not justified in reducing the disallowance, and deleting the WWF.
In relation to adjustment of tax credit, the learned DR Mr. Gohar Ali, contended that section 80D is armed with non-obstane prefix therefore, it will override all other provisions of the law, and credit as such shall not be admissible. In particular, he has drawn our attention to explanation, to subsection (1) of section 80D of the repealed Ordinance, which was inserted by Finance Act, 1992 and to subsection (1) of section 113 of Ordinance of 2001, both of which specifically, prohibit that no credit shall be adjustable, inter alia, against the tax under the aforesaid sections. The learned DR has placed reliance, on an order of the ITAT, Karachi Bench, inter alia, reported as 79 Tax 110.
On the other hand, Mr. Saifuddin Adeeb, F.C.A., the learned AR of assessee-company and contended with utmost vehemence that credit is lawfully admissible, not only against tax under section 80D, of the repealed Ordinance and section 113 of the Ordinance of 2001, but also against the tax paid under section 80CC of the repealed Ordinance, 1979 and under section 154 read with section 169 of the Ordinance of 2001. He also contended that, upon filing .an appeal, the assessment proceedings, are thrown open, and the ITA'L has the lawful jurisdiction and discretion, to consider, a fresh legal plea, allow the credit and delete minimum tax.
In relation to admissibility of tax credit under section 107AA of the repealed Ordinance, against tax under sections 80CC and 80D of the repealed Ordinance and under section 113 the L/AR also gave the following reasons:--
(i) Sections 80CC and section 80D were, respectively, introduced into the repealed Ordinance, in the year, 1992 and 1991 and section 107AA was inserted, in the said repealed Ordinance, in 2001, respectively, full eight and nine years, after the aforesaid sections 80CC and 80D, saw light of the day. Therefore, section 107AA, being later in time and an special provision too, shall prevail over the earlier general provisions, contained, in aforesaid sections 80CC and 80D, notwithstanding the deployment of Non-Obstante prefix, in both the aforesaid earlier sections.
(ii) The Non-Obstante phrase, by no spread of reverie, can be used, to disregard and overwhelm, the subsequent of Law, if the subsequent Law is not consistent therewith. In fact, the earlier provision shall give way to the later provision.
(iii) Section 169(2)(d), inter alia, prohibits the adjustment of credit allowed, under the Ordinance of 2001 and to the credits, which were earlier allowed, under the repealed Ordinance and brought, forward, to Tax Year, 2003.
(iv) The Legislature, being conscious of the legal position, vis a vis, allowability of tax credit under the repealed Ordinance, has purposely restricted, the disallow-ability, to the credits furnished under the Ordinance of 2001, in aforesaid section 169(2)(d), so that credit lawfully allowable under the former Law, is not dislodged.
(v) Without prejudice to the above, and without prejudice to contention as to absence of charging power, in relation section 113 of the Ordinance of 2001, (sec later paragraphs 48 and 49), the said section 113 is not armed with any Non Obstante clause, on the one hand, and does not exclude, the admissibility of tax credit permissible, under the repealed Ordinance.
In support of his aforesaid contentions, as to raising of fresh plea, at belated stage, with regard to tax credit admissibility, against the tax under section 80CC of repealed Ordinance and under section 154 read with section 169 of the Ordinance of 2001, and as to admissibility of aforesaid tax credit, seeing that section 107AA is an special provision and also later in time, and also, as to absence of power to charge tax under section 113 of the Ordinance of 2001, he has placed reliance on the following:
(i) The Decision of Honorable Supreme Court of Pakistan, in Elahi Cotton case, inter alia, reported as 76 Tax 5 (Para 54), with regard to later and special provision, overriding the earlier and general provision.
(ii) The Order of ITAT Islamabad Bench, in I.T.As. Nos.249/IB of 2004, for assessment year 2001-2002, 250/18 of 2004 for assessment year 2002-2003, 521/lb of 2005-for assessment year 2001-2002 and 522/IB of 2005, for assessment year 2002-2003, wherein the aforesaid para.54 has been respectfully followed, in allowing tax credit, against tax under section 80D of the repealed Ordinance.
(iii) The Decision of Honourable Supreme Court of Pakistan inter alia, reported as 66 Tax 132, in case of Chanda Motors, inter alia, holding that assessment proceedings are thrown upon filing of an appeal.
(iv) The Division of Honourable Karachi High Court, in case CIT v. Abdul Majeed, inter alia, reported as 81 Tax 317= 2000 PTD 359, inter alia, holding the question of law, which goes to the root of the case, can he raised at any stage of proceedings.
(v) The Order of Income Tax Appellate Tribunal, Lahore Bench, inter alia reported as 2004 PTD 2352, inter alia, holding that ground, being purely legal in nature, can be raised at any stage.
(vi) The Decision of Honourable Lahore High Court, inter alia, reported as PLD 1976 Lah. 547 = 1976 PTD 11 in case of CIT v. M. Iqbal Saigol, on power to permit fresh points to be raised.
(vii) The Decision of Honourable Karachi High Court, in case of Pakistan Medical Stores, inter alia, reported as. 15 Tax 157 --1967 PTD 339, on exercise of discretionary powers, with regard to additional ground of appeal, going to the root of the case.
(viii) The Decision of Karachi high Court, in case of Pakistan Electric Fittings Manufacturing Co. Limited, inter alia, reported as 2000 PTD 2407, inter alia, holding that the contravention of mandatory provisions of Law, were a nullity and no limitation ran against such orders.
(ix) The Order of the Income Tax Appellate Tribunal, reported as 2005 PTD (Trib.) 960. The order of the Income Tax Appellate Tribunal, inter alia, reported as 2005 PTD (Trib.) 1061, on unlawful charge.
(x) The Order of the Honourable Income Tax Appellate Tribunal, inter alia, reported as 2005 PTD (Trib.) 1061 on unlawful charge.
We have given our thorough consideration and perused the relevant law and the cases law referred by learned DR and AR. of department and asscssec. In order to fully and properly appreciate the law and the cases law it would be fair and proper to reproduce the relevant provisions of these as under.
107AA. Tax credit for investment.--(1) Where an assessee being a Pakistani company invests any amount in the purchase of plant and machinery for installation, at any time between the first day of July, 2000 and the 30th day of June, 2002, in an industrial undertaking set up in Pakistan and owned by it, credit equal to ten per cent of the amount so invested shall be allowed against the tax payable by it in the manner hereinafter provided.
(2) The amount of credit admissible under this section shall be deducted from the tax payable by the assessee in respect of the income year in which the machinery or plant in the purchase of which the amount referred to in subsection (1) is invested, is installed.
(3) Where no tax is payable by the assessee in respect of the assessment year relevant to the income year in which such plant or machinery is installed, or where the tax payable is less than the amount of the credit, the amount of the credit, or so much of it, as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the assessee in respect of the immediately Following assessment year only.
(4) Where any credit is allowed under this section and subsequently it is discovered by the Deputy Commissioner of Income Tax that any one or more of the conditions specified in this section was, or were, not fulfilled, as the case may be, the credit originally allowed shall be deemed to have been wrongly allowed and the Deputy Commissioner may, notwithstanding anything contained in this Ordinance, recomputed the tax payable by the assessee for the relevant year and the provisions of section 65 shall, so far as may be, apply accordingly.
(5) The provisions of subsections (1) and (2) shall also apply in the like manner to any plant and machinery installed, for the purposes of balancing, modernization and replacement.
(6) Nothing contained in rule 5A of the Third Schedule to the Ordinance, shall apply to an industrial undertaking, which claims tax credit under subsection (1).
80D. Minimum tax on income of certain persons.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where no tax is payable or paid by a company or a registered firm an individual, an association of persons, an unregistered firm or a Hindu undivided family which, not being a company, does not qualify for assessment under the self-assessment scheme under subsection (1) of section 59 resident in Pakistan or the tax payable or paid is less than one-half per cent of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company or registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family which, not being a company, does not qualify for assessment under the self-assessment scheme under subsection (1) of section 59 and tax thereon shall be charged in the manner specified in subsection (2).
Explanation.---For the removal of' doubt, it is declared that the expression "where no tax is payable or paid" and "or the tax payable or paid" apply to all cases where tax is not payable or paid for any reason whatsoever including any loss of income, profits or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including depreciation) admissible under any provision of this Ordinance or any other Law for the time being in force.
(2) The company or a registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family which, not being a company, does not qualify for assessment under the sell' assessment scheme under subsection (I) of section 59 referred to in subsection (1) shall pay as income tax-
(a) an amount, where no tax is payable or paid equal to one-half per cent of the said turnover; and
(b) an amount, where the tax payable or paid is less than one-half per cent of the said turnover, equal to the difference between the tax payable or paid and the amount calculated in accordance with clause (a).
Explanation: For the removal of doubt it is declared that "turnover" means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts.
(3) Nothing in this section shall apply to an individual, an association of persons, an unregistered firm or a Hindu undivided fancily in respect of' any assessment year commencing on, or after, the first day of July, 2001.
Section 8000 of repealed income Tax Ordinance
Tax on income of certain exporters.---(1) Notwithstanding anything contained in this Ordinance or any Law for the time being in force, where any amount referred to in subsection (5A) or subsection (5AA), of section 50 is received by any person, the whole of such amount shall be deemed to be the income of said person and tax thereon shall be charged at the rates specified in the First Schedule.
(2) Nothing contained in this Ordinance shall be so construed as to authorize any allowance, or deduction against the income as determined under subsection (1) or any refund of tax deducted under subsection (5A) of section 50 or set off of any loss under any provision of this Ordinance.
(3) Where the assessee has no income other than the income referred to in subsection (1) in respect of which tax has been deducted under subsection (5A) of section 50, the tax so deducted shall be deemed to be the final discharge of his tax liability under this Ordinance and he shall not be required to file the return of total income under section 55.
(4) Where an assessee, while explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure, referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of this section, he shall not be entitled to take credit of any sum as is in excess of an amount which if taxes at a rate or rates, other than the rate applicable to income chargeable to tax under this section, would have resulted in tax liability equal to the tax payable in respect of income under this section.
(5) For the purpose of determining the share of partner of a firm out of such income of the firm as is determined under section 80B or this section, the said income of the firm shall be taken to be an amount which if taxed at the rate or rates. Other than the rate applicable to income chargeable to tax under section 80B or this section, would have resulted in tax liability equal to the tax payable in respect of income under section 80B or this section.
(6) In a case to which subsection (4) applies, an order under section 59B shall he deemed to have been made in respect of income referred to in subsection (1).
Provisions of Ordinance of 2001.
Section 4
Tax on taxable income.--(1) Subject to this Ordinance, income tax shall be imposed for each tax year, at the rate or rates specified in Division I or II of Part-1 of the First Schedule, as the case may be, on every person who has taxable income for the year.
(2) The income tax payable by a taxpayer for tax year shall be computed by applying the rate or rates of tax applicable to taxpayer under this Ordinance to the taxable income of the taxpayer for the year, and from the resulting amount shall be subtracted any tax credits allowed to the taxpayer for the year.
(3) ------------------------------------
(4) Certain classes of income (including income of certain classes of persons) may be subject to--
(a) separate taxation as provided in sections 5, 6 and 7; or
(b) collection of tax under Division II of Part-V of Chapter X or deduction of tax under Division Ill of Part-V of Chapter X as a final tax on income or the person.
(5) --------------------------------
(6) --------------------------------
154. Exports (1)---Every authorized dealer in foreign exchange shall, at the time. of realization of foreign exchange proceeds on account of exports of goods by an exporter, deduct tax from the proceeds at the rate specified in Division IV of Part-III of the First Schedule.
(2) --------------------------------
(3) --------------------------------
(3A) --------------------------------
(3B) --------------------------------
(4) The tax deduced under this section shall be final tax on the income arising from the transactions referred to in this section.
169(1)(b)
This section shall apply where--
(a) --------------------------------
(b) the deductions of tax is a final tax under subsection (4) of section 154 on the income from which it has been deducted.
169(2)(d)
Where this section applies--
(a) --------------
(b) --------------
(c) --------------
(d) The tax deducted shall not be reduced by any tax credit allowed under this Ordinance.
Cases relied upon
66 Tax 132, 1992 PTD 1681 Chanda Motors Honourable Supreme Court of Pakistan.
Head Note--Assessment orders as such do not have touch of finality unless all the forums are exhausted in which such Orders can be challenged, so that the orders take the shape of final decisions.
Para. 18. Legally speaking order of assessment passed by Income Tax Officer is an order of original authority but its not final for the reason that it can he challenged in appeal or revision as case may be and would be final only when it goes through all the forums and the finding of the last forum shall be binding and conclusive.
Para 19. The question whether appeal and other remedies provided under the Law formed part of the proceedings or not came up for consideration before the Supreme Court of India in the case of Garikapati Veeraya v. N. Subbiah' Choudhry and others reported in 1'LD 1957.
Supreme Court (Ind) 448. It is held as per majority opinion that legal pursuit of a remedy, suit, appeal and second appeal are really but steps in the series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. Reference can be made in case of Commissioner of Wealth Tax, v. Vimlaben Vadilal Mehta reported in (1984) 45 ITR 11, in which it is held that it is well settled that when an appeal is filed against an assessment order before, the AAC, the assessment is thrown open and the appellate proceedings constitutes a continuation of the assessment proceedings.
Para. 21 On the question of construction in the light of what is stated above, it can be said without fear of contradiction that order passed in original proceedings is not final unless it crosses all the forums set up under the Law in which it can be challenged and the order of the last forum would become final, Mr. Rehan Masan Naqvi, learned counsel for the respondent has submitted before us that there is plethora of Case-law on the point that even within the framework of Income Tax Law, appeals and other remedies provided therein formed part of the same proceedings regarding assessment. In this context our attention is drawn to the case of Chatturam and others v. Commissioner of Income Tax Bihar reported in (1947) 151 ITR 302. In the reported case assessees of partially excluded area were served with notices under section 22(2) of the Income Tax Act for furnishing returns..................................................................................................................................................................................... It was held by the Federal Court of India, inter alia, that appeals to the Appellate Assistant Commissioner were an integral part of the machinery of assessment and therefore it could not be contended that assessment proceedings were over when Regulation 1 of 1941 was made and the Regulation could not apply to the proceedings covered by those appeals.
2000 PTD 371, 2000 PTD 359 CIT v. Abdul Majeed = Honourable Karachi High Court.
Head Notes.
Appeal to Appellate Tribunal --Question of law---Jurisdiction---Question of Law which goes to the root of the case or raises a question with regard to the jurisdiction of particular forum to proceed with the matter or with a particular issue can be raised at any stage of the proceedings---Assessee could raise such question even at the stage of second appeal before the Appellate Tribunal and the Appellate Tribunal was competent F. entertain the question and decide whether the Assessing Officer had jurisdiction to proceed with the assessment of such income to bring the same within tax net--
Exemption---Reference---Income from source of fish catching---Assessee had taken additional ground verbally before Appellate Tribunal that income declared by assessee from source of fish catching was exempt under clause (99) of the Second Schedule of the Income Tax Ordinance, 1979 while said plea was not taken up by the assessee either before the Assessing Officer or in the grounds of appeal filed before First Appellate Authority---Appellate Tribunal found that question as to whether income earned from fishing/fish catching was exempt from charge to income tax was a question of Law and even if the assessee had not raised the same before Assessing Officer or First Appellate Authority, there was no bar for the same being raised before the Appellate Tribunal and the Appellate Tribunal had jurisdiction to decide the same and direct the Assessing Officer to accept the declared income under the head fish catching in toto as the Assessing Officer was not entitled to probe into the income declared by the assessee-Validity-Once the Assessing Officer came to the conclusion that declared income was actually earned from fishing/fish catching then the had no authority or jurisdiction to proceed or probe further with regard to declared sales, gross profit rate etc., in relation to such income and to make estimate with regard thereto---Appellate Tribunal, therefore, was justified in allowing the assessee to raise plea of income from fishing/fish catching being exempt from tax and beyond the jurisdiction of the Assessing Officer---Officer of the Appellate Tribunal was confirmed by the High Court.
2004 PTD 2352 Income Tax Appellate Tribunal, Lahore Bench-
Head Notes
Legal issue---Grounds being purely legal in nature can be raised at any stag and in order to dispense justice Courts/Tribunals have to allow the same to decide controversy once for all touching the merits of the case from its all angles--
Grounds being purely legal in nature can be raised at any stage and in order to dispense with justice Courts/Tribunals have to allow the same to decide the controversy once for all touching the merits of the case from its all angles-Sometimes bench is hesitant to allow if leading of rather evidence becomes necessary or second party is to be taken into surprise.
PLD 1976 Lah. 547, 1976 PTD 11 CIT v. M. Iqbal Saigol Honourable Lahore High Court.
Head Note---Appeal---Appellate Tribunal---Power to permit fresh points to be raised---Objections against jurisdiction and authority vested in Inspecting Assistant Commissioner under section 34A---Neither raised at any earlier stage nor in the grounds of appeal before the Tribunal--Objections purely legal and going to the root of the case---Whether Tribunal competent to permit the objections to be raised before it in exercise of its discretionary powers---Held yes--
Para 5
................................................................................................................................................................................................................
(2) Whether on the facts and in the circumstances of the case the Tribunal was justified to decide the appeal on an issue neither raised before Inspecting Assistant Commissioner of Income Tax, section 34A nor taken in the grounds of appeal before the Tribunal?
Para. 30
..........................................................................................
We are further of the opinion that on the facts and in the circumstances of the case the Tribunal was not debarred in the exercise of the discretion vested in it in Law, in basing its appellate order on an issue, which was neither raised before the Inspecting Assistant Commissioner nor taken in the grounds of appeal before it. We, therefore, return our answer to the second question reproduced above in the affirmative. The respondent shall bear the costs of this reference application before us.
2004 PTD 1071 Income Tax Appellate Tribunal, Lahore Bench-
Head Notes
Res Judicata--Principles of---Application---Principles of res Judicata would not apply to the income tax/wealth tax proceedings before each year was a separate assessable entity.
Natural Justice---Principles of---Natural justice and fair play demand that none should be burdened with tax if the facts of the case are proved to be otherwise.
Cause of justice---Advancement of---Judgment of Court is to be designed to advance cause of justice and not to be source of perpetual injustice.
1967 PTD 339 Pakistan Medical Stores v. CIT v. Honorable Karachi High Court.
Head Notes
Reference---Question of Law---Appeal to appellate Tribunal---Exercise of discretionary powers---Additional ground of appeal going to the root of the case---No further investigation required to decide the question---Additional ground admitted by Tribunal in exercise of discretionary jurisdiction---Whether proper exercise of discretion---Held yes---Question of Law, whether arises---Held no---Income Tax Appellate Tribunal Rule 1948 Rule 12.
Appeal before Appellate Tribunal---Additional ground---Granting or withholding leave to urge additional ground Discretionary with Tribunal---Tribunal granting leave to agitate new point going to very root of the case and capable of being decided on material already on record---Exercise of discretionary jurisdiction by Tribunal, held cannot be attack td as arbitrary, in circumstances of case---
(ii) Whether the Tribunal exercise its discretion judicially under Rule 12 of the Income Tax Rules, by allowing the department to raise additional ground of appeal without the department's showing any cause, which prevent it from including the, same in the memorandum of appeal?
Para. 9
...................................................................................................................................................................................
We do not see how this order of the Tribunal can be attacked as an arbitrary exercise of the discretionary jurisdiction, lawfully vested in the Tribunal. We have, therefore, no hesitation in holding that the question No.2 in the facts of this case did not merit a reference to this Court.
The L/AR of assessee further referred to unreported judgment of ITAT of Islamabad I3ench passed vide I.T.As. Nos.249, 250(IB) of 2004 (assessment years 2001-2002 and 2002-2003 and 521, 522(IB) of 2005 (assessment years 2002-2003), dated 19-8-2006 where it has been held that tax credit under section 107AA o the repealed Ordinance is adjustable against the tax chargeable under section 80D of the repealed ordinance.
We are persuaded to agree with the contention of L/AR of assessee that provision of the law has to be construed strictly, and tax can only be levied if it has unequivocally be levied under the charging section/and there is no question that section 80D of repealed Income Tax Ordinance and section 169 of Income Tax Ordinance, 2001 are not charging section. As per judgment of apex Court of the country in Ellahi Cotton Mills tax is chargeable under section 80D of 1979 Ordinance, likewise under section 113 of Income Tax Ordinance, 2001. However, the tax credit under section 107AA is allowable and adjustable against the demand of sections 80D, 8000 of repealed ordinance and section 113 of Ordinance, 2001 as has been held in ITAS mentioned supra decided by the Islamabad Bench of the Tribunal and the Karachi Bench in a case reported as 2004 PTD 2380 at relevant para. at Page. 2385, hold that tax credit of section 107AA, not only be adjusted in the year of installation of plant and machinery but also be brought forward, and be adjusted in the next year. While there is no provision in the Income Tax Ordinance, 1979 which place bar on adjustability of tax credit, whereas per section 169(2) of Income Tax Ordinance, 2001 there is a provision imposing bar on tax credit allowed in the ordinance not to be adjustable. However this section explicitly prohibits the credits stipulated under the ordinance of 2001, from being admissible against the tax levied under the Final Tax Regime and the reference to the repealed Ordinance is conspicuous in its unambiguous absence. Form a cursory look at Ordinance of 2001 it can be seen, that reference to repealed Ordinance has appeared, at may places and if the intention to the legislature was, to prohibit the admissibility of tax credit, against tax under section 80CC of the repealed Ordinance, as well, it could have been done, by inserting a reference to the repealed Ordinance, in the aforesaid section 169(2)(d) like it has been done, at many other places.
So in the light of above discussed facts and the provision of law and the law quoted above, we are of the affirmed opinion and have doubt in our mind that credit under section 107AA is not only available to sections 80D, 8000 of the repealed Income Tax Ordinance, 1979, but like wise available against tax under section 113 of Income Tax Ordinance, 2001, as section 169(2)(d) does not prohibit, adjustment of the tax credit, allowed under the repealed ordinance. Therefore, we see no reason to make any interference in the impugned order thus it is endorsed and department is directed to give credit for assessment years 2001-2002, 2002-2003 against the demand of tax under sections 80D and 80CC as per the judgment of Islamabad Bench of the Tribunal while for tax year, 2003 under section 113 of Income Tax Ordinance, 2001. As per the reported judgment of Karachi Bench mentioned Supra. It was also contested on behalf of assessee that the law has not properly been applied in levying minimum tax at the rate of half percent of turn over falling under the normal regime instead of computing minimum tax. In entire turn over and deducting there from the tax paid under PTR or FDR as applicable. On this score the case-law reported as 2003 PTD 622 in which it has been held in precise manner that minimum tax under section 80D includes tax under section 80C, while DR has failed to re-establish that tax paid under the provision of section 80C of Income Tax Ordinance, 1979 is excluded from total tax payable under the provision of section 80D of the Repealed Ordinance. As per contention of learned AR in the case of assessee minimum tax has been levied on total turn over with tax paid under final tax retime deducted there from. The case-law referred by the learned AR of the assessee reported as 2003 PTD 622 favour the stance of assessee, the tax paid under section 80C of the repealed Income Tax Ordinance is to be excluded from total tax paid under the provision of section 80D of the Ordinance.
For assessment year 2002-2003 assessee as well as department both have contested the impugned order. Regarding the objection of assessee about the provision of gratuity, neither the gratuity has been got approved as per requirement of law nor actually it has been paid, therefore, the L/CIT(a) has rightly disallowed the same, hence his finding is confirmed. About the chargeability of minimum tax on other income, which largely represent scrape sales cannot form the part of turn over, therefore tax under section 80D is not chargeable over the other income. While regarding the disallowance and restriction of P&L expenses the impugned finding being quite justified also need not to be interfere with. Also on account of WWF the finding of L/CIT(A) being at par with the various case-law is endorsed:
In this way the appeals are disposed of accordingly.
(Sd.)
(JAVID IQBAL)
Judicial Member
As per Shahid Azam Khan, Accountant Member
1. I have very carefully gone through the findings of my learned brother, the Judicial Member of this Division Bench of the Income Tax Appellate Tribunal in this order with reference to facts of the case, relevant provisions of tax laws and the cited case-laws. My learned brother has given a number of findings at pages 16, 17 and 18 of this order. Except for the findings of my learned brother on the issues of (i) disallowance of gratuity, (ii) disallowance of expenses under certain heads of the Profit and Loss Account and (iii) charge of Workers' Welfare Fund involved in the cross appeals of the taxpayer and the Department for the Assessment year 2002-2003 only, I am not inclined to agree with his certain references and various findings for all the years under consideration on the following issues:--
(i) Workers' Welfare Fund
At second last para. at page. 3 of this order, reference has been made with regard to charge of WWF for the assessment year 2001-2002 and tax year, 2003. I have gone through the grounds in departmental appeals for these years and have not found any ground on this issue for these years. The department has raised this issue only its appeal for the assessment year 2002-2003 under section 62 through ITA No.326/KB/2004. Accordingly, in any view, the second last para at page No.3 of this order needs to be deleted.
(ii) Scope of section 80-D
The impugned assessment orders in the departmental appeals for the assessment year 2001-2002 (ITA No.591/KB/2005), for the assessment year 2002-2003 (ITA No.592/KB/2005) and for the Tax year, 2003 (ITA No.593/KB/2005) were passed under section 221 of the Income Tax Ordinance, 2001 through which the Taxation Officer proceeded (a) to disallow the tax credit under section 107AA against the tax demand under section 80-D of the repealed Income Tax Ordinance, 1979 and to disallow carry forward of tax credit under section 107AA of the repealed Ordinance against the tax demand under section 113 of the Income Tax Ordinance, 2001 and (b) to charge WWF since the matter was sub judice before the Hon'ble High Court. In these impugned assessment orders under section 221, the Department, as is apparent from the orders, has neither touched upon the issue of scope of section 80-D nor any computational change has been made by the Taxation Officer in the total turnover. Therefore, in my considered opinion, the findings of the learned Judicial Member of this Division Bench with regard to the inclusion of receipts/sales falling under sections 80-C or 80-CC in the total turnover for the purpose of charging tax under section 80-D of the repealed Ordinance and that of section 154 to be included in the total turnover under section 113 of the Income. Tax Ordinance, 2001 fall outside the jurisdiction of this Division Bench in the said Departmental appeals before us. Accordingly, I am of the considered opinion that all findings given by the learned Judicial Member in this order with reference to sections 80-C and 80-CC of the repealed Ordinance and sections 154, 169 and 113 of the Income Tax Ordinance, 2001 are outside the jurisdiction of this Division Bench in the instant appeals.
(iii) Tax Credit Under section 107AA
The learned Departmental Representative in his arguments, has relied upon a case decided on 18-8-1998 by a Division Bench of the Tribunal in E.T.A. No.6815/KB/1992-93 (Assessment year 1991-1992) reported as 1999 PTD (Trib.) 811 in the following words:--
"(9) Above discussion leaves no doubt that the explanation was so added which intention of charging 0.5% lax as minimum liability against the turnover. It was added only to clarify that the provisions is applicable on all the cases where no tax was payable or the tax paid for any reason whatsoever including loss of income, profits and gains or set-off of loss of earlier years, exemption from tax, credits or rebate in tax and allowances and deductions "including depreciation" admissible under the provisions of this or any other law for the time being in force, is less than 0.5%. The provisions of section 80-D, therefore, have the overriding effect and nothing contained in the Income Tax Ordinance, 1979 or any other law for the time being in force can be so construed as to authorized any exemption, concession or relief in respect of the said income tax. The provision has been added as a non obstante clause and its overriding effect is beyond any doubt. The minimum tax payable is on deemed income representing the total income of the declared turnover from all sources. Deemed income also is a know device of charging tax and the learned Supreme Court of Pakistan have already supported the action of creating Pakistan have already supported the action of creating such charge and have considered it well within the right of the legislature.
As a result thereof there is absolutely no merit in the arguments of the learned A.R. The overriding effect of the impugned provision of law, therefore, is notwithstanding the allowance of rebate under section 107. As a result thereof, we confirm the action of the two subordinate officers of charging tax @ 0.5% on the turnover.
(10) The assessee appeal being devoid of any merit, fails."
From the supra judgment of the Tribunal, it is abundantally clear that no credit of tax is allowable against the tax under section 80-D of the repealed Ordinance. I am also of the considered opinion that the tax credit under section 107 is similar to the tax credit under section 107AA of the repealed Ordinance and the supra judgment of the Tribunal squarely applies to the instant case also. Accordingly, I am of the considered opinion that tax credit under section 107AA is neither allowable to the taxpayer against the tax under section 80-D of the repealed Ordinance for the assessment years 2001-2002 and 2002-2003 nor the unadjusted tax credit under section 107AA can be brought forward for adjustment against tax under section 113 of the Income Tax Ordinance, 2001 for the Tax year, 2003.
(iii) MINIMUM TAX ON OTHER INCOME
The learned Judicial Member has recorded his findings that the other 'income largely represents scrap sales which cannot form part of turnover and, hence, tax under section 80-D is not chargeable over the other income. I do not find myself in agreement with these findings. In my considered opinion, sale of scrap is part of the business sales and very much falls within the scope of aggregate of the declared turnover from all sources and are very much liable to tax under section 80-D of the repealed Ordinance.
2. Since, I have recorded my foregoing differences of opinion, the case is, therefore, proposed to be referred to the Hon'ble Chairperson of the Income Tax Appellate Tribunal for seeking opinion of a third Member of the Income Tax Appellate Tribunal or referring this case to a Full Bench of the Income Tax Appellate Tribunal, as deemed fit.
(Sd.)
(SHAHID AZAM KHAN)
ACCOUNTANT MEMBER
Questions proposed by the Judicial Member, Mr. Jawaid Iqbal
The following questions emerging from the difference of opinion are referred for further proceedings.
(1) Whether on the facts and circumstances of the case, matter based on interpretation, leading to difference of opinion between the two members of the Bench, could there be a mistake floating and apparent in the original order sought to be rectified.
(2) Whether an issue requiring debate and interpretation could be rectified under section 221 or 156 of Income Tax Ordinance, 2001 or 1979.
(3) In the above mentioned circumstances and facts of the case, as to whether the order passed by DCIT under section 221 of Income Tax Ordinance could be termed as valid one.
(4) Whether allowances and credits mentioned to Explanation under section 80-D include tax credit under section 107AA of the Repealed Income Tax Ordinance, 1979, if not so, it could be adjustable against tax demand of section 80-D of the Repealed Ordinance and the carried forward in the next year.
(5) Whether other income assessable under section 30 of the repealed Ordinance form part of turnover under section 80-D of the repealed Income Tax Ordinance, or it is applicable only to the income assessable tinder section 22 of the repealed Ordinance.
(6) Whether respondent can agitate a legal issue, not arising out of the impugned order, as per reported judgment of 90 Taxation 191 of apex Court of the country any issue taken as per the Rules of Administration of Justice, Tribunal or Court of Justice are not bound to apply the law itself to adjudicate the legal issue of dispute.
(Sd.)
Javed Iqbal
Judicial Member
Questions agreed by the Member of Division Bench
The AR (Roster) has today produced the records before me for my consideration of the questions proposed by the learned Judicial Member, I propose the following further questions for consideration by the third Member:--
Q.No.1 Whether, the Questions Nos. 1, 2 and 3 as raised by the learned JM, can be raised now on the interpretation or scope of section 221 or 156 of the Income Tax Ordinance, 2001 or the repealed Income Tax Ordinance, 1979 when the same has neither been discussed by the learned JM in his order nor the AM has recorded any findings thereon in this difference of opinion?
Q. No.2. Whether the minimum tax payable under section 80-D can be reduced to lower than one-half per cent of the aggregate turnover on account of any tax credit in the light of Explanation to subsection (1) of section 80-D of the repealed Income Tax Ordinance, 1979?
Q.No.3 Whether the scrape sales fall within the scope of section 22 and not section 30 for computing aggregate turnover under section 80-D of the repealed Income Tax Ordinance, 1979?
Q.No.4. Whether section 80-D is pare materia of section 80-CC
of the repealed Income Tax Ordinance, 1979?
Q.No.5. Whether the legal issue raised by the respondent/ taxpayer regarding admissibility of tax credit under section 107AA against the tax chargeable under section 80-CC has any relevance with the minimum tax under section 80-D of the repealed Income Tax Ordinance, 1979?
(Sd.)(Sd.)
(Javed Iqbal)(Shahid Azam Khan)
Judicial MemberAccountant Member
Sh. Jalal-ud-Din, Advocate along with Saif-ud-Din Adeeb, F.C.A.
Ahmed Saced Siddiqui, D.R.
AS PER MR. JAWAID MASOOD TAHIR BHATTI, JUDICIAL MEMBER
This matter has been referred to me by the Hon'ble Chairperson for resolving the difference of opinion which has arisen while deciding the above titled five appeals, out of which the four appeals have been filed by the department for the assessment year 2001-2002 to 2002-2003and tax year, 2003 while the reaming one is the cross appeal filed by the assessee for the tax year, 2002-2003. Strangely the above referred six question of difference were framed by my learned brother, the learned Judicial Member on 9-2-2008 who is the author of the original order but subsequently on 27-11-2008 my learned brother the Accountant Member proposed above referred five more questions.
However later on both my learned brothers have agreed on the above referred following five question, which are resolved here-under: --
I have heard the learned representatives from both the sides and have also perused the above referred views of' my both learned brothers, the impugned order of the learned CIT(A), the assessment order, the case-law referred from both the sides and other relevant record of the case.
Regarding the observation of my learned brother, the learned Accountant Member in respect of Workers' Welfare Fund, at the very out-set, the learned representative of the assessee has conceded that there is an error in narration of history, with regard to Workers' Welfare Fund. However, I am not agreed to the view of my learned brother the Accountant Member as the exclusion of the second last Para on page 3 of the order shall be of no consequence, as the learned DR has also conceded that in the assessment year 2002-2003 the Workers' Welfare Fund is not levy able, for the assessment year 2001-2002 and for the Tax year 2003 the department in its appeals has not contested the deletion of charge of Workers' Welfare Fund by the learned CIT(A), therefore, it shall be of no consequence.
Now I come to the above referred questions. The first question is in relation to correct application of law. I am of the view that the law with regard to computation of minimum tax is well-settled and therefore it needs to be properly applied. There cannot be any dispute the effect that this Tribunal as well as all the judicial forums should have to correctly apply the law and if the law has not been correctly applied due to any mistake, on the application of the aggrieved parties as well as suo moto action should be taken and that illegality should he rectified. I am of the view that this Tribunal as well as all other judicial forums are very much within the jurisdiction to rectify the order where law has not been properly applied. In the present case my learned brother the Accountant Member has not dissented, to non levy of minimum tax under section 113 of the Ordinance, 2001 as charging section 4 of the Income Tax Ordinance, 2001 does to provide for, or empower to such a levy. He has not even disagree with the view of my learned brother Judicial Member. I am of the view that section 221 can be invoked only to handle the situation where a mistake is apparent from the floating on the surface on the record. This is precise scope of section 221 which cannot be transgressed. If in the course of rectification some findings are to be m made and the matter involves debates and arguments, then application of section 221 is ousted as has already been held by this Tribunal as well as the Honourable superior Courts. I am further of the view that the question and debate as to pertinence of section 221 is not any practical significance for the issue in the present case as the credit under section 107(AA) is duly available against lax under sections 80CC and 80D of the repealed Ordinance, 1979 and against tax under sections 13 and 154 of the new Ordinance, 2001 as has been held by the Honourable Supreme Court of Pakistan in the cases of Messrs Ellahi Cotton, reported as 76 Tax 5 (para. 54) in relation to sections 80D and 80CC both, and in the case of Messrs Zaman Cotton reported as 96 Tax 203 which is in relation to tax under section 8000. In this regard on behalf of the assessee order of his Tribunal, dated 19-8-2006 in the matter of CIT v. Dewan Salman Fibre Limited in I.T.As. Nos. 29 and 250/IB of 2004 and I.T.As. Nos. 521 and 522/113 of 2005 (Assessment year 2001-2002 and 2002-2003) has been referred wherein it has been held that:--
"We are inclined to agree with the view point expressed by learned AR of the assessee that the tax credit under section 107(AA) separately provided under Chapter X is different from the Allowance/Relief and credits and rebates provided under Chapter III, IV & V of the repealed Ordinance, tax credit under section 107(AA) is a special incentive provided by the Government for a specific period to certain classes of persons, the contention of learned AR that incentive provided to different assessee through amendment made in repealed Income Tax Ordinance, 1979 vide Finance Ordinance, 2000 being a later enactment was available to all such persons and could not be restricted by the provisions of section 80 inserted by Finance Act, 1991 or Explanation added to the said section vide Finance Act, 1992 also merits favourable consideration. Before proceedings further we will like to reproduce the provisions of section 107(AA) of the repealed Ordinance which are as hereunder:-
107(AA). Tax credit of investment:---(1) where an assessee being a Pakistani company invests any amount in the purchase of plant and machinery for installation, at any time between the first day of July, 2000 and the 30th day of June, 2002, in an industrial undertaking set up in Pakistan and owned by it, credit equal to ten percent of the amount so invested shall be allowed against the tax payable by it in the manner hereinafter provided....
The CIT(A) allowed the impugned relief with the following obser vation:--
I have considered the arguments, perused the order and the appellate order of the learned CIT(A), Karachi. The provisions of the section 80D provides minimum tax on certain persons where no tax is payable therefore the tax under section 801) would be "tax Payable" whereas section 107(AA) allows tax credit @ 10% of the amount invested against the tax payable for the year. The Assessing Officer did not allow the credit because the provisions of section 80D overrides all other provision. The Assessing Officer however did not appreciate that the credit under section 107(AA) is allowed against "tax payable" for the year and tax under section 80D is "tax payable" for that year, on this bases the credit under section 107(AA) is allowable against the tax payable for the year under section 80D as no exclusion of the tax payable under section 80D for such adjustment has been provided in the law. In view of the above Assessing Officer is directed to allow the claimed credit under section 107(AA) against the tax payable under section 80D and modify the order.
Considering the facts of the case in the light of the provisions of law as discussed above we are inclined to agree with the above quoted findings of CIT(A) hence the order of the CIT(A) are maintained."
After considering the above decisions I am of the view that the credit under section 107(AA) is available against section 154 in addition to above said reason is also available for yet another reason as well. I have found that section 169(2)(d) prohibits adjustment of tax credits under the new Ordinance, 2001 but no such provision is under the repealed Ordinance, 1979. I, therefore, find no substance in the difference note in this regard by the learned brother Accountant Member as brother learned Judicial Member has discussed the matter in detail and placing reliance on the decision of this Tribunal and the honorable higher Courts has allowed relief to assessees. I am therefore, of the view that the question No.1 as to applicability of section 221 does not remain, of any practical significance for credit adjustment.
Regarding the above referred question No.2, I am of the view that in the above referred decision, the Honourable Supreme Court of Pakistan in the matter of Messrs Elahi Cotton in paragraph 54 it has been held that if a later law is in conflict with section 80D, the said Later Law shall prevail and entire section 80D, shall not apply. It therefore, logically follows that tax under section 80D can be reduced as well, to less than as half percent, by a later Law, it the Later Law can render the whole section, of no effect, and thereby reduce the tax under section 80D to zero.
Regarding the question No.3 I am of the view that the sale of scrap, by no spread of reverie, is turnover. Once it is not turnover, it obviously cannot be part of business turnover. I am of the view that it is not income. Once it is not income it cannot be assessed under any section as income. The expression "turnover" denotes buying and selling, processing and selling, with an aim to earn profit. In the present case, there is not turnover as the phenomenas of buying and selling or buying, processing and selling are not involved and even there is no intention, to earn income or to make profit, therefore, it is not the business of the assessee to earn profit from selling scrap and for all these reasons no maximum tax can be levied on sale of scrap. The legislative intend is to levy tax on business turn over and not on fractional recovery of cost. It would be akin to levying tax on purchase return, for practical recovery of cost can be equated with purchase return. If the sale return cannot be taken as turnover, I find no reason to treat purchase return as turnover. The returns connote reversals and there cannot be any tax thereon. The business turnovers are intended to and in actual fact, in the main, produce income. The scrap sales are neither meant to produce income, nor they supply any income whatsoever. Even otherwise, I have found that my learned brother Accountant Member has not discussed this issue in his differential note but has only framed the question without giving reasons for the question framed in this regard.
Regarding the question No.4 after considering the opinions given by my both the learned Brothers I have found that the relevance of question is to the context of the subject-matter. I am of the view that sections 80D and 80CC of the late Ordinance 1979 are identical in some ways. Both these sections are under Presumptive Tax Regime and regardless of actual income, there is some income fictionally presumed and tax is computed and levied thereon. Li case of section 80D, the tax so computed is minimum tax and a higher tax is further chargeable, if tax on income, under other pertinent provisions of law is more than the minimum tax. On the other hand, tax levied under section 80CC is final tax, and once this tax is levied, no other tax is levy able on the other relevant income. Section 80D and section 8000 of the repealed Ordinance, 1979, in the context of subject matter of the appeal, have similarity in the sense, that tax credit allowed under section 107(AA) is adjustable against tax under sections 80CC and 80D both, for the reasons that section 107(AA) is a later Law and both sections 8000 and 801) represent earlier laws and it is a trite rule of law, that the Former Legislation shall give way to the following legislation. In the above referred case of Messrs Zaman Cotton reported as 96 Tax 203 it has been held that the tax credit under section 107(AA) shall be adjusted against tax under section 80CC. Likewise, in the case of Messrs Ellahi Cotton reported as 76 Tax 5 (Nara. 54) it has been held that later Law shall prevail over earlier law. I am further of the view that as my learned brother Accountant Member has also not discussed the issue raised in the aforesaid question, in his dissenting note. Therefore, the hoisting of question, not arising out of the dissenting note, itself comes under a serious and genuine question.
Regarding the above referred last question No.5 I am of the view that this question is also' not relevant as the legal plea can be raised, at any stage of the appeal, and it is incumbent upon the Tribunal to appropriately implement the law. In this regard I may refer the above discussed decision of the honourable Supreme Court of Pakistan in the matter of Messrs Ellahi Cotton reported as 76 Tax 5 wherein the honourable apex Court of the country has employed its suo motu jurisdiction in settling the issue, I am therefore of the view that my learned brother Judicial Member has accepted the fresh plea raised, in relation to adjustment of tax credit under section 107(AA) against under section 80CC section 154 and relation to non levy of tax under section 113 and has adjudicated the same in accordance with law but my learned brother Accountant Member without discussing the issue in his dissenting note has raised questions which are not arising out of the dissenting note. On the other hand my brother, the learned Judicial Member after detailed discussion no the subject matter and following the decisions of this Tribunal as well as the honourable higher Courts already made in this regard has dismissed the appeals filed by the department and has allowed appeal filed by the assessee. I am in agreement with the view of my learned brother the Judicial Member and the view taken in this regard is upheld.
Consequently all the four appeals filed by the Department for the assessment years 2000-2001 to 2002 2003 and tax year, 2003 are dismissed, while the cross appeal for the assessment year 2002-2003 filed by the assessee is partially allowed to the extent and in the manner referred above.
C.M.A./54/Tax (Trib.)Departmental appeals dismissed.
Assessee's appeal accepted.