TELENOR PAKISTAN (PVT.) LTD. VS APPELLATE TRIBUNAL INLAND REVENUE
2017 P T D 1181
[Islamabad High Court]
Before Noor-ul-Haq N. Qureshi and Athar Minallah, JJ
Messrs TELENOR PAKISTAN (PVT.) LTD.
Versus
APPELLATE TRIBUNAL INLAND REVENUE and 3 others
I.T.R. No.63 of 2015, decided on 09/01/2017.
(a) Interpretation of statutes---
----Redundancy, avoidance of---Principle---In order to avoid redundancy and interpretation leading to absurd interpretation, every word and expression has to be given meaning---Provisions must be given its true meaning by construing them together in harmonious manner.
(b) Income Tax Ordinance (XLIX of 2001)---
----S.2(29C)(a)(i) to (iv)---"Industrial undertaking"---Connotation---Undertaking which is not engaged in one of the trades and businesses described in clauses (ii) to (iv) of S.2(29C)(a) of Income Tax Ordinance, 2001, can be treated as an "industrial undertaking" if it satisfies tests provided in clause (i) of S.2(29C)(a) of Income Tax Ordinance, 2001.
(c) Words and phrases---
----"Materials"---Connotation---Material inter alia also refers to information and data.
Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Oil and Gas Development Company Limited through Manager (Pricing) v. Federal Board of Revenue through Chairman and 2 others 2016 PTD 1675; Zaver Petroleum Corporation Limited through Director-General, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332; Dr. Raja Aamer Zaman v. Omer Ayub Khan Khan and others 2015 SCMR 1303; Mst. Rooh Afza v. Aurangzeb and others 2015 SCMR 92; Advanced Law Lexicon (3rd Edition); The Chambers Dictionary (10th Edition); Concise Oxford Thesaurus (3rd Edition); Oxford Advanced Learner's Dictionary of Current English (7th Edition); Encyclopedia Law Dictionary along with Legal Maxims and Indian Edition: Oxford Paperback Threasurus rel.
(d) Words and phrases---
----"Process"---Connotation---Expression "process" has wide meaning going beyond mere manufacturing of goods as materials.
Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Oil and Gas Development Company Limited through Manager (Pricing) v. Federal Board of Revenue through Chairman and 2 others 2016 PTD 1675; Zaver Petroleum Corporation Limited through Director-General, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another 2016 PTD 2332; Dr. Raja Aamer Zaman v. Omer Ayub Khan Khan and others 2015 SCMR 1303; Mst. Rooh Afza v. Aurangzeb and others 2015 SCMR 92; Advanced Law Lexicon (3rd Edition); The Chambers Dictionary (10trh Edition); Concise Oxford Thesaurus (3rd Edition); Oxford Advanced Learner's Dictionary of Current English (7th Edition); Encyclopedia Law Dictionary along with Legal Maxims and Indian Edition: Oxford Paperback Threasurus rel.
(e) Income Tax Ordinance (XLIX of 2001)---
----Ss. 2(29C)(a)(i) to (iv), 133 & 148---Mobile Cellular Policy, 2004, clause 9---Reference---Question of fact---Advance income tax---Industrial undertaking---Determination---Applicant companies were providing cellular phone services and claimed to be "industrial undertakings"---Applicant companies were aggrieved of deduction of advance income tax by authorities under S.148(7) of Income Tax Ordinance, 2001---Validity---Telecommunication systems used by companies engaged in providing telecommunication services were covered under the definition of an "industrial undertaking"---Data processing through various machines, equipment and other modes was also to be covered within the meaning of 'subjection of goods and materials to any process'---Appellate Tribunal on factual side had to examine the process through which telecommunication operators render the services---If Appellate 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 treated as a question of law for the purposes of S.133 of Income Tax Ordinance, 2001---High Court set aside the order remanded the matter and directed the Appellate Tribunal to advert to factual aspects in each case---Reference was decided accordingly.
(f) Income Tax Ordinance (XLIX of 2001)---
----S.133---Reference---Question of fact---Effect---Decision or determination of Appellate Tribunal on question of fact attains finality, thereby making the Tribunal a final forum in such regard---Failure to advert to a question raised before Appellate Tribunal in itself is a question of law.
(g) Words and phrases---
----"Decide"---Meaning.
Black's Law Dictionary, Sixth Edition rel.
(h) Words and phrases---
----"Decision"---Explained.
Quoting Wilcox v. Sway 160 p.2d 154 rel.
Ali Sibtain Fazli, Malik Sardar Khan Awan for Applicant (in I.T.Rs. Nos.63 to 67 of 2015).
Saeed Ahmed Zaidi for Applicant (in I.T.Rs. Nos.73 to 79 of 2015).
Sardar Ahmed Jamal Sukhera for (in I.T.Rs. Nos.114 to 121 of 2016) Applicant.
Khalid Anwar and Iftikhar Ahmed Bashir for Respondents (in I.T.Rs. No.73 to 79 of 2015).
Saeed Ahmed Zaidi for Respondents (in all other references).
Date of hearing: 29th September, 2016.
JUDGMENT
ATHAR MINALLAH, J.---Through this consolidated judgment we shall decide the references listed in Annexure-A attached hereto. We have divided the References into three categories because the respective judgments rendered by the learned Appellate Tribunal Inland Revenue (hereinafter referred to as the 'Tribunal') are distinct. References listed under Category 'A' have been filed by the Department, while those under Categories 'B' and 'C' were filed by the telecommunication service operators (hereinafter referred to as the "Taxpayers"). The questions of law proposed for our consideration are common in all the References, which relate to the interpretation of subsection (7) of section 148 of the Income Tax Ordinance, 2001 (hereinafter referred to as the 'Ordinance of 2001') and clause (29C) of section 2 ibid.
2.The facts, in brief, are that the Taxpayers are, inter alia, enaged in rendering telecommunication services through telecommunication systems. The taxpayers are licensed to render such services by the Pakistan Telecommunication Authority pursuant to powers conferred under the Pakistan Telecommunication Authority (Re-organization) Act, 1996 (hereinafter referred to as the 'Act of 1996'). In order to render telecommunication services, the Taxpayers use various machines, equipment and materials. The expressions 'Telecommunication Services' and 'intelligence' are defined in clauses (g) and (v) of section 2 of the Act of 1996 respectively. The Federal Government approved the Mobile Cellular Policy and the same was circulated on 28-01-2004. Clause 9 of the policy provides that the telecom sector, including the mobile cellular operations, would be classified as an 'industry'. Likewise clause 10 envisages that appropriate changes in the legal and regulatory framework would ensue. Pursuant to the Cabinet's decision, a notification dated 20-04-2004 was published in the official gazette, declaring that the Federal Government had been pleased to classify the telecom sector, including cellular operations, as an 'industry'. The Ministry of Information and Technology, vide its recommendations dated 18-06-2014, advised the Federal Board of Revenue to issue a notification in order to give effect to the Cabinet's decision by treating the telecommunication industry, including mobile cellular operations, as 'Industrial undertaking' under section 2(29C) of the Ordinance of 2001. Earlier the Federal Board of Revenue, vide letter dated 01-04-2011, in response to a query raised on behalf of one of the taxpayers, had declared that a telecommunication company providing and rendering telecommunication services are not covered under the definition of 'industrial undertaking' in the context of section 2(29C) of the Ordinance of 2001. It is noted that the said clarification was in relation to the issuances of an exemption certificate under section 153 ibid. The Taxpayers admittedly use machinery and equipment forming part of the telecommunication system in order to render telecommunication services. The Taxpayers file their returns under section 120 of the Ordinance of 2001 for each financial year, and the same are treated as assessment orders. The Taxpayers, from time to time, import materials, plants, machinery and equipment, and pay advance income tax under section 148 of the Ordinance of 2001. Such income tax paid at the import stage is later adjusted by the Taxpayers in their respective returns. The adjustment was challenged by the respective Assessing Officers on the ground that the Taxpayers are not 'industrial undertakings' in the terms of the definition provided under subsection (7) of section 148 of the Ordinance of 2001 and were, therefore, not entitled to adjustment of the income tax paid at the import stage. It would be relevant to briefly refer to the facts in the case of each category.
Category 'A'
3.Show-cause notices were issued under section 221 of the Ordinance of 2001 by the Assessing Officer. The latter passed assessment orders for the respective tax years under section 122(1) of the Ordinance of 2001. The taxpayer, namely, M/s. C.M. Pak Ltd., filed appeals and the same were allowed by the Commissioner Inland Revenue (Appeals), Large Taxpayers' Unit, Islamabad (hereinafter referred to as the 'CR(A)') vide the appellate order dated 15-02-2012. The learned CIR(A) held that the notices issued under section 221 or 122 of the Ordinance of 2001 were ultra vires. Moreover, it was further held that the Taxpayer was entitled to adjust the income tax paid at the import stage since it was not a final tax in the case of the latter. The learned CIR(A), therefore, deleted the tax which had been declared as final tax and directed the Assessing Officer to treat the advance tax adjustable against tax liability due from the taxpayer under the normal tax regime. Appeals were filed before the learned Tribunal and the latter upheld the appellate order of the learned CIR(A) by dismissing the same. The department has filed the References under section 133 of the Ordinance of 2001 proposing the following question of law.---
"Whether in the facts and in the circumstances of the case, the Honourable ATIR was justified to hold that the tax collected at source under section 148 of the Income Tax Ordinance, 2001 is adjustable advance tax, whereas, the taxpayer being a service provider does not qualify to an "industrial undertaking" as provided in section 2(29C) of the Income Tax Ordinance, 2001, hence not entitled for the said adjustment?"
Category 'B'
4.The References have been filed by Messrs Telenor Pakistan (Pvt.) Ltd. Show-cause notices relating to different tax years were issued by the respective Assessing Officers under section 122(9) of the Ordinance of 2001 on the sole ground that the Federal Board of Revenue, vide letter dated 01-04-2011, had declared the telecommunication sector companies providing and rendering telecommunication services as not being covered under the definition of 'industrial undertaking' for the purposes of section 148(7) of the Ordinance of 2001. It was also alleged that taxable loss on account of disposal of fixed assets had been claimed and the same were in excess and, therefore, an explanation was sought. The Assessing Officer, vide the respective orders, decided against the Taxpayer and, therefore, the latter filed appeals before the CIR(A) but the same did not succeed. The learned CIR(A) dismissed the appeals on the sole ground that the letter dated 01-04-2011, issued by the Federal Board of Revenue, and the circulars, letters or orders of the latter are binding on the field officers. The learned CIR(A), therefore, dismissed the appeals and held that the advance income tax paid by the taxpayer at the import stage was final discharge of tax. The taxpayer preferred appeals and the same were dismissed by the learned Tribunal vide orders dated 05-06-2014 and 26-01-2015. The questions proposed in the References relate to the interpretation of section 148(7) read with section 2(29C) of the Ordinance of 2001.
Category 'C'
5.The References have been filed by M/s. Pakistan Telecom Mobile Limited. The Assessing Officer issued show-cause notices under section 122(9) of the Ordinance, 2001 on the sole ground that since the Federal Board of Revenue, vide letter dated 01-04-2011, had declared that the telecommunication companies are not covered under the definition of 'industrial undertaking', therefore, the Taxpayer was not entitled to adjustment of advance tax paid at the import stage. The show-cause notice were decided by the respective Assessing Officers against the Taxpayer and the latter preferred appeals before the learned CIR(A). The learned CIR(A), vide appellate orders, disposed of the appeals on the sole ground that the Taxpayer was not an 'industrial undertaking' since it had not been successful in having itself declared as such despite making several attempts. It was, therefore, held that the taxpayer was a service company and did not fall within the definition of an industrial undertaking. The taxpayer filed an appeal before the learned Tribunal. A larger Bench of the learned Tribunal was constituted since various Benches of the Tribunal had passed conflicting judgments. The learned Tribunal dismissed the appeals vide consolidated judgment dated 03-08-2016. The Bench drew a distinction between the provisions of section 2(29C) as they existed before and after the amendment made through the Finance Act, 2010. After discussing the phrase 'which is engaged in' in great detail, it was concluded that in order to be treated as an 'industrial undertaking' the entity claiming exemption under section 148(7) had to be simultaneously engaged in all the trades mentioned in sub-clauses (i) to (iv) of clause (a) of section 2(29C). The questions proposed for our consideration relate to the interpretation of sections 148(7) and 2(29C) of the Ordinance of 2001.
6.The learned counsels for the petitioners have argued that; the question proposed by the Department does not arise out of the impugned order passed by the learned Tribunal; the learned Tribunal had not discussed the definition of 'industrial undertaking' provided under section 2(29C) of the Ordinance of 2001; the goods imported by the taxpayer in the instant References are not sold in the market to generate income; the goods imported are used by the taxpayers for the purposes of subjecting material to various processes; reliance is placed on the case of 'Elahi Cotton Mills Ltd. v. Federation of Pakistan' [PLD 1997 SC 582] in support of the contention that a presumptive tax can only be imposed on items when it is regarded as citizens' income; if no income is being derived from the imports, there can be no question of final tax and any advance payment shall always remain adjustable; in the instant case no income is generated from the sale of the imported goods and there is no question of section 148(7) being applicable and the tax paid under subsection (1) being final; the goods imported by the assessee are exclusively for self use in the course of business and not resale, and hence tax will be separately charged on the income which is generated by the use of the machine; it is settled law that what cannot in any rational sense be regarded as income cannot conceivably be taxed as income; the position adopted by the department is perverse; the quantum of presumptive income can only be fixed on the basis that the importer is going to earn direct income from the imports; the presumptive tax i.e. final tax regime was introduced purely to capture the untaxed income of commercial importers who were in the business of reselling imported goods; the orders passed by the respective Assessing Officers were passed in violation of the principles of natural justice; proper opportunity was not provided to the taxpayers despite the fact that the proposed action was very severe; the power of rectification was of a limited scope and, therefore, the deemed assessment could not have been amended by invoking the said provisions; the learned Assessing Officers have misinterpreted the expression 'industrial undertaking'; the telecommunication services' and 'telecommunication system' are terms defined under the Act of 1996; a plain reading of the said definitions clearly shows that the cellular operators i.e. the taxpayers in the instant References are engaged in the activities described in section 2(29C) of the Ordinance of 2001.
7.On the other hand, the learned counsels appearing for the Department have argued that; the Federal Board of Revenue, vide letter dated 01-04-2011, has unambiguously declared that the telecommuni-cation sector companies providing/rendering telecommunication services to their clients are not covered under the definition of 'industrial undertaking'; the said letter was not challenged by the taxpayers in the instant Tax References; the larger Bench of the learned Tribunal has correctly interpreted the provisions of section 148(7) read with section 2(29C) of the Ordinance of 2001; the tax paid by the taxpayer at the import stage was a final tax under section 148(7) of the Ordinance of 2001 and the same was not adjustable; the Taxpayers had failed to discharge the onus that they are covered under the expression 'industrial undertaking'.
8.the learned counsels have been heard and the record perused with their able assistance.
9.In all the Tax References the questions of law proposed for our consideration relate to the interpretation of sections 148(7) and section 2(29C) of the Ordinance of 2001. The learned counsel have advanced arguments to this extent only since no other question has been pressed. The questions of law which arise from the judgments rendered by the learned Tribunal are as follows:--
(a)Whether the letter dated 01-04-2011, issued by the Federal Board of Revenue, declaring the entities engaged in providing telecommunication services as not covered under the definition of section 2(29C) is final and binding on the adjudicating forums, and
(b)When does a taxpayer become entitled to adjustment of advance tax paid under section 148 of the Ordinance of 2001.
(c)Whether the adjudication forums in the case of the instant References have adverted to the relevant factual considerations in the context of section 148 read with section 2(29C).
10.In order to answer the above questions it would be beneficial to reproduce the relevant provisions of the Ordinance4 of 2001.
148 Import.---
(7) The tax [required to be] collected under this section shall be a final tax [except as provided under subsection (8)] on the income of the importer arising from the imports subject to subsection (1) and this subsection shall not apply in the case of import of---
(a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use;
11.The expression 'industrial undertaking' has been defined in clause (29C) of section 2 of the Ordinance, 2001, the said provision was amended through the Finance Act, 2010. The provisions before the amendment were as follows:---
[(29C) "Industrial undertaking" means---
(a) an undertaking which is set up in Pakistan and which employs, (i) ten or more persons in Pakistan and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; or (ii) twenty or more persons in Pakistan and does not involve the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy and which is engaged in,---
(i) the manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition;
(ii) ship-building
(iii) generation, conversion, transmission or distribution of electrical energy, or the supply of hydraulic powers, or
(iv) the working of any mine, oil-well or any other source of mineral deposits; and
any other industrial undertaking which the [Board] may by notification in the official Gazette, specify;]
After the amendment the provisions that stand enforced today are as follows:--
[(29C) "Industrial undertaking" means---
(a) an undertaking which is set up in Pakistan and which employs;
(i) ten or more persons in Pakistan and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; or
(ii) twenty or more persons in Pakistan and does not involve the of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy;
and which is engaged in,---
(i) the manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition;
(ii) ship-building; or
(iii) generation, conversion, transmission or distribution of electrical energy, or the supply of hydraulic powers; or
(iv) the working of any mine, oil-well or any other source of mineral deposits; and
any other industrial undertaking which the Board may by notification in the official Gazette, specify.]
12.Subsection (1) of section 148 empowers the Collector of Customs to collect advance tax from every importer of goods on the value thereof at the rate specified in Part-II of the First Schedule. Admittedly, the advance tax in collected from and paid by the Taxpayers against all the imports made, as envisaged under section 148. Subsection (7) of section 148 declares that the advance tax collected at the import stage is a final tax. However, the legislature, in its wisdom, has carved out certain exceptions which are described in subsection (7). The exceptions, inter alia cover raw material, plants, machinery, equipment, equipment and parts imported by an 'industrial undertaking' for its own use. In case an entity is able to establish that it meets the conditions specified in section 148(7), read with the definition of an 'industrial undertaking' provided under section 2(29C), then it becomes entitled to claim adjustment since the tax paid under section 148 would not be treated as final tax.
13.The provisions of section 2(29C) relating to the definition of 'industrial undertaking', before and after the amendments made through the Finance Act, 2010, have been reproduced above. A plain reading of the provisions as they existed prior to the amendment shows that various conditions had to be fulfilled in order to be treated as an 'industrial undertaking' for the purposes of subsection (7) of section 148. Sub-clauses (i) to (vi) listed after the expression 'which is engaged in' are distinct and separate. The larger Bench of the learned Tribunal has interpreted the said provision in such a manner which leads to an anomalous situation i.e. reading clauses (i) to (iv) together with the expression 'engaged in' rather than treating them as distinct alternatives. The learned larger Bench of the Tribunal, based on this interpretation, reached the conclusion that in order to be treated as an 'industrial undertaking' an entity had to show that it was simultaneously engaged in all the four different and distinct categories. If this interpretation of the larger Bench of the learned Tribunal is accepted then in order to qualify as an industrial undertaking, an entity would have to show that it is engaged in and covered under all the four clauses i.e. (i) to (iv). The larger Bench of the learned Tribunal has not interpreted the clauses as being independent of each other, which has the effect of making it virtually impossible for any undertaking to be treated as an 'industrial undertaking'. It, therefore, givens rise to an absurdity which obviously cannot be attributed to the legislature. Moreover, this interpretation also renders clause (i) as redundant and it is settled law that redundancy can also not be attributed to the legislature. Reference in this regard may be made to "Oil and Gas Development Company Limited through Manager (Pricing) v. Federal Board of Revenue through Chairman and 2 others [2016 PTD 1675] "Zaver Petroleum Corporation Limited through Director-General, Islamabad v. Federal Board of Revenue through Chairman FBR, Islamabad and another" [2016 PTD 2332], "Dr. Raja Aamer Zaman v. Omer Ayub Khan and others" [2015 SCMR 1303] and "Mst. Rooh Afza v. Aurangzeb and others" [2015 SCMR 92].
14.Clauses (i) to (iv) refer to the nature of the trade or business in which an undertaking must be engaged in order to be covered under the definition of an 'industrial undertaking'. Clause (i) is general in nature and the language has wide meanings so as to cover a large number of undertakings. Clauses (ii) to (iv) are in relation to specific reference to a particular trade or business and definitely fall under clause (i) as well, because it either involves manufacturing of goods or materials or subjecting goods or materials to a process which substantially changes their original condition. Besides the four categories expressly mentioned in clauses (i) to (iv) the Board is also vested with the power to declare an entity as an 'industrial undertaking' through a notification published in the official gazette. In order to avoid redundancy and an interpretation leading to an absurd interpretation, every word and expression has to be given meaning. It is a settled principle of interpretation of a statute, that the provisions must be given its true meaning by construing them together in a harmonious manner. By applying these principles no other conclusion can be drawn except to hold that clauses (i) to (iv), specified in the context of the engagement of an undertaking, are independent of each other. An undertaking which is not engaged in one of the trades and businesses described in clauses (ii) to (iv) would be treated as an 'industrial undertaking' if it satisfies the tests provided in clause (i). The subsequent amendment made in section 2(29C) through the Finance Act, 2010 obviously did not bring about any material change except rearranging the provisions merely to improve its drafting. The legislative intent, however, remained the same i.e. to construe clauses (i) to (iv) as distinct and independent of each other. The larger Bench, therefore, had misconstrued the provisions of section 2(29C).
15.It is, therefore, noted that the legislative intent before or after the amendment made in section 2(29C) through the Finance Act, 2010, remained the same. According to the combined reading of section 148(7)(a) and section 2(29C), the tax collected under section 148 is not a final tax and an importer is entitled to adjustment thereof provided the following conditions are met:
(i)An industrial undertaking defined under section 2(29C) has imported raw material, plant, machinery or equipment for its own use.
(ii)An undertaking shall be treated as an "industrial undertaking" under section 2(29C) if;
(a)It is set up in Pakistan;
(b)Employs a minimum number of persons specified in sub-clauses (i) and (ii) of clause (a) section 2(29C), as the case may be depending on the type of energy it uses;
(c)It is engaged in one of the trade of businesses specified in clauses (i) to (iv) or has been notified as an undertaking for the purposes of section 2(29C) by the Federal Board of Revenue through a notification published in the official gazette.
16.It is crucial in the context of the facts and circumstances involved in the instant References before us to further examine clause (i) which follows the expression "and which is engaged in,-". A plain reading of clause (i) shows that it has two distinct parts, firstly, manufacture of goods and materials and, secondly, subjection of goods or materials to any process which substantially changes their original condition. In its wisdom the legislature has used language which clearly draws a distinction between these two parts and inevitably have to be read disjunctively. This distinction is crucial for discerning the legislative intent. Though, prima facia, they appear to be similar but the language of the latter part has a much wider meaning and extends to eventualities beyond the conventional manufacturing of goods and materials. These two phrases cannot be treated as having the same meaning and covering similar situations, otherwise one would be rendered redundant or superfluous. As already noted, redundancy cannot be imputed to the legislature. The phrase 'engaged in subjection of goods or materials to any process which substantially changes their original conditions' is, therefore, to be interpreted by distinguishing it from 'manufacture of goods or materials'. In order to give true meaning to the provisions and by construing the two parts together harmoniously, it would be safe to conclude that the legislature has intended to cover a wider range of eventualities and not merely manufacturing of goods and materials by using the conventional methods. The legislature appears to have been conscious of the revolutionary developments achieved in the realm of technology which are beyond the conventional methods of manufacturing of goods and materials. It is also significant to note that two distinct expressions have been used i.e. 'goods' and 'materials'. Both these expressions have not been defined in the Ordinance of 2001 and, therefore, it would be relevant to refer to the dictionary meanings of the expressions 'material' and 'process':
Advanced Law Lexicon (3rd Edition):
Material:------------------------------------------------------------------
As a noun, the substance or matter of which anything is made (Webster Dict.); everything of which anything is made (Bouvier L. Dict.); any article employed in the erection and completion of buildings; something that goes into and forms part of the finished structure. Relating to or consisting of matter corporeal; not spiritual; physical; substantial as opposed to formal. (Johnson Dict.).
The Chambers Dictionary (10th Edition):
Material: Adj relating to matter; consisting of matter; being the substance of the thing (Shakesp); pithy, matterful (Shakesp); corporeal, not spiritual; bodily; physical; gross, lacking spirituality; relating to subject matter; relevant; of serious importance, esp of legal importance; relating to matter as opposed to form (philos). *n that out of which anything is or may be made; a fabric; that which may be made use of for any purpose; a person who is suitable for a specified occupation, training, etc; (in pl) equipment, implements, etc. needed for a task or activity. [L materials, from material matter].
Process: /pro'ses or (esp N Am) pros', also (Milton) pro-ses'/ n a state of being in progress or being carried on; course; a narrative (Shakesp); a series of actions or events; a sequence of operations or changes undergone; a photo-process (printing); a writ by which a person or matter is brought into court (law); an action, suit, or the proceedings in it as a whole; progression; proceeding; an edict (shakesp); a projection or projecting part, esp on a bone (boil, anat). *vt to serve a summons on; to sue or prosecute; to subject to a special process; to produce or print photomechanically; to prepare (eg agricultural produce) for marketing by some special process, eg canning or bottling; to arrange(documents, etc.) systematically; to examine and analyse: to test the suitability of (a person) for some purpose; (of a computer) to perform operations of adding, subtracting, etc., or other operations on (data supplied); to subject (data) to such operations. [Fr process, from L Processus, -us advancer; of proceed].
Concise Oxford Thesaurus (3rd Edition):
Material: noun 1 the decomposition of organic material; matter, substance, stuff, medium. 2 the materials for a new building: constituent, raw material, element, component. 3 cleaning materials; things, items, articles, stuff, necessaries; Brit. Informal gubbins. 4 curtain material; fabric, cloth, textiles, 5 material for a magazine article; information, data, facts, facts and figures, statistics, evidence, details, particulars, background, notes; info, gen, dope, low-down.
Process: noun 1 investigation is a long process; procedure, operation, action, activity, exercise, affair, business, job, task, undertaking. 2 a new canning process; method, system, technique, means, practice, way, approach, methodology.
* verb applications are processed rapidly: deal with, attend to, see to, sort out, handle, take care of, action.
*in the process of in the middle of, in the course of, in the midst of, in the throes of, busy with, occupied in/with, taken up with/ by, involved in.
Oxford Advanced Learner's Dictionary of Current English (7th Edition):
Material: noun 1 [U, C] cloth used for making clothes, curtains, etc. SYN Fabric: a piece of material  'What material is this dress made of ?' 'Cotton.'-picture  KNITTING--note on next page 2 [C,U] a substance that things can be made from; building materials (=bricks, sand, glass, etc.)-see also RW MATERIALS 3 [C, usually pl., U] things that are needed in order to do a particular activity: teaching materials  the company produces its own training material  (figurative). The teacher saw her as good university material (=good enough to go to University) note at EQUIPMENT 4 [U] information or ideas used in books, etc.: She's collecting material for her latest novel. 5 [U] items used in a performance: The band played all new material at the gig.
Process: noun 1 a series of things that are done in order to achieve a particular result: a consultation process  to begin the difficult process of reforming the education system  I'm afraid getting things changed will be a slow process.  mental process  Coming off the drug was a long and painful (=difficult) process for him,  Find which food you are allergic to by a process of elimination.  We're in the process of selling our house.  I was moving some furniture and I twisted my ankle in the process (=while I was doing it). See also PEACE PROCESS 2 a series of things that happen, especially ones that result in natural changes: the ageing process  It's a normal part of the learning process. 3 a method of doing or making especially one that is used in industry: manufacturing process.
* verb [VN] 1 to treat raw material, food, etc. In order to change it, preserve it, etc.: Most of the food we buy is processed in some way,  processed cheese  I sent three rolls of film away to be processed.  a sewage processing plant 2 to deal officially with a document, request, etc.: It will take a week for your application to be processed. 3 (computing) to perform a series of operations on data in a computer * processing noun [U]: the food processing industry- see also DATA PROCESSING, WORD PROCESSING.
Encyclopedia Law Dictionary along with Legal Maxims:
Material: Of such consequences, importance or significance as to be likely to influence to determination of a cause; to alter the character of an instrument, etc.; of or consisting of maters [S. 11(3)(b), industrial Disputes Act (14 of 1947)]; the matter from which anything is made [Ss.475 and 476, IPC(45 of 1860)]; that out of which anything is or may be made [S. 2(1)(b)(iii), Arms Act (54 of 1959)].
Process: A word which may be applied either to methods of action such as legal proceedings, or the treatment of substance in transforming and reducing it to a different state and the means of such treatment.
Indian Edition:
Oxford Paperback Theasurus:
Material: noun 1 the decomposition of organic material: matter, substance, stuff, medium. 2 the materials for a new building: constituent, raw material, element, component. 3 cleaning materials: things, items, articles, stuff, necessaries; Brit. Informal gubbins. 4 curtain material: fabric, cloth, textiles 5 they were gathering material for a magazine article: information, data, facts, fact and figures, statistics, evidence, details, particulars, background notes, informal info, gen, dope, low-down.
Process: noun 1 investigation is a long process: procedure, operation, action, activity, exercise, affair, business, job, task, undertaking. 2 a new canning process: method, system technique, means, practice, way, approach, methodology. Verb applications are processed rapidly: Deal with, attend to, see to sort out, handle, take care of, action.
17.It is, therefore, obvious from the above that the expression 'materials', inter alia, also refers to information and data, likewise the expression 'process' has wide meanings going beyond the mere manufacturing of goods as materials. There appears to be force in the argument advanced by the learned counsel for the Taxpayers that the telecommunication systems used by the companies engaged in providing telecommunication services are covered under the definition of an 'industrial undertaking'. Data processing through various machines, equipments and other modes would also be covered within the meaning of 'subjection of goods and materials to any process'. It was, therefore, essential on the factual side that the learned Tribunal ought to have examined the process through which the telecommunication operators render the services. The Telecommunication System involves machines, equipments and material for enabling the service providers to achieve various results. However, this factual aspect has not been considered or adverted to be any forum in all these Tax References. There is also force in the argument that telecommunication services involving telecommunication systems are globally treated as an industry. The Mobile Cellular Policy of 2001 notified by the Federal Government explicitly provides that the telecom sector, including mobile cellular operators, were to be classified as an industry. The Federal Government, vide notification dated 20-04-2014, pursuant to the said policy has declared and classified the cellular operators as an 'industry'. These aspects were crucial for consideration but none of the forums have been taken them into consideration. The taxpayers have been declared as not being covered under section 2(29C) without undertaking an enquiry on the factual side and thus rendering the findings in this regard as perfunctory and perverse.
18.It is noted that all the forums i.e. the Assessing Officers, CIR(A) and the learned Tribunal in the cases listed in Category 'B' and 'C' have solely relied on the letter dated 01-04-2011 issued by the Federal Board of Revenue. Perusal of the letter dated 01-04-2011 shows that it was in response to a query raised by a firm of Chartered Accountants and was addressed to the latter. The letter clearly shows that the Federal Board of Revenue had formed an opinion on the basis of an assumption that the telecommunication companies were merely providing services. No inquiry had been undertaken by the Federal Board of Revenue for the purposes of ascertaining whether the providers of telecommunication services use and process wherein goods or materials are substantially changed from their original condition. The learned Tribunal as well as the learned CIR(A) were not justified in holding that the said letter or circular/orders issued/passed by the Federal Board of Revenue are binding on the quasi judicial forums. The status and role of the Federal Board of Revenue formerly known as the Central Board of Revenue, in the context of the provisions relating to adjudication and the hierarchy of appellate forums under the Income Tax Ordinance, 1979 was examined by the august Supreme Court in the judgment rendered in "Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others" [1993 SCMR 1232] and the relevant portion is reproduced as follows:---
"It is evident from the above provisions that though the Central Board of Revenue has administrative control over the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue, on a statutory provision cannot be treated as a pronouncement by a forum competent to adjudicate upon such a question judicially or quasi-judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which may interfere with the judicial or quasi-judicial functions entrusted to the various functionaries under a statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to the administrative matters. The interpretation of any provision of the Ordinance can be rendered judicially by the hierarchy of the forums provided for under the above provisions of the Ordinance, namely, the Income Tax Officer, Appellate Assistant Commissioner, Appellate Tribunal, the High Court and this Court and not by the Central Board of Revenue. In this view of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the Circular, can be treated as administrative interpretation and not judicial interpretation."
19.The scheme of the Ordinance of 2001 in the context of the role of the Central Board of Revenue, in relation to adjudication and hierarchy of the appellate forums is similar, as was the case under the Income Tax Ordinance, 1979. The above principles enunciated by the august Supreme Court, therefore, are relevant and attracted in the instant case. It is, therefore, obvious that in so far as quasi judicial functions are concerned the opinion, instructions of orders of the Federal Board of Revenue are not binding. On the administrative side, the Federal Board of Revenue would indeed be the final authority but that is not the case in matters relating to quasi judicial adjudication. The letter, dated 01-04-2011, therefore, was not binding on the Assessing Officers nor the appellate authorities since the functions performed by them are quasi judicial in nature.
20.the learned CIR(A) and the learned Tribunal, in their respective orders passed in the cases listed in Category 'A', also did not advert to the factual aspects of the cases before them. In all these cases it was crucial to have adverted to the factual aspects, such as the nature of goods which had been imported by the Taxpayers, whether they were raw material, plant, machinery or parts and if so whether they had been imported for the Taxpayers' own use. The nature of the processes essentially required a detailed inquiry in order to ascertain whether there is 'subjection of goods or materials to any process which substantially changes their original condition'. The learned Tribunal also did not consider whether the show-cause notices issued in all the cases met the threshold of section 122 of the Ordinance of 2001.
21.For the above reasons we hold that the letter, dated 01-04-2011, was not binding on the forums exercising quasi judicial functions. The learned Assessing Officers, CIR(A) and the Tribunal were under a statutory obligation to advert to the relevant factual aspects i.e. the nature of goods imported by the Taxpayers and the processes involved in providing telecommunication services for the purposes of making a determination whether the Taxpayers are covered under the definition of 'industrial undertaking'. Without having adverted to all these factual aspects the findings given by all the forums in the cases before us are definitely arbitrary, perverse and fanciful. A taxpayer indeed cannot be burdened in such a perfunctory manner. The learned Tribunal also did not advert to the fundamental question in all these cases i.e. whether the show-cause notices met the minimum threshold contemplated under section 122 of the Ordinance of 2001.
22.The learned Tribunal is indeed the final forum for determination of questions of fact. 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.
23.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. "The '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.
24.We, therefore, remand the cases to the learned Tribunal. The latter shall advert to the factual aspects in each case separately, having regard to the principles and observations highlighted above. We expect that the learned Tribunal shall afford a reasonable opportunity to the parties and thereafter decide the appeals which shall be deemed to be pending.
25.A copy of this order shall be sent to the learned Tribunal under the seal of this Court as required under section 133 of the Ordinance of 2001.
ANNEXURE - A OF FIR NO.63/20015
(Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others
Category 'A'
1. ITR No.73/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 2. ITR No.74/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 3. ITR No.75/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 4. ITR No.76/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 5. ITR No.73/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 6. ITR No.73/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited, 7. ITR No.73/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited and 8. ITR No.82/2015 Commissioner Inland Revenue, LTU v. Messrs CM Pak Limited.
Category 'B'
1. ITR No.63/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others, 2. ITR No.64/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others, 3. ITR No.65/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others, 4. ITR No.66/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others, 5. ITR No.67/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others and 6. ITR No.90/2015 Messrs Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue and 3 others.
Category 'C'
1. ITR No.115/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 2. ITR No.116/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 3. ITR No.117/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 4. ITR No.118/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 5. ITR No.119/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 6. ITR No.120/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others, 7. ITR No.114/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others and 8. ITR No.121/2016 Pak Telecom Mobile Limited v. Commissioner Inland Revenue, LTU and 2 others.
MH/7/Isl. Case remanded.