M/S Rice Partners (Pvt.) Ltd. Islamabad. | Appellant | |
Vs | ||
The Commissioner Inland Revenue, RTO, Islamabad | Respondent | |
Appellant by | Mr. Istataat Ali, Advocate | |
Respondent by | Ms. Naheed Akhtar Durrani, DR | |
Date of hearing | 25.07.2019 | |
Date of order | 25.07.2019 |
M. M. AKRAM (Judicial Member): This appeal has been filed by the
appellant/taxpayer against the order-in-Appeal No.279/2018 dated 08.11.2018
passed by the learned Commissioner Inland Revenue (Appeals-II), Islamabad for
the Tax Year 2016 on the grounds as set forth in the memo of appeal.
Subsequently, the appellant amended its original grounds of appeal.
2. Brief facts culled out from the record
are that the appellant is engaged in the business of processing and export of
rice. The appellant is liable to deduct tax at the time of making payments to
the recipients under the provisions of the Income Tax Ordinance, 2001 (“the
Ordinance”). The appellant did not fully discharge its legal duty of
withholding agent while making payments. The appellant was confronted with
certain anomalies through notices asking for various details/documents and
after considering the reply, the Assessing Officer passed an order against the
appellant creating thereby a tax demand of Rs.11,728,431/- for the tax year
2016. The appellant preferred an appeal before the learned CIR(A) who vide
order dated 08.11.2018 remanded the case to the Assessing Officer on certain
issues and confirmed the treatment meted out by the DCIR on account of purchase
of rice and BTL Salaries. Being aggrieved, the appellant has now come up before
this forum and has assailed the impugned order on the aforesaid two issues.
3. The learned Counsel appearing on behalf
of the appellant/taxpayer contended that the appellant being an exporter of
Brown Rice is not required to deduct tax while making payment to the recipient in
terms of SRO No.368(I)/94 dated 07-05-1994. Further submits that the Assessing Officer
has wrongly charged the tax @ 1.5% as specified in Division III, Part-III of First
Schedule to the Ordinance by treating it as rice whereas all products i.e rice,
paddy, brown rice, etc having different H.S Code does not come within the ambit
of such provisions. Reliance was placed on 1992 SCMR 663 and 2015 PTD 1855. As
far as alleged non-deduction of tax on account of salaries is concerned, the
learned AR submits that the appellant did not deduct the tax on an amount of
Rs.12,379,988/- for the reason that these salaries were below taxable limits. All
the detail of salaries was provided to the Assessing Officer during assessment
proceedings but he could not properly consider the documents and therefore, he
prays for deletion of tax under this head.
4. On the other hand, the learned DR
appearing on behalf of the department has fully supported the impugned order on
both the issues and submits that the appellant failed to justify its claim with
documentary evidence despite the fact that sufficient opportunity was provided
to them.
5. Arguments heard and relevant record
available on file carefully perused. To resolve the controversy between both
the parties on account of the non-deduction of tax on the purchase of rice, it
would be expedient to first reproduce hereunder the relevant provisions of law
and the SRO. Special rates of deduction of tax have been prescribed in Division
III of Part-III of the First Schedule to the Ordinance.
THE FIRST SCHEDULE
PART III
DEDUCTION OF TAX AT SOURCE
(See Division III of Part V of Chapter X)
Division
III
Payments for Goods or Services
(1) The rate of tax to be deducted from a payment referred to in clause (a) of sub-section (1) of section 153 shall be -
(a) in the case of the sale of rice, cotton seed, or edible oils, 1.5% of the gross amount payable: (Emphasis supplied)
Explanation:- For removal of doubt, it is clarified that "cotton seed and edible oils" means cotton seed oil and edible oils;
(ab)----------------------------
SRO NO.368(I)/1994 dated 07-05-1994In exercise of the powers conferred by clause (ii)
of the proviso to sub-section (4) of section 50 of the Income Tax Ordinance,
1979 (XXXI of 1979), hereinafter referred to as the Ordinance, and the
supersession of its Notification No. S.R.O. 828(I)/91, dated 24th
August, 1991, the Central Board of Revenue is pleased to satisfy the following
to be the payers, or the classes of payers to whom the said sub-section shall
not apply, namely:-
(i)
Companies
whose paid-up capital is below Rs. 1.5 million;
(ii)
Registered
firms whose capital (total of closing balances of partner’s capital accounts)
as per the balance sheet in respect of the latest assessment year is below Rs,
1.5 million;”
(iii)
Persons,
being exporters of goods, making payment of account of supply of such goods as
are purchased in respect of goods exported outside Pakistan: Provided that-
(a). The said persons shall deduct tax on
account of goods purchased in respect of goods sold in Pakistan;
(b). If tax has not been deducted from payments
on account of supply of goods in respect of goods sold in Pakistan, the said
tax shall be paid by the said persons, if the sales in Pakistan are in excess
of 5% of export sales; and
(c) Nothing
contained in this clause shall apply to payments made on accounts of purchase
of such goods in respect of which special rates of tax deduction have been
specified in the exercise of the powers under clause © of sub-section (4) of
section 50 of said Ordinance. (Emphasis supplied)
2. This
Notification shall be deemed to have taken effect from 1st day of
July, 1991.”
The
provisions similar to SRO 368(I)/94 dated 07-05-1994 are presently available in
Part IV of the Second Schedule to the Income Tax Ordinance, 2001in the form of
clause (45) which provides an exemption from withholding provisions of section
153 with certain conditions. Clause (45) of Part IV of the Second Schedule to
the Income Tax Ordinance, 2001 is also reproduced hereunder:-
THE SECOND
SCHEDULE
PART IV
EXEMPTION FROM SPECIFIC PROVISIONS
“Income, or classes of income, or persons or classes of persons, enumerated below, shall be exempt from the operation of such provisions of this Ordinance, subject to such conditions and to the extent, as are specified hereunder: -
(45) The provisions of sub-section (1) of section 153 shall not apply to any manufacturer-cum-exporter as the prescribed person:
Provided that-
(a) the manufacturer-cum-exporter shall deduct tax from payments made in respect of goods sold in Pakistan;
(b) if tax has not been deducted from payments on account of supply of goods in respect of goods sold in Pakistan, the tax shall be paid by the manufacture-cum-exporter, if the sales in Pakistan are in excess of five percent of export sales; and
(c) nothing contained in this clause shall apply to payments made on account of purchase of the goods in respect of which special rates of tax deduction have been specified under the provisions of the repealed Ordinance.”(Emphasis supplied)
The notification SRO 368(I)/94 has been issued by virtue of the powers conferred on the Central Board of Revenue (CBR) now Federal Board of Revenue (FBR) by clause (ii) of the proviso to sub-section (4) of section 50 of the repealed Income Tax Ordinance, 1979 though there are no corresponding provisions in the Income Tax Ordinance, 2001, it is saved and continued by section 239(12) of the Income Tax Ordinance, 2001. It is the case of the appellant that it exports only Brown Rice and therefore, it does not come within the ambit of the provisions which prescribe special rates of tax deduction i.e Division III, Part-III of First Schedule to the Ordinance reproduced above. Precisely, the primary ground of challenge of the appellant is that in the said provisions a word “Rice” has been used which does not cover the “Brown Rice”. Therefore, according to the learned Counsel of the appellant, there are no special rates of deduction of tax having been specified on purchase of Brown Rice and as such the appellant is exempt from the deduction of tax in terms of SRO 368(I)/04 read with clause (45) of Part IV of the Second Schedule to the Income Tax Ordinance, 2001. This interpretation of the learned AR is misconceived and not tenable. It can be seen upon a bare reading of the above provisions of law that the Federal Government has prescribed the special rates of deduction of tax on rice of all sorts. Thus, on the contrary, the Federal Government does not make a distinction amongst different kinds of rice as the rate of deduction of tax applies across the board to all kinds of rice and not to any particular one. Had the Federal Government specify the rate of deduction to a particular rice and not the other, the taxpayers might have an objection and agitate the issue on the basis of discrimination or other constitutional or legal basis. However, since the Federal Government has not made any distinction in respect of rice, the appellant cannot urge that they do not fall in the said category. A statement on the issue expressed in Maxwell on the Interpretation of Statutes, Twelfth Edition, page 256 has been oft-quoted with approval by the superior Courts. According to Maxwell:
"Statutes which impose pecuniary burdens are subject to the same rule of strict construction. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language because in some degree they operate as penalties: the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and language must not be strained in order to tax a transaction which, had the legislature thought of it, would have been covered by appropriate words. 'In a taxing act, said Rowlett, J, one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.”
In M/s Mehran Associates Limited v. The
Commissioner of Income Tax, Karachi (1993 SCMR 274), the Supreme
Court of Pakistan laid down the basic rule as follows:
"The cardinal principles of interpretation of a fiscal statute seem to be that all charges upon the subject are to be imposed by clear and unambiguous language. There is no room for any intendment nor there is any equity or presumption as to tax.”
In
view of the foregoing discussion, a special rate of deduction of tax on the sale
of rice has specifically been provided in Division III of Part-III of First
Schedule to the Ordinance and as such the appellant does not fall in SRO
368(I)/94 read with clause (45) of Part IV of the Second Schedule to the Income
Tax Ordinance, 2001. Therefore, the appellant was obliged to deduct tax @ 1.5% on
the purchase of rice while making payment to the recipients. The Assessing
Officer has rightly charged and assessed the tax on the purchase of rice.
Hence, there is no infirmity in the impugned appellate order; we accordingly
reject the appeal of the appellant under this head. As far as the alleged
default on account of non-deduction of tax on salaries is concerned, on this
account, the case is remanded to the Assessing Officer for de-novo proceedings
with the direction to finalize the order in accordance with law after affording
sufficient opportunity of being heard to the taxpayer. The taxpayer is also
directed to avail this further opportunity by way of making sure his presence
during assessment proceedings along with complete documentary evidence
possessed by him. We order accordingly.
8. Appeal is disposed of in the above
terms. This order consists of (06) pages and each page bears my signature.
|
Sd/- |
Sd/- (M.M.
AKRAM) JUDICIAL
MEMBER |
|
(NADIR
MUMTAZ WARRAICH) ACCOUNTANT
MEMBER |
|
CERTIFICATE U/S 5 OF THE LAW REPORT ACT
This case is fit for
reporting as it settles the principles highlighted above.
(M. M. AKRAM)
JUDICIAL MEMBER
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