VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2163 (2009)

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

----S.221 & Seventh Sched., Part-II---Rectification of mistake---"Textile made ups"---Rate of tax---Rectification application, on the ground that cotton fabrics fell within the definition of `made ups' and 'the rates of withholding tax applicable on the `made ups' (0.75%) was to be deducted whereas at the time of deduction rates applicable to the goods manufactured in Pakistan (1 %) falling under Part-II of the Seventh Schedule was applied and excess deduction was made---Taxation Officer, in the present case, observed that cotton fabrics did not fall within the ambit of `made ups' and application for the assessment year 2002-03 and tax years 2003 & 2004 were rejected on the plea that no mistake was apparent from record while the applications for assessment years 2000-01 and 2001-02 were rejected on the basis of limitation---Validity--Definition of word "textile made ups" having stood settled through various judgments of the higher legal fora as well as Appellate Tribunal in favour of assessee, order of the First Appellate Court was vacated and assessment framed under S.221 of the Income Tax Ordinance, 2001 were annulled for all the years---Taxation officer was directed to allow the rectification as claimed.

I.T.A. Nos. 885/LB to 859/LB of 2006 and I.T.As. Nos.1371 to 1380/LB of 2006 ref.

1999 PTD 4138 rel.

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

----S.170---Refund---Excess levy of tax---Limitation in respect of refund---Excess levy of duties over the actual levy was refundable irrespective of time limitation.

PLD 1998 SC 64 rel.

Muhammad Iqbal Khawaja for Appellant.

Muhammad Tahir, D.R. for Respondent.

ORDER

SYED NADEEM SAQLAIN, (JUDICIAL MEMBER).--Appeals for the assessment years, 2000-2001, 2001-2002 and 2002-2003, Tax years, 2003 and 2004 have been directed against the combined impugned order dated 28-5-2008, passed by the learned C.I.T.(A), Gujranwala (camp at Faisalabad). The common grounds urged at the bar for all the assessment years in appeal are that the learned first appellate authority was not justified to reject the rectification application filed by the' taxpayer under section 221 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) for seeking rectification of "wrong levy of tax" for the reason that fabric produced by the taxpayer was `textile made ups" which attracted levy of tax @ 0.75%.

2. The appellant is a Private Limited Company deriving income from export of cotton fabrics. Statements under sections 143-B/115(4) were filed by the taxpayer on the basis of tax deducted on prescribed rates as final discharge of liability. On 22-6-2007, the taxpayer filed rectification application under section 221 of the Ordinance contending that cotton fabrics fall within the definition of made ups and the rates of withholding tax applicable on the made ups (0.75%) was to be deducted whereas at the time of deduction rates applicable to the goods manufactured in Pakistan (1%), falling under Part-II of the Seventh Schedule was applied, hence, excess deduction was made. The taxation officer observed that cotton fabrics did not fall within the ambit of made ups and rectification applications for the assessment years, 2000-2001 and 2001-2002 were rejected on the basis of limitation, whereas application for the assessment year, 2002-2003 and tax years, 2003-2004 were rejected on the plea that no mistake was apparent from record. The assessee approached the learned first appellate authority who vide an order dated 28-5-2008 rejected the appeals of the assessee, hence the assessee in further appeal before the Tribunal.

3. The learned A.R. has strenuously argued the case and contended that as far as assessment years, 2000-2001 and 2001-2002 are concerned, assessment was framed under section 59-A of the repealed Income Tax Ordinance, 1979. He argued that the application submitted by the assessee was with regard to the excess levy of tax which is refundable to the assessee, hence the taxation officer was not justified to reject the said application on the basis of limitation. It was argued by the learned A.R. that Honouable Supreme Court of Pakistan has held vide judgment reported as PLD 1998 SC 64 that excess levy of State duties over the actual levy was refundable irrespective of time limitation. With regard to remaining assessment year, 2002-2003, tart years, 2003 and 2004, the learned A.R. submitted that the issue of definition of word "textile made c ups" stands settled through various judgments of the higher legal fora as well as Tribunal. In this respect he relied upon judgments of the Tribunal IC passed vide I.T.As. Nos. 885 to 859/LB/06, dated 7-11-2007, I.T.As. Nos.1371 to 1380/LB/06, dated 22-11-2007, 1999 PTD 4138.

4. The learned D.R. on the other hand opposed the arguments advanced by the learned A.R. He supported the orders of the authorities below and requested for maintaining of the same.

5. We have heard both the parties and have gone through the relevant orders as well as case-law cited supra. We fully agree with the arguments advanced by the learned A.R. Admittedly, in a number of judgments the Tribunal as well as higher Courts have decided the issue involved in the present case. The Honourable Supreme Court of Pakistan in a case reported as PLD 1998 SC 64 held that:--

"It may be noted that section 224 of the Act provides that the Federal Government, the Board or the appropriate officer of customs, may, upon being approached by an aggrieved party if satisfied that the delay was beyond the control of the applicant and that by granting such extension there is a possibility of some loss or hardship to the applicant being mitigated or prevented, extend the time limit laid down in any section."

6. With regard to issue of "textile made ups", it is not out of place to mention here that the said issue has already been decided by the Honourable Lahore High Court, Lahore vide a judgment reported as 1999 PTD 4138 wherein it has been held:--

"As noted earlier cotton yarn does not fall within the category of "textile made ups". These words as used in Part-I of the Eighth Schedule certainly refer to items of dressing, bed spreads or household clothing etc. Cotton Yarn in all Textile made ups could be one or more of the contents. In its simpler form it cannot be treated as a textile made-ups which clearly is the next stage or converted form of yarn into something which amongst, other characteristics is available for the aforesaid uses. The item, however, being placed between raw cotton and the textile made ups can conveniently be taken as a "good manufactured" as it travels from various stages to acquire that form. The term manufacturing as a general rule is applied to conversion or process of a material or materials into refiner forms of the raw material or the making of an altogether different thing. Another principle applied in this regard is the change in nature and use of the item which had travelled from one stage of material to another or stood converted even by simple flux of time and preservation with or without making of any human effort to affect the change."

7. In the light of above discussion and the ratio settled by the Honourable Supreme Court of Pakistan as well as the Honourable High Court, the order of the learned C.I.T.(A) is vacated and assessment framed under section 221 are hereby annulled for all the years under consideration. The Taxation Officer is directed to allow the rectification as claimed by the assessee.

8. Appeals of the assessee succeed.

C.M.A./112/Tax(Trib.)Appeal succeeded.