DIAMOND METALS (AOP) VS FEDERATION OF PAKISTAN through Secretary Ministry of Finance
2019 P T D 1296
[Sindh High Court]
Before Aqeel Ahmed Abbasi and Abdul Maalik Gaddi, JJ
Messrs DIAMOND METALS (AOP) through Attoney
Versus
FEDERATION OF PAKISTAN through Secretary Ministry of Finance and 3 others
C. P. No. D-5625 of 2016, decided on 14/12/2016.
Income Tax Ordinance (XLIX of 2001)---
----S. 159(3) [omitted]---Exemption from Income Tax---Exemption or lower rate certificate---Certificates issued under subsection (3) (since omitted) of S.159 of the Income Tax Ordinance, 2001---Certificates to remain in force until rescinded by Federal Board of Revenue despite omission of subsection (3) of S.159 of the Income Tax Ordinance, 2001 by the Legislature---Scope---Question before High Court was whether "Exemption Certificate" issued to a taxpayer under subsection (3) of S.159 of the Income Tax Ordinance, 2001 remained in force after omission of said subsection (3) of S.159 by the Finance Act, 2015---Held, that per S.159(6) of the Income Tax Ordinance, 2001 Legislature had saved all notifications which were issued under S.159 of the Income Tax Ordinance, 2001 irrespective of the fact that S.159 subsection (3) of the Income Tax Ordinance was omitted---All such notifications would, therefore, continue to hold field unless rescinded by Federal Board of Revenue through a notification in the official gazette.
Syed Irshad-ur-Rehman for Petitioner.
Muhammad Aqeel Qureshi for Respondents Nos.2 and 3.
Mayhar Kazi for Respondent No.4.
Meer Hussain Standing Counsel.
ORDER
Through instant petition, the petitioner has impugned the order dated 14.10.2016 passed by the Chief Commissioner, Inland Revenue, LTU-II, Karachi, under Section 122B of the Income Tax Ordinance, 2001, whereby, the order passed by the Commissioner Inland Revenue, Zone-II, LTU, Karachi, dated 13.07.2016, rejecting the claim of the petitioner for issuance of Exemption Certificate under Sections 159(1)/ 235 of the Income Tax Ordinance, 2001 has been upheld.
2.Learned counsel for the petitioner submits that both the officers below have erred in law and facts by misconstruing the facts and the effect of omission of subsection (3) of Section 159 through Finance Act, 2015. According to the learned counsel, the legislative intention has been made clear by inserting subsection (6) to Section 159 through Finance Act, 2015, whereby, the Notification issued under subsections (3), (4) and (5) of Section 159 has been saved, unless rescinded by the Board through Notification in the Official Gazette. Per learned counsel, since the Notification applicable to the case of the petitioner i.e. S.R.O. No.1053(I)/2010 dated 22.11.2010 has not been rescinded by the Board, therefore, the same is fully applicable to the facts of the case of the petitioner, who was earlier issued Exemption Certificate by the Commissioner, Inland Revenue upto tax year 2016, whereas, for the tax-year 2017, the request for issuance of Exemption Certificate has been declined on wrong assumption and incorrect interpretation relating to withdrawal of subsection (3) of Section 159 through Finance Act, 2015. Learned counsel for the petitioner submits that since the petitioner otherwise qualifies for the issuance of Exemption Certificate, and has submitted all the relevant documents and the material before the concerned Commissioner, therefore, the impugned orders passed by the Commissioner, Inland Revenue, Zone-II, LTU, Karachi, as well as by Chief Commissioner, Inland Revenue, LTU-II, Karachi, may be set-aside and the matter may be remanded back to the Commissioner, Inland Revenue, Zone-II, LTU, Karachi, for issuance of Exemption Certificate in accordance with law.
3.While confronted with above submissions and the legal position as argued by learned counsel for the petitioner, learned counsel for the respondent could not controvert the same, however, submits that the petitioner is not entitled for the issuance of Exemption Certificate, as according to learned counsel for respondent, the provisions of sub-section (3) of Section 159 and the SRO No.1053(I)/2010 dated 22.11.2010 of the Board relate to the withholding tax in respect of advance tax liability, and not to the tax, which is being collected under Section 235 of the Income Tax Ordinance, 2001.
4.We have heard the learned counsel for the parties, perused the record and the impugned orders passed by the Chief Commissioner Inland Revenue, LTU-II, Karachi as well as Commissioner, Inland Revenue, LTU-lI, Karachi and have also examined the relevant provisions of Section 159 and Section 235 read with SRO No.1053(I)/2010 dated 22.11.2010 with their assistance.
5.From perusal of the impugned order passed by the Chief Commissioner, Inland Revenue, LTU-II, Karachi in the case of petitioner, it appears that the claim of the petitioner for issuance of Exemption Certificate in terms of Section 159(1) read with SRO No.1053(I)/2010 dated 22.11.2010 has been rejected on the pretext that since subsection (3) of Section 159 has been omitted by the Finance Act, 2015, therefore, such Exemption Certificate cannot be issued to the petitioner for the tax year 2017. It will be advantageous to reproduce the provision of subsection (6) of Section 159, which were inserted through Finance Act, 2015, which read as follows:-
"159(6) Notwithstanding omission of subsections (3), (4) and (5), any notification issued under the said subsections and for the time being in force, shall continue to remain in force, unless rescinded by the Board through notification in the official Gazette."
6.From perusal of hereinabove provisions of subsection (6) of Section 159, it is clear that the legislature has saved all such Notifications, which were issued under subsections (3), (4) and (5) of Section 159, irrespective of the fact that subsection (3) of Section 159 has been omitted through Finance Act, 2015. All such Notifications, unless rescinded by the Board through Notification in the Official Gazette, would continue to hold filed and would be made applicable with full force in appropriate cases. Admittedly SRO No.1053(I)/2010 dated 22.11.2010, which was issued in exercise of powers conferred by clause (b) of subsection (3) of section 159 of the Income Tax Ordinance, 2001 has not been rescinded by the Board through Notification in the official gazette, hence, the same will continue to apply in appropriate cases, unless the same is rescinded by the Board through Notification in the Official Gazette. Therefore, the claim of the petitioner, seeking exemption from collection of tax under Section 235 of the Income Tax Ordinance, 2001, which was earlier acceded by the respondent department under similar facts and circumstances of the case, may be considered accordingly, irrespective of the omission of subsection (3) of Section 159 of Income Tax Ordinance, 2001 through Finance Act, 2015, keeping in view insertion of subsection (6) in Section 159 of the Income Tax Ordinance, 2001.
7.In view of the above facts and circumstances of the case, we hereby set-aside both the orders passed by the Chief Commissioner, Inland Revenue, LTU-II, Karachi dated 14.10.2016 as well as the order of the Commissioner, Inland Revenue, Zone-II, LTU, Karachi dated 13.07.2016, and remand back the matter to the Commissioner, Inland Revenue, Zone-II, LTU, Karachi, who shall decide the claim of the petitioner regarding issuance of Exemption Certificate from withholding tax in terms of Section 159(1) of the Income Tax Ordinance, 2001, strictly in accordance with law, however, keeping in view above legal position as clarified by this Court. It is expected that such exercise shall be undertaken within two (02) weeks from the date of receipt of this order by the Commissioner, after providing complete opportunity of being heard to the petitioner.
The petition stands disposed of in the above terms along with listed application.
KMZ/D-2/Sindh Order accordingly.