VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 654 (2008)

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

----Ss. 107AA, 80-D, 221 & 122---Tax credit for investment---Department pleaded that tax credit was wrongly allowed under S. 107AA of the Income Tax Ordinance, 1979 and while doing so Taxation Officer, who charged tax under S.80-D of the Income Tax Ordinance, 1979 in the revised order erroneously adjusted the same against the tax credit allowed under S.107AA of the Income Tax Ordinance, 1979 whereas the tax credit was adjustable against taxpayer---Such order was rightly amended by the Taxation Officer which had been annulled by the First Appellate Authority without any justification---Validity---Credit allowed by the Taxation Officer was strictly in accordance with law as Ss.107A and 107AA of the Income Tax Ordinance, 1979 were inserted in years 1996 and 2000 respectively and relevant section override all the sections including S. 80D of the Income Tax Ordinance, 1979 which was inserted by the Finance Act, 1991 as the insertions of Ss.107A and 107AA of the Income Tax Ordinance, 1979 were subsequent in time---Section 107A of the Income Tax Ordinance, 1979 was inserted which starts with the word "notwithstanding" authorizing the Central. Board of Revenue to make scheme or schemes for the provisions of tax credit"---Sections 107 A and 107AA of the Income Tax Ordinance, 1979 were inserted which mentioned about tax credit and its allowability and it did not say that it will not be allowed in case of S.80-D of the Income Tax Ordinance, 1979---First Appellate Authority had rightly annulled the order passed by Taxation Officer under S. 122 of the Income Tax Ordinance, 2001 on legal as well as factual planes---Appeals filed by the Department were dismissed by the Appellate Tribunal in the circumstances.

1999 PTD (Trib.) 811; 2000 PTD (Trib.) 3776; 2003 PTD (Trib.) 2308; 2001 PTD (Trib.) 2919; 2001 PTD 1467; 2008 PTD 1420; 2005 PTD 1316; I.T.As. Nos. 366 to 368/KB of 2005; I.T.As. Nos.509 to 513/KB of 2005; 2007 PTD (Trib.) 1780; 1987 PTD (Trib.) 116; 1997 PTD (Trib.) 36; 1993 SCMR 274 and 1993 PTD 69 ref.

1977 SCMR 1097 rel.

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

----S.80-D---Minimum tax on income of certain persons---Tax credit---Tax paid under S.80 of Income Tax Ordinance, 1979 was a tax payable and the taxpayer could claim credit in respect of tax payable.

(c) Interpretation of Statutes---

----Non-obstante clause overrides only those sections, which come in conflict with the two relevant statutory provisions.

(d) Interpretation of statutes---

----Construction should be made in a manner that no statutory provision becomes redundant.

(e) Interpretation of statutes---

----When a new section was added or inserted, it is presumed that legislature was conscious of the existing law.

1993 SCMR 274 = 1993 PTD 69 ref.

(f) Interpretation of statutes---

----Fiscal provision of statute is to be construed liberally in favour of the taxpayer and in case of any substantial doubt the same is to be resolved in favour of the citizens.

1993 SCMR 274 = 1993 PTD 69 rel.

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

----Ss. 122 & 170---Amendment of assessment---Assessee filed application for refund under S. 170 of the Income Tax Ordinance, 1979 for issuance of refund but the Taxation Officer, instead of issuing refund, had amended the order under S. 122 of the Income Tax Ordinance, 1979 which was annulled by the First Appellate Authority---Validity---Duty of refunding authorities was controlled to the extent of cross check of me documents for calculation of the amount of refund only and to satisfy that no other tax was outstanding against him before issuance of refund---Taxation Officer had amended/rectified the assessment on application filed by the assessee for issuance of refund under S. 170 of the Income Tax Ordinance, 2001---First Appellate Authority had rightly annulled the order passed by the Taxation Officer which required no further interference.

2007 PTD (Trib.) 1780 rel.

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

----Ss. 170, 129 & 221----Refunds---Order passed under Ss.170, 129 and S.221 of the Income Tax Ordinance, 2001 in violation of the directions of First Appellate Authority, was illegal and beyond jurisdiction.

Farrukh Ansari, D.R. for Appellant.

Abid Shaban and Jan-e-Alam, ITP for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI, J.---Through these four appeals the appellant Department has objected to the two separate impugned orders of the learned C.I.T. (A). One is the consolidated order for the assessment years 2001-2002 and 2002-2003 dated 10th March, 2005 and the other order is dated 23-5-2005 for the tax year 2003 deciding two separate appeals for the same year regarding the order under sections 170/129 and the order under section 121 of the Income Tax Ordinance, 2001. In all the four appeals the impugned orders have been objected on the following common grounds:--

(2) That the learned C.I.T. (A) failed to properly understand the provisions of section 80-D while holding that terms of credits appearing in the explanation to the said section does not refer to take credit available under section 107AA, moreso in view of overriding character of section 80-D, notwithstanding the allowance of any rebate or credit.

(3) That the learned Commissioner of Income Tax was not justified in deciding the case by annulling the order of the I.A.C. and ignoring the case reported as 1999 PTD (Trib) 811 wherein the ITAT has held that tax credit including under section 107AA, which is similar in nature to tax credit under section 107A, is not allowable against tax under section 80-D. This judgment had binding nature.

(4) That the learned Commissioner of Income was not justified in annulling the order of the I.A.C. and deciding the case by ignoring the case law reported as 2000 PTD (Trib.) 3776, wherein it was held by the Full Bench of the ITAT that the tax payable is not tax under section 80-D which is levied, when no tax is payable or paid or is less than one half per cent of the turnover. This decision of Full Bench of the learned ITAT was binding on the C.I.T. (Appeals).

(5) That the learned C.I.T. (A) was not justified in relying on few reported cases, as per appellate order, which were distinguishable on facts."

2. We have heard the learned representatives from both the sides and have also perused both the impugned orders and the orders passed by the Taxation Officer. The learned DR representing the appellant Department has contended that the original assessment order for the years 2001-2002 was passed by the panel consisting of three officers of the Department on 2-5-2002, while the assessment for the year 2002-2003 was framed by the Taxation Officer on 27-1-2003. Both these assessments were amended under section 122 of the Income Tax Ordinance, 2001 by the Taxation Officer on 3-2-2005 through separate orders. He has contended that the original assessment orders for both the years were rectified under section 221 of the Income Tax Ordinance, 2001 on 17-12-2003, wherein the tax credit was wrongly allowed under section 107AA of the Repealed Income Tax Ordinance, 1979 and while doing so the Taxation Officer, who charged tax under section 80-D of the Repealed Income Tax Ordinance, 1979 in the revised order erroneously adjusted the same against the tax credit allowed under section 107AA of the Repealed Income Tax Ordinance, 1979, whereas the tax credit is adjustable against taxpayer and has, therefore, rightly amended the orders. He has contended the Taxation Officer has discussed all the issues in detail and has placed reliance on the decisions of this Tribunal and the provisions of law and has amended the order, which has been annulled by the learned C.I.T. (A) without any justification. Regarding tax year 2003, the learned D.R. has contended that the Taxation Officer has passed two separate orders under sections 170/129 and the second order under section 121 of the Ordinance for the same year calculating the tax liability as an abundant precaution. He has contended that the application for the tax year 2003 for the refund was rejected by the Taxation Officer against which the assessee tiled before the learned C.I.T. (A), who has set aside the assessment for fresh consideration, vide order dated 28-7-2004 and in the second round the assessee despite providing more than sufficient and responsible opportunities failed to satisfy the Taxation Officer regarding the refund application who has therefore rejected the application as no refund is determined and the learned C.I.T. (A) has without any justification cancelled the order passed by the Taxation Officer. He has, however, contended that the second appeal filed by the department in this regard is against order passed by the Taxation Officer under section 221 of the Income Tax Ordinance, 2001, which has been passed by the Taxation Officer as an abundant precaution rectifying the order already passed; which has no effects whatsoever.

3. On the other hand, Mr. Abid Shahan, Advocate, along with Mr.Jan-e-Alam, I.T.P, have appeared and are supporting the impugned orders of the learned C.I.T.(A). It has been contended that the learned C.I.T. (A) has rightly annulled the orders passed by the Taxation Officer. In this respect, legal objection has been raised against the order passed by the Taxation Officer. Regarding the order for the assessment year 2001-2002,, it has contended that the original assessment in this case was finalized by the Panel of Advocates consisting of Mr. Fahimul Haq, Additional Commissioner as the Chairman of the Panel and the two DCITs Mr. Badaruddin Qureshi and Dr. Tariq Masood. According to representatives of the assessee, it is a settled law that the order passed by the Panel of officers cannot be revised by the Officer of the lower grade, who has already passed the order. In this case, the order amending the original assessment order has been passed by Mr. Mushtaq Hussain Qazi, who was the Additional Commissioner of Income Tax. The Taxation Officer, who has amended the already completed assessment under section 122 of the Income Tax Ordinance, 2001 was not having the jurisdiction to amend the order already completed by the Panel of three officers and, therefore, the order was nullity in the eyes of law and the learned C.I.T. (A) has rightly annulled the order. In this regard, reference has been placed on the decisions reported as 2003 PTD (Trib.) 2308, 2001 PTD (Trib.) 2919, 2001 PTD 1467 (Lah H.C.).

4. The learned counsel, regarding the orders of both the years 2001-2002 and 2002-2003, has contended that the assessments for both these years were completed much before 1-7-2003 and it is now settled up to the Honourable Supreme Court of Pakistan that the assessments finalized before 1-7-2003 cannot be amended under section 122 of the Income Tax Ordinance, 2001. The learned counsel, in this regard, has referred the latest decision of the Honourable Lahore High Court reported as 2008 PTD 1420 and the decision reported as 2008 PTD 1316 (Kar. H.C.). The orders of this Tribunal dated 8-11-2005 in I.T.A. Nos.366 to 368/KB/2005 (Assessment years 1998-99 to 2001-2002) and order dated 2-8-2006 in I.T.As. Nos. 509 to 513/KB/2005 (Assessment years 1998-99 to 2002-2003).

5. It has been contended that the assessee has filed application under section 170 of the Income Tax 1mance, 2001 for issuance of 13 refund but the Taxation Officer instead of issuing refund has amended the order under section 122 of the Ordinance which has rightly been annulled by the learned C.I.T. (A) following the decision of this Tribunal reported as 2007 PTD (Trib.) 1780.

6. After considering the above referred arguments from both sides, we have found that the assessee/Taxpayer in this case, a Public Limited Company, is an industrial undertaking engaged in the manufacturing of Yarn. The assessee for the assessment years 2001-2002 and 2002-2003, claimed tax credit under section 107AA of the Repealed Income, Tax Ordinance, 1979. The Department allowed the tax credit under section 107AA. Later on the tax credits were disallowed by I.A.C. under section 122 of the Income Tax Ordinance, 2001.

It has been contended by the learned counsel for the assessee that the credit in all the universally accepted accounting practices denotes as adjustment which equates with payments, In other words, it is to be construed as payment towards the tax liability. This credit does not involve levy of minimum tax under section 80D but is only to be construed as a credit against the said demand, as has been held by this Tribunal in a decision reported as 1987 PTD (Trib) 116 wherein the similar distinction in explaining the meaning for "tax credit" has been made in the following words:--

"Let us also mention here that both tax credit and deduction or allowance stand on altogether different footing because the former is deducted from the tax payable either in the relevant assessment year or future year or years, as the case may be whereas the allowances or deductions are made from the total income."

The above view has again been fortified by this Tribunal in its decision reported as 1997 PTD (Trib) 36.

We are of the view that the contentions of the learned counsel for the assessee have enough force that the credit allowed by the Taxation Officer was strictly in accordance with law as sections 107A and 107AA were inserted in the years 1996 and 2000 .and the relevant section overrides all the sections including section 80D of the Repealed Income Tax Ordinance, 1979 which was inserted by the Finance Act, 1991 as the insertions of sections 107A and 107AA were subsequent in time. In this regard, the decision of the Honourable Supreme Court of Pakistan reported as 1977 SCMR 1097 has been referred wherein it has been held:--

"In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisos of section 80D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which Was part of a general statute. In this view of the matter, assessees who fulfil the conditions of the notifications referred to the Schedule to section 6 of Act XII of 1992, are entitled to the protection."

We have noted that section 107 does not start with the word "notwithstanding" i.e. it is a non-obstante clause whereas in the year 1996 a new section 107A was inserted which starts with the word "notwithstanding" authorizing the C.B.R. to make scheme or schemes for the provisions of tax credit etc. sections 107A and 107AA were inserted which mentioned about tax credit and its allowability and it does not say that it will not be allowed in case of section 80D of the Repealed Income Tax Ordinance, 1979. The issue involved in the instant appeals is that whether the tax credit under section 107AA can be adjusted from the tax payable under section 80D and the fact that whether tax under section 80D comes within the purview of the definition of "tax payable" under the provisions of Repealed Income Tax Ordinance, 1979.

As regards the observation of the Taxation Officer as to whether section 80D comes within the definition of "tax payable", we are of the view that the law in this respect is very clear as the explanation appended to section 54 of the Repealed Income Tax Ordinance, 1979 through Finance Act, 1993 reads as under:--

"Explanation.---For the removal of any doubt, it is declared that the expression `tax payable' as used in this section includes the tax under section 80D".

After examining the above explanation, we find force in the contentions of the learned counsel for the assessee that the tax paid under section 80D is a tax payable and the taxpayer can claim credit in respect of tax payable. Furthermore, there is no cavil to the proposition that the non-abstante clause overrides only those sections which come in conflict between two relevant statutory provisions. It is a well-settled principle of interpretation that a construction should be made that no statutory provision becomes redundant. If we go by the interpretation of the Taxation Officer, then the provision of section 107AA would become redundant. It is also a well-settled principle of interpretation that when a new section is added or inserted, it is presumed that legislature was conscious of the existing law. In this regard, we may also, refer the decision of the Honourable Supreme Court of Pakistan reported as 1993 SCMR 274 = 1993 PTD 69 wherein it has been held that a fiscal provision of statute is to be construed liberally in favour of the taxpayer and in case of any substantial doubt, the same is to be resolved in favour of the citizens.

After considering the legal as well as factual position of the case, we are of the view that the learned C.I.T. (A) has rightly annulled the orders passed by the Taxation Officer under section 122 of the Income Tax Ordinance, 2001 on legal as well as factual planes.

In view of the above facts and circumstances of the case, both the appeals filed by the Department for these years i.e. 2000-2001 and 2002-2003 are therefore, dismissed.

7. Regarding the tax year 2003, we have found that the assessee filed two appeals before the learned C.I.T. (A); one against the order passed under sections 170/129 and the other against the order passed under section 221 of the Income Tax Ordinance, 2001. On the factual side, we have found that the issue agitated by the assessee was regarding disallowance of credit under section 107AA which has been discussed in the above paras regarding the appeals for the assessment years 2001-2002 and 2002-2003. The taxpayer assessee in this case, after receiving the above referred impugned order of the learned C.I.T. (A) dated 10th March, 2005 in the assessment years 2001-2002 and 2002-2003, filed an application under section 170 for the claim of refund in accordance with the directions in the first appellate order.

We have noted that the Taxation Officer has passed the order under sections 170/129 and section 221 of the Income Tax Ordinance, 2001 in the presence of the order of the learned C.I.T. (A) dated 10th March, 2005, in violation of the directions made in this regard and for the same tax year, which is illegal and beyond jurisdiction as has been held by the learned C.I.T.(A). We will, in this regard also refer to the decision of-this Tribunal reported as 2007 PTD (Trib.) 1780 wherein it has been held that the duty of the refunding authorities was controlled to the extent of cross check of the documents for calculation of the amount of refund only and to satisfy that no other tax was outstanding against him before issuance of the refund. In this case, the Taxation Officer has amended/rectified the assessment on the application filed by the assessee for issuance of refund under section 170 of the Income Tax Ordinance, 2001. We are, therefore, of the view that the learned C.I.T. (A) has rightly annulled the order passed by the Taxation Officer which requires no further interference.

8. Both the appeals filed by the Department for the tax years 2003 are, therefore, also dismissed.

9. All the four appeals filed by the Department are dismissed for the reasons discussed supra.

C.M.A./11/Tax(Trib.)Appeals dismissed.