COMMISSIONER OF INCOME TAX VS MUBASHAR SHEIKH, CITY TOWERS, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 795 (2016)

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

----Ss. 148(1), 148(2), 170 & 133 ---Advance tax paid to a collection agent---Imports---Value of supply---Question before the High Court was whether for purpose of calculating tax under S. 148(1) of the Income Tax Ordinance, 2001, value of imported goods shall be the value minus the customs duty or sales tax, if levied thereon---Held, advance tax was to be collected at import stage from the importer on the "value of goods" and such "value of goods" was defined in S. 148(9) of the Income Tax Ordinance, 2001, which clearly stated that the ad valorem duty shall be increased by payable taxes on imported goods---Tax envisaged under S. 148(1) of the Income Tax Ordinance, 2001 was an advance tax at specified rate of "value of supply" as defined by S. 148(9) of the Income Tax Ordinance, 2001 and such advance tax had to be adjusted against final tax liability of taxpayer and unadjusted amount was liable to be refunded after determination under S. 170 of the Income Tax Ordinance, 2001---Argument that tax payable included in the "value of supply" was not "income", was misconceived, as firstly it was included in value of supply and secondly; it had to be adjusted if not subject to tax under the Final Tax Regime, where tax withheld was taken to be final tax under fiction of law---Reference was answered accordingly.

Messrs Ramma Pipe and General Mills (Pvt.) Limited through its Director v. The Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 1994 PTD 848; CIT v. Crescent Steel and Allied Products Ltd. PTR No.136 of 2006 and Deputy Collector of Customs, Railway Station, Lahore v. Messrs Abdul Ghaffar Abdul Rehman and others 2005 PTD 194 distinguished.

(b) Interpretation of statutes---

----Mandatory provision of a statute, if ignored, was tantamount to transgressing on the express provision of law and was against the spirit of Legislation---Statute or provision thereof was to be construed so as to make it workable and any construction which defeated the main scheme of law, was to be avoided---Court was to interpret the law as it stood and redundancy must not be attributed to a statute or provision thereof---Every word or expression had to be given meaning and questions essentially relating to the wisdom of Legislature in enacting law, were the exclusive prerogative of the Parliament.

Abdul Razzaq Khokhar v. Province of Punjab through Secretary to Government of Punjab and others 1990 SCMR 183; Market Committee Khudian through its Administrator v. Town Committee Khudian through its Chairman 1992 SCMR 1403; Qazi Hussain Ahmad, Ameer Jamaat-e-Islami Pakistan and others v. General Pervaiz Musharraf, Chief Executive and others PLD 2002 SC 853; Aftab Shahban Mirani and others v. Muhammad Ibrahim and others PLD 2008 SC 779; District Bar Association, Rawalpindi and others v. Federation of Pakistan and others PLD 2015 SC 401; Messrs Habib Rafiq (Pvt.) Ltd. through Authorized Representative v. Government of Punjab and another PLD 2015 Lah. 34 and Pakistan Telecommunication Company Ltd. v. Pakistan Telecommunication Authority PLD 2015 Isl. 184 and Pakistan Telecommunication Company Ltd. v. Federation of Pakistan 2016 PTD 1484 rel.

(c) Precedent ---

----Order passed by consent of parties did not constitute a binding precedent.

(d) Interpretation of statutes ---

----No estoppel against clear provision of law---Explicit provision of law could not be made redundant by consent of parties or statement by any one of them contrary to statutory provision---Legal provision continued to exist despite any statement to the contrary as there could be no estoppel against clear provision of law---Rules of statutory interpretation did not permit a court to restrict or enlarge the meaning of express words used in a statute and an admission by a party could not create an estoppel against law.

Fauja v. Mst. Karim Khatoon and 6 others 1993 MLD 1078; Muhammad Asif Bangash v. A.S.P., Kohat and 4 others PLD 2005 Pesh. 107; Messrs Habib Bank Ltd. through Attorneys and 2 others v. Messrs Schon Textile Ltd. through Director and 8 others 2010 CLD 1819 and Commissioner of Wealth Tax, Rawalpindi v. Hafiz S. A. Rahman, Rawalpindi 2014 PTD 2063 rel.

(e) Constitution of Pakistan---

----Arts. 189 & 185 ---Decisions of Supreme Court binding on other Courts---Granting of leave to appeal or refusing the same by the Supreme Court had no binding effect against settled principles on an issue, for the reason that the same did not lay down a law to be followed having a binding force, as envisaged under Art. 189 of the Constitution---Only those judgments / orders of the Supreme Court were binding which decided a question of law or enunciated a principle of law.

Kareem Nawaz Khan v. The State through PGP and another 2016 SCMR 291 and Pervaiz Rasheed and others v. Ex-Officio Justice of Peace and others 2016 YLR 1441 ref.

(f) Waiver---

----Waiver of one party did not estop another party from raising legal objections and the same did not get foreclosed merely because of having been waived in another set of proceedings, or even at the same stage in the proceedings.

Imran Rasool for Applicant.

Zahid Ateeq for Respondent.

ORDER

Through the instant Reference Application under Section 133(1) of the Income Tax Ordinance, 2001 ("the Ordinance of 2001") filed against the order dated 20.05.2008 passed by the learned Income Tax Appellate Tribunal, Lahore Bench, Lahore, ("Appellate Tribunal"), the only following question of law, arising out of impugned order, is pressed and argued for our opinion:--

"Whether on the facts and in the circumstances of the case, the learned ITAT was justified to hold that for the purpose of calculating of Tax under Section 148(1), the value of imported goods shall be the value minus the custom duty or Sales Tax if any levied thereon where Section 148(9) of the Income Tax Ordinance, 2001 clearly states that value of the goods shall include the amount of custom duty or sales tax payable in respect of import of such goods?"

2.Brief facts of the case are that respondent taxpayer filed application for refund and, during course of refund proceedings, it was found that respondent taxpayer was a commercial importer of 'plastic dana' and tax was deducted at import stage. Respondent taxpayer contended that the deduction was required to be made at landed cost of the imported goods, excluding the custom duty and sales tax payable on such goods. Taxation Officer rejected the plea of taxpayer being contrary to Section 148(9) of the Income Tax Ordinance, 2001. Accordingly, the refund application was rejected. Feeling aggrieved, the taxpayer filed an appeal before the CIT (A), which was accepted vide order dated 12.04.2006. Being dissatisfied, the applicant department filed appeal before learned Appellate Tribunal, which was dismissed vide impugned order dated 20.05.2008, operative part of which reads as under:--

"We have heard both sides and have perused the orders passed by the authorities below. After due consideration of the matter, we find that no exception can be taken to the treatment as accorded by the CIT(A) which is found to be fair and reasonable in the ambient circumstances of the case. The direction as given by the learned CIT(A) is consistent with the ratio settled in the above cited reported judgments and we find no reason to disturb the same. Order of the CIT(A) is accordingly maintained."

3.Learned counsel for applicant department submits that learned Appellate Tribunal was not justified to hold that for the purpose of calculating Tax under Section 148(1), the value of imported goods shall be the value minus the custom duty or sales tax, if any levied thereon, whereas Section 148(9) of the Income Tax Ordinance, 2001 clearly states that "value of goods" shall include the amount of custom duty or sales tax payable in respect of import of such goods. He adds that the impugned order being in conflict with express provision of law is not sustainable.

4.On the other hand, learned counsel for the respondent taxpayer submits that the applicant department has failed to point out any illegality or legal infirmity in the impugned order, which is even otherwise in accord with law laid down in Messrs Ramma Pipe and General Mills (Pvt.) Limited through its Director v. The Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others (1994 PTD 848).

5.Heard. Record perused.

6.Examination of impugned order shows that learned Appellate Tribunal has upheld the findings of CIT (A) on the ground that the same are in consonance with the decisions rendered by the superior Courts.

7.The law on the subject is very clear that "value of goods" is to be determined under the Customs Act, 1969, as if the goods were subject to ad valorem duty increased by the custom duty, federal excise duty and sales tax paid in respect of goods. The relevant provisions of Section 148 subsections (1) and (9) read as under:--

148. Imports.---"(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part II of the First Schedule."

"(9) .

"value of goods" means the value of the goods as determined under the Customs Act, 1969 (IV of 1969), as if the goods were subject to ad valorem duty increased by the customs-duty, federal excise duty and sales tax, if any, payable in respect of the import of the goods;"

[emphasis supplied]

8.Perusal of the above provisions shows that advance tax is to be collected at import stage from the importer on the "value of goods" at specified rates. The "value of goods" is defined in subsection (9), which clearly says that the ad valorem duty shall be increased by payable taxes on the imported goods. It is well settled that if a mandatory provision of statute is ignored, the same tantamounts to transgress the express provision of law and is also against the spirit of legislation. Statute or a provision thereof is to be construed so as to make it workable and any construction which shall defeat the main scheme of law, is to be avoided. Court is to interpret law as it stands and redundancy must not be attributed to a statute or provision thereof. Every word or expression has to be given meaning. An effort has to be made to read provisions harmoniously. Question essentially relating to the wisdom of Parliament in enacting law, as long as legislature has competence to legislate, is the exclusive prerogative of Parliament. Reference in this regard can be made to Abdul Razzaq Khokhar v. Province of Punjab through Secretary to Government of Punjab and others (1990 SCMR 183), Market Committee Khudian through its Administrator v. Town Committee Khudian through its Chairman (1992 SCMR 1403), Qazi Hussain Ahmad, Ameer Jamaat-e-Islami Pakistan and others v. General Pervaiz Musharraf, Chief Executive and others (PLD 2002 Supreme Court 853), Aftab Shahban Mirani and others v. Muhammad Ibrahim and others (PLD 2008 Supreme Court 779), District Bar Association, Rawalpindi and others v. Federation of Pakistan and others (PLD 2015 Supreme Court 401), Messrs Habib Rafiq (Pvt.) Ltd. through Authorized Representative v. Government of Punjab and another (PLD 2015 Lahore 34), Pakistan Telecommunication Company Ltd. v. Pakistan Telecommunication Authority (PLD 2015 Islamabad 184) and Pakistan Telecommunication Company Ltd. v. Federation of Pakistan (2016 PTD 1484).

9.We have examined the judgment in the case of Messrs Ramma Pipe and General Mills (Pvt.) Limited supra and subsequent judgments cited by learned counsel for respondent taxpayer. It is found that the same were result of consent shown by learned counsel for the applicant department. Under the law, it does not constitute a binding precedent. Explicit provision of law could not be made redundant by consent of parties or statement of any one of them contrary to the statutory provision. Legal provision continues to exist despite statement to the contrary as there could be no estoppel against clear provision of law. The relevant portions of judgments cited by learned counsel for respondent taxpayer during the course of arguments are being reproduced hereunder for ease of reference.

The relevant part of the case of M/s. Ramma Pipe and General Mills (Pvt.) Limited supra, is reproduced hereunder:--

"2. Mr. Muhammad Ilyas Khan, learned counsel appearing for respondents on instructions from respondents has conceded that while charging income tax under section 80-C of the Income Tax Ordinance, 1979, the amount paid as sales tax cannot be deemed to be the income of the petitioner and as such, cannot be subjected to payment of income tax. He submits that tax liability of the petitioner shall be worked out after deducting the sales tax paid."

Similarly, in order dated 21.09.2015 passed in PTR No.136 of 2006 titled CIT v. Crescent Steel and Allied Products Ltd., this Court has observed as under:--

"2. We have noted that aforesaid question of law has already been decided by this Court in Messrs Ramma Pipe and General Mills (Pvt.) Limited through its Director v. The Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 3 others (1994 PTD 848) and finally by the august Supreme Court of Pakistan in Deputy Collector of Customs, Railway Station, Lahore v. Messrs Abdul Ghaffar Abdul Rehman and others (2005 PTD 194), where it is held that the amount of sales tax could not be subject to payment of income tax.

3. As the question of law has already been set at rest by the august Supreme Court of Pakistan, therefore, question raised herein is also answered in terms of august Supreme Court's judgment referred supra."

In the case of Deputy Collector of Customs, Railway Station, Lahore v. Messrs Abdul Ghaffar Abdul Rehman and others (2005 PTD 194), the Hon'ble Supreme Court has observed as under:--

"3. The writ petition aforesaid of the respondents, through the impugned order, was decided by the learned Judge on the basis of earlier judgment delivered by the High Court in Messrs Ramma Pipe and General Mills (Pvt.) Limited v. The Federation of Pakistan (1994 PTD 848).

4. The perusal of record and specifically the judgment referred to above would indicate that Mr. Muhammad Ilyas Khan, learned counsel appearing for Income Tax Department under the instructions from the Department had conceded that while charging income tax under section 30-C of the Income Tax Ordinance, 1979 the amount paid as sales tax cannot be deemed to be the income of the petitioner and thus cannot be subjected to payment of income-tax. The circumstances of such case were similar to those of the present case and hence the High Court rightly placed reliance on 1994 PTD 848.

5. In the instant case the Authorities of Customs Department are merely collectors of tax on behalf of the Income Tax Department. The Income Tax Department has not filed any petition against the impugned judgment despite the fact that it was a party in the writ petition and was represented by the same learned counsel Mr. Muhammad Ilyas Khan, Advocate. The Collector of Customs though a party in the writ petition and never contested the matter, had never appeared and had never filed any comments." [emphasis supplied]

10.Collective reading of the quoted judgments shows that these were decided on the basis of conceding statement by counsel for the department. Besides, provisions of the repealed Income Tax Ordinance, 1979, were involved. Under new scheme, the legal position has been clarified unequivocally by giving definition of phrase "value of supply" in the subsection (9) of Section 148.

11.Rules of interpretation of a statute do not permit Court to restrict or enlarge the meaning of express words used in the statute. Admission would not create estoppel against law. Waiver of one of the parties does not estop a party from raising legal objection and it never gets foreclosed merely because of having been waived in another set of proceedings or even at same stage in the same proceedings, there being no estoppel against law. Reliance in this regard can be placed upon Fauja v. Mst. Karim Khatoon and 6 others (1993 MLD 1078), Muhammad Asif Bangash v. A.S.P., Kohat and 4 others (PLD 2005 Peshawar 107), Messrs Habib Bank Ltd. through Attorneys and 2 others v. Messrs Schon Textile Ltd. through Director and 8 others (2010 CLD 1819) and Commissioner of Wealth Tax, Rawalpindi v. Hafiz S. A. Rahman, Rawalpindi (2014 PTD 2063).

12.It would not be out of place to observe here that tax envisaged under subsection (1) of Section 148 is an advance tax at specified rate on the "value of supply", defined under subsection (9) of the value of imported goods. The advance tax has to be adjusted against final tax liability of a taxpayer. The unadjusted amount of the advance tax paid is liable to be refunded after its determination under Section 170 of the Ordinance of 2001. The argument that tax payable included in the "value of supply" is not income, in our opinion, is misconceived. Firstly, because it is included in the "value of supply" and secondly, because it has to be adjusted if not subjected to tax under Final Tax Regime, where tax withheld is taken to be final tax by fiction of law. We may conclude by saying that in cases referred by learned counsel for respondent taxpayer, the provision of law i.e. Section 50(5) of the repealed Ordinance of 1979, was not declared ultra vires, rather the decisions are based on conceding statement of the counsel for department. In instant case as well, taxpayer had never challenged the express provisions of Section 148 (1) and (9), therefore, no opinion against clear and express words of the statute can be given.

13.Needless to observe here that the leave granting or refusing order by Hon'ble Supreme Court of Pakistan has no binding effect against the settled principles on an issue for the reason that it does not lay down a law to be followed having a binding force, as was envisaged under Section 189 of the Constitution of the Islamic Republic of Pakistan, 1973. Under the said provision, only those judgments of Hon'ble Supreme Court are binding which decides a question of law or enunciates a principle of law. Reference can be made to Kareem Nawaz Khan v. The State through PGP and another (2016 SCMR 291) and Pervaiz Rasheed and others v. Ex-Officio Justice of Peace and others (2016 YLR 1441).

14.The examination of impugned order shows that findings given by learned Appellate Tribunal are against the express provision of law.

15.Since the impugned order is not in conformity with the provision of section 148 (9) of the Ordinance of 2001, therefore, our answer to the proposed question is in negative i.e. in favour of the applicant department and against the respondent taxpayer.

This Reference Application is decided in favour of the applicant department.

16.Office shall send a copy of this order under seal of the Court to learned Appellate Tribunal as per Section 133 (5) of the Income Tax Ordinance, 2001.

KMZ/C-6/L Order accordingly.