COMMISSIONER OF INCOME TAX VS BADRUDDIN
2011 P T D 2186
[Sindh High Court]
Before Muhammad Athar Saeed and Irfan Saadat Khan, JJ
COMMISSIONER OF INCOME TAX and others
Versus
Messrs BADRUDDIN and others
I.T.Cs. Nos.132, 154 to 156, 181 of 2002 and 124 to127 of 2003, decided on 28/03/2011.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 50(4) & 80-C---Stevedoring services rendered during assessment years 1996-97 to 2000-2001-- Deduction of tax at source on such Stevedoring receipts---Treating such deduction, as full and final discharge of tax liability of assessee for the assessment years---Scope---Present case related to period when legislature had not provided definition of term "stevedoring services", thus, ordinary dictionary meaning would be applied thereto during its pre-defined period--Case had to be decided in accordance with law prevalent at relevant time--- Such deductions relating to predefined period of term "stevedoring services" could not be considered as full and final discharge of tax liability---Provisions of S. 80-C of Income Tax Ordinance, 1979 would not apply to such deductions -- Principles.
Premier Mercantile Services v. Commissioner of Income Tax 97 Tax 89 ref.
(b) Taxation---
----Case is to be decided in accordance with the' law prevalent at relevant time.
(c) Interpretation of statutes---
----Fiscal statute---Central Board of Revenue (C.B.R.), powers of---Scope---C.B.R. could not interpret provisions of fiscal law--Illustration.
Central Assurance 68 Taxation 86 rel.
Javed Farooqui for Applicant (in I.T.Cs. Nos.132, 154 to 156, 181 of 2002 and 124 to 127 of 2003).
Muhammad Idrees Sukhera for Respondents (in I.T.Cs. Nos.132, 154 to 156, 181 of 2002.
None for Respondent (in I.T.Cs Nos. 124 to 127 of 2003).
Date of hearing: 10th March, 2011.
JUDGMENT
IRFAN SAADAT KHAN, J.---These are two sets of Income Tax Cases (ITC). The ITC No.132 of 2002, ITC No.154 of 2002, ITC No.155 of 2002, ITC No.56 of 2002, ITC No.181 of 2002 have been filed against the consolidated order passed by the Income Tax Appellate Tribunal (ITAT) in R.A. No.589-KB/2001' to R.A. No.593-KB/2001 pertaining to the assessment years 1996-97 to 2000-2001 dated 13-2-2002. These R.A. were filed by the department before the ITAT against the order passed by the ITAT in I.T.As. Nos.1526 of 2001 to 1530-KB/2001 relating to the same assessment years in respect of the consolidated order passed by the ITAT dated 10-8-2001. The second set of I.T.Cs. bearing No. I.T.Cs. Nos.124 of 2003 to 127 of 2003 have been filed by the department against the order passed by the ITAT in R.As. Nos.283-KB/2002 to 286-KB/2002 pertaining to the assessment years 1996-97 to 1999-2000 in respect of the decision given by the Tribunal in I.T.As. Nos. 1563-KB/2001 to 1566-KB/2001 dated 30-1-2002. It is against the refusal to refer the question of law to this Court by the ITAT that the appellant/department has preferred the present I.T.Cs. under section 136(2) of the Income Tax Ordinance, 1979 ("the Repealed Ordinance"). The Department has proposed the following common question of law which in the opinion of the Department, has arisen out of the orders passed by the ITAT in the above two sets of cases:
"Whether on the facts and circumstances of the case the Learned Income Tax Appellate Tribunal was justified in annulling the Order on the ground that Stevedoring Receipts were in lieu of Services and not contract within the meaning of section 50(4) of the Income Tax Ordinance."
3. Mr. Saved Farooqui, learned counsel appearing on behalf of the Department/Applicant, at the very outset submitted that the question of law raised in the present I.T.Cs. has already been decided by this Court in the decision reported as Premier Mercantile Services v. Commissioner of Income Tax (97 Tax 89). He, therefore, submitted that the said question of law raised by him in the present I.T.Cs. may be answered in negative i.e. in favour of the Department and against the respondent/ assessee.
4. Mr. Muhammad Idrees Sukhera, advocate appeared on behalf of the respondent/assessee and supported the Orders passed by the ITAT and submitted that the Tribunal has reached to the conclusion. that the respondent assessee was rendering services, hence provisions of section 50(4) the Repealed Ordinance is not applicable to them, after detailed reasons and the question of law raised by the department may be answered in affirmative i.e. in favour of the assessee and against the department.
5. Briefly stated the facts of the case in I.T.Cs. Nos.132/02, 154/02 to 156/02 and 181/02 are that the Assessee was rendering stevedoring services and filed its return of total income for the relevant assessment year by claiming that since they were not covered under the provisions of section 80-C of the Repealed Ordinance, hence the amount of tax deducted at source on these receipts cannot be considered as full and final discharge of their tax liability. The assessment pertaining to the assessment years 1996-97 was completed under section 62 of the Repealed Ordinance dated 6-11-1998 whereas the assessment for the year 1997-98 was completed on 16-11-1998 under the provisions of section 59(1)(3) of the Repealed Ordinance. The assessment for the year 1998-99 was completed under section 59(1) of the Repealed Ordinance on 29-5-1999. The assessment for the year 1999-2000 was completed under section 59 of the Repealed Ordinance on 15-10-1999 and the assessment for the year 2000-2001 was completed under section 62 of the Repealed Ordinance on 28-2-2001. Thereafter, the above assessments were reopened under the provisions of section 66A of the Repealed Ordinance, as the Inspecting Additional Commissioner (IAC) found these assessments to be erroneous insofar as prejudicial to the interest of Revenue. The learned IAC then vide his order dated 11-6-2001 observed that the stevedoring receipts of the assessee fall outside the purview of section 80-C of the repealed Ordinance. He, thereafter, treated the said receipts as contractual receipts and considered the tax deducted under section 50(4) of the Repealed Ordinance on these receipts to be full and final discharge of the tax liability of the assessee for the particular assessment year. Being aggrieved with the above treatment meted out by the I.T. A. C. appeals were preferred' before the ITAT and the ITAT vide its order dated 30-8-2001 reversed the order of the IAC by observing as under:--
"We, in the circumstances supra, find that the order passed by the DCIT treating the stevedoring receipts as "services rendering and falling outside the purview of section 80C is appropriate in the absence of any written contract, hence the order passed by the DCIT is neither erroneous nor prejudicial to the interest of Revenue. In view of the above, the appellant should be assessed to tax under section 62 of the Income Tax Ordinance, 1979 and the deduction of the tax under section 50(4) should not be deemed to be the final discharge of the tax liability. "
6. Reference applications, under section 136(1) of the repealed Ordinance were thereafter, filed by the department which, too, were dismissed by the ITAT vide consolidated order dated 13-2-2002, by observing as under:--
"Admittedly the Department has already preferred reference in the Hon'ble High Court on this issue, from the order of the ITAT, hence it would not be useful and judicious to over burden the Hon'ble High Court through another reference on a issue which is already pending in the High Court for adjudication, opinion and finding. Consequently the request for making reference to Hon'ble High Court is declined."
7. In the other set of appeals i.e. I.T.Cs. Nos.124 to 127 of 2003, briefly stated the facts are that the assessee was rendering stevedoring services, which too declared the same to be receipts to which provision of section 80-C of the repealed Ordinance was not applicable. The assessments for the years 1996-97 and 1997-98 were concluded under section 62 of the Repealed Ordinance on 30-12-1998. The assessment for the year 1998-99 was completed under section 62 of the Repealed Ordinance on 11-2-1999. For the assessment year 1999-2000 the assessment was under section 62 of the Repealed Ordinance on 18-5-2000. Under identical circumstances the IAC found the assessments to be erroneous insofar as prejudicial to the interest of Revenue and initiated proceedings under section 66A of the repealed Ordinance and after rejecting the claim of the assessee that their receipts do not fall under the provisions of section 80-C of the repealed Ordinance, passed the order under section 66A on 11-6-2001, by treating the receipts of the assessee to be that of contractual receipts. In these cases also appeals were preferred, before the ITAT and the learned ITAT vide its consolidated order dated 30-1-2002 cancelled the orders passed by the IAC by observing asunder:
"We have heard the learned representatives of the two parties and have also perused the impugned order of the learned IAC, the assessment order and the order of the Tribunal. On perusal of the orders of this Tribunal we have found that this Tribunal has already decided the issue against the department. We, therefore, follow the orders of this Tribunal, cancel the impugned order of the learned IAC assed under section 66A of the Income Tax Ordinance.: 1979 and the order passed by the DCIT is restored"
8. Reference applications, under section 136(1) of the repealed Ordinance were thereafter, filed by the department which, too, were dismissed by the ITAT vide consolidated order dated 10-8-2002 by observing as under:
"We heave heard the learned Representatives of the two parties and have also perused the order of this Tribunal dated 30-1-2002. After perusal of the question proposed by the applicant/department, we have found that this question does not arise out of the order of this Tribunal, as there is no discussion on the point of contract. Furthermore, it is finding of facts and not question of law that Stevedoring is a service, therefore all the four reference applications filed by the department having no merits or substance are dismissed."
9. We have heard both the learned, counsel at length and have perused the record, the question raised in the decision of Premier Mercantile Services was answered as under:
"We have examined the questions, in the light of the arguments of the learned counsel and have carefully perused the provisions of various subsections of section 153 as stood on 30-6-2003. Since subsection (1), subsection (6) and subsection (9) of section 153 are the subject-matter of the present controversy, it . will be relevant to reproduce them:
153. Payment for goods and services.--(1)-- Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment, in Pakistan of non-resident person:
(a)for the sale of goods;
(b)for the rendering of services;
(c)on the execution of a, contract, other than a contract for the sale of goods or the rendering of services.
shall, at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division-III of Part III of the First Schedule.
(3)
(4)
(5)
(6) The tax deducted under this section shall be a final tax on the income of a resident person arising from transactions referred to in clause (a) or (c) of subsection (1).
(7)
(8) .
(9) In this section, "prescribed person" means ---
(a)the Federal Government;
(b)a company
(c)an association of persons
(d)a foreign contractor or consultant;
(e)a consortium or joint venture;
(f)an exporter or an export house for the purpose of subsection (IA)
services include the services of accountants, architects, dentists, doctors, engineers, interior decorators and lawyers. Otherwise than as an employee, and
"sale of goods" includes a sale of goods for cash or on credit, whether fender written contract or not.
(9) (sic) From a combined reading of these subsections it emerges that initially professional services and then services have been defined to include the services of accountants, dentists, doctors, engineers, interior decorators and lawyers only and does not include other services. We cannot subscribed, to the arguments of the learned Counsel for the respondent that all services will fall under clause (b) of subsection (1) of section 153 as the services which have been defined in subsection (9) are services of those persons who required professional qualification to provide these service and, therefore, according to the rule of ejusdem generic which is one of the principals of interpretation, only such type of professional services which require the person to have a professional degree may be included in this definition and in our opinion stevedoring does not require a professional degree and will, therefore, not fall in the definition of services which have been excluded from the provision of clause (c). It is an admitted fact that all the receipts are contractual receipts received for providing stevedoring services. He would also like to point out that though C.B.R does not figure in the hierarchy of the forums whose interpretation or explanation is binding, but, if a law has been correctly interpreted by C.B.R., it cannot be rejected for this reason only. Even otherwise, as far as the respondents are concerned they are bound under section 214 of the Income Tax Ordinance, 2001 to follow the directions of the Central Board of Revenue although the directions of the C.B.R. are not biding on the Appellate Authorities. The Tribunal has relied on its earlier judgment reported as (2001) 84 Tax 183 (Trib.) =2002 PTD 228 without realizing that in section 50(4) of the Income Tax Ordinance, 1979 which is para materia with section 153(1), services were not defined and there was a C.B.R. Circular which apparently was followed in the earlier judgment wherein it was said that services under contract will also not fall within the presumptive tax regime.
(10) In view of the above discussion, we are of the considered opinion that the receipts from business of stevedoring fall within the ambit of section 153(6) and tax deducted on such receipts its final discharge of tax liability of these receipt and, therefore, the order of the Tribunal holding otherwise cannot be sustained.
(11) The above are the reason for our short order passed in Court on 3-10-2007 by which, after hearing the arguments, of the learned counsel, we have answered Questions Nos. 9, 10 and 11 in negative in favour of the assessee and did not answer the other questions as the learned counsel for the application had not pressed them".
10. For the case of reference we are reproducing below relevant extract of section 50(4) and section 80(C) of the Repealed Ordinance also.
(4) Notwithstanding anything contained in this Ordinance, -
(a) any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person, being residents, (hereinafter referred to respectively as 'payer" and "recipient"), on account of the supply of goods or for service rendered to, or the execution of a contract with the Government, or a local authority, or a company, or a registered firm, or any foreign contractor or consultant or consortium shall, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year if any, in which the "said date", as referred to therein, falls, whichever is the later;
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) its received by or accrues or arises or is deemed to accrue or arise to any person the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged the rate specified in the First Schedule.
(2) The amount referred to in subsection (1) shall be the following, namely:
(a) Where the person is a resident, -
(i) the amount representing payments on which tax is deductible under subsection (4) of section 50, other than payments on account of services rendered.
11. Reading of the above provisions of law i.e. provisions of section 50(4) and section 80C of the Repealed Ordinance and section 153 of the Income Tax Ordinance, 2001 and the decision relied upon by the learned Counsel representing the department, which is being authored by one of us namely Athar Saeed, J. it would reveal that this decision caters the situation where the term services has been defined to include the services rendering by certain professionals; whereas the present cases are that of the period when there was no definition of the said term services being provided by the law makers, meaning thereby that so far as the pre-defined period of the word services is concerned its ordinary dictionary meaning would be applied.
12. The learned counsel representing the department' has not denied the fact that the assessee/respondent was not rendering services but his only contention being that the issue already stands resolved in his favour in view of decision cited supra. On a careful reading of said decision it is clear that in the said decision the analogy which has been drawn, which perhaps has not been appreciated by the learned counsel, being that since the term services has been defined and the Stevedoring services do not find place in those defined terms of services, this service cannot be termed as services but would be a contract and the tax deducted on these receipts would be its full and final discharge of the tax liability on those receipts. Whereas in the instant cases at the relevant period of time the word services was not defined meaning thereby that the Stevedoring services would squarely fall under the definition of term services and the tax deducted at source under section 50(4) of the repealed Ordinance would not be considered as its full and final discharge of the tax liability.
13. It is a trite proposition of law that a case is to be decided in accordance with the law prevalent at that moment of time. It is seen from the record that these I.T.Cs. pertains to the assessment years 1996-97 to 2000-2001 when the said term services has not been specifically defined in the law, though there are some explanations issued by the F.B.R., the then C.B.R., with regard to the term services but that could not be considered to be an interpretation as the C.B.R. does not figure in the hierarchy of the forum who can interpretate the provisions of the law as held by the Hon'ble Supreme Court of Pakistan in the case of Central Assurance (68 Taxation 86).
14. Hence in view of whatever stated above, we are of the considered view that the Stevedoring services, in the case of the present respondent for the years under appeal fall under the definition of term services and the tax deducted at source under section 50(4) of the repealed Ordinance could not be considered to be the discharge of full and final tax liability hence the provisions of section 80C of the repealed Ordinance were also not applicable. We therefore answer the question raised by the department in the present I.T.Cs. in affirmative i.e. in favour of the Respondent/Assessee and against the appellant/department.
S.A.K./C-17/KAnswer in affirmative.