COMMISSIONER INLAND REVENUE VS IMPERIAL ELECTRIC COMPANY (PVT.) LTD., 2015 PTD-LAHORE-HIGH-COURT-LAHORE 884 (2014)

2015 P T D 884

[Lahore High Court]

Before Abid Aziz Sheikh and Shahid Jamil Khan, JJ

COMMISSIONER INLAND REVENUE

versus

IMPERIAL ELECTRIC COMPANY (PVT.) LTD.

PTRs Nos.147, 152, 242, 372, 467, 468, 469, 470, 471, 557, 558, 559, 560, 561, 205, 213, 241, 376, 377, 378, 379, 380, 421, 422 of 2012, decided on 19/11/2014.

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

----Ss. 113, 169, 120 & 133---Finance Act (I of 2008) S. 18(8)---Reference to High Court---Minimum tax on turnover---Phrase "Turnover from all sources" occurring in S.113, Income Tax Ordinance, 2001---Scope---Final Tax Regime under the Income Tax Ordinance, 2001---Interpretation of S. 113 of the Income Tax Ordinance, 2001 [as it stood before omission by S. 18(8) of the Finance Act, 2008]---Question before the High Court was whether receipts and tax paid under the Final Tax Regime under the Income Tax Ordinance, 2001 could be included in "aggregate turnover from all sources" for charging of minimum tax under S. 113 [as it stood before omission vide S. 18(8) of the Finance Act, 2008] of the Income Tax Ordinance, 2001----Held, that provisions of the Income Tax Ordinance, 2001 when examined under the principle that "statute should be read as a whole" or that "textual interpretation should match the contextual", then while there was no cavil that taxation under Normal Tax Regime and Final Tax Regime were different in nature and mutually exclusive, however it could not be ignored that income charged to tax under the Final Tax Regime in lieu of income tax arrived through the conventional way (through assessment) was an independent source of income and it was also not ignorable that after being taxed under the Final Tax Regime, in an unconventional way, an assessment order was treated as passed under Normal Tax Law---Under S. 169(3) of the Income Tax Ordinance, 2001 a statement filed under S. 115(4) of the Income Tax Ordinance, 2001 was treated as an assessment order under S. 120 of the Income Tax Ordinance, 2001 and source of such income was not found to have been excluded specifically from "turnover from all sources"----Argument that phrase "turnover from all sources" used in S. 113 of the Income Tax Ordinance, 2001 meant only the source of income determined under normal law was misconceived, and had the Legislature intended it to be so, it could have been done by use of clear words---Finality of the Final Tax Regime was not compromised by inclusion of its receipts in "turnover from all sources" because minimum tax was charged under S. 113(2)(2a) of the Income Tax Ordinance, 2001 also through presumption of treating the aggregate of a person's turnover as income---Held further that S. 113 was a charging provision, which did not exclude receipts relating to the Final Tax Regime from "turnover from all sources" in clear words and had Legislature intended to charge minimum tax on final tax regime, it could have been done by clear words---Reference was answered accordingly.

Commissioner of Income Tax/Wealth Tax Companies Zone, Faisalabad v. Messrs Masood Textile Mills Ltd., Faisalabad 2009 PTD 1707; Messrs Elahi Cotton Mills Ltd., and others v. Federation of Pakistan, through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582 = 1997 PTD 1555; Highway Petroleum Service (Regd.), Lahore v. Islamic Republic of Pakistan and another 1977 PTD 183 and Partington v. A.G., (1869) LR 4 HL 100, p.122, referred to in IRC v. Duke of Westminster, (1936) AC 1, P. 24 (HL) rel.

Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 K.B. 69; The Commissioner of Income Tax, Central Zone 'B', Karachi v. Messrs Asbestos Cement Industries Limited, Karachi 1993 SCMR 1276 and Messrs Rijaz (Pvt.) Ltd., through Chief Executive Riaz A. Gul, Lahore v. The Wealth Tax Officer, Circle III, Lahore and another 1996 PTD 489 distinguished.

(b) Interpretation of statutes---

----Tax statute---Charging provision---Charging provisions were to be interpreted strictly and literally and while construing such provisions, courts were not to be overwhelmed by principles of equity and only those could be charged to tax who were caught by clear words of the charging provisions---If two interpretations of such changing provisions were possible, one favoring the subject was to be embraced---Principles of interpretation in light of case-law, examined.

Highway Petroleum Service (Regd.), Lahore v. Islamic Republic of Pakistan and another (1977) 36 Tax 8 (H.C. Lah.) and Partington v. A.G., (1869) LR 4 HL 100, p.122, referred to in IRC v. Duke of Westminster, (1936) AC 1, P. 24 (HL) rel.

(c) Interpretation of statutes---

----"Amendment" to a statute and "insertion" in a statute---Distinction---Effect---Retrospective application of an amendment or insertion---Scope---Marked difference existed between an "insertion" and an "amendment"---Amendment was made of an existing provision, therefore question of retrospectivity could arise; however an insertion was always of a new provisions, which if created a liability or took away a vested right, could not be applied retrospectively.

Khawaja Farooq Saeed, for Applicants (in PTRs Nos.147, 152, 242, 372, 467, 468, 469, 470, 471, 557, 558, 559, 560 and 561 of 2012).

Amjad Hussain Malik, for Applicants in (PTRs Nos. 205 and 213/2012).

Sajjad Haider Rizvi, for Applicant (in PTR No. 241 of 2012).

Muhammad Asif Hashmi, for Applicants (in PTRs Nos. 376, 377, 378, 379 and 380 of 2012.

Asjad Saeed, for Applicants (in PTRs Nos. 421 and 422 of 2012).

Muhammad Iqbal Hashmi, for Applicant.

Imran Rasool, for Applicant.

Ch. Liaquat Ali, for Applicant.

Mr. Ehsan-ur-Rehman Sheikh, for Applicant.

Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, Lahore.

Shahbaz Butt, for Respondent (in PTR No. 213 of 2012).

Date of hearing: 19th November, 2014.

JUDGMENT

SHAHID JAMIL KHAN, J.---This judgment shall also decide Reference applications listed at the bottom, as common legal proposition is moved for our opinion through all the applications under similar facts and circumstances.

2.The applications, under section 133 of the Income Tax Ordinance, 2001 ("Ordinance"), are on behalf of Commissioners ("Applicant Department"), relating to tax years 2003 to 2007. Respondent Taxpayers (in all the applications); besides been taxed under 'Normal Law' were also charged to tax under 'Final Tax Regime ("FTR"). As, in department's opinion, the tax payable or paid was less than one-half percent (0.5%) of the Taxpayer's turnover from all sources for relevant tax years, hence Minimum Tax was charged under Section 113 of the Ordinance by excluding FTR income from 'total turnover' through amendment of assessment orders under Section 122 of the Ordinance. After exhausting remedies before Commissioner (Appeals), the matter was decided by Appellate Tribunal in favour of Respondent Taxpayers. The Appellate Tribunal, has relied upon a judgment by Division Bench of this Court in Commissioner of Income Tax/Wealth Tax Companies Zone, Faisalabad v. Messrs Masood Textile Mills Ltd., Faisalabad (2009 PTD 1707), in all cases, to hold that receipts and tax paid under FTR shall be included in aggregate of turnover, for the purpose of calculating Minimum Tax payable. It was observed that provisions of section 113 of the Ordinance were in pari materia to provisions of section 80D of Repealed Income Tax Ordinance, 1979 ("Repealed Ordinance"); therefore, it was followed in the instant cases. After examining all questions, proposed in these applications, a question of law (infra) is resettled to sum up the legal proposition into a representative question:--

"Whether under the facts and circumstances, Appellate Tribunal was justified to include receipts and tax under 'Final Tax Regime' in aggregate of turnover from all sources for charging minimum tax under Section 113 of the Income Tax Ordinance, 2001?"

3.Khawaja Farooq Saeed, Advocate led arguments for the Applicant Department, submitting that Appellate Tribunal was not justified to hold that provisions relating to Minimum Tax in both the Ordinances were similar. He submitted that section 80D of Repealed Ordinance was a non obstante, whereas section 113 of the Ordinance does not exclude other provisions of the Ordinance. He explained that subsection (3) of section 168 is not without purpose, which does not allow credit of tax collected under FTR. He also referred to Section 169 of the Ordinance to submit that Final Taxation does not fall under any head of income, as deduction, allowance, tax credit or refund etc. is not allowable under this regime. He relied upon a famous quote from Cape Brandy Syndicate v. Inland Revenue Commissioner (1921 K.B. 69) to submit that for interpretation of a taxing statute, one has looked at what is clearly said, there is no role of equity and nothing can be construed. He concluded that burden of tax under FTR is passed on to consumer for being taxed at source along with other indirect taxes. Whereas under Normal Law; tax is levied on income at the end of a tax year, after permissible deductions and its burden is directly born by the Taxpayer, hence, it is a direct tax. Appellate Tribunal's decision has in fact given undue benefit to the Taxpayers; tax charged under FTR is not born by the Taxpayers and they are also allowed to escape minimum burn of direct tax.

Messrs Muhammad Iqbal Hashmi, Sajjad Haider Rizvi and Imran Rasool Advocates adopted the arguments advanced by Mr. Khawaja Farooq Saeed Advocate. Ch. Liaqat Ali, Advocate also adopted his arguments, however added that Explanation to subsection (1) of Section 113, inserted by Finance Act, 2012, is declaratory in nature, therefore, shall apply retrospectively to the provisions before omission by Finance Act, 2008. For this submission he relied on The Commissioner of Income Tax, Central Zone 'B', Karachi v. Messrs Asbestos Cement Industries Limited, Karachi (1993 SCMR 1276). Further submitted that Final Tax could not be reduced as its finality is protected under section 4(4) read with section 169 (2) (d), whereas no such protection was available under section 9(3) of the Repealed Ordinance. He has also placed reliance on Messrs Rijaz (Pvt.) Ltd., through Chief Executive Riaz A. Gul, Lahore v. The Wealth Tax Officer, Circle III, Lahore and another (1996 PTD 489) to contend that change in law is applicable on pending cases.

Mr. Ehsan-ur-Rehman Sheikh, Advocate and Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue made submissions with permission of the Court. Their emphasis was on the nature of taxation in both the Regimes. It was submitted that language of section 113(1), before omission by Finance Act, 2008, envisaged tax under Normal Law only. Mr. Ehsan-ur-Rehman Sheikh, Advocate referred to section 67 of the Ordinance read with Rule 13, which prescribe separate working for tax under Normal Law.

4.Mr. Shahbaz Butt, Advocate argued for Respondent Taxpayers. He submitted that Masood Textile's Case has rightly been applied by the Appellate Tribunal as provisions of section 113 of the Ordinance were in pari materia to provisions contained in section 80D of the Repealed Ordinance. Added that provisions similar to the one contained in section 168 of the Ordinance were available under sections 80C(3) and 80CC(2) of the Repealed Ordinance. Further submitted that learned counsel for the applicants have over looked section 67 of the Ordinance read with Rule 13 of the Income Tax Rules, 2002, which provide a mechanism for proration of expenses between incomes under FTR and Normal Law. He argued that examination of subsections (3) and (4) read with subsection (5) of Section 4, would reveal that subsection (5) excludes income falling under sections 5, 6 and 7 from computation in taxable income. He concludes that provisions of Section 113, before repeal through Finance Act, 2008, did not make any distinction between incomes under FTR and Normal Law. He emphasized that phrase "from all sources" used in section 113 cannot be ignored, which include income and tax paid thereon under FTR also.

5.Heard, record perused.

6.Before examination of rival argument, a brief history leading to this overstretched controversy is necessary; Concepts of 'Presumptive Tax' and 'Minimum Tax', based on Legal Fiction, were brought under challenge, which was a departure from conventional way of arriving at a taxable income. Its validity and legislative competence under the Constitution was endorsed by Apex Court, in Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan, through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 SC 582 = 1997 PTD 1555), in following words:--

"34. Keeping in view the above case-law and the treatises and the aforesaid legal inferences drawn therefrom, we may now revert to the question of vires of impugned sections. It may again be observed that the power to levy taxes is a sine qua non for a State. In fact it is an attribute of sovereignty of a State. It is a mandatory requirement of a State as it generates financial resources which are needed for running a State and for achieving the cherished goal, namely, to establish a welfare State. In this view of the matter, the Legislature enjoys plenary power to impose taxes within the framework of the Constitution. It has prima facie power to tax whom it chooses, power to exempt whom it chooses, power to impose such conditions as to liability or as to exemption as it chooses, so long as they do not exceed the mandate of the Constitution. It is also apparent that the entries in the Legislative List of the Constitution are not powers of legislation but only fields of legislative heads. The allocation of the subjects to the lists is not by way of scientific or logical definition but by way of mere simple enumeration of broad catalogue. A single tax may derive its sanction from one or more entries and many taxes may emanate from one single entry. It is needless to reiterate that it is a well-settled proposition of law that an entry in the Legislative List must be given a very wide and liberal interpretation. The word "income" is susceptible as to include not only what is in ordinary parlance it conveys or it is understood, but what is deemed to have arisen or accrued. It is also manifest that income-tax is not only levied in the conventional manner i.e., by working out the net income after adjusting admissible expenses and other items, but the same may also be levied on the basis of gross receipts, expenditure etc. There are new species of income-tax, namely, presumptive tax and minimum tax.

In our view, sections 80-C and 80-CC of the Ordinance fall within the category of presumptive tax as under the same the persons covered by them pay a pre-determined amount of presumptive tax in full and final discharge of their liability in respect of the transactions on which the above tax is levied. Whereas section 80-D of the Ordinance is founded on the theory of minimum tax which has been elaborately dealt with in the treatises, the relevant portions of which have been quoted in extenso hereinabove. If we were to read Entry 47 in isolation without referring to Entry 52, one can urge that Entry 47 does not admit the imposition of presumptive tax as the expression "taxes on income" employed therein should be understood as to mean the working out of the same on the basis of computation as provided in the various provisions of the Ordinance. We are inclined to hold that presumptive tax is in fact akin to capacity tax i.e., capacity to earn. In this view of the matter, we will have to read Entry 47 in conjunction with Entry 52 which provides taxes and duties on production capacity of any plant, machinery, undertaking, establishment or installation in lieu of the taxes or duties specified in Entries 44, 47, 48 and 49 or in lieu of any one or more of them. Since under Entry 52, tax on capacity in lieu of taxes mentioned in Entry 47 can be imposed, the presumptive tax levied under sections 80-C and 80-CC of the Ordinance is in consonance with the above two entries if read in conjunction. However, we may point out that in Entry 52, the key words used are "in lieu of taxes and duties specified in entries 44, 47, 48 and 49 or in lieu of any one or more, of them". In order to understand the real import of the above portion of Entry 52, we will have to refer to the meaning of the words "in lieu of". In this regard, reference may be made to Black's Law Dictionary, Sixth Edition, Ballentine's Law Dictionary, Third Edition; and the Legal Thesaurus by Steven C. De Costa, which read as follows----

Black's Black's Law Dictionary. page 787

"In lieu of": Instead of; in place of; in substitution of. It does not mean "in addition to".

Ballentine's Law Dictionary. page 628

"in lieu of": In substitution for or in place of Ordinarily implying the existence of something to be replaced.

Legal Thesaurus, page 266

"In lieu of": Proposition as a substitute for, as an alternative, by proxy, or, in place of, instead of, on behalf of, rather than, representing.

35. A perusal of the above quoted meanings of the above expression "in lieu of" indicates that the same connotes, instead of, in place of, in substitution of, but it does not mean, in addition to.

If we were to construe Entry 52 of the Legislative List keeping in view the above meanings of the expression "in lieu of", it becomes evident that the Legislature has the option instead of invoking Entry 47 for imposing taxes on income, it can impose the same under Entry 52 on the basis of capacity to earn in lieu of Entry 47, but it cannot adopt both the methods in respect of one particular tax. Since under sections 80-C and 80-CC the imposition of presumptive tax is in substitution of the normal method of levy and recovery of the income-tax, the same is in consonance with Entry 52."

(emphasis supplied)

Purpose of 'Presumptive Tax' in general and 'Minimum Tax' in particular was discussed in the following paragraph:--

"42. We may again point out that the NTRC, which mostly comprised the representatives of business community representing various trade associations, in its report of December, 1986, quoted hereinabove in para. 17, highlighted the corruption obtaining in Government and semi-Government departments and so also the dishonest tendency on the part of the tax-payers to evade the payment of lawful taxes by using unfair means. In such a scenario, the Legislature is bound to adopt modern and progressive approach with the object to eliminate leakage of public revenues and to generate revenue which may be used for running of the State and welfare of its people. The imposition of minimum tax under section 80-D is designed and intended to achieve the above objectives. The rate of half per cent, of minimum tax adopted under section 80-D seems to be on the basis of the minimum rate of tax suggested by the Exports Enhancement Committee. In our view, the above provision falls within the legislative competence under Entry 47 read with Entry 52. The approach of this Court while interpreting the Constitution should be dynamic, progressive and oriented with the desire to meet the situation effectively which has arisen keeping in view 'the requirement of ever changing society. Applying the above rule of interpretation, we do not find any infirmity in the impugned section 80-D of the Ordinance."

(emphasis supplied)

7.The purpose of Minimum Tax under erstwhile section 80D was to maintain a threshold of tax, which was not being achieved through conventional mode of determining taxable income, for the reasons given by in the paragraph reproduce ibid. Problem arose when both the concepts could not be reconciled for the purpose of charging Minimum Tax. Division Bench of this Court, in Masood Textile's Case (supra), preferred to go by the plain words of the provisions and by lying emphasis on the words "turnover from all sources", decided the proposition against the Revenue, holding:--

"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."

(emphasis supplied)

8.Now we advert to examine the arguments, whether provisions of erstwhile section 80D and section 113 of the Ordinance are in pari materia. It is important to point out here that Section 113 was omitted from the Ordinance by Finance Act, 2008 and it was inserted again by Finance Act, 2009, meaning thereby that it was not available on the statute book for tax year 2008. All the cases, being dealt with, relate to tax years 2003 to 2007, therefore, provisions of section 113 before omission through Finance Act, 2008 are being considered, which are reproduced hereunder along with provisions of erstwhile section 80D:---

"113. Minimum tax on the income of certain persons.---(1) This section shall apply to a resident company where, for any reason whatsoever, including the sustaining of a loss, the setting off of a loss of an earlier year, exemption from tax, the application of credits or rebates, or the claiming of allowances or deductions (including depreciation and amortization deductions) allowed under this Ordinance or any other law for the time being in force, no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than one-half per cent of the amount representing the person's turnover from all sources for that year.

(2)Where this section applies--

(a)the aggregate of the person's turnover for the tax year shall be treated as the income of the person for the year chargeable to tax;

(b)the person shall pay as income tax for the tax year (instead of the actual tax payable under this Ordinance), an amount equal to one-half per cent of the person's turnover for the year; and

(c)where tax paid under subsection (1) exceeds the actual tax payable under Part I, Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under Part I, Division II of the First Schedule of the subsequent tax year:

Provided that the amount under this clause shall be carried forward and adjusted against tax liability for five tax years immediately succeeding the tax year for which the amount was paid.

(3)In this section "turnover" means--

(a)the gross receipts, exclusive of sales tax and Federal excise duty or any trade discounts shown on invoices or bills, derived from the sale of goods;

(b)the gross fees for the rendering of services or giving benefits, including commissions;

(c)the gross receipts from the execution of contracts; and

(d)the company's share of the amounts stated above of any association of persons of which the company is a member."

80D. Minimum tax on income of certain persons.---(1) 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 per cent 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.---For the removal of doubt, it is declared that the expressions "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 loss of income, profits or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including depreciation) admissible under any provision of this Ordinance or any other law for the time being in forced.

(2)The company or a registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family 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 the 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 the 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."

(emphasis supplied)

Examination of both the provisions, in juxtaposition, shows that there is difference in form of both the provision, however, the emphasized portions of both provisions reveal that there is no difference in substance. Except that under section 80D; to maintain threshold of 0.5%, the less paid tax only was charged, however, under section 113 Minimum Tax is charged on a given rate and tax paid in excess is carried forward. The crucial part, relied upon in Masood Textile Case, is also same i.e., "amount representing the person's turnover from all sources for that year". Receipts falling under FTR are not specifically excluded while defining "turnover" in both the provisions. It is additionally noticed that under section 113(3)(c), while defining "turnover", "gross receipts from the execution of contracts" are included in turnover, whereas under Section 153(3) of the Ordinance, tax deductible on such receipt i.e., under Section 153(1)(c), is final tax.

9.We had two options for interpretation of provisions contained in Section 113, as it stood before omission by Finance Act 2008, to answer the legal proposition; First, to go by clear words used in the provisions and second; to probe into the philosophy of concepts of 'Presumptive and Minimum Taxation' as argued by Khawaja Farooq Saeed. The philosophy has extensively been discussed in Ellahi Cotton Mills' Case and argument of learned counsel that burden of tax under FTR is not born by the Taxpayer has weight. Hon'ble Supreme Court, as reproduced above, has enshrined that Presumptive Tax in fact is a capacity tax, charged in lieu of income tax. Nevertheless, we cannot ignore that Section 113 is a charging provision, which has to be interpreted strictly and literally. While construing such provisions, courts are not to be overwhelmed by principles of equity. Only those can be charged to tax who are caught by clear words of charging provisions. If two interpretations are possible, one favoring the subject is to be embraced.

In support of these observation some passages from classic judgments can be referred:--

Highway Petroleum Service (Regd.), Lahore v. Islamic Republic of Pakistan and another [1977 PTD 183].

"On well based judgments, the propositions are stated in Maxwell, Rules of Interpretation, 12th Edition at page 257 as under:---

"It is well settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties "(as in penal laws)" the subject is not to be taxed unless the language of the statute clearly imposes the objection(1) and language must not be strained in order to tax a transaction which, had the legislature thought of it, would have been covered by appropriate words. "In a taxing Act", said Rowlatt, J., "one has to look merely at what is clearly said. There is no room or 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." But this strictness of interpretation may not always ensure to the subject's benefit, for if the person sought to be taxed comes within the letter of the law, he must be taxed, however, great hardship may appear to the judicial mind to be."

(emphasis supplied)

In a classic passage LORD CAIRNS stated the principle:--

"If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute."

[PARTINGTON v. A.G., (1869) LR 4 HL 100, p.122, referred to in IRC V. DUKE OF WESTMINSTER, (1936) AC 1, P. 24 (HL)]

10.We have also considered arguments from both sides; referring to other provisions of the Ordinance in support of their arguments. Being mindful of the principle of interpretation that 'statute should be read as a whole' or 'textual interpretation should match the contextual', the provisions referred in arguments are examined. There is no cavil that taxation under Normal Law and FTR are different in nature and mutually exclusive, yet it cannot be ignored that income charged to tax under FTR, in lieu of income tax arrived at through conventional way (i.e., through assessment) is an independent source of income. It is also not ignorable that after being taxed under FTR, in an unconventional way, an assessment order is treated as passed under Normal Law. Under Section 169 (3), a statement filed under Section 115(4) is treated as an assessment order under Section 120 for all purposes of the Ordinance. This source of income is not found to have been excluded specifically from 'turnover from all sources'.

The argument that phrase 'turnover from all source' used in section 113, means the source determined under normal law has no force. Had Legislature intended so, it could have been done by use of clear words.

11.We have also pondered on the argument that unlike section 80D, section 113 was not a 'non obstante' provision. We have conceived that Section 80D was not part of original scheme of the Repealed Ordinance. Being inserted as a new concept at latter stage, its conflict with other provisions of the Repealed Ordinance was inevitable. Hence provisions of Section 80D were made self executory, with an opening word "Notwithstanding". Conversely, concept of Minimum Tax was incorporated in the Ordinance from its inception.

Provisions of section 168(3) are also read; which say that tax credit shall not be allowed for a tax collected or deducted that is final tax. We are in agreement with submissions by Mr. Shahbaz Butt, Advocate that similar provisions were available under sections 80C(3) and 80CC(2) of the Repealed Ordinance. All these provisions, in fact, enjoin finality to tax withheld/collected under FTR.

It may again be observed here, that finality to FTR is embodied in Section 4 of the Ordinance because it was part of scheme of the Ordinance since its inception, such was not a case under Section 9 of the Repealed Ordinance, because concepts of Presumptive Tax and Minimum Taxation were introduced latter. Finality of FTR is not compromised by inclusion of its receipts in "turnover from all sources", because Minimum Tax is charged, under section 113(2)(a), also through presumption of treating the aggregate of person's turnover as income.

12.Argument of Ch. Liaqat Advocate that explanation inserted through Finance Act, 2012, shall have retrospective application has no force. Section 113 was inserted by Finance Act, 2009 as a new provision after omission of earlier section 113 in 2008. For tax year 2008 section 113 was not available on statute book, hence its latter insertion cannot be said to be a continuity of the earlier Section. There is a marked distinction between "insertion" and "amendment". Amendment is made of an existing provision, therefore, question of retrospectivity can arise. But insertion is always of new provision, which if creates a liability or takes away a vested right cannot be applied retrospectively. We are of the view that the explanation was for section 113 inserted by Finance Act 2009 and not for the Section which was omitted by Finance Act, 2008. The judgments relied upon by learned counsel were on different facts, therefore are not relevant.

13.Section 67 of the Ordinance read with Rule 13 of Income Tax Rules, 2001 are also examined in light of arguments by learned counsel for the parties. Proration of expenses between FTR and Normal Law is not to attribute expenses to FTR, rather it is meant to arrive at an actual taxable income by allowing only those expenses, which should have been incurred under Normal Tax Regime. These provisions do not disturb the finality given to FTR, by other provisions under the Ordinance.

14.For the reasons discussed above, we are of the opinion that Section 113 (before omission by Finance Act, 2008) was a charging provision, which did not exclude receipts relating to FTR from turnover from all sources in clear words, hence it leads to more than one interpretations. Had Legislature intended to charge Minimum Tax on FTR, it could have been done by clear words. Our answer to the question of law, supra, is in Affirmative, i.e., against the Applicant Department in all the cases.

All the Reference Applications are decided against Department.

15.Office shall send a copy of this judgment under seal of the Court to the Appellate Tribunal Inland Revenue as per section 133(5) of the Income Tax Ordinance, 2001.

16.This judgment shall also decide PTRs Nos.152, 205, 213, 241, 242, 363, 364, 372, 376, 377, 378, 379, 380, 381, 382, 383, 384, 393, 421, 422, 446, 447, 448, 467, 468, 469, 470, 471, 557, 558, 559, 560 and 561 of 2012.

KMZ/C-6/LOrder accordingly.