APPELLATE TRIBUNAL
INLAND REVENUE, DIVISIONAL BENCH-1,
ISLAMABAD
(Tax Year 2010)
********
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M/s Weather Ford Drilling International (BVI) Ltd. Company House No.13A, St. # 50, F-8/4, Islamabad. (NTN 3145523-9) |
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Appellant |
|
|
VS |
|
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Commissioner
Inland Revenue, Zone-I, LTU, Islamabad |
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Respondent
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Appellant
by |
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Mr. Rashid Ahmed Qureshi, FCA |
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Respondent
by |
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Mr. Faheem Sikandar, DR |
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Date
of hearing |
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09.03.2020 |
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Date
of order |
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09.03.2020 |
O R D E R
M. M. AKRAM (Judicial Member):
The titled appeal has been filed by the appellant/taxpayer against an Order
No.785/2012 dated 20.12.2012 passed by the learned Commissioner Inland Revenue
(Appeals-II), Islamabad for the Tax Year 2010 on the grounds as set forth in
the memo of appeal.
2. Brief facts giving rise to the appeal are that the appellant is a non-resident company and a branch of Weather Ford Drilling International (BVI) Limited (WDI), a limited liability company incorporated in the British Virgin Islands. The appellant commenced its operations from July 1, 2008, and is engaged in the execution of contracts for drilling wells for oil and gas exploration companies. The appellant filed its income tax return for the tax year 2010 on May 16, 2011, whereby taxable income for the year was declared at Rs.341,401,803/- after Workers’ Welfare Fund (WWF) liability of Rs.5,417,661/-. This income was adjusted against brought forward losses of (Rs.3,726,187,835/-) and balance loss of (Rs.3,384,786,032/-) was carried forward to the tax year 2011. The following taxes were paid and deducted at source and subsequently were claimed as refundable:-
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Tax paid/deducted at source:- |
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Rupees |
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-
Imports |
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10,776,315 |
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-
Services |
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141,147,446 |
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|
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151,923,761 |
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Less: WWF liability |
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5,417,661 |
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Balance refundable |
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146,506,136 |
The return so filed by the appellant was treated to be an assessment order under section 120(1)(b) of the Income Tax Ordinance, 2001 (“the Ordinance”). The appellant taxpayer filed refund application under section 170 of the Ordinance on 02.02.2012 by claiming refund of Rs.146,506,136/- which was disposed of by the Assessing Officer vide order under section 170 of the Ordinance on 08.06.2012 inter alia observing that :-
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S.Noo |
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Tax deducted/paid claimed as per return on account of |
Amount |
Amount |
Remarks |
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|
|
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verified |
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||
|
|
|
|
|
|
||
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1 |
- |
Imports
|
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10,776,315 |
8,635,857 |
- |
|
2 |
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Services
|
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141,147,4466 |
- |
Not
refundable by virtue of |
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|
|
|
|
|
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section
153(3)(b). |
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|
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Less
tax paid |
- |
5,417,661 |
- |
|
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Net amount refundable |
- |
3,218,196 |
- |
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Being aggrieved of the order passed by the Assessing Officer, the appellant preferred an Appeal before Commissioner Inland Revenue (Appeals-II), Islamabad, who decided the case against the appellant vide order No.785/2012 dated 20.12.2012. The appellant still feeling aggrieved by the said order preferred an appeal before this Tribunal and has assailed the impugned order on a number of grounds.
3. This case came up for hearing on 09.03.2020. The learned AR of the appellant reiterated the same grounds as contemplated in the memo of appeal. On the other hand, the learned DR opposed the arguments advanced by the learned AR and submits that the learned CIR(A) has rightly rejected the appeal of the appellant and passed a speaking order after dilating upon the issue raised before him. Thus, there is no infirmity in the impugned appellate order. He, therefore, prays for the rejection of the appeal.
4. We have considered the arguments of both the parties and have also perused the relevant orders as well as case-laws relied upon by the learned AR of the appellant. The submissions made on behalf of the appellant have substance. The following questions emerge from the records which are required to be considered and dilated upon by this Tribunal while deciding the instant appeal:-
i). Whether under the facts and in the circumstances of the case, the provisions of section 153 and in particular section 153(3)(b) of the Ordinance substituted through Finance Act, 2011 having a retrospective effect and are applicable for the tax year 2010?
ii). Whether under the facts and in the circumstances of the case, the provisions of section 153 and in particular section 153(6)(iii) of the Ordinance prior to substitution of section 153 through Finance Act, 2011 is relevant and the case of the appellant falls under the said provisions?
iii). Whether under the facts and in the circumstances of the case, the Assessing Officer has erred in law in calculating and determining the appellant’s tax liability under section 170 of the Ordinance by applying the provisions of section 153 and in particular section 153(3)(b) of the Ordinance substituted through Finance Act, 2011 without first invoking the provisions of section 122 of the Ordinance?
iv). Whether under the facts and in the circumstances of the case, the appellant was obliged to pay Workers’ Welfare Fund (WWF) on the basis of the amendments made in the WWF Ordinance, 1971 through Finance Acts, 2006 and 2008?
In order to appreciate the divergent views of
the parties, it would be appropriate to first examine and review the relevant
provisions of section 153 of the Ordinance prior to the substitution of section
153 through the Finance Act, 2011. The relevant provision then read as:
"153. Payments for goods, services, and
contracts:-(1) Every prescribed person making a payment in full or part
including a payment by way of advance to a resident
person or permanent
establishment in Pakistan of a non-resident person-
(a)
for the sale of goods;
(b)
for the rendering of or providing of services;
(c)
on the execution of a contract, other than a contract for the sale of goods or
the rendering of or providing of services, shall, at the time of making the
payment, deduct tax from the gross amount payable at the rate specified in
Division III of Part-III of the First Schedule.
(3) Omitted by Finance Act, 2006
(6)
The tax deducted under this section shall be a final tax on the income of a resident person arising from
transactions referred to in sub-section
(1) and (1A):
Provided
that sub-section (6) shall not apply to companies in respect of transactions
referred to in clause (b) of sub-section (1):
Provided
further that this sub-section shall not apply to payments received on account
of-
(i) advertisement services, by owners of newspapers and magazines;
(ii) sale of goods and
execution of contracts by a public company listed on a registered stock
exchange in Pakistan; and
(iii) the rendering of or providing of services referred to in sub-clause
(b) of sub-section (1):
Provided that tax deducted under sub-clause (b) of sub-section (1) of section 153 shall be minimum tax. (Emphasis supplied)
5. A careful reading of the provisions of section 153 of the Ordinance, as reproduced above, inter alia, mandates that firstly, under sub-section (1), every "prescribed person" (duly defined in sub-section (7) of section 153) is required to deduct tax at the time of making payments to a resident person or permanent establishment in Pakistan of a non-resident person in respect to the sale of goods, providing or rendering of services, or on the execution of certain contracts, at the rate specified in Division III of Part III of the First Schedule to the Ordinance. Secondly,sub-section (6), subject to certain exclusions provides that taxes so deducted under sub-section (1) or (IA) would be deemed to be the final tax on the income of a resident person only arising from the said transactions, and the tax deducted under sub-clause (b) of sub-section (1) of section 153 shall be a minimum tax on the income of a resident person.
6. Subsequently,
through Finance Act, 2011 certain amendments were made in the Ordinance and
section 153 of the Ordinance was substituted. The relevant provision of
sub-section (3) of section 153 is reproduced hereunder which is the subject
matter of controversy inter se:-
“153(3) The tax deducted under clauses (a) and (c) of
sub-section (1) and under sub-section (2) of this section, on the income of a resident person or permanent establishment in Pakistan of a
non-resident person, shall be a final tax.
Provided
that,--
(a)
………………
(b)
Tax deducted shall be minimum tax on transactions referred to in
clause (b) of sub-section (1);
and
(c)
……………..”(Emphasis
supplied)
It can be seen from the plain reading of the above provisions of law that after substitution of sub-section (3) through Finance Act, 2011 the tax deducted on the transactions referred to in clause (b) of sub-section (1) is a minimum tax on the income of a resident person or permanent establishment in Pakistan of a non-resident person without any exception. It is quite significant to note that prior to the said amendment, the tax deducted on transactions referred to in clause (b) of sub-section (1) subject to certain exclusion was to be considered as minimum tax on the income of resident person only in terms of sub-section (6)(iii) of section 153 of the Ordinance and the permanent establishment in Pakistan of a non-resident person was intentionally excluded from the purview of minimum tax. It is also quite significant to note that through Finance Act, 2012 the words “permanent establishment in Pakistan of a non-resident person” were omitted in section 153(3) by virtue of which again the permanent establishment in Pakistan of a non-resident the person was excluded from the purview of minimum tax. The expressions “resident person”, “non-resident person” and “permanent establishment” have been defined in sections 2(52), 2(37), and 2(41) of the Ordinance respectively.
7. Now
we come to question No. (i) as to whether the
provisions of section 153(3)(b) of the Ordinance substituted through Finance
Act, 2011 having a retrospective effect and is applicable for the tax year
2010? The Assessing Officer vide order dated
08.06.2012 passed under section 170 of the Ordinance observed that the tax
deducted on payments made on account of rendering or providing of services
falls under the minimum tax regime for the year under consideration by virtue
of newly substituted sub-section (3)(b) of section 153 through Finance Act,
2011, as reproduced above and as such, the appellant was not entitled to any
tax credit or refund for the tax deducted on payments made on account of
rendering or providing of services. The crucial point of divergence between the
parties is the applicability of section 153(3)(b) substituted through Finance
Act, 2011, and in simple terms, the contest is as to whether the same would
apply to the case of the appellant for the tax year 2010 which relates to the
period commencing from 1st July 2009 till 30th June 2010 or otherwise?
8. It is a settled principle of statutory interpretation that the applicability of enactment can best be adjudged from its expressed content and implied intent. When the enactment itself provides for the same to have effect from a particular point in time, the express command of the legislature is to be abided, interpreted, and applied accordingly. In the present case, the Finance Act, 2011 provides:
"1.
Short title, extent and commencement:- (1) This Act may be called the
Finance Act, 2011.
(2) It extends to the whole of Pakistan.
(3) It shall, unless otherwise provided, come into force on the
first day of July, 2011."(Emphasis supplied)
Sub-section (3) of section 1 of the Finance
Act, 2011, highlighted above, clearly and expressly provides for its provisions
to take effect from 1st July 2011. This being so, there can be no cavil to its
applicability commencing from 1st July 2011 and not for any period prior
thereto.
9. With regards to the contention of the learned DR that the amendments related to the procedure, and would thus have a retrospective effect on the case of the appellant, we are afraid this line of argument, though attractive, is not applicable to the facts of the present case. Like any other fiscal enactment, the Ordinance provides for three distinct types of provisions. The charging provisions, which relate to the levy or charge of the tax, which usually state that tax is to be levied and on what matters, or goods or income and in which manner and at what rate and matters relevant thereto. The assessment provisions, which deal with the assessment, calculation, or quantification of the tax for the purposes of determining the amount of tax due and payable or which has escaped collection or has been under-assessed or assessed at a lower rate or on which excessive relief or refund has been allowed. The collection provisions, which relate to the mode and manner of receipt or collection of the tax. The charging sections have to be strictly construed and any benefit found therein has to be given to the tax-payer. However, the assessment and collection provisions are merely the machinery sections and they can be liberally construed. The aforesaid categorization of provisions of fiscal statutes has been very aptly explained in detail by His Lordship Mr. Justice. Rustam S. Sidhwa, in M/s Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax, Lahore and others (PLD 1989 Lahore 337).
10. Now,
to the crucial issue of applicability of amendments introduced in fiscal
statutes. It was in 1905, when Lord Macnaghten, in The Colonial Sugar Refining
Company v. Irving (1905 AC 369) case, speaking for the Privy
Council, opined that:
"As
regards the general principles applicable to the case there was no controversy.
On the one hand, it was not disputed that if the matter in question be a matter
of procedure only, the petition is well founded. On the other hand, if it be
more than a matter of procedure, if it touches a right in existence at the
passing of the Act, it was conceded that, in accordance with a long line of
authorities extending from the time of Lord Coke to the present day, the appellants
would be entitled to succeed. The Judiciary Act is not retrospective by express
enactment or by necessary intendment. And therefore the only question is, was
the appeal to His Majesty in Council a right vested in the appellants at the
date of the passing of the Act, or was it a mere matter of procedure? It seems
to their Lordships that the question does not admit of doubt. To deprive a
suitor in a pending action of an appeal to a superior tribunal which belonged
to him as of right is a very different thing from regulating procedure. In principle,
their Lordships see no difference between abolishing an appeal altogether and
transferring the appeal to a new tribunal. In either case, there is an
interference with existing rights contrary to the well-known general principle
that statutes are not to be held to act retrospectively unless a clear
intention to that effect is manifested."
The above principle of interpretation of
statutes was followed and further developed by the Hon’ble Supreme Court of
Pakistan. Some of the leading cases are Muhammad Ishaq v. State (PLD
1956 SC 256), Nagina Silk Mill, Lyallpur v. Income Tax Officer, A-Ward, Lyallpur
(PLD 1963 SC 322), The State v. Muhammad Jamel (PLD 1965 SC 681) and Abdul
Rehman v. Settlement Commissioner (PLD 1966 SC 362). It was the
case of Adnan Afzal v. Capt. Sher Afzal (PLD 1969 SC 187) that
the said principle was articulated by the Hon’ble Supreme Court in terms that:
"Nevertheless, it must be pointed out that if in this case process any existing rights are affected or the giving of retroactive operation cause inconvenience or injustice, then the Courts will not even in the case of a procedural statute, favour an interpretation giving retrospective effect to the statute. On the other hand, if the new procedural statute is of such a character that its retroactive application will tend to promote justice without any consequential embarrassment or detriment to any of the parties concerned, the Courts would favourably incline towards giving effect to such procedural statutes retroactively."
The opinion of the Apex Court, rendered in the
above referred cases, has remained un-wavered, as can clearly be seen from
decisions that followed, in particular Ch. Safdar Ali v. Malik Ikram Elahi and
another (1969
"……….. was not permissible as certain rights had already come
to vest in the respondents on the date on which they had filed their tax
returns under the original section…..."
The Hon’ble Supreme Court also went on to
reiterate the view taken earlier in the Nagina Silk Mill case (supra):
"The Courts must lean against giving a statute retrospective operation on the presumption that the Legislature does not intend what is unjust. It is chiefly where the enactment would prejudicially affect vested rights, or the legality of past transactions, or impair existing contracts, that the rule in question prevails ... Even if two interpretations are equally possible, the one that saves vested rights would be adopted in the interest of justice, especially where we are dealing with a taxing statute."
Thus, the judicial consensus, as it stands
today, are that firstly, unless the statute expressly provides otherwise,
charging provisions are to be applied prospectively. Secondly, the assessment
and recovery provisions are to be considered retrospectively unless the
enactment expressly or impliedly provides otherwise.
11. When we revisit the provisions contained in section 153 of the Ordinance substituted through Finance Act, 2011, and in particular sub-section (3)(b) of the Ordinance in the light of the above discussed settled principles of interpretation, it prima facie established that sub-section (1) mandates that every "prescribed person" is obliged to deduct tax at the time of making payments to a resident person or permanent establishment in Pakistan of a non-resident person in respect to sale of goods, or providing, or rendering of services, or on execution of certain contracts, at the rate specified in Division III of Part III of the First Schedule to the Ordinance, while subsection (3)(b) specifically provides that tax deducted shall be a minimum tax on transactions referred to in clause (b) of sub-section (1) resultantly a resident person or permanent establishment in Pakistan of a non-resident person shall not be entitled to take any tax credit or refund on payments made on account of rendering or providing of any services. In the case in hand, the amendment had transposed the appellant’s tax liability from the entitlement of tax credit or refund to a minimum tax, resultantly having negative tax implications. In the circumstances, even if we regard the amendment to be procedural in nature, it would not have retrospective effect, as valuable rights had already accrued and matured in favour of the appellant at the moment when the tax was deducted as required under sub-section (1) of section 153 ibid. Any other interpretation will violate section 1(3) of the Finance Act, 2011, and the law laid down by the Apex Court cited supra.
12. In view of the above
deliberation, the answer to question No. (i) is in negative, the provisions of
sub-section (3)(b) of section 153 substituted through Finance Act, 2011 would not apply
retrospectively for the tax year 2010.
13. To answer the second question as to whether the provisions of section 153 and in particular section 153(6)(iii) of the Ordinance prior to substitution of section 153 through Finance Act, 2011 is relevant and the case of the appellant falls under the said provision? We have to glance on the provisions of sub-sections (1), in juxtaposition with sub-section (6) of section 153 of the Ordinance, as reproduced above. In sub-section (1) two expressions i.e “resident person” and “permanent establishment in Pakistan of a non-resident person” have been used intentionally by the legislature for the purpose of deduction of tax at source by the prescribed person while making payments to them. Whereas in sub-section (6) of section 153, the legislature has intentionally used only one expression “resident person” by declaring that the tax deducted under sub-section (1) and (1A) shall be a final tax on the income of a resident person subject to the certain exclusion and the tax deducted under sub-clause (b) of sub-section (1) of section 153 shall be a minimum tax on the income of a resident person in terms of clause (iii) of sub-section (6). The Ordinance has independently and separately defined the words “resident person”, “non-resident person” and “permanent establishment in Pakistan” under sections 2(52), 2(37), and 2(41) respectively. In the instant case, undisputedly, the appellant is a permanent establishment in Pakistan of a non-resident person does not come within the ambit of sub-section (6). Rules of interpretation of a statute do not permit any Court/Tribunal or Authority to restrict or enlarge the meaning of express words used in the statute. It is settled law that when legislature provides something at one place and ignoring the same at another place, the ignorance is deliberate that the legislature consciously intended it. Reference is made to the following judgments, the relevant extracts thereof are reproduced below for ease of reference:-
(i) [(1981) 44 Tax 1 (SC)]
“Where the legislature wanted that limitation on expenses should be reflected in income tax law for the purposes of taxation it expressly incorporated it as in rule 2 where the intention was to exclude it, an omission was made as in rule 6. It cannot on any principle of interpretation of statute be urged that the legislature so alive to the issue, by an omission accomplished similar results as was done by it by providing for it by express words. If at all any conclusion can be drawn by such inclusion in rule 2 and exclusion in rule 6 with a definition of management expense in rule 5, it is that for one rule specified limitation had to be given effect to while none could be read into the other”.
(ii) [(1995) 71 Tax 17 (Trib)]
In sub-section (1) of Section 156, an Income-tax Authority as well as the Appellate Tribunal have been empowered to amend an order passed by them by way of rectification. However, while prescribing period of limitation for rectification in sub-section (3) of Section 156 the expression “Appellate Tribunal” is conspicuous by absence. It only speaks of any mistake brought to the notice of any income-tax authority by the assessee and does not refer to the bringing of mistake to the notice of Income-tax Appellate Tribunal. The position is further clarified with the provisions contained in section 3 of the Income-tax Ordinance, 1979 wherein the classes of income-tax authorities have been specified. …………………….
10. A perusal of above section shows that the Income-tax Appellate Tribunal is not included in the income-tax authorities and, therefore when sub-section (1) of section 3 of the Income-tax Ordinance is read with sub-section (1) and sub-section (3) of Section 156 it becomes absolutely clear that the Income-tax Appellate Tribunal is not included in the expression “income-tax authority” and, therefore, the period limitation provided in sub-section (3) of Section 156 of the Income-tax Ordinance for the disposal of rectification application is not applicable to the Income-tax Appellate Tribunal.
(iii) 1986 PTD 408 (Trib)
It· may be noted that the powers given 'to the Commissioner of Income-tax under section 33-A are similar to those given to an Inspecting Assistant Commissioner under section 34-A. However, a number of Imitations have been imposed on his powers under that section. One such limitation is that where an appeal is filed to the Appellate Assistant Commissioner or to the appellate Tribunal and the appeal is pending before such an appellate authority, the Commissioner of Income-tax is debarred from exercising powers under section 33-11. But no corresponding Imitation has been imposed on the powers of the Inspecting Assistant Commissioner under section 34-A. These two sections bring into focus sharp contrast between the powers of the Commissioner of Income-tax and the Inspecting Assistant Commissioner under the two different sections which means that the legislature consciously omitted to impose such limitations on the powers of the Inspecting Assistant Commissioner as have been imposed on the powers of the Commissioner of Income-tax. It is a settled rule of interpretation that where the Legislature makes specific provision .at one place and omits it at another, it would be assumed that Legislature consciously and deliberately intended it.”
We, therefore, have no two opinions that the appellant
being permanent establishment in Pakistan of a non-resident person, is not
covered in sub-section (6) of section 153 of the Ordinance. The
legislature itself while enacting the latest provisions of section 153
substituted through Finance Act, 2011 in the Income Tax Ordinance of
2001, was conscious of the fact that such permanent
establishment in Pakistan of a non-resident person is not so included in the
earlier sub-section (6) of section 153 of the Ordinance. While
substituting section 153 of the Ordinance, such person was included in
sub-section (3) of section 153. Section 153(3)(b) of the Ordinance
reads as under:-
“153(3). The tax
deducted under clauses (a) and (c) of sub-section (1) and under sub-section (2)
of this section, on the income of a resident
person or permanent
establishment in Pakistan of a non-resident person, shall be a final
tax.
Provided
that,--
(j)
………………
(k)
Tax deducted shall
be minimum tax on transactions referred to in clause (b) of sub-section (1); and
(l)
…………………..”
(Emphasis supplied)
This subsequent inclusion of permanent establishment in Pakistan of a non-resident person by a positive act of legislation is conclusive proof of the fact that the same were excluded in the earlier provision. Consequently, we hold that under section153(6) of Ordinance, the appellant is not covered in the said sub-section and the tax deducted on transactions referred to in clause (b) of sub-section (1) of section 153 shall not be considered as a minimum tax on the income of a permanent establishment in Pakistan of a non-resident person. Reliance may be placed on the judgment of the Hon’ble Supreme Court of Pakistan titled as Commissioner of Income Tax/Wealth Tax Companies Zone-II, Lahore Vs M/s Lahore Cantt Cooperative Housing Society, Lahore and 7 others (2009 PTD 799). In the said judgment it was held by the Hon’ble Supreme Court that the societies are not covered by the definition of the Company as provided in section 2(16)(b) of the repealed Income Tax Ordinance, 1979. While enacting Income Tax Ordinance of 2001, such Cooperative Societies were included in the definition of Company. This subsequent inclusion of Cooperative Societies by a positive act of legislation is conclusive proof of the fact that the same were excluded in the earlier enactment.
Therefore, for forgoing reasons, the answer to this question is
also in negative.
14. Now let us come to the third question as to whether the Assessing Officer has erred in law in calculating and determining the appellant’s tax liability under section 170 of the Ordinance by applying the provisions of section 153 and in particular section 153(3)(b) of the Ordinance substituted through Finance Act, 2011 without first invoking the provisions of section 122 of the Ordinance? As stated in para 9 above, in a fiscal statute there are three types of provisions i.e charging provision, assessment provisions, and recovery provisions. The aforesaid categorization of provisions of fiscal statutes has been very aptly explained in detail by His Lordship Mr. Justice. Rustam S. Sidhwa, in M/s Friends Sons and Partnership Concern v.The Deputy Collector Central Excise and Sales Tax, Lahore and others (PLD 1989 Lahore 337). According to His Lordship Mr. Justice. Rustam S. Sidhwa, the assessment provisions, which deal with the assessment, calculation, or quantification of the tax for the purposes of determining the amount of tax due and payable or which has escaped collection or has been under assessed or assessed at a lower rate or on which excessive relief or refund has been allowed. Therefore, according to the said judgment, the only course available to the assessing officer was to invoke the provisions of section 122 of the Ordinance to amend an assessment treated as issued under section 120 of the Ordinance for the purposes of determining the tax liability of the appellant and to consider and decide that the tax deducted at source on the payments made on the transactions referred to in clause (b) of sub-section (1) of section 153 comes within the ambit of minimum tax on the income of the appellant or otherwise. Under section 170 the power of issuance of refund does not include the power to discuss the nature of business of the taxpayer as well as dilation on the issue whether the same is a case of presumptive income or not. Reliance is placed on 2008 PTD 332(Trib). The duty of refunding authorities is controlled to the extent of cross check of documents for calculation of the amount of refund only and to satisfy that no other tax was outstanding against him before issuance of a refund. Reliance may be placed on 2009 PTD 654. In the instant case, admittedly the deemed order has not been amended under section 122 of the Ordinance, therefore, the deemed order had attained finality. The assessing officer could not in the grab of provisions of section 170 of the Ordinance determine the tax liability of the appellant. Under the Ordinance, the power to amend an assessment order is a different concept having its own parameters as provided under section 122 of the Ordinance whereas the claim of refund is adjudicated under section 170 of the Ordinance having its own attributes. Therefore, the action taken by the assessing officer under section 170 is illegal and void ab-initio. Reliance is placed on the case titled Commissioner Inland Revenue Vs Muhammad Ali, 2016 PTD 377(H.C).
15. As far as the last question with respect to the levy of WWF on the basis of the amendments made in Worker’s Welfare Ordinance, 1971 through Finance Acts 2006 and 2008 is concerned, the submissions made on behalf of the learned AR have substance. We have noted that by virtue of amendments made through Finance Acts 2006 and 2008 in the WWF Ordinance, the appellant was liable to pay WWF. The vires of these amendments were challenged before different High Courts by the taxpayers. Three Hon’ble High Courts had already considered and delivered exhaustive judgments on the question of the vires of the amendments made through the Finance Acts, 2006 and 2008. The Full Bench of the Hon’ble Sindh High Court in the case titled as M/s Shahbaz Garments (Pvt.) Ltd Vs Pakistan (2013 PTD 969), after exhaustively examining the law adjudged the impugned levy to be a tax and, therefore, validated the introduction and enactment thereof through a Money Bill. The Hon’ble Lahore High Court, on the other hand, in East Pakistan Chrome Tannery’s case reported as (2011 PTD 2643) and M/s Azgard Nine Ltd, v. Pakistan through Secretary and others” PLD 2013 Lahore 282, has declared the impugned levy, made through the amendments in the WWF Ordinance of 1971 vide the Finance Acts, 2006 and 2008 as a fee and not a tax, and thus struck down the legislation as being ultra vires. The Peshawar High Court, through judgment dated 29-05-2014 in Associated Industries Limited, Amangarh Industrial Area, Nowshera and others v. Federation of Pakistan in W.P. No. 1425/2010, after discussing in detail the judgments of the Sindh High Court and the Lahore High Court and other precedent law, declared the amendments made through Money Bills as ultra vires.
It is, therefore, obvious that three distinct High Courts had delivered exhaustive and well-reasoned judgments regarding the vires of the amendments made in the Worker’s Welfare Fund Ordinance, 1971 through Finance Acts, 2006 and 2008. Thus, the divergent views of the Hon’ble High Courts were in the field. However, finally, the amendments made through Finance Acts, 2006 and 2008 in the WWF Ordinance were taken into consideration and dilated upon by the Hon’ble Supreme Court of Pakistan in the case titled Workers Welfare Funds, M/s Human Resources Development, Islamabad and others Vs East Pakistan Chrome Tannery (Pvt.) Ltd and others (PLD 2017 SC 28) wherein the amendments were declared ultra vires. The relevant extract of the judgment is reproduced hereunder:-
“22. As we have established from
the discussion above that none of the subject contributions/payments made under
the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968,
the Act of 1968 and the Ordinance of 1969 possess the distinguishing feature of
a tax, i.e. a common burden to generate revenue for the State for general
purposes, instead they all have some specific purpose, as made apparent by
their respective statutes, which removes them from the ambit of a tax.
Consequently, the amendments sought to be made by the various Finance Acts of
2006, 2007 and 2008 pertaining to the subject contributions/ payments do not
relate to the imposition, abolition, remission, alteration or regulation of any
tax, or any matter incidental thereto (tax). We would like to point out at this
juncture that the word ‘finance’ used in Finance Act undoubtedly is a term
having a wide connotation, encompassing tax. However, not everything that
pertains to finance would necessarily be related to tax. Therefore, merely inserting
amendments, albeit relating to finance but which have no nexus to tax, in a
Finance Act does not mean that such Act is a Money Bill as defined in Article
73(2) of the Constitution. The tendency to tag all matters pertaining to
finance with tax matters (in the true sense of the word) in Finance Acts must
be discouraged, for it allows the legislature to pass laws as Money Bills by
bypassing the regular legislative procedure under Article 70 of the
Constitution by resorting to Article 73 thereof which must only be done in
exceptional circumstances as and when permitted by the Constitution. The
special legislative procedure is an exception and should be construed strictly
and
its operation restricted. Therefore, we are of the candid view that since the amendments relating to the subject contributions/ payments do not fall within the parameters of Article 73(2) of the Constitution, the impugned amendments in the respective Finance Acts are declared to be unlawful and ultra vires the Constitution.”
16. By following the judgment of the Hon’ble
Supreme Court of Pakistan, the answer to the question no. (iv) is also in
negative. The appellant is not required to pay the WWF resultantly the amount
paid under this head is directed to be refunded to the appellant.
17. For
what has been discussed above, the appeal of the appellant is accepted and the
orders passed by the lower authorities are annulled.
18. This order consists of (17) pages and each
page bears my signature.
Sd/-
(M.M. AKRAM)
Sd/- Judicial
Member
(IMTIAZ AHMAD)
Accountant Member
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