2009 P T D (Trib.) 2154
[Income-tax Appellate Tribunal Pakistan]
Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant' Member
I.T.As. Nos.216/LB to 219/LB of 2009, decided on 06/05/2009.
(a) Income Tax Ordinance (XLIX of 2001)---
----Ss.153(1)(c), 153(6A) & 170---Payments for goods and services---Canteen contractor---`Manufacturer'---Connotation---Assessee contendedthat he being canteen contractor was primarily engaged in the business of manufacturing of food articles and since his nature of business was manufacturing, tax deducted under S.153(1)(c) of the Income Tax Ordinance, 2001 was final discharge of tax liability as laid down in S.153(6A) of the Income Tax Ordinance, 2001---Being manufacturer, tax deducted under S.153(1)(c) of the Income Tax Ordinance, 2001 was adjustable and he was entitled for claim of refund---Validity---Taxpayer was obliged to provide breakfast, lunch, dinner to the employees of the contractee company---Breakfast, lunch, dinner and even preparation of tea involves different articles and when they were put together, they were converted into another distinct article or produce which were completely changed or reshaped and were put to different use as compared to their original condition---Definition of word "manufacturer" was quite comprehensive and refers all sorts of processes including the one of the canteen contractor---Taxpayer was a `manufacturer' and his case fell within the purview of S.153(1)(c) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was vacated and assessment order passed by the Taxation Officer was annulled by the Appellate Tribunal.
2003 PTD 2073 rel.
(b) Income Tax Ordinance (XLIX of 2001)---
----S.153---Payments for goods and .services-'Manufacturer'-Connotation-Term "manufacturer" inserted in Income Tax Ordinance, 2001 clarifies the ambiguity if there was any with regard to the meaning of word "manufacturer"-'Manufacturer' could be explained as article singly or in combination with other articles, material, components either converted into another distinct article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or a process of assembling mixing, cutting, packing, repacking or preparation of goods in any other manner.
(c) Words and phrases---
---`Manufacturer'---Definition---Manufacturer, included any material produced by hand and also fell within the ambit of the term "manufacturer"---Production of article for use from raw material or prepared material by giving such material new forms, qualities, properties of combinations also included in the definition of 'manufacturer'.
Black's Law Dictionary, 6th Edn. at p.965 ref.
Bashir Malik for Appellant.
S.A. Masood Raza Qazilbash, D.R. for Respondent.
ORDER
SYED NADEEM SAQLAIN, JUDICIAL MEMBER---Captioned appeals pertaining to the tax years 2004 to 2007 have been directed against the combined impugned order dated 23-12-2008 passed by the learned C.I.T.(A), Gujranwala (camp at Faisalabad):--
(i) That the order passed under section 170(4) by the Taxation Officer as well as Commissioner of Income Tax (Appeals), Gujranwala camp at Faisalabad is bad in law against the facts of the case.
(ii) That the Commissioner of Income Tax (Appeals), Gujranwala camp at Faisalabad is not justified to confirm the order of the Taxation Officer.
(iii) That the reliance placed on the judgment of Kerala High Court of India and confirmation by the Commissioner of Income Tax (Appeals) is against law and unjustified.
(iv) That the Commissioner of Income Tax (Appeals) is wrong in not considering the definition of manufacturer inserted in section 153 through Finance Act, 2008.
(v) That the definition of manufacturers inserted in section 153 through Finance Act, 2008 is applicable retrospectively. Non-considering of the same by the Commissioner of Income Tax (Appeals) is against law and unjustified.
(vi) That the Taxation Officer as well as Commissioner of Income Tax (Appeals) is wrong in not treating the nature of business of the appellant as manufacturers.
(vii) That the appellant's business of preparing of good, Chapatti and tea etc. falls under the definition of manufacturers.
(viii) That the Commissioner of Income Tax (Appeals). is wrong in treating the supplies of food etc; to the workers as final discharge of tax liability.
2. The facts as narrated in the assessment order passed under section 170(4) of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) are that the taxpayer being an individual derived income as contractor. The taxpayer filed statement under section 115(4) of the Ordinance treating tax deducted on execution , of contract under section 153(1)(c) of the Ordinance as a final tax charge on tax liability. However, subsequently the taxpayer filed revised return for the years under appeal and claimed total refund of Rs.7,96,839. Eventually, the revised return filed by the taxpayer were not accepted and treated the same being invalid returns. The plea of the taxpayer that he was a manufacturer was not accepted on the basis of a judgment from the Indian jurisdiction which resulted into refusal with regard to claim of refund by taxpayer.
3. Feeling aggrieved with the afore-said assessments, the taxpayer approached the learned first appellate authority who vide an order dated 23-12-2008 dismissed the same. The taxpayer is in further appeal before the Tribunal.
4. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that the taxpayer/appellant being canteen contractor was primarily engaged in the business of manufacturing of food articles and since his nature of business is manufacturing, tax deducted under section 153(1)(c) of the Ordinance is final discharge of tax liability as laid down in section 153(6A) of the Ordinance. He submitted that being manufacturer, tax deducted under section 153(1)(c) ibid was adjustable in the case of taxpayer, hence he was entitled for claim of refund for tax years under appeal. The learned A.R. submitted that the definition of word "manufacturer" was inserted in section 153 of the Ordinance through Finance Act, 2008 which reads as follows:--
"Manufacturer" for the purposes of this section means, a person who is engaged in production or manufacturing of goods, which includes:-
(a) any process in which an article singly or in combination with other articles, material, components, is either converted into another, distinct article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or
(b) a process of assembling, mixing, cutting, packing, repacking or preparation of goods in any other manner."
5. The learned A.R. also produced a copy of the contract between the taxpayer and Azhar Corporation Private Limited with whom' the taxpayer has entered into contract for providing food etc. to the employees of the afore-said company. The learned A.R. elaborated that conversion of raw-material into eatable food is an act of manufacturing, hence the treatment accorded to the taxpayer by the Taxation Officer was not in consonance with law. In support of his stance, the learned A.R. relied upon judgment of the Karachi High Court reported as 2003 PTD 2073. The learned A.R. further pleaded that in the presence of a findings given by the High Court from our own jurisdiction, placing reliance on the judgment of the foreign jurisdiction could not be given credence. He stated that even otherwise, the judgment relied upon by the Assessing Officer is. not attracted in the assessee's case since it is related to an assessee who was running a hotel which provides many other services such as renting out of rooms etc. and provision of food was only ancillary to the above services. While summing up his arguments the learned A.R. stated that being manufacturer, the tax deductible was adjustable, hence entitled to claim of refund.
6. The learned D.R. has opposed the arguments advanced by the learned A.R. It was argued by the learned D.R. that taxpayer is basically a contractor and preparation of food cannot be considered a process which involved manufacturing. The learned D.R. further argued that judgment relied upon of the. Kerala High Court was in consonance with law.
7. We have heard the learned counsel for both the parties and have also gone through the relevant orders along with the case-law cited at the bar. Perusal of the definition of the term "manufacturer" inserted in Income Tax Ordinance, 2001 clarifies the ambiguity if there was any with regard to the meaning of word "manufacturer". It is explained that article singly or in combination with other Articles, material, components either converted into another distinct Article or produce is so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or a process of assembling, mixing, cutting, packing, repacking or preparation of goods in any other manner. Keeping in view the over-mentioned explanation of term "manufacturer", we can try to analyze the taxpayer's case. As per copy of contract placed on record, the taxpayer is obliged to provide breakfast, lunch, dinner to the employees of the 'contractee company. Obviously, the breakfast, lunch, dinner and even preparation of tea involves different articles and when they are put together, they are converted into another distinct article or produce which are completely changed or reshaped and are put to different use as compared to their original condition. Undoubtedly, the definition of word "manufacturer" is quite comprehensive and refers all sorts of processes including the one which is under discussion. At this juncture we would like to go through the judgment relied upon by the learned A.R. In the supra cited judgment, the issue which came for adjudication before the Honourable High Court was whether charges received for tailoring and stitching for other parties are covered by exemption under clause 125 of the Second Scheduled to the Income Tax Ordinance, 1979, it was held by the Honourable High Court that the assessee was a manufacturer. In this respect the Court relied upon the definition of "manufacturer" given in the Black's Law Dictionary, 6th Edition at page 965 which is reproduced as under:--
"Manufacturer"---The process or operation of making goods or any material produced by hand, by machinery or by other agency anything made from the raw materials by hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine."
8. It is pertinent to notice that above-mentioned definitions included that any material produced by hand also fell within the ambit of the term "manufacturer". It is further noted that the production of -article for use from raw material or prepared material by giving such material new forms, qualities, properties of combinations also included in the afore-said definition.
9. After hearing the contentions urged by both the parties, we find ourselves in full agreement with the assertions made by the learned A.R. In the light of amendment made in section 153(1)(c) as well as ratio settled in the supra cited judgment, we are constrained to observe that taxpayer is a manufacturer and hence his case falls within the purview of section 153(1)(c) of the Ordinance. We, therefore, vacate the impugned order passed by the learned C.I.T.(A) and annul assessment order passed by the Taxation Officer.
10. Appeals of the assessee succeed.
C.M.A./113/Tax(Trib.)Appeal succeeded.