COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD VS MASOOD TEXTILE MILLS LTD., FAISALABAD, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 1707 (2009)

(a) Interpretation of statutes---

----Fiscal statute---Literal meaning would prevail.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B.69; Government of Pakistan and others v. Messrs Hashwani Hotel, Ltd. PLD 1990 SC 68 and Messrs Mehran Associates Limited v. The Commissioner of Income Tax Karachi 1993 SCMR 274 ref.

(b) Words and phrases---

----Aggregate---Definition.

Concise Oxford English Dictionary and Mushtaq Textile Mills Ltd. v. Karachi Metropolitan Corporation 1994 CLC 1516 ref.

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

----Ss. 80-D, 80-C & 80-CC---Tax on turnover---Scope---Section 80-D, Income Tax Ordinance, 1979 cannot be applied on each and every source of income of a tax-payer separately and it has to be on aggregate of the turnover of the taxpayer from all sources---Direction of the Income Tax Appellate Tribunal to charge it on the aggregate of S.80-C or 80-CC of the Ordinance, after inclusion of the turnover from other sources like local sale etc., which is not subject to withholding tax, needs no excep tion---Principles.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi 2005 PTD 2216; Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi and 2005 PTD 2216 and Messrs Baig Spinning Mills Ltd. V. Federation of Pakistan and others 2005 PTD 1102 ref.

Khadim Hussain Zahid, Syed Sajjad Ali Jaffri, Shahbaz Butt, Shahid Jamil Khan, Rana Muhammad Afzal and Syed Naveed Andrabi for Appellant.

Syed Ibrar Hussain Naqvi for Respondent.

Date of hearing: 27th May, 2009.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This judgment will dispose of P.T.R. Nos. 218, 219, 221, 222, 103, 216, 217 of 2005, 194, 195, 236, 246, 247, 59, 60, 153, 154, 155, 156, 187, 188, 588, 589 of 2006, 91, 417, 515, 516, 19, 20, 373, 274, 295, 67, 86, 86-A, 87, 88, 89, 90, 277, 278, 399, 400, 401, 621, 758 of 2007, I.T.A No. 117 of 2000, P.T.R. Nos. 402, 403, 404, of 2003, W.P. Nos. 7512, 7991, 8317, 10124, 10125 of 2002, 10979, 17139, 17659 of 2008 and 1654 of 2009. In all the above mentioned references and writ petitions common questions of law and facts are involved. However, the question framed in reference application i.e. P.T.R. No. 218 of 2005 covers the entire controversy, hence, the same is re-produced as follows:--

"Whether under the facts and circumstances of the case, the learned Tribunal was justified in holding that turnover tax is leviable on aggregate of turnover including receipts covered under sections 80C/80CC"

2. The case of the department as argued by Mr. Khadim Hussain Zahid, advocate, is that the scheme of income tax law may be common in respect of the recovery of taxes but the same is separate and independent regarding charge of income. All the charging provisions are independent and each has created a separate charge. Section 80D is an independent law and has got nothing to do with the provisions of section 80C, 80CC or any other provision of the Income Tax Ordinance, 1979 (repealed).

3. Section 80C deals with tax on income of contractors and importers and 80CC deals with tax on income of export. The provisions of section 80C inter alia considers the tax deductable at the time of supply of goods or import to be as full and final discharge if he does not have any other source of income. Similarly section 80CC considers the tax deductable at the time of export to be a final discharge and nothing further is required to be paid by the said exporter unless he has some other source also.

4. The turnover tax in terms of section 80D is independent in respect of other sources. The department is neither charging it on the income of the petitioner from the said source nor it has any such intention. The charge is only on sources which are not covered under the presumptive tax regime, that also if the tax on the said other source is less than the threshold provided therein.

5. He added that in the cases under discussion the applicants have business of local purchase and sale in addition to the sources covered under the presumptive tax regime. Since the applicants have either not paid any tax on their local business or the tax paid is less than half per cent of their, turnover from the local business, they are liable to meet with the requirements of said section 80D. In favour of this claim that the foundation and the structure of sections 80C and 80CC are different from section 80D, he has referred PLD 1997 SC 582 re. "Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others" and (2005 PTD 2216) re: "Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi".

6. It has been claimed that in the earlier judgment it has been held that sections 80C 'and 80CC of the Income Tax Ordinance, 1979 (repealed) are in the category of presumptive while section 80D is founded on the theory of minimum tax. Thus, they are in his opinion with a different charge. Further in the later judgment this Court has held in categorical terms that the income from dividend which is assessable under section 30 is not covered under section 80D of the Ordinance, 1979, hence, tax on dividend shall be payable independently in addition to the turnover tax under section 80D. Another important distinction between the cases covered under sections 80C and 80CC against section 80D is that no return of income is required to be filed under the provisions of section 55 of the Income Tax Ordinance,. 1979 (repealed) in the provisions mentioned earlier.

7. The law provides for a separate statement in respect of such taxpayer which is to be filed under section 143(b) as substitute thereof. Thus, when a tax is to be calculated under section 80D, it should be kept in view that the same is in respect of the calculation of the tax for the return filed under section 55. Under Section 80C and such other clauses neither any demand is required to be created nor a formal order is required.

8. As against above in the case of a local business a return is required to be filed which is later assessed and tax is created on the basis thereof. Thus, if from the said local source that income generates a tax which is less than half per cent of its turnover from the said business the petitioner is required to pay the same to meet with the said target of 1/2% tax.

9. His arguments have been adopted by Mr. Sajjad Hussain Jafri, Advocate, also. He, however, supplements that the provision has been added to charge each and every source of income of an assessee as practically if a person is left un-taxed in respect of his local source of income on the basis of his higher deduction in respect of income from import, export or supply etc., this will amount to depriving the department from its well deserved revenue.

10. While adopting the argument of his colleagues to a large extent, the learned Legal Advisor Mr. Shahid Jamil Khan added that section 80D is in sharp contrast to all other provisions of Income. Tax Ordinance, 1979. It is neither similar to the sections 61, 62, 63 etc., nor it can be equated with the sections relating to presumptive tax regime in terms of sections 80C, 80CC etc. It has created a situation where any person having any source will have to pay minimum 1/2 per cent tax of its turnover. In his opinion the section being of non-obstante nature is obviously separate from the entire construction of the Income Tax Ordinance prior to it. It applies after due calculation of the tax from every source and comes into operation if after the said exercise it is determined that the tax thereon is less than half per cent of the turnover of the said source. The claim that it shall apply on the average turnover from all sources is not justified.

11. Mr. Shahid Jamil Khan further commented that the I.T.A.T. has failed to look into the language from the said angle, hence indulgence of this Court is sought for. His reliance is on paras 34, 42 and 55 of the already referred judgment of "Elahi Cotton Mills" (surpa).

12. As far as the judgment now mentioned and its referred paras are concerned the issue before the Hon'ble Supreme Court was vires of the above provisions. It is in the said context that the said provisions have been discussed. The present issue has neither been a subject-matter in the judgment nor the discussion in any way is relevant to the same. As already mentioned the issue in the said judgment being legislative competence, the same have no bearing on the issue under discussion.

13. Before discussing the case of the respondents which obviously has the support of I.T.A.T., re-production of the relevant provisions of law shall be helpful:--

Section 80C:

"Tax on income of certain contractors and importers.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to any person (xxxx) the whole of such amount shall be deemed to be income of the said person and tax thereon, shall be charged at the rate specified in the First Schedule.

Section 80CC;

"Tax on income of certain exporters.---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in sub-section (5-A) (or subsection (5-AA) of section 50, is received by any person, the whole of such amount shall be deemed to be the income of the said person and tax thereon shall be charged at the rates specified in the First Schedule."

Section 80D;

"minimum tax on income of certain (persons).---(1) Notwith standing 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 (xxxxxx) resident of 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 income of the said company (or a registered firm) (an individual, and association of persons, an unregistered firm or a Hindu undivided family (xxxx) 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 of income. 'profits or gains or set off of loss of earlier .years, exemption from tax, credits or rebates in tax, and allowance 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) (xxxx) 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 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 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 family in respect of any assessment year commencing on, or after, the first day of July, 2001.]"

14. So far as the claim of the applicant that the above three provisions are independent in their application is concerned, there cannot be two opinions about that. It is also correct that sections 80C and 80CC do not require filing of return. However, since the statement under section 143 (b) has practically been equated with filing of the return by implication under section 80C(4) this argument is also of no help to the department.

15. In case of determination of tax under section 80D, the requirement acceptable is filing of return, its assessment and consequential creation of demand as a result of the proceedings initiated on the basis of said return. The procedure is different but the same even by reference to the judgment relied upon by the learned petitioner counsel does not support his view point.

16. The judgment referred as (2005 PTD 2216) re: "Messrs Pakistan Refinery Ltd. v. Commissioner of Income Tax Companies-V Karachi" is also distinguishable. The issue in the said judgment is as to whether a dividend income is covered within the provisions of section 80D or not. The finding of this Court in the said case is that the two are separate charges altogether. The distinction is obvious. Section 80D deals with the business income only which is apparent from the language of the section quoted above while dividend income is covered by income from other sources. The income from business is chargeable under section 22 of the Income Tax Ordinance, 1979, while the income from dividend is chargeable under section 30 of the said Act. Sections 80C and 80CC even after its presumed assessment under the said two provisions remain a business income covered under section 22 read with the relevant section of the presumptive tax provision.

17. In any case, since section 80D is in respect of income from business only obviously dividend income was not to be given the treatment of the business income. This finding is covered by the explanation after section 80D(2) which defines the word `turnover'. Dividend income is neither a result of sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts.

18. Similar is the position in the other judgment which is (2005 PTD 1102) re: "Messrs Baig Spinning Mills Ltd. v. Federation of Pakistan and others". It has been referred to say that the provisions in respect of determination of the income under section 80D is totally different than sections 80C and 80CC. This Court has held that for the purpose of determination of tax under section 80D one cannot escape the process of assessment under Chapter 7.

19. Nevertheless, such assessment has to be undertaken initially for the purpose of determination whether total income of assessee exceeds to a figure where the tax calculated is less than 0.5% of the minimum tax under section 80D or not. If the same exceeds the said half per cent than obviously the normal tax would be payable while if the same is less than half per cent the said minimum rate of section 80D becomes applicable.

20. This obviously is a distinguishable situation.

21. The principle of interpretation of fiscal statute is no more a debatable issue. There is a consensus throughout the world that the literal meaning would always prevail. In this regard famous Verse by Mr. J. Rowllet, in "Cape Brandy Syndicate v. Inland Revenue Commissioner"(1921 K.B.69) needs reference:--

"It simply means 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 read in, nothing is to be implied. One can only look, fairly at the language used."

`Grey v. Pearsan' also support the above view in the following verse:--

"I have been long and deeply impressed with the wisdom of the rule now, I believe universally adopted at least in the Courts of law in Westminster Hall, that in construing wills and indeed statutes, and all written instructions, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid the absurdity and inconsistency but no farther."

22. The above principle has been followed now in dozens of judgments. However, for reference one can mention following:--

"(PLD 1990 Supreme Court 68) re: "Government of Pakistan and other v. Messrs Hashwani Hotel, Ltd."

1993 SCMR 274) re: "Messrs Mehran Associates Limited v. The Commissioner of Income Tax Karachi"

23. Following the said principle if we look into the language in section 80D, not much discussion would be required. The provision starts from the word "notwithstanding" thus it becomes a non-obstante clause. It comes in supersession to all the earlier provisions which obviously includes sections 80C and 80CC.

24. The other language creates a charge in a situation where no tax is payable or the paid or payable tax is less than one half per cent of the "amount representing its `turnover from all sources and it is in respect of a company, a registered firm, association of persons etc being resident of Pakistan". (Emphasis added)

25. An accumulative reading of the section 80D gives an impression that the said charge has been created in respect of' person including company, a registered firm an individual etc. on his `turnover from all sources'. The provision does not end there. The charge is on the aggregate of declared turnover. The legislature has intendedly and advisedly used the word `aggregate' as it can only be of more than one sources. The legislature would have never used this connotation if intention was to charge it separately in respect of each source of the individual or company etc. The Word `aggregate' has been defined as follows: -

"Concise Oxford English Dictionary"

(1) "a whole formed by the combining several disparate elements;(2) a total score of a player or team in a picture comprising more than one game or round;

"Law Terms and Phrases"

`Meaning of Aggregate' means a collection of things in order to form a whole, Mushtaq Textile Mills Limited v. Karachi Metropolitan Corporation 1994 CLC 1516.

26. The use of language `amount representing its turnover from all sources' and then followed by the words `the aggregate of the declared turnover shall be deemed to be income' leaves no doubt that the sources like import, export, local supply and local sale etc. all are to be aggregated and 1/2 per cent minimum tax is to be calculated on its total turnover declared by him from all his sources. Thus if after said calculation the tax deducted or paid in any of the source falls higher than 1/2 per cent of the aggregate turnover from all sources no more tax is required to be paid.

27. Obviously there was no restriction on the legislature to use the language in the manner to provide this 1/2 per cent charge on each source separately.

28. The above discussion leaves no doubt that section 80D cannot be applied on each and every source of income of a taxpayer separately and it has to be on the aggregate of the turnover of the taxpayer from all sources. The direction of the Income Tax Appellate Tribunal to charge it on the aggregate of section 80C or 80CC after inclusion of the turnover from other sources like local sale etc., which is not subject to with-holding tax, needs no exception.

29. The reference applications, therefore, are considered without any merit, hence, are dismissed.

M.B.A./C-18/LApplication dismissed.