VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 353 (2008)

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.80D, 12(19), 15 & 62---Income Tax Ordinance (XLIX of 2001), S.239---Minimum tax on income of certain persons---Assessment year 2001-02---Lease rental income---Assessee contended that Taxation - Officer had levied tax under S. 80D of the Income Tax Ordinance, 1979 without considering the fact that levy of tax under S.80D of the Income Tax Ordinance, 1979 was no more available in Ss.239(1) & 239(2) of the Income Tax Ordinance, 2001---Validity---For any income to be included in "total income" that income had to fall in any of the heads prescribed under S.15 of the Income Tax Ordinance, 1979, whereas S.80D of the Income Tax Ordinance, 1979 was a special deeming provision separate from computation of total income and tax payable on total income---Charging of tax under S.80D of the Income Tax Ordinance, 1979 after 1st July, 2002 was not justified in the eyes of law---Taxation Officer had passed the order without confronting the assessee and had made the order in accordance with the previous history of the case without considering the fact that the legal position due to the promulgation of the Income Tax Ordinance, 2001 had been changed and the decision for the previous years could not be made basis for the year under review---Order of First Appellate Authority to the extent of levy of tax under S.80D of the Income Tax Ordinance, 1979 was vacated and order passed by the Taxation Officer was annulled---Appeal filed by the assessee on the issue was allowed while the appeal filed on the remaining grounds was dismissed being not passed by the assessee.

(2001) 83 Tax 376; 1997 PTD 1555; PLD 1997 SC 582; 1993 PTD 69; 2006 PTD 2277; 2004 PTD 2479; 2005 PTD 2513; 2003 PTD 577; (1999) 80 Tax 241; 2001 PTD (Trib.) 2938; 2003 PTD (Trib.) 625; 1999 PTD (Trib.); 3892; 2001 PTD 678; 2001 PTD 2884; 2006 PTD (Trib.) 2325 and 2006 PTD (Trib.) 2060 ref.

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

----S.239--- Income Tax Ordinance (XXXI of 1979), S.80D---Savings---Provisions of Income Tax Ordinance, 1979, in so far as these relate to computation of total income and tax payable thereon, shall apply as if the Income Tax Ordinance, 2001 had not come into force and under subsection (2) of S.239 of the Income Tax Ordinance, 2001 the assessment referred to in sub-S. (1) of S.239 of the Income Tax Ordinance, 2001 shall be made by an Income Tax Authority which was competent into the Income Tax Ordinance, 2001 which made alt assessment in respect of a tax year ending on any date after the 30th day of June, 2002, and in accordance with the procedure specified in S.59, 59A, 61, 62 or 63, as the case may be, of the Income Tax Ordinance, 1979---However provision of S.80D of the Income Tax Ordinance, 1979 had not been mentioned meaning thereby that the statute had saved provisions relating to "computation of total income and tax payable there on" only.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 15 & 80D---Head of income---Computation of taxable income was covered in the Income Tax Ordinance, 1979 in various sections like Chapter IV starting from S.15 of Income Tax Ordinance, 1979 and other various sections other than S.80D of the Income Tax Ordinance, 1979 and computation of tax payable on total income was covered under First' Schedule to the Income Tax Ordinance, 1979.

(d) Income Tax Ordinance (XXXI of 1979)---

----S.2(43)---"Tax"---Definition---Term "tax" had been defined under S.2(43) of the Income Tax Ordinance, 1979, wherein the income tax, super tax, surcharge and additional tax chargeable or payable under the Income Tax Ordinance, 1979 and also included penalty, fee or other charge or any sum of amount leviable or payable under the Income Tax Ordinance, 1979.

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

----S.239---Saving---Tax---All types of taxes had not been saved in S.239 of the Income Tax Ordinance, 2001; only the tax payable on total income had been saved in S.239 of the Income Tax Ordinance, 2001.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 2 (44), 11 & 80D---"Total Income"---Meanings---Total income as defined in S.2 (44) of the Income Tax Ordinance, 1979 means the total amount of income referred to in S.11 of the Income Tax Ordinance, 1979 computed in the manner laid down in the Income Tax Ordinance, 1979 and includes any income which under any provisions of the Income Tax Ordinance, 1979 was to be included in the total income of an assessee---Definition covered `income' referred to in S.11 of the Income Tax Ordinance, 1979 or any `income' which under any provision of Income Tax Ordinance, 1979 was to be included in the `total income'---Receipts deemed as income under S.80D of the Income Tax Ordinance, 1979 were not included in `total income'.

Rizwan Bashir F.C.A. for Appellant.

Gohar Ali, D.R. for Respondent.

ORDER

The appellant through this appeal has objected to the impugned order of the learned C.I.T. (A) dated 2-5-2005 on the following grounds:

*The learned Commissioner of Income Tax (Appeals) was not justified in upholding levy of tax under section 80D being repeated and not saved in the Income Tax Ordinance, 2001.

*The Taxation Officer has erred in taxing gross lease rentals under section 80D without confronting the same to the appellant and without considering the facts that section 12(19) was a deeming provision for limited purpose only and not for 80D.

*After considering the binding judgment of the Honourable Sindh High Court reported as (2001) 83 Tax 376 (H.C.Kar) the learned Commissioner of Income Tax (Appeals) erred in setting aside the issue of allocation of admission expenses between `income from lease rentals' and `income from other operations other than leasing' instead of deciding it as per judgment of the Honourable High Court.

*The learned C.I.T. (A) was not justified to uphold disallowance of diminution in the value of short term investments made by the Taxation Officer without fulfilling requirement of law as laid down in section 62.

2. We have heard the learned representatives from both the sides and have also perused the impugned order of the learned C.I.T. (A), the assessment order and other relevant record of the case.

3. The appellant in this case is a listed public limited concern engaged in the business of leasing. Assessment for the year under review was finalized under section 62 to the Repealed Ordinance, 1979. The assessee preferred appeal against the order. The learned C.I.T. (A) has set aside the matter regarding allocation of admission expenses between income from lease rental and income from operation of the leasing. Learned counsel at the very out set not pressed the ground in this regard as the relief has already been allowed by the Taxation Officer reliance of the decision of Honourable High Court. The learned counsel however, contesting the applicability of section 80/D of the taxpayer and the taxing of gross lease rental under section 80D of the Repealed Ordinance, 1979. He has contended that section 80D of the Repealed Ordinance is not applicable after June 30th 2002 being not saved in the new Ordinance, 2001. He has contended that the appellant has returned total income for the year under review with tax loss. Since there was no tax payable on total income computed as loss, the provisions of section 80D of the late Ordinance, 1979 came into operation. The appellant computed tax @ 0.5% on total turnover. The learned counsel has contended that no order was framed by the Taxation Officer by 30-6-2002, the last date of operation of the Repealed Ordinance 1979. He is of the view that from the 1st July, 2002 the new Income Tax Ordinance, 2001 has come into operation. While promulgating Ordinance, 2001 few necessary provisions of the Repealed Ordinance, 1979 deemed necessary by the legislature were kept saved as provided in section 239 of the Income Tax Ordinance, 2001. He has contended that a consequence of the new Ordinance at the time of passing the order the Taxation Officer was obliged to pass it in accordance with the provision of new Ordinance but the Taxation Officer has levied tax under section 80D without considering the fact that levy of tax under section 80D of the Repealed Ordinance was no more available in sections 239(1) & 239(2) of the Income Tax Ordinance, 2001. Referring the above subsection (2) of section 239 he has argued that subsection (1) is subject to subsection (2) according to which in making any assessment in respect of any income year ending on or before the 30th day of June 2002. The provisions of the Repealed Ordinance in so far as these relates to computation of total income and tax payable thereon shall apply as if this Ordinance had not come into force. He has submitted as per subsection (2) the assessment referred to in subsection (1) shall be made by an Income Tax Authority which is competent under this Ordinance to make an assessment in respect of a tax year ending on any date after the 30th day of June, 2002, and in accordance with the produce specified in section 59 or 59A or 61 or 62 or 63, as the case may be of the Repealed Ordinance, 1979. Learned counsel has contended that the statute has saved provisions relating to "computation of total income and tax payable thereon" only. The computation of taxable income is covered in the Ordinance in various sections like Chapter IV starting from section 15 and other various sections other than section 80D and computation of tax pay-able on total income is covered under 1st Schedule to the Repealed Income Tax Ordinance, 1979. The term `Tax' has been defined under section 2(43) of the Repealed Ordinance, 1979. According to the definition "tax" means income, super tax, surcharge and additional tax chargeable or payable under this Ordinance and includes and penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance. This definition under section 2 (43) is all inclusive but section 239 has not saved all types of tax it has saved provisions of Repealed Ordinance relating to tax payable on total income only. According to learned counsel the "total income" has been defined in section 2(41) as the "total income" means the total amount of income referred to in section 11 computed in the manner laid down in this Ordinance and includes any income which under any provision of this Ordinance is to be included in the total income of assessee. He has-submitted that the definition covers income referred to in section 11 or any income which under any provision of Repealed Ordinance is to be included in the total income. However, the receipts deemed as income under section 80D are never included in the total income. Learned counsel is of the view that for any income to be included in "total income" that income has to fall in any of the heads prescribed under section 15, whereas section 80D is special deeming provision separate from computation of total income and tax payable on total income. He has contended that the section 80D of the Repealed Ordinance does not find place in the above referred saving clause of section 239 of the new Ordinance, 2001, therefore, the charging of tax under section 80D after July, 1st 2002 is not justified in the eyes of law. The learned counsel in this regard has also argued the case on this issue without prejudiced to the above reading legal contentions regarding treating the section 12(19) of the Repealed Ordinance, 1979 lease rental as income for the purpose of section 22 only and does not deem as turnover for section 80D. He has contended that section 80D starts with "Notwithstanding anything contained in this Ordinance or any other law for the time being in force". He is of the view that due to the above wording of section 80D it override provision of section 12(19) to the extent of computing tax liability under section 80D. He has submitted that the criteria for determining turnover or income defined in section 80D itself which speaks about declared turnover is to be followed rather than that prescribed in section 12(19) which speaks about deemed income. He has in this respect placed reliance on the decision of Honourable Supreme Court of Pakistan reported as 1997 PTD 1555 (SC Pak). He has also referred the decision of the Honourable Supreme Court of Pakistan in the case of Elahi Cotton Mills Ltd reported as 1997 PLD 582, whereas the turnover has been defined as income by virtue of legal fiction and the legal fiction are created for limited purpose and can not be extended beyond the purpose for which they were created. The learned counsel has contended that section 80D was enacted to levy tax where tax on total income comprising of all six heads mentioned in section 15 was less than 0.5% of the aggregate turnover and it is evident that turnover is not covered for any head of income mentioned in section 15. He 4 therefore of the view that section 239(1) of the Income Tax Ordinance, 2001 does not extend to tax levied/leviable under section 80D because turnover is not part of total income. He has in this respect placed reliance on the decision of the Honourable Supreme Court of Pakistan reported as 1993 PTD 69 (SC Pak) and also referred the decision of the Indian High Court in case of Mahabaleswarappa & Sons v. Commissioner of Land Revenue reported as AIR 1997 (FB), wherein it has been held that in a taxing act one has to look merely at what is clearly said. There is no room for any intendment, there is no equity about a tax, there is no presumption as to a tax. Nothing is to be reading, nothing is to be implied. One can look fairly at the language used. The learned counsel has further contended that Honourable Superior Courts in many cases has established cardinal principle that in the matter of fiscal nature, the enactment has to be given its literal meaning and no inference can be made specially when none is required, even if any inference is to be required be drawn it should be to the beneficial of the taxpayer. Reliance in this respect has been placed on the following reported decision.

2006 PTD 2277 (SC Pak), 2004 PTD 2479 (SC Pak), 2005 PTD 2513 (HC) and 2003 PTD 577 (HC).

4. The learned counsel has further contended that the tax under section 80D of the Repealed Ordinance, 1979 can be levied at the declared turnover by the assessee and not assessed turnover as per the provision of section 80D. He has contended that in the instant case the Taxation Officer has charged tax under section 80D on assessed turnover and not charged it on declared turnover. He has submitted that the declared turnover of the assessee is as follows:--

5. According to the learned counsel the Taxation Officer has took assessed turnover at Rs.42,63,92,680. According to the learned counsel this treatment of the Taxation Officer is against the law as any adverse decision/act of the Taxation Officer without confronting is void in the eyes of law. He has contended that the Taxation Officer has never confronted through any Notice or given any opportunity of being heard to the assessee. No notice under section 62(1) has ever been issued. He has in this regard placed reliance on the following repealed decisions.

(1999) 80 Tax 241 (H.C), 2001 PTD (Trib.) 2938, 2003 PTD (Trib.) 625, 1999 PTD (Trib.) 3892, 2001 PTD 678 (HC), 2001 PTD 2884 (HC), 2006 PTD (Trib.) 2325 and 2006 PTD (Trib.) 2060.

6. On the other hand the learned D.R. has supported the impugned orders of the officers bellow. He has contended that the learned C.I.T.(A) has upheld the treatment meted out by the Taxation Officer regarding charge of section 80D of gross turn over placing reliance of the decision of this Tribunal in the case of the assessee in the previous assessment year. Similar is the position regarding diminution of the value of short term investment placing .reliance on the decision of this Tribunal.

7. We have considered the above referred contentions from bath the sides and we found that the assessee is a public limited company maintaining audited accounts which have been produced before the Taxation Officer along with returns and this fact has been admitted by the Taxation Officer with the observation that return was accompanied by the audited statement, comprising of balance sheet and accounts for the year under review. We have further noted that in response to Notice under section 61 on behalf of the appellant all necessary details/ documents/statements and explanations have been provided which have been scrutinized by the Taxation Officer and have been placed on record but the Taxation Officer without confronting the assessee through Notice under section 62 has made certain additions rejecting the version of the assessee placing reliance on the history of the case which cannot be justified. But as on behalf of the assessee it has been conceded that in compliance of the impugned order of the learned C.I.T. (A) the Taxation Officer has already passed order under sections 62/129 of the Ordinance, 2001/Repealed Ordinance 1979, we therefore, find no warrant for inter ference in respect of the grounds of appeal regarding issue of allocation of admissible expenses between income from lease rentals and income from other operations other than leasing and regarding issue of diminu tion in the value of short term investments. We however, find force in the arguments of the learned counsel regarding charge of section 80D on gross turnover. We are of the view that the decision of the Tribunal for the previous year on the basis of which the Taxation Officer has placed reliance was before the promulgation of the new Ordinance, 2001. As per the saving clause provided under section 239 of the Income Tax Ordinance, 2001 under subsection (1) which is subject to subsection (2) and according to which in making any assessment in respect of any income year ending on or before the 30th day of June 2002. The provisions of the Repealed Ordinance in so far as these relate to computation of total income and tax payable thereon shall apply as if the new Ordinance has not come into force and under subsection (2) the assessment referred to in subsection (1) shall be made by the Income Tax Authority which is competent into the new Ordinance which make an assessment in respect of a tax year ending on any date after the 30th day of June, 2002, and in accordance with the procedure specified in section 59 or 59A or 61 or 62 or 63, as the case may be of the Repealed Ordinance, 1979. But in this provision section 80D has not been mentioned meaning thereby that the statute has saved provisions relating to "computation of total income and tax payable thereon" only. We find force in the contention of the learned counsel for the appellant that the computation of taxable income is covered in the Ordinance in various sections like Chapter IV starting from section 15 and other various sections other than section 80D and computation of tax payable on total income is covered under 1st Schedule to the Repealed Income Tax Ordinance, 1979. The term `Tax' has been defined under section 2(43) of the Repealed Ordinance, 1979, wherein the income tax, super tax, surcharge and additional tax chargeable or payable under the Repealed Ordinance, 1979 and also includes penalty, fee or other charge or any sum or amount leviable or payable under the Ordinance. We have further noted that in section 239 all types of taxes have not been saved only the tax payable on total income has been saved in section 239. The total income as defined in section 2(44) means the total amount of income referred to section 11 computed in the manner laid down in the Ordinance and includes any income which under any provision of this Ordinance is to be included in the total income of an assessee. We are of the view that the definition covers income referred to in section 11 or any income which under any provision of Repealed Ordinance is to be included in the total income. The receipts deemed as income under section 80D are not included in the total income. We are of the view that for any income to be included in "total income" that income has to fall in any of the heads prescribed under section 15, whereas section 80D is a special deeming provision separate from computation of total income and tax payable on total income. We are therefore, of the view that the charging of tax under section 80D after 1st July 2002 is not justified in the eyes of law. We have further noted that the Taxation Officer has passed the order under section 80D of the Repealed Ordinance without confronting the assessee in this regard and has made the order in accordance with the previous history of the case and the decision of the Tribunal regarding the previous years without considering the fact that the legal position due to the promulgation of the new Ordinance has been changed and the decision for the previous years can not be made basis for the year under review.

8. In view of this legal position the impugned order of the learned C.I.T. (A) to the extent of the above issue of levy of tax under section 80D is vacated and the order passed by Taxation Officer in this regard is annulled. The appeal filed by the assessee on this issue is allowed while the appeal filed by the assessee on the remaining grounds is dismissed being not pressed by the assessee.

C.M.A./125/Tax/(Trib.)Order accordingl