COMMISSIONER OF INCOME TAX/COY ZONE, ISLAMABAD VS PAKISTAN BROADCASTING CORPORATION, 2010 PTD-ISLAMABAD 1119 (2009)

Income Tax Ordinance (XXXI of 1979)---

----S.80(2), Explanation---Turnover', meanings explained---Gross receipts derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts, fell within the definition of 'turnover'---Licence fee or the subsidy from the government did not fall within the definition of `turnover'.

Hafiz Munawar Iqbal for Petitioner.

Hafiz Muhammad Idrees for Respondent.

Date of hearing: 10th June, 2009.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---The assessee, Pakistan Broadcasting Corporation is a statutory corporation created under Pakistan Broadcasting Corporation Act, 1973. It derives income mainly from advertising business, licence fee from Radio users and subsidy from Government. The income of the Corporation was exempt from income tax under section 17 of the Pakistan Broadcasting Corporation Act, 1973 uptill promulgation of Finance Act, 1999. Through Finance Act, 1999, the provision exempting the income of the Corporation was omitted. However, it is not disputed that the assessee is liable to pay minimum tax in terms of section 80-D of the Income Tax Ordinance, 1979. In the assessment year, 1998-99, the assessee declared no income or loss. However, the Assessing Officer did not accept the declared version and proceeded to include licence fee amounting to Rs.12,298,691 and subsidy of Rs.5883,372,100 in the total turnover of the assessee and subjected the assessee to pay income tax under section 80D of the Ordinance. The assessee challenged the said treatment given by the Assessing Officer before the Commissioner of Income Tax (Appeals). The Commissioner Income Tax (Appeals) came to the conclusion that subsidy and the licence fee cannot be included in the total turnover of the assessee. Similarly, for the tax year 1999-2000, the assessee declared loss of Rs.134,215,533. The Assessing Officer included the licence fee amounting to Rs.9,857,980 and subsidy from government Rs.564,987,000 in the total turnover of the assessee and subjected the assessee to pay income tax under section 80-D. On appeal the Commissioner of Income Tax excluded both subsidy and the licence fee from the chargeability of the tax.

2. The Commissioner Income Tax felt aggrieved and filed two separate appeals before the Income Tax Appellate Tribunal. The Appellate Tribunal upheld the order of the Commissioner (Appeals) for both the assessment years.

3. The Commissioner of Income Tax gave an application to the Tribunal to refer the question of law proposed by him to the High Court. The Tribunal vide order, dated 26-5-2002, referred the following question of law to this Court:

"Whether on the facts and in the circumstances of the case the learned ITAT was justified in holding that licence fee collected and subsidy received by the assessee falls outside the ambit of turnover within the terns of section 80D of the Income Tax Ordinance, 1979."

4. We have heard the learned counsel for the assessee as well as the learned counsel representing the department and have gone through the relevant provisions of Income Tax Ordinance, 1979.

5. Section 80D(1) of the Ordinance, reads as under:--

"Notwithstanding 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 resident in Pakistan or the tax payable or paid is less than one-half percent of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company or a registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family and tax thereon shall be charged in the manner specified in subsection (2).

Explanation to subsection (2) of section 80D provides as under:--

"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 the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts."

What is meant by the phrase "Turnover" is explained through this explanation. Gross receipts derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts fall within the definition of "turnover". The licence fee or the subsidy from the Government does not fall within the definition of "turnover". We, therefore, agree with the interpretation placed by the Tribunal on section 80D of the Income Tax Ordinance, 1979. Our answer to question referred is in the positive.

H.B.T./C-4/Isl.Order accordingly.