WATEEN TELECOM LTD. VS COMMISSIONER INLAND REVENUE, 2015 PTD-ISLAMABAD 936 (2015)

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

----Ss. 132, 131 & 133---Disposal of appeal by the Appellate Tribunal---Practice and procedure---Statutory duty upon the Appellate Tribunal to "decide" an appeal---Legislative intent behind S. 132 of the Income Tax Ordinance, 2001---Reference to High Court---Scope---Question before the High Court was as to whether the Income Tax Appellate Tribunal, while deciding nine appeals, was justified in failing to advert to the facts and circumstances of each appeal/case and whether the order of the Appellate Tribunal could be termed as a "judgment" or "order" under the provisions of S. 132 of the Income Tax Ordinance, 2001---Held, that decision or determination of the Income Tax Appellate Tribunal on a question of fact attained finality thereby making the said Tribunal the final forum in such regard and failure to advert to a question raised before the Tribunal in itself was a question of law---Legislative intent behind S. 132 of the Income Tax Ordinance, 2001 envisaged a clear, definite and conscious determination and decision on all matters raised before the Tribunal in an appeal and contemplated application of mind and giving reasons for any determination or decision made by the Tribunal after affording an opportunity of hearing to the parties---Appellate Tribunal under S. 132 of the Income Tax Ordinance, 2001 was under a statutory duty to decide an appeal and give its decision in writing and if relevant facts were not taken into consideration or deliberated upon, and the reasons for or against had not been weighed, then it could not be said that the Tribunal had "decided" an appeal and any purported order or judgment without "deciding" the appeal would be a nullity in law---High Court observed that if the Tribunal failed to advert to a question of law or fact raised before it or before any other forum under the relevant statute, it was to be treated as a question of law for the purposes of S.133 of the Income Tax Ordinance, 2001---In the present case, in each appeal; the facts, nature of transaction and contractual relationship between the parties was distinct and separate and the same was also acknowledged by the Tribunal---Tribunal was required to decide the separate appeals by affirming, annulling, varying or amending the impugned orders rather than restricting itself to mere interpretation---Held further that the impugned order of the Appellate Tribunal was not an "order" or "judgment" passed by the Tribunal in terms of S. 132 of the Income Tax Ordinance, 2001 as it failed to advert to the facts and nature of transaction in each case, and consequently failed to "decide" the appeals separately as required under S. 132 of the Income Tax Ordinance, 2001---Impugned order of Appellate Tribunal was set aside, and matter was remanded---Reference was answered accordingly.

(b) Words and Phrases---

----"Decide"---Meaning of---To decide meant to deliberate, to weigh the reasons for and against, to see which preponderate and to be governed by such preponderance.

Balck's Law Dictionary, Sixth Edition rel.

(c) Words and Phrases---

----"Decision"---Meaning---Decision was defined as a determination arrived at after consideration of facts and in the legal context, the law---"Decision" may be explained as a finding and conclusion of law, which must be in writing.

Balck's Law Dictionary, Sixth Edition and Quoting Wilcox v. Sway 160 P.2d 154 rel.

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

----Ss. 132 & 131---Sales Tax Act (VII of 1990) S. 46---Customs Act (IV of 1969) S.194---Federal Excise Act (VIII of 2005), Ss.34 & 2(3)---Constitution of Pakistan, Art.199---Constitutional jurisdiction of High Court---Scope---Appellate Tribunal of Inland Revenue---Statutory duty cast upon Appellate Tribunal, Inland Revenue for adjudication of appeals---Nature, scope and importance of such adjudication---Bar of statutory duty was high on appellate forums provided under the Federal Excise Act, 2005, the Sales Tax Act, 1990, the Customs Act, 1969 and the Income Tax Ordinance, 2001---Appellate Tribunal, being the last forum for determination of questions of fact undoubtedly carried a heavy burden of discharging its functions in a fair, just and transparent manner and particularly observing the requirements of due process and deciding appeals as provided under relevant provisions---Levy of charge or payment of tax or duty imposed a financial burden and therefore role of Appellate Tribunal as the last statutory forum assumed greater importance---Jurisdiction of High Court under Art.199 of the Constitution was barred when a statute provide an adequate remedy and the role of the Appellate Tribunal of Inland Revenue which exclusively heard and decided appeals became crucial in ensuring the interests and rights of taxpayers were safeguarded and that they remained protected from being saddled with illegal, arbitrary and unwarranted imposition of financial burden and for such reason higher duty of care was to be exercised by adjudicating officers and the statutory appellate forums by, inter alia, taking into consideration all the matters before them, whether relating to facts or law and after thorough deliberation, manifesting application of mind and deciding appeal by delivering a reasoned judgment / order.

Hafiz Muhammad Idrees for Applicant (in FERA Nos. 1, 2, 3 and 4 of 2013).

Anwar Kamal and Muhammad Umar Khan Vardag for Applicants (in FERA Nos. 5, 6 and 7 of 2013).

Hafiz Munawar Iqbal and Sikandar Naeem Qazi for Respondents.

Date of hearing: 4th February, 2015.

JUDGMENT

ATHAR MINALLAH, J.---We intend to decide through this consolidated order the instant Reference and connected References titled "Messrs Teradata Pakistan (Pvt.) Ltd., v. Commissioner Inland Revenue etc.", "Messrs Warid Telecom (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue etc.", "Messrs Warid Telecom (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue etc", "Pakistan Telecommunication Company Ltd. v. The Appellate Tribunal Inland Revenue etc.", "Pakistan Telecommunication Company Ltd. v. The Appellate Tribunal Inland Revenue etc.", and "Pakistan Telecommunication Company Ltd. v. The Appellate Tribunal Inland Revenue etc.", bearing Nos.2, 3, 4, 5, 6 and 7 of 2013 respectively.

2.The applicants have assailed the judgment of the learned Appellate Tribunal Inland Revenue, Islamabad Bench, Islamabad dated 6-3-2013. The applicants have framed several questions of law; however, the most relevant question of law arising out of the impugned judgment is "whether the learned Tribunal was justified in failing to advert to the facts and circumstances of each appeal and deciding the same on its own merits, as the nature of the transaction and the tax year raised a distinct cause of action". In other words, whether the judgment of the learned Tribunal is an order or judgment under the provisions of the Federal Excises Act, 2005 read with the Income Tax Ordinance, 2001?

3.Hafiz Muhammad Idrees and Mr. Anwar Kamal, A.S.C. appearing for the applicants contended that the learned Tribunal, while admitting that the facts in each appeal were different, failed to advert thereto and left the appeals undecided. It was further contended that the majority opinion restricted itself to the scope and interpretation of the expression "Franchise", without taking into consideration or adverting to the distinct nature of the transaction and facts in each appeal, so as to conclusively decide the appeals by determining whether the said transactions and contractual relationships would give rise to the charge and payment of Excise Duty. They have, therefore, submitted that the impugned judgment is not an order or judgment in the eyes of the law, as it has left the appeals undecided. It was further stressed that the learned Tribunal, being the final fact finding forum, was under the statutory obligation to take into consideration the facts and circumstances in each appeal separately and, thereafter, give its determination on the merits in each appeal. It was submitted that the learned Tribunal disposed of nine appeals relating to six different appellants/companies and the tax years in each appeal/case were also not the same. Furthermore, the nature of the transactions and the agreements/contracts is also distinct and separate.

4.On the other hand, Hafiz Munawar Iqbal and Mr. Sikandar Naeem Qazi, learned counsel for the respondents conceded that the learned Tribunal has not made a determination in the case of each appeal separately. However, it was contended that it was sufficient for the Tribunal to interpret the term "Franchise" and that it was not required to apply the said interpretation in case of each appeal separately. Upon our query they were not able to show us what was decided by the majority opinion in the case of each appeal separately, nor were the cases remanded to the Commissioner or Commissioner (Appeal) for making an inquiry under section 132 (3)(c) of the Income tax Ordinance, 2001.

5.The learned counsel have been heard and the record perused with their able assistance.

6.The learned Tribunal is indeed the final forum for determination of questions of fact. In the instant References, the assessment and demand is in respect of Federal Excise Duty under the Federal Excises Act, 2005. Section 34 ibid provides for a right of appeal to the Appellate Tribunal, which is defined in section 2(3) as meaning the Appellate Tribunal established under section 130 of the Income Tax Ordinance, 2001 and, therefore, sections 130 to 132 of the latter statute are attracted. In order to determine the powers vested in, or statutory obligations required to be carried out by a Tribunal in case of appeals relating to Federal Excise Duty, the provisions of the Income Tax Ordinance, 2001 need to be examined. The composition and statutory duties of the Tribunal, and the right of appeal of an aggrieved party are provided in sections 130 to 132 of the Ordinance. The powers of the Tribunal as provided in section 132 may be summarized as follows;

(i)Before disposing of an appeal i.e. while appeal remains pending, the Tribunal may (a) call for such particulars as it may require in respect to the matters arising on the appeal or (b) cause further inquiry to be made by the Commissioner.

(ii)After affording an opportunity of hearing i.e. after service of notice, if any of the party defaults in appearing on the date fixed for hearing, the Tribunal may proceed ex-parte to decide the appeal on the basis of the available record;

(iii)Where an appeal relates to an assessment order, the Tribunal may (a) affirm, (b) modify, (c) annul the assessment order or (d) remand the case to the Commissioner or Commissioner (Appeal) for making such inquiry or taking such action as it may direct.

(iv)The Tribunal may increase the amount of any assessment or penalty or decrease the amount of refund, provided the taxpayer has been given a reasonable opportunity to Show Cause in this regard.

(v)The Tribunal may authorize the Commissioner to amend an assessment order, if any change is made in the assessment of an association of persons, or a new assessment is ordered pursuant to an appeal.

(vi)Where the appeal relates to a decision other than in respect of an assessment, the Tribunal may (a) annul, (b) affirm, (c) vary the decision and in addition (d) issue such consequential directions as the case may require.

7.It is important to note that the decision or determination of the Tribunal on a question of fact attains finality, thereby making the Tribunal a final forum in this regard. It is settled law that failure to advert to a question raised before the Tribunal in itself is a question of law. It is evident from the above summarized powers of the Tribunal discerned from the statute, that the legislative intent envisages a clear, definite and conscious determination and decision on all matters raised before the Tribunal in an appeal. It contemplates application of mind and giving reasons for any determination or decision made by the Tribunal after affording an opportunity of hearing to the parties. The expressions used by the legislature in section 132 of the Ordinance i.e. to 'decide the appeal', 'annul, modify, or annul an order', 'increase any assessment or penalty', 'decrease the amount of refund', 'annul, vary or affirm a decision' determines the scope and statutory duty of a Tribunal. According to Black's Law Dictionary, Sixth Edition, 'Decide' means "To arrive at a determination. "To 'decide' means to deliberate, to weigh the reasons for and against, to see which preponderate, and to be governed by that preponderance." Similarly, 'Decision' is defined as ' A determination arrived at after consideration of facts, and in legal context, law..." Quoting Wilcox v Sway 160 P.2d 154, 'Decision' is explained as "The findings of fact and conclusion of law which must be in writing...". It is, therefore, obvious that the Tribunal under section 132 of the Ordinance is under a statutory duty to 'decide' the appeal and give its 'decision' in writing. If the relevant facts are not taken into consideration or deliberated, and the reasons for or against have not been weighed, the Tribunal would then not have decided the appeal. Any purported order or judgment without deciding the appeal would be a nullity in law. It is for this reason that if the Tribunal fails to advert to a question of law or fact raised before it or before any other forum under the relevant statute, it is treated as a question of law for the purposes of section 133 of the Ordinance.

8.Now we revert to answering the question of law before us i.e. whether the impugned order is an order or decision of the Tribunal and whether the learned Tribunal 'decided the appeal' of the applicants? The consolidated order dated 6-3-2013 has been passed in nine appeals relating to six different juridical persons. All appeals had arisen from separate Show Causes Notices, which had alleged failure to pay Federal Excise Duty levied and charged on 'Franchise Services' falling under the relevant heading of the First Schedule of the Federal Excises Act, 2005. It essentially involved the interpretation of the expression 'Franchise Services' and 'Franchise' and then to take into consideration the nature of transaction and contractual relationship for making a determination whether the levy, charge and payment of Federal Excise Duty will be attracted or not. It is noted that in the case of each appeal the facts, nature of transaction and contractual relationship between the parties are distinct and separate. The learned Tribunal acknowledges this crucial factor. It is pertinent to reproduce paragraphs Nos.23 to 25 of the dissenting opinion of the impugned judgment and the same are as follows:--

"23. The case of the department is that any payment of management fee, service fee, royalty or reimbursement of expenses incurred by non-resident associated companies on behalf of the Pakistan companies falls within the definition of Franchise and thus liable for levy of FED, hence the findings in Order in Originals should be maintained.

24. After examining the submissions of the parties, case-laws relied upon and the record including agreements placed before us, we are of the considered view that each transaction has to be examined independently and the payments which do not constitute Franchise as discussed supra should be excluded and levy of FED on such payments is illegal.

25. In view of the above discussion we are of the considered view that where payments are made for acquisition of Management services or Technical services, such payments would not fall within the definition of "Franchise" and hence not liable to Federal Excise Duty under the Federal Excise Act, 2005. Excise duty is payable at the time of payment of "Franchise" to the "Franchisor" by the "Franchisee" and not when invoice was received by the "Franchisor".

9.It is obvious from the above, that the author Member was conscious that the Tribunal was required to consider and examine each transaction independently, so as to determine whether the definition or provisions relating to "Franchise" would be attracted or not. However, in paragraph 24 the learned Member assumed that the 'matter in hand is one of interpretation', and consequently did not advert to determine whether in each appeal the nature of the transaction was such so as to bring it within the ambit of levy, charge and payment of Federal Excise Duty. Consequently, he purportedly disposed of, rather than deciding the appeals as required under section 132 of the Ordinance. The Tribunal was required to decide the separate appeals by affirming, annulling, varying, or amending the impugned order before it in case of each appeal rather than restricting itself to the mere interpretation of 'Franchise Services' or 'Franchise'. The majority view also failed to advert to the facts and nature of the transactions in each case separately, and gave a finding in a perfunctory manner, which by no stretch of the imagination can be stated that the learned Tribunal fulfilled its statutory duty to decide each appeal on its own merits. It is pertinent to mention that the author Member of the majority view reproduced the opening paragraph of the order of the Member who was in minority, and thus acknowledged that 'although the facts of the appeals of each appellant are different however it would be appropriate if we restrict ourselves to the issue of interpretation of "Franchise". When confronted with the said position, the learned counsel for the respondents conceded that the Tribunal did not advert to the facts, particularly to the nature of the transactions and contractual relationships in each appeal separately, for making a determination whether such transactions would attract the definition of 'Franchise' under the Federal 'Excises Act, 2005. The learned Tribunal was required to interpret the term "Franchise" and, thereafter, examine the payments and transactions in the case of each appeal to determine whether they would fall within the definition of "Franchise" and thereby affirm, annul, vary or amend the demand arising out of orders, and thus decide the respective appeals. It is also noted that all the nine appeals were heard on 12-10-2012, while the date of judgment is 6-3-2013. The delay in announcing the judgment may have been a factor in the failure to decide the respective appeals in accordance with the legislative intent expressed in section 132 of the Ordinance.

10.We, therefore, answer the question of law in the negative and decide that the impugned order was not an order or judgment passed by the learned Tribunal, as it failed to advert to the facts and nature of the transaction in each case, and consequently failed to decide the nine appeals separately as required under the Federal Excises Act, 2005 read with section 132 of the Income Tax Ordinance, 2001.

11.As a final note we would like to observe that the bar of statutory duty is high on the appellate forums provided under the Federal Excise Act, 2005, the Sales Tax Act, 1990, the Customs Act, 1969 or the Income Tax Ordinance, 2001. The learned Tribunal, being the last forum for determination of questions of fact, undoubtedly carries a heavy burden of discharging its functions in a fair, just and transparent manner, particularly in observing the requirements of due process and deciding appeals as provided under the relevant provisions. The levy, charge or payment of a tax or duty imposes a financial burden and, therefore, the role of the Tribunal as the last statuary forum assumes greater importance. The jurisdiction of the High Court under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 is barred when the statute provides an adequate remedy. The role of the Appellate Tribunal Inland Revenue, which exclusively hears and decides appeals under the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and the Federal Excises Act, 2005 becomes crucial in ensuring that the interests and rights of the tax payers are safeguarded and that they remain protected from being saddled with illegal, arbitrary or unwarranted imposition of financial burden. It is for this reason that there is a higher duty of care to be exercised by the adjudicating officers and the statuary appellate forums, particularly the Tribunal, inter alia, in taking into consideration all the matters before it, whether relating to the facts or law, and after thorough deliberation, manifesting application of mind, deciding the appeal by delivering reasoned judgment/order.

12.In the light of the above, the References succeed, the impugned judgment is set aside and the cases are remanded back to the learned Tribunal. The appeals of the applicants shall be deemed to be pending before the learned Tribunal. We expect that the learned Tribunal shall decide the appeals afresh expeditiously, preferably within four months. We further expect that neither the applicants nor the Department will cause any delay.

13.The Registrar of this Court shall send a copy of this judgment under seal of the Court to the Appellate Tribunal.

KMZ/25/IslOrder accordingly.