Sardar QASIM HASSAN KHAN VS FEDERATION OF PAKISTAN, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 2064 (2017)

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

----Ss. 231-B, 234 & 148---Import of motor vehicles---Advance tax on private motor vehicles---Petitioners/taxpayers impugned demand of advance tax under S. 231-B of the Income Tax Ordinance, 2001 at the time of their application for registration of imported vehicles---Contention of the petitioners, inter alia, was that the tax under S. 148 of the Income Tax Ordinance, 2001 had already been paid at the time of import of the said vehicles, therefore no advance tax was recoverable from the petitioners at the time of registration / transfer of ownership of said vehicles---Validity---Under S. 231-B(4) of the Income Tax Ordinance, 2001 every manufacturer of vehicles shall collect advance tax at the time of sale of vehicles and S. 231-B(4) of the Act provided an exception that the said tax shall not apply if a person produced evidence that tax under S. 231-B(3) in case of a locally manufactured vehicle or tax under S. 148 of the Income Tax Ordinance, 2001, was collected from the same person in respect of same vehicle---Words "person produces evidence" and "same person in respect of same vehicle" used in S. 231-B(4) of the Income Tax Ordinance, 2001 left no doubt that S. 231-B(1) of the Income Tax Ordinance, 2001 would not apply, only if registration of vehicle S. 231-B(1) of the Income Tax Ordinance, 2001 was sought in the name of same person who already paid advance tax under S. 231-B or 148 of the Income Tax Ordinance, 2001 at the time of import in respect of same vehicle---For registration of vehicle in name of a person who was not an importer and had not paid tax under S. 148 of the Income Tax Ordinance, 2001 the benefit of exception S. 231-B(4) Income Tax Ordinance, 2001 would not apply and subsequent purchaser shall be liable to pay advance tax under said section---Petitioners, in the present case, were subsequent purchasers of said vehicles and had not themselves paid tax under S. 148 of the Income Tax Ordinance, 2001 at the time of import and therefore demand of tax under S. 231-B of the Income Tax Ordinance, 2001 was not illegal---Constitutional petitions, were dismissed, in circumstances.

(b) Interpretation of statutes---

----Interpretation of taxing/taxation statutes---Resolution of ambiguities---Scope---In case of any ambiguity or two possible interpretations, the one that favours the taxation authorities had to be adopted.

Islamabad and another v. Wapda and another PLD 2014 SC 766; Messrs Army Welfare Sugar Mills Limited and others v. Federation of Pakistan and others 1992 SCMR 1652; Collector of Customs and others v. Ravi Spinning Ltd and others 1999 PTD 1078 and Ahmad Ali Anjum v. Deputy Commissioner, Faisalabad 1998 SCMR 1950 rel.

Ikram Ullah Malik for Petitioners.

Mian Muhammad Javaid, A.A.G. and Khalid Waheed Khan, A.A.G. for Respondent.

Zafar Iqbal Advisor for Respondent.

Date of hearing: 4th April, 2017.

JUDGMENT

ABID AZIZ SHEIKH, J.---This judgment will also decide Writ Petitions Nos.6078, 9319, 12726, 15422 and 27757 of 2015 as common questions of law and facts are raised in all these petitions.

2.Through these constitutional petitions, the petitioners have challenged the demand of advance tax/withholding tax on the registration of their motor vehicles under section 231-B of the Income Tax Ordinance, 2001 ("Ordinance"). The facts common in all these petitions are that petitioners purchased imported motor vehicles from various importers after verification of import documents. The petitioners applied for the registration of these vehicles in their name to the Excise and Taxation Department ("Department"). The department beside registration charges also demanded advance tax/withholding tax from the petitioner under section 231-B of the Ordinance. The petitioners being aggrieved filed these constitutional petitions.

3.Learned counsel for the petitioners argued that vehicles in question were imported by various importers who paid tax under section 148 of the Ordinance at the time of import, therefore, no advance tax/withholding tax was recoverable from the petitioners at the time of registration or transfer of ownership in their name under subsection (4) of section 231-B of the Ordinance. Further submits that petitioners provided proof of advance tax to the respondents but they have illegally refused to register the vehicles and demanded advance tax/withholding tax which has already been paid at the time of import.

4.Learned counsel for the respondents submit that Motor Registering Authority has lawfully demanded advance/withholding tax from the petitioners in accordance with section 234 read with section 231-B of the Ordinance as per rate introduced through Finance Act, 2014.

5.I have heard learned counsel for the parties and perused the record. The main arguments of the petitioners are that as they purchased the vehicles from different importers who had already paid tax under section 148 of the Ordinance, therefore petitioners are not liable to pay advance/withholding tax under section 231-B of the Ordinance. To examine this argument, it is necessary to go through the provision of section 231-B of the Ordinance which is reproduced as under:--

[231B. Advance tax on private motor vehicles.---(1) Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of registration of a motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule

(2)Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of transfer of registration or ownership of a private motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule:

Provided that no collection of advance tax under this subsection shall be made on transfer of vehicle after five year from the date of first registration in Pakistan.

(3)Every manufacturer of a motor car or jeep shall collect, at the time of sale of a motor [vehicle], advance tax at the rate specified in Division VII of Part IV of the First Schedule from the person to whom such sale is made.

(4)Subsection (1) shall not apply if a person produces evidence that tax under subsection (3) in case of a locally manufactured vehicle or tax under section 148 in the case of imported vehicle was collected from the same person in respect of the same vehicle.

(5)The advance tax collected under this section shall be adjustable:

Provided that the provisions of this section shall not be applicable in the case of-

.

.

(d) in all other cases the date of first registration by the Excise and Taxation Department.

(7) For the purpose of this section, "motor vehicle" includes car, jeep, van, sports utility vehicle, pick-up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.]

(underlining by me to add emphasis)

Plain reading of section 231-B shows that under subsection (1), every Motor Vehicle Registering Authority of Excise and Taxation Department shall collect advance tax at the time of registration of motor vehicle at the rates specified in Division VII of Part IV of the First Schedule. Under subsection (2) of section 231-B of the Ordinance, advance tax shall be collected at the time of transfer of registration or ownership of a private vehicle, if such transfer is before five years from the date of first registration in Pakistan. Under subsection (3) of section 231-B of the Ordinance, every manufacturer of motor car or jeep shall collect advance tax at the time of sale of vehicle. However, subsection (4) of section 231-B provides an exception that subsection (1) shall not apply if a person produces evidence that tax under subsection (3) in case of a local manufactured vehicle or tax under section 148 of the Ordinance in case of imported vehicle, was collected from the same person in respect of same vehicle. The words "person produces evidence" and the words "same person in respect of same vehicle" used in subsection (4) of section 231-B leaves no doubt that subsection (1) of section 231-B shall not apply, only if registration of vehicle under subsection (1) is sought in the name of same person who already paid advance tax under sub-section (3) of section 231-B or paid tax under section 148 of the Ordinance at the time of import in respect of same vehicle. In converse this means that at time of initial registration of vehicle under sub-section (1) of section 231-B in name of a person who is not an importer and has not paid tax under section 148 of the Ordinance, the benefit of exception under subsection (4) of section 231-B will not apply and said subsequent purchaser shall be liable to pay advance tax under subsection (1) of section 231-B. Further subsection (2) of section 231-B postulates that if initial registration under subsection (1) was made in favour of the importer who already availed benefit of subsection (4) of section 231-B, the subsequent purchaser when apply for transfer of registration or ownership, he will still be liable to pay advance tax, if said transfer is within five years from the date of first registration in Pakistan. The exception provided under subsection (4) of section 231-B being in form of exemption, the said provision has to be construed very strictly against the assertion of tax payer and in favour of the taxing power. Further in case of any ambiguity or two possible interpretations, the one favours the taxation authorities has to be adopted. In this contest reliance is placed on Islamabad and another v. Wapda and another (PLD 2014 SC 766), Messrs Army Welfare Sugar Mills Limited and others v. Federation of Pakistan and others (1992 SCMR 1652), (Collector of Customs and others v. Ravi Spinning Ltd and others (1999 PTD 1078) and Ahmad Ali Anjum v. Deputy Commissioner, Faisalabad (1998 SCMR 1950).

6.The above plain language of section 231-B and its interpretation when applied to these petitions, it is found that none of the petitioners are original importers or have paid advance tax under subsection (3) of section 231-B of the Ordinance or paid tax under section 148 of the Ordinance. The petitioners are subsequent purchasers of vehicles imported by various importers and have applied either for its initial registration under subsection (1) or transfer of registration in their name under subsection (2) of section 231-B of the Ordinance. As already discussed above, the exception in subsection (4) of section 231-B of the Ordinance is only available to same person who already paid tax and seeking registration in his own name, for same vehicle and not applicable to the subsequent purchaser. Therefore, petitioners' cases are not covered under subsection (4) of section 231-B of the Ordinance.

7.The above interpretation is also in consonance with settled law that "income tax" is on the income of a particular person and not on the goods. The advance tax paid under section 148 of the Ordinance by importer was a final tax on the income of said importer arising from import. Therefore, subsequent purchaser cannot take advantage of said final tax paid by importer when benefit of final tax was also availed by him. I have also noted that advance tax paid under section 231-B by subsequent purchaser is not final tax and same is adjustable under sub-section (5) of section 231-B of the Ordinance. Therefore, petitioners if pay advance tax, will be entitled to adjust same at the time of their final assessment for particular tax year.

8.In view of above discussion, the demand of advance tax/withholding tax from the petitioners by the Excise and Taxation Department on behalf of Federal Board of Revenue cannot be held to be illegal or against provision of section 231-B(4) of the Ordinance. The upshot of above discussion is that these petitions have no merits, therefore, same are dismissed with no order as to cost.

KMZ/Q-4/L Petitions dismissed.