COMMISSIONER INLAND REVENUE, ZONE-I, RTO, HYDERABAD VS HYDERABAD ELECTRIC SUPPLY (HESCO), HYDERABAD, 2014 PTD-KARACHI-HIGH-COURT-SINDH 951 (2013)

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

----Ss. 235(1), 235(2) & First Sched. (Part IV)---Interpretation of S.235 of the Income Tax Ordinance, 2001---Electricity consumption---Distinction between "electricity consumption bill" and the "gross electricity bill"---Question before the High Court was whether advance income tax was to be deducted on the electricity consumption charges only or on the gross amount of the electricity bill---Held, that distinction existed between "electricity consumption bill" and the "gross electricity bill" and advance income tax was required to be charged on basis of electricity consumption only in the manner in which electricity consumption was charged, and therefore the gross electricity bill, which included Excise Duty, Income Tax, and General Sales Tax was not relevant for the purposes of charging advance tax at the rates specified in Part IV of the First Schedule of the Income Tax Ordinance, 2001---No ambiguity or conflict existed between Ss.235(1) & 235(2) of the Income Tax Ordinance, 2001, which were to be read in harmony and not in isolation.

(b) Interpretation of Statutes---

----Provisions of a statute would have to be construed harmoniously so as to advance the purpose of a substantive provision of law and to avoid conflict, and no provision was to be read in isolation---Court was duty bound to attempt to interpret a statute as a whole so as to avoid conflict between its various provisions.

Abdul Rahim Lakho, Advocate for Applicant.

Syed Riazuddin, Advocate for Respondent.

Date of hearing: 26th November, 2013.

JUDGMENT

AQEEL AHMED ABBASI, J.---Through instant reference application, following question has been framed, which according to learned counsel for the applicant is a question of law which arises from the impugned order dated 16-2-2012 passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi, in I.T.A. No.933/KB/2011 (Tax year 2010):--

"Whether in facts and circumstances of the case Appellate Tribunal Inland Revenue was justified to hold that advance income tax under section 235 was deductible on the electricity consumption charges under section subsection (2) and not on gross amount of electricity bill as contemplated by subsection (1) of section 235 of the Income Tax Ordinance, 2001."

2.Notice was issued to the respondent, pursuant to which Syed Riazuddin, Advocate filed Vakalatnama on behalf of respondent. By consent of both the learned counsel for the parties, instant reference application is being disposed of at Katcha Peshi stage.

3.Learned counsel for the applicant submits that both the learned Commissioner Inland Revenue (Appeals-III) Karachi @ Hyderabad as well as learned Appellate Tribunal Inland Revenue (Pakistan) Karachi, have erred in law and fact while holding that deduction of tax under section 235 of the Income Tax Ordinance, 2001 is to be made on consumption charges and not on the gross bill of the consumer. It has been contended by the learned counsel for the applicant that in terms of subsection (1) of section 235 of the Income Tax Ordinance, 2001, the person preparing electricity consumption bill is required to collect advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer, therefore, the respondents were required to charge and deduct the amount of tax on the gross consumption charges which was not done in the instant case, therefore, Deputy Commissioner Inland Revenue rightly invoked the provisions of sections 161/205 of the Income Tax Ordinance, 2001 in the instant case whereby, the respondent was required to pay the balance amount of short deducted tax along with default surcharge as per law. According to learned counsel for the applicant, both the impugned orders passed by the learned CIT (Appeals) as well as learned Appellate Tribunal may be set aside and the question proposed hereinabove may be answered in negative against the respondent and in favour of the applicant.

4.Conversely, learned counsel for the respondent submits that both the learned CIT (Appeals) as well as learned Appellate Tribunal Inland Revenue (Pakistan) Karachi have decided the instant controversy strictly in accordance with law by making correct interpretation of section 235 of the Income Tax Ordinance, 2001. Per learned counsel, the Deputy Commissioner (Inland Revenue) Enforcement-I, Hyderabad, was not justified in facts and law to invoke the provisions of sections 161/205 of the Income Tax Ordinance, 2001 in the instant case as neither there was any short deduction of tax nor there was any default on the part of the respondent, as according to learned counsel, the proper tax was deducted by the respondent in terms of section 235(2) of the Income Tax Ordinance, 2001, which provides that advance tax under subsection (1) of section 235 is to be charged on electricity consumption bill and not on the gross bill which includes other charges such as Excise Duty, Income Tax, G.S.T and N.J. Learned counsel for the respondent has drawn the attention of this Court to the table as mentioned at typed page 2 of the order passed by the Deputy Commissioner Inland Revenue, which according to learned counsel, was filed by the respondent in response to Notice under sections 161/205 wherein, the detail of taxable amount and non-taxable amount of electricity bill have been given, to show that advance tax has been withheld by the respondent on the amount of electricity consumption which includes variable, meter rent and fix charges, whereas the amount of Excise Duty, Income Tax, G.S.T and N.J has been excluded for the purposes of charging advance tax in terms of section 235(2) of the Income Tax Ordinance, 2001. It has been contended by the learned counsel for the respondent that there is no error or illegality in the impugned order passed by the learned Appellate Tribunal, whereas, subject controversy has been decided strictly in accordance with law and on the basis of correct interpretation of provisions of section 225 of the Income Tax Ordinance, 2001, hence does not require any interference by this Court in its reference jurisdiction. It has been prayed that the reference application may be dismissed, whereas the question proposed may be answered in affirmative against the applicant and in favour of the respondent.

5.We have heard both the learned counsel and perused the record with their assistance. The precise controversy in the instant case revolves around interpretation of the provisions of section 235 of the Income Tax Ordinance, 2001, and to examine as to whether the advance income tax under Section 235 is to be deducted on the electricity consumption charges only or on the gross amount of the electricity bill. It will be advantageous to reproduce the provisions of section 235 of the Income Tax Ordinance, 2001, which reads as follows:-

"235. Electricity consumption.---(1) There shall be collected advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer.

(2)The person preparing electricity consumption bill shall charge advance tax under subsection (1) in the manner electricity consumption charges are charged.

(3) .

(4) .

(a) .

(b) .

(c) "

6.From combined reading of subsection (1) and subsection (2) of section 235, it may be seen that subsection (1) provides for collection of advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer, whereas subsection (2) of Section 235 provides for the mechanism, mode and manner, according to which the advance tax under subsection (1) is to be charged. Subsection (2) of section 235 requires a person preparing electricity consumption bill to charge advance tax under subsection (1) in the manner electricity consumption charges are charged (Emphasis is ours). From plain reading of hereinabove provisions, it is clear that there is distinction between electricity consumption bill and the gross electricity bill, whereas, the advance tax is required to be charged on the basis of electricity consumption only, and in the manner electricity consumption charges are charged, therefore, the gross electricity bill, which includes Excise Duty, Income Tax, G.S.T and N.J, is not relevant for the purposes of charging advance tax at the rates specified in Part-IV of the First Schedule. We do not see any ambiguity or conflict between the two provisions of subsection (1) and subsection (2) of section 235 of the Income Tax Ordinance, 2001, which otherwise, are to be read in harmony and not in isolation.

7.Provisions of statute would have to be construed harmoniously so as to advance purpose of a substantive provision of law and to avoid conflict whereas no provision is to be read in isolation. It is the duty of the Court to attempt to interpretation the statute as a whole so as to avoid conflict between its various provisions. In the instant case, it appears that the Taxation Officer by ignoring the above principle of interpretation of statute, read the provisions of subsection (1) of the section 235 of the Income Tax Ordinance, in isolation without referring the provisions of subsection (2) of section 235, which is relevant for the purposes of charging advance tax in the manner electricity consumption charges are charged.

8.In view of hereinabove, we are of the opinion that the order passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi, does not suffer from any error or illegality as it depicts correct legal position. Accordingly, we do not find any substance in the instant reference application, which is hereby dismissed. The question proposed by the applicant is answered in affirmative against the applicant and in favour of the respondent.

KMZ/C-13/KOrder accordingly.