GHEE CORPORATION PAKISTAN (PVT.) LTD. LAHORE VS DCIT, OFFICER, LAHORE, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 1824 (2015)

Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 80-D, 88, 54 & 136---Reference to High Court -- Minimum tax on income of certain persons---Charge of additional tax for failure to pay tax with the return---Payment of tax with return of income---Question before the High Court was whether tax under S. 88 of the Income Tax Ordinance, 1979 could be charged after levying of minimum tax under S. 80-D of the Income Tax Ordinance, 1979 upon the taxpayer---Validity---Per S. 80-D(1) of the Income Tax Ordinance, 1979, key words were "tax payable or paid" and payable tax was arrived at after an assessment and in case the declared version of the taxpayer was accepted, the tax to be paid after claimed deduction/ allowances was tax payable---Perusal of S. 80-D of the Income Tax Ordinance, 1979 showed that it was meant for charging a minimum tax where due to certain allowance the tax payable dropped from 0.5%---High Court observed that if additional tax and penalty were held not chargeable after charging of tax under S. 80-D of Income Tax Ordinance, 1979, then the same would lead to an absurd interpretation as the taxpayer would take benefit of its own omission to pay tax---Appellate Tribunal was therefore justified in upholding that tax under S. 88 of the Income Tax Ordinance, 1979 could be charged after levying of minimum tax under S. 80-D of the Income Tax Ordinance, 1979---Reference was answered, accordingly.

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 rel.

Waheed Shehzad Butt for Applicant.

Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU, Lahore for Respondent.

ORDER

Number of questions are referred for our opinion in this Tax Reference, by the learned Appellate Tribunal on the instance of assessee.

2.Learned counsel for the applicant assessee submits, that tax under Section 88 of the Repealed Income Tax Ordinance, 1979 ("Repealed Ordinance"), was charged after levy of minimum tax under section 80-D of Repealed Ordinance.

3.His argument before the learned Appellate Tribunal as well as before us is that after charging minimum tax under Section 80-D of the Repealed Ordinance, no other tax including additional tax could be charged. It is an admitted position that the tax required to be paid under section 54, along with return was not deposited, which resulted into charging of additional tax under section 88. Learned counsel has laid stress on the word "notwithstanding" used in subsection (1) of section 80-D. He has also referred the definition of Tax under section 2(43).

4.These arguments are opposed by Dr. Ishtiaq Ahmad Khan, Additional Commissioner Inland Revenue, LTU, Lahore. It is argued that such an interpretation is absurd and it would lead to many anomalies. Explains; if this interpretation is adopted, no penalty for default or non-payment of tax would be chargeable. Subsection (1) of section 80-D is reproduced here under:--

"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]."

5.Examination of Subsection (1) of Section 80-D shows that the key words used are "tax payable or paid". The payable tax arrived at after an assessment. In case the declared version of tax-payer is accepted the tax to be paid after claimed deduction/allowance is tax payable. In our opinion reference to Section 2(43) by learned counsel for applicant is not relevant because the word "Tax" alone is not required to be interpreted for proposition under discussion. Even otherwise, perusal of Section 80-D shows, that it was meant for charging a minimum tax where due to certain allowance the tax payable used to drop from 0.5%. The concept and philosophy of Section 80-D has elaborately been discussed in the Judgment of Hon'ble Supreme Court of Pakistan i.e. 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), which needs no addition.

6.We agreed with the submissions made by respondent side that such absurd interpretation would lead to much confusion. The tax-payer would take benefit of its own omission to pay tax, if additional tax and penalty are held not chargeable after charging Section 80-D.

7.The question as framed is not reflecting the legal proposition accurately. The proposed proposition is therefore resettled hereunder.

"Whether under the facts and circumstances of this case, Appellate Tribunal was justified to uphold charging of tax under section 88 after levying of minimum tax under section 80-D of the Repealed Income Tax Ordinance, 1979?"

Our answer to the resettled question is in affirmative i.e. against the applicant assessee.

Reference Application is decided against the applicant assessee.

8.Office shall send a copy of this order under seal of the court to the Appellate Tribunal Inland Revenue as per section 136(6) of the Repealed Income Tax Ordinance, 1979.

KMZ/G-7/L Order accordingly.