Mr. Muhammad Iqbal M/s Iqbal Siddique Enterprises. Small Industrial Estate, Sargodha. | Appellant | |
Vs | ||
The Commissioner Inland Revenue, Zone-1, RTO, Sargodha. | Respondent | |
Appellant by | Mr. Inam Ul Haq, ITP | |
Respondent by | Mr. Zaheer Ahmed Qureshi, DR | |
Date of hearing | 08.10.2019 | |
Date of order | 08.10.2019 |
O R D E R
M. M. AKRAM (Judicial Member): The titled appeal has been filed by the appellant/taxpayer against an Order No.1266 dated 16.08.2018 passed by the learned Commissioner Inland Revenue (Appeals), Sargodha for Tax Year 2015 on the grounds as set forth in the memo of appeal. Subsequently, the appellant also filed the following additional grounds:-
“1. That the order passed by the learned
taxation authority is without lawful jurisdiction & authority.
2. That the order under section 122(5A) is liable to be cancelled as no amended taxable income has been mentioned in the amended order as per provision of section 122(6)(a).”
2. Briefly
stated, the relevant facts for the disposal of the appeal are that the
appellant is an individual who filed return for the Tax Year 2015 declaring the
following results:-
|
Net
Sales |
Rs.181,848,854/- |
|
Gross
Profit |
5,296,569/- |
|
P
& L Expenses |
4,020,429/- |
|
Net
Income |
Rs.1,276,140/- |
The
return so filed by the appellant was deemed to be considered as an assessment
order under section 120(1)(b) of the Income Tax Ordinance, 2001 (“the
Ordinance”). As per amendment made in section 113 of the Ordinance through
Finance Act, 2009, the appellant was liable to pay minimum tax @ 1% of the
declared turnover but he failed to discharge his liability regarding minimum
tax. In consequence thereof, the deemed order under section 120(1) of the
Ordinance was found to be erroneous as well as prejudicial to the interest of
revenue warranting amendment of assessment under section 122(5A) of the Ordinance
by charging of minimum tax @ 1%. A show-cause notice dated 09.01.2018 was
issued and the appellant submitted its written reply, stating inter alia
therein that an amount of Rs.3,800,729/- was collected under section 148 of the
Ordinance during the Tax Year 2015 at the time of import of “red chili whole”
for its own use and tax collected at sources is adjustable under section
148(7)(a) of the Ordinance. Therefore, in its reply, the appellant requested to
allow credit of tax collected at the import stage while charging minimum tax
under section 113 of the Ordinance. The assessing officer did not accept the
explanation tendered by the appellant for the reasons enumerated in the amended
assessment order and ultimately passed an order dated 06.06.2018 under section
122(5A) of the Ordinance by creating demand of tax on account of minimum tax @
1% amounting to Rs.1,704,567/-. Being aggrieved, the appellant/taxpayer went in
appeal before the learned CIR (A) and assailed the order on various grounds.
The learned CIR (A) declined the relief sought by the taxpayer/appellant by
passing the impugned order dated 16.08.2018. The appellant has now assailed the
said order before this forum on a number of grounds.
3. The titled appeal came up for hearing on 08.10.2019.
The learned AR of the appellant vehemently argued that the appellant falls
within the definition of “Industrial Undertaking” and therefore, he is entitled
to get a credit of tax paid at import stage against minimum tax liability in
terms of section 148(7)(a) of the Ordinance. The learned AR further contends
that the rebate in minimum tax levied under section 113 as prescribed in
Division IX of Part-I of First Schedule @ 0.20% is also available to the distributors
of fast-moving consumer goods and the appellant is entitled to this concession
as well. To sum up, his arguments, the learned AR submits that the amended
assessment order is illegal and void ab-initio as no amended taxable income is stated
in the said order as required under clause (a) of sub-section (6) of section
122 of the Ordinance. Therefore, according to the learned AR, on this score
alone the amended assessment order is illegal, void ab-initio, and without
jurisdiction. To support this argument, reliance was placed on the judgment of
this Tribunal in MA (Rect) No.49/KB/2013 in ITA No.187/KB/2011 dated 02.05.2013
titled as M/s Central Power Generation Co, Guddu Vs CIR, RTO, Sukkur.
4. On the other hand, the learned DR
appearing on behalf of the department has fully supported the impugned orders.
He contended that the order passed by the leaned CIR(A) is a well-reasoned and
speaking order, each and every ground was taken by the appellant has duly been
dilated upon and therefore, there is no legal infirmity in the said order. He,
therefore, prays for the dismissal of the appellant’s appeal.
5. The orders of
both the authorities have been examined in detail and perused the available
record as well keeping in view the submissions advanced by the rival parties.
We have not been able to find out any substance in the instant appeal. The
contention of the learned AR that the tax collected at the import stage is
adjustable under section 148(7)(a) of the Ordinance is flawed and not tenable
keeping in view the facts of the instant case. The appellant did not produce
any document/evidence neither before the lower authorities nor before this
forum to substantiate his version that the appellant falls within the
definition of “Industrial Undertaking” as defined in section 2(29C) of the
Ordinance in spite of giving the proper opportunity of being heard to them on
03.10.2019. On 08.10.2019, the learned AR again appeared before this Tribunal
but no supporting documents in support of his stance were furnished. Therefore,
the tax paid by the appellant at the import stage was a final tax under section
148(7) of the Ordinance and the same was not adjustable. The appellant has
failed to discharge the onus that it is covered under the expression
“Industrial undertaking”. 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.
As stated above, the appellant has not produced any single document or corroborating evidence which prima facie shows that the appellant business comes within the ambit of the industrial undertaking. For the aforesaid reasons, this contention of the appellant is turned down as being devoid of merit.
The other contention of the appellant is that he is
entitled to a rebate in minimum tax given in Division IX of Part-1 of First
Schedule to the Ordinance @ 0.2% which inter alia is available to the
Distributor of fast-moving goods, whereas the appellant has the status of an
importer cum manufacturer. Therefore, the appellant is not entitled to a rebate
in minimum tax. Further, in the said Division, the concession in tax rates has
been given to certain persons therefore according to the settled principle of
interpretation; it has to be strictly construed. Reliance may be placed to M/s
Humayun Ltd. v. Pakistan and others (PLD 1991SC 963), the basic
principles and rationale of the exemption clause is emphasized by reproducing
an excerpt from the case Bank of Commerce v. Tennessee (161
US 134), which is as under:-
"Taxes being the sole means by which sovereignties can maintain their existence, any claim on the part of anyone to be exempt from the full payment of his share of taxes on any portion of his property must on that account be clearly defined and founded on plain language. There must be no doubt or ambiguity in the language used upon which the claim to the exemption is founded. It has been said that a well-founded doubt is fatal to the claim; no implication will be indulged in for the purpose of construing the language used as giving the claim for the exemption, where such claim is not founded upon the plain and clearly expressed intention of the taxing power".
In
Karachi
Development Authority v. Central Board of Revenue through Members Central
Excise and Land Customs, Islamabad and others (2005 PTD 2131), the
Hon'ble Apex Court held,
"Taxing statutes were construed strictly in favour of subjects whereas the provisions relating to exemptions were construed in favour of Government as Taxing authority and the Government while exercising the power of exemption of duty on a particular article, might impose such condition, limitation, and restriction as it deemed fit."
A necessary corollary is that while interpreting an exemption clause, plain language is to be considered; implications are not allowed; conditions stipulated in the exemption clause must be fulfilled; and in case of any doubt or two possible interpretations, the one favouring chargeability of tax is to be employed. It is also a principle that exemption presupposes the chargeability, the judgment in Collector of Customs and others Vs. Ravi Spinning Ltd. and others (1999 SCMR 412) can be referred.
6. The contention of the learned AR that the
amended assessment order is illegal and void ab-initio as no amended taxable
income is stated in the said order as required under clause (a) of sub-section
(6) of section 122 of the Ordinance which is a condition precedent for invoking
the provisions of section 122 of the Ordinance. Therefore, according to the
learned AR, on this score alone the amended assessment order is unsustainable
in law. Reliance was placed on the judgment of this Tribunal in MA (Rect)
No.49/KB/2013 in ITA No.187/KB/2011 dated 02.05.2013 titled as M/s
Central Power Generation Co, Guddu Vs CIR, RTO, Sukkur. This
contention of the learned AR is also misconceived and not tenable. Prior to
answer this contention, it would be pragmatic to first reproduce hereunder the relevant
provisions of section 122 of the Ordinance:-
122. Amendment of
assessments.-(1)Subject to this section, the Commissioner may amend an
assessment order treated as issued under section 120 or issued under section
121, by making such alterations or additions as the Commissioner considers
necessary.
(3) …………………
(4) Where an assessment order (hereinafter
referred to as the "original assessment") has been amended under
sub-section (1),(3) or (5A), the Commissioner may further amend, as many times
as may be necessary, the original assessment within the later of -
(a)
five years from the end of the financial year
in which the Commissioner has issued or is treated as having issued the
original assessment order to the taxpayer; or
(4A) …………………………..
(5) An
assessment order in respect of a tax year, or an assessment year, shall only be
amended under sub-section (1) and an amended assessment for that year shall
only be further amended under sub-section (4) where, on the basis of definite
information acquired from an audit or otherwise, the Commissioner is satisfied
that -
(i) any
income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at too low a rate, or
has been the subject of excessive relief or refund; or
(iii) any
amount under a head of income has been misclassified.
(5A) Subject
to sub-section (9), the Commissioner may, after making, or causing to be made,
such enquiries as he deems necessary, amend, or further amend, an assessment
order if he considers that the assessment order is erroneous in so far it is prejudicial
to the interest of revenue.
(5AA) …………………………
(5B) ..………………………..
(6) As soon as possible after making an amended assessment under sub-section (1),
sub-section (4), or sub-section (5A) the Commissioner shall issue an amended assessment order to the taxpayer stating
-
(a)
the amended taxable income of the taxpayer;
(b) the amended amount of tax
due;
(c) the amount of tax paid, if any;
and
(d) the time, place, and manner of
appealing the amended assessment.
(7) ……………………………….
(8) ………………………………
(9) No assessment shall be amended, or further
amended, under this section unless the taxpayer has been provided with an opportunity
of being heard." (Emphasis
supplied)
A plain reading of sub-section (6) of section 122(6) of the Ordinance shows that it is in effect a machinery provision authorizing the Commissioner to take steps after making an amended assessment order under sub-section (1), sub-section (4), or sub-section (5A) for the purpose of issuance of an amended assessment order to the taxpayer stating therein the eventualities enumerated in clause (a) to (d) as and where applicable. In our humble reading, the issuance of an amendment assessment order is procedural in as much as it does not absolve the liability of a taxpayer nor does it curtail the powers of the Commissioner to amend an assessment order for the purpose of charging income tax and hence, it cannot be conveniently styled as something of a substantive character. The clauses (a) to (d) of sub-section (6) of section 122 cannot be read conjunctively rather it has to be read disjunctively and would be applied distinctively as and where applicable, as the case may be depending on the type of amendment of assessment. If the said clauses are read conjunctively then it gives rise to an absurdity which obviously cannot be attributed to the legislature. Moreover, this interpretation also renders clause (ii) of sub-section (5) of section 122 to the extent which suggests that “income assessed at too low a rate, or has been the subject of excessive relief or refund” and clause (iii) which says “any amount under a head of income has been misclassified” of the said sub-section as redundant because in such eventualities the declared taxable income of the taxpayer may not be amended. 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 vs. Federal Board of Revenue and 2 others (2016 PTD 1675), Zaver Petroleum Corporation Limited Vs Federal Board of Revenue and another (2016 PTD 2332), Dr. Raja Aamer Zaman Vs Omer Ayub Khan and others(2015 SCMR 1303) and Mst. Rooh Afza Vs Aurangzeb and others (2015 SCMR 92). 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 their 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 (a) to (d) mentioned in sub-section (6) of section 122 are independent of each other, inevitably have to be read disjunctively and the legislature has intended to cover a wide range of eventualities.
7. For what has been discussed above, the appellant has failed to point out any legal or factual infirmity in the impugned appellate order and has not put forth any documentary or material evidence to rebut the observations and findings of the learned Commissioner (Appeals). We find no infirmity in the impugned order of the learned Commissioner (Appeals) and do not feel persuaded to interfere with the treatment meted out by the first appellate authority. Accordingly, the impugned appellate order is maintained and the appeal under reference is dismissed being devoid of merit.
8. This order consists of (08) pages and each
page bears my signature.
|
|
Sd/- (M.M. AKRAM) JUDICIAL MEMBER |
|
Sd/- (NADIR
MUMTAZ WARRAICH) ACCOUNTANT
MEMBER |
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