M/s Haidri Beverages (Pvt) Ltd; Vs Commissioner Inland Revenue, Zone-II, LTU, Islamabad

 

APPELLATE TRIBUNAL INLAND REVENUE, DIVISIONAL BENCH-I,

ISLAMABAD

ITA No.1117/IB/2019

(Tax Year 2013)

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M/s Haidri Beverages (Pvt) Ltd; CDA Industrial Triangle Kahuta Road, Islamabad.		Appellant
	VS
Commissioner Inland Revenue, Zone-II, LTU, Islamabad		Respondent
Appellant by		Mr. Sajid Ijaz Hotiana, Advocate
Respondent by		Mr. Faheem Sikandar, DR
Date of hearing		18.08.2020
Date of order		18.08.2020

O R D E R

M M Akram, Judicial Member:-  This appeal of the appellant taxpayer is directed against the impugned Order in Appeal No.64/2019 dated 07.10.2019 passed by the learned Commissioner Inland Revenue (Appeals-I), Islamabad for the tax year 2013 on the grounds as set forth in the memo of appeal.

2.       The background giving rise to the issues, now being assailed before us, is pivotal and hence, required to be taken into account for the purposes of the comprehension of the matter and the disposal of the appeal. The appellant is a Private Limited Company, engaged in the business of manufacturing and sale of soft drinks under the brand name of the “Pepsi” family. The appellant filed its income tax return for the tax year 2013 at a total income of Rs.271,703,339/ which was treated to be an assessment order under section 120(1)(b) of the Income Tax Ordinance, 2001 (“the Ordinance”).  Subsequently, on examination of return and the relevant record, it was found by the Additional Commissioner Inland Revenue (ACIR) that the deemed order is erroneous in so far as prejudicial to the interest of revenue. In consequence thereof, the proceedings were initiated under section 122(5A) of the Ordinance on a number of grounds duly incorporated in the amended order dated 30.03.2019. However, after considering the reply to the show-cause notice, the ACIR passed the amended order and only disallowed the claim of adjustment/credit of minimum tax amounting to Rs.9,258,175/- paid for the tax year 2008 under section 113(2)(c) of the Ordinance against the tax payable for the tax year 2013 by relying upon the judgment of the Hon’ble Sindh High Court in the case titled as Commissioner Inland Revenue, Zone-II, Karachi vs. M/s Kasim Textile Mills (Pvt) Limited, Karachi, 2013 PTD 1420. Following is the detail of income declared for the year under consideration and Minimum Tax carried forward and adjusted under section 113(2)(c) ibid for the Tax Year 2013 by the appellant:-

“In the tax year 2013 Income Tax Return was filed declaring the following taxable income, income tax liability and tax paid thereon for the year: 

Taxable Income	271,703,339
Tax payable under normal law (since it is greater than the minimum of Rs.30,809,004, therefore, no minimum tax payable).	95,096,169
Tax liability under the final tax regime.	278,471
Total tax payable for the Tax Year 2013	95,374,640

 Bifurcation of Income-tax of Rs.95,374,640/- paid for the Tax Year 2013 is as under: 

Tax paid/deduction during the Tax Year 2013	43,307,848
Minimum tax adjusted u/s 113 (2)(c). (detail below)	43,755,544
Refund adjusted for the tax year 2011	6,916,518
Refund adjusted for the tax year 2012	88,272
Tax paid with Return	1,306,458
Total Tax payments/adjustments	95,374,640

 Detail of minimum tax adjusted for the Tax Year 2013 of Rs. 43,755,544/- is as under: 

Tax year	Normal Tax	Minimum Tax	Excess minimum tax paid claimable	Claimed in the tax year 2013
2011	16,324,194	39,825,775	23,501,581	23,501,581
2010	11,665,516	22,661,305	10,995,789	10,995,789
2008	0	15,765,462	15,765,462	9,258,174

 

Total minimum tax claimed/adjusted in tax year 2013

43,755,544

 Since for the Tax Year 2008, no tax was payable or paid under the normal law (and the entire liability consisted of minimum tax); therefore, the Department disallowed the carry forward and adjustment of the minimum tax pertaining to the Tax Year 2008 of Rs.9,258,174/-. The excess of the minimum tax (15,765,462-9,258,174 = 6,507,288) has lapsed due to time limitation as prescribed in the proviso to section 113(2)(c) of the Ordinance.” 

Against the amended order dated 30.03.2019, the appellant/taxpayer preferred an appeal before the learned Commissioner Inland Revenue (Appeals-I), Islamabad who vide order dated 07.10.2019 confirmed the treatment meted out by the ACIR. Aggrieved with this order, the appellant has now come before this tribunal and assailed the impugned appellate order on a number of grounds.

3.       This case came up for hearing on 18.08.2020. The learned AR of the appellant went through section 113 of the Ordinance in some detail to highlight the intent, purpose, and scope of the provisions of sub-section (1) and (2). It was submitted that sub-section (1) of section 113 of the Ordinance is not a charging provision rather a machinery provision. This sub-section merely describes the eventualities where this sub-section would apply without providing about the income to be charged to tax under this section or the rate of tax. It was submitted that in fact, it is sub-section (2) which qualifies to be a charging section. Further argued that the Hon’ble Sindh High Court has not only erred but have also misdirected itself while construing clause (c) of sub-section (2) omitted to consider clauses (a) and (b) which precede clause (c). In fact, while reproducing section 113 in its judgment, the Hon’ble High Court has not reproduced the first two clauses which, submitted with the utmost respect, has resulted in misconstruction of clause (c). For a proper interpretation of clause (c), all the three clauses are to be read in the sequence in which the same are available. The learned AR further stated that the Hon’ble High Court while interpreting section 113, and more particularly clause (c) of sub-section (2) omitted to consider the intent or purpose of the provision altogether. It has been stated that the Hon’ble High Court has misconstrued the provision of section 113(2)(c) on assumption thereby treating the claim of adjustment and carry forward of unadjusted/excess tax as “exemption”. The learned AR has also relied upon the judgment of the Hon’ble Lahore High Court titled CIR Vs M/s Education Excellence Ltd, ITR No.255/16 which is later in time, and the reference application filed by the Department was dismissed. In the said case, the judgment of the Hon’ble Sindh High Court was duly referred and considered. It was prayed that the appeal be allowed.

4.       On the contrary the learned DR for the Department, submitted that the view taken by the Hon’ble Sindh High Court was correct and to be preferred over the view taken by the Hon’ble Lahore High Court. It was submitted that the Hon’ble Lahore High Court has not dilated upon the issue in detail rather dismissed the reference of the Department on the sole ground that the question framed by it does not raise any legal issue. He, therefore, prays for the dismissal of the appeal.

5.       We have heard both the parties and perused the available record. The question in the instant appeal relates to the interpretation of section 113 of the Ordinance and more particularly provisions of section 113(2)(c) which gives benefit to the taxpayer to adjust and carry forward of unadjusted/excess tax paid under section 113 exceeds the actual tax payable under Part-I, Division-II of the First Schedule to the Ordinance against the tax liability under the aforesaid Part of the subsequent tax year. The appellant's stance is that it qualifies the said benefit given in the aforesaid provisions of law. However, the impugned order on the basis of the judgment of the Hon’ble Sindh High Court has put a different construction on the relevant provisions of the Ordinance and disallowed the credit under section 133(2)(c) of the Ordinance to the tune of Rs.9,258,175/-. Therefore, it will be convenient to begin by setting out the relevant statutory provisions. Section 113 of the Ordinance has undergone a number of changes, but for our present purpose, only construction of sub-section (2)(c) of section 113 of the Ordinance is relevant. Such subsection has remained the same in essence over the years. Section 113 is, therefore, reproduced hereunder:-

“113. Minimum tax on the income of certain persons.- (1) This section shall apply to a resident company, an individual having turnover of ten million rupees or above in the tax year 2017 or in any subsequent tax year, and an association of persons having turnover of ten million rupees or above in the tax year 2017 or in any subsequent tax year where, for any reason whatsoever allowed under this Ordinance, including any other law for the time being in force—

(a)        loss for the year;

(b)        the setting off of a loss of an earlier year;

 (c)       exemption from tax;

(d)        the application of credits or rebates; or

(e)        the claiming of allowances or deductions (including depreciation and amortization deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than the percentage as specified in column (3) of the Table in Division IX of Part-I of the First Schedule of the amount representing the person’s turnover from all sources for that year.

……………………..

(2)       Where this section applies:

(a)        the aggregate of the person’s turnover as defined in sub-section (3) for the tax year shall be treated as the income of the person for the year chargeable to tax;

(b)        the person shall pay as income tax for the tax year (instead of the actual tax payable under this Ordinance) an amount equal to one percent of the person’s turnover for the year;

(c)        where tax paid under sub-section (1) exceeds the actual tax payable under Part I, Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year.

Provided that the amount under this clause shall be carried forward and adjusted against tax liability for five tax years immediately succeeding the tax year for which the amount was paid.”

6.       We begin by noting that there are three stages in the imposition of tax. In the case titled Whitney v. IR Commissioners (1926) 10 TC 88, in a well-known passage that has stood the test of time, Lord Dunedin spelled out the three stages of a tax (at the broadest plane) in the following terms:

"Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."

The above categorization of provisions of fiscal statutes has also been very aptly explained in detail as well by Rustam S. Sidhwa, J. in the case titled M/s Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax, Lahore and others (PLD 1989 Lahore 337). Now when the provisions of sub-section (1) and (2) of section 113 are tested on the touchstone of the aforesaid principles dilated upon in the aforesaid judgments, it is clearly established that sub-section (2) clause (a) and (b) qualifies to be the charging provision. Clause (a) provides what would be the income for the purpose of this section, and clause (b) provides the charge of minimum tax which at the relevant time was “an amount equal to one percent of the person’s turnover for the year”. Thus, sub-section (1) of section 113 of the Ordinance is not a charging provision rather it is a machinery provision. This sub-section merely describes the scope and eventualities that would apply without providing about the income to be charged to tax or the rate of tax. This point becomes further crystal clear when sub-section (1) is compared with section 4 of the Ordinance which is the main charging provisions of the Ordinance. Sub-section (1) of section 4 provides regarding the imposition of tax for each tax year as well as the rate of tax as specified in the First Schedule. Sub-section (2) of section 4 provides how the income tax payable shall be computed and so on and so forth. Clause (c) of sub-section (2) of section 113 provides the benefit in terms of carrying forward and adjustment of the minimum tax in subsequent tax years. Therefore, if any part of section 113 qualifies as a charging provision, it is clauses (a) and (b) of sub-section (2) rather than sub-section (1).

7.       Now when sub-sections (1) and (2) are compared one thing becomes very clear that sub-section (1) being a broadly worded provision separately provides the following two distinct situations: -

i.        Where no tax is payable or paid; or

ii.        The tax payable or paid is less than a specified amount (the minimum tax). 

In this sub-section, there is no reference to any actual tax payable. The entire emphasis is on the fact that the tax payable or paid is less than the minimum tax payable in terms of sub-section (2) and how much is the difference between the tax payable or paid and the minimum tax levied under this section is immaterial. It is for the first time in clauses (b) and (c) of sub-section (2) that the phrase “....actual tax payable” is used and not “actual tax paid”. This phrase takes its color from sub-section (1) and thus would include both the scenarios i.e. a situation where some tax is payable or paid and where no tax is payable or paid.  Further, this phrase is used both in clause (b) as well as clause (c). Quite naturally the same phrase when used twice in two clauses of the same sub-section and that too in a succession cannot mean two different things in two clauses rather it would carry the same meaning. Clause (b) which is a charging provision clearly and unambiguously provides that where section 113 would apply the taxpayer, instead of the actual tax payable under the Ordinance, shall pay the minimum tax. If the construction put by the Hon’ble Sindh High Court on clause (c) i.e. the phrase “actual tax payable” refers only to a situation where some tax is payable under the normal law and it excludes a situation where no tax is payable. Obviously, as per the interpretation of the learned High Court, a taxpayer who is not required to pay any amount of tax under normal law would stand excluded from clause (b) as well as from the application of the entire section 113.

This interpretation of section 113 [(and more particularly of clause (c)] produces two extraordinary results: -

i.       A taxpayer who declares taxable turnover for the purposes of this section but no income chargeable to tax under the normal law would not be liable to minimum tax in terms of clause (b) of sub-section (2) as there would be no actual tax payable; and 

ii.      Where a taxpayer pays no actual tax and the entire amount is paid as the minimum tax he would not be entitled to the benefit of clause (c). 

No canon of interpretation (as we will shortly discuss) would allow this interpretation of section 113 as it is plainly against the intention of the Legislature, or in other words, it violates the purpose of this piece of legislation. On the contrary, the very obvious intention behind section 113 is that every taxpayer who has chargeable turnover is required to pay a certain amount of minimum tax no matter the actual tax payable by him is nil or merely a fraction short of the minimum tax payable under this section. Therefore, the interpretation of this section would be legally correct which helps to achieve this purpose and every such interpretation is to be avoided which defeats this purpose.

Notwithstanding the aforesaid, had it been the intention of the legislature to give the benefit under section 113(2)(c) only to those persons where the tax payable or paid under the normal tax regime is less than a specified amount (the minimum tax) then the words “actual tax paid” would have been used in clause (b) and (c) of sub-section (2) of section 113 ibid instead of the words “actual tax payable”. 

8.       Now the next question would be as to what are the rules of interpretation applicable to fiscal statutes?  In this regard, it is now a settled proposition that there are no separate canons of interpretation of a fiscal statute. There is no rule that while interpreting a fiscal statute only a strict or a literal interpretation is to adhere even if it may lead to wholly unreasonable results. Since the judgment of the King’s Bench in the case of Cape Brandy Syndicate is usually referred, therefore, it would be appropriate to start a discussion with the judgments from the English jurisdiction. It is a settled rule of interpretation that in a fiscal statute or some other law the primary rule is to give effect to the intention of the Legislature. The Courts have now repeatedly stressed that there are no special canons of interpretation of fiscal statutes. In this regard, starting reference may be made to the observations of Lord Russell of Killowen CJ in the case of A-G v Carlton Bank [1899] 2 QB 158 at page 164:

“I see no reason why any special canons of construction should be applied to any Act of Parliament, and I know of no authority for saying that a taxing Act is to be construed differently from any other Act. The duty of the court is, in my opinion, in all cases the same, whether the Act to be construed relates to taxation or any other subject, viz to give effect to the intention of the legislature.”

In 1963, in the case of Luke v IRC [1963] AC 559 the House of Lords, the highest Court in the English jurisdiction, gave a purposive and strained construction to a taxing Act. Lord Reid said: -

“To apply the words literally is to defeat the obvious purpose of the legislation and produce a wholly unreasonable result. To achieve the obvious intention and produce a reasonable result we must do some violence to the words.”

Now in this judgment of 1963, the House of Lords approved even to “do some violence to the words” to achieve the obvious intention of the Legislature in a tax statute. It is the correct approach and it is far away from the impression given by the flowery language used by Rowlatt J in Cape Brandy Syndicate. It shows beyond any shadow of a doubt that literal interpretation in a fiscal statute is permissible only when it does not yield unreasonable results otherwise even fiscal statutes can be subjected to constrained and purposive interpretation. The dictum of Rowlatt J is not an authority that there are any special rules of interpretation of fiscal statutes requiring strict and literal interpretation in contradistinction with purposive and constrained interpretation. In every case, the Court is required to find the intention of the legislature and gave a reasonable interpretation promoting the purpose of the legislation instead of defeating the same.

If there was any doubt regarding the acceptable rules of interpretation of a fiscal statute the same is now laid to rest (perhaps forever) by the judgment of the House of Lords in the case of WT Ramsay Ltd v. Inland Revenue Commissioners [1981] 1 All ER 865. While enumerating the basic principles of interpretation of fiscal statutes, Lord Wilberforce explained the first principle as under: -

“A subject is only to be taxed on clear words, not on ‘intendment’ or on the ‘equity’ of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle. What is ‘clear words’ is to be ascertained on normal principles; these do not confine the courts to a literal interpretation. There may, indeed should, be considered the context and scheme of the relevant Act as a whole, and its purpose may, indeed should, be regarded.”

Now this admirable reaffirmation of principles of interpretation of a fiscal statue by Lord Wilberforce is a ruling authority in the English jurisdiction and if we take a closer look, it is a new superstructure put on the dictum of Rowlatt J of 1921.

          As stated above, with the utmost respect, the Hon’ble Sindh High Court while interpreting section 113, and more particularly clause (c) of sub-section (2) omitted to consider the intent or purpose of the provision altogether. The issue before the learned High Court was not whether the interpretation put by it on clause (c) was going to create any hardship for a category of taxpayers or not rather the real issue was that whether its interpretation was a reasonable one for promoting the purpose of the enactment?

          In fact, the intent of the Legislature in enacting section 113 is so clear and obvious that it does not require any interpretation. When the learned High Court (with the utmost respect) omitted to consider the most relevant part of section 113 i.e. clause (b) of sub-section (2), it was bound to produce unreasonable results and clause (c) could only be correctly interpreted in conjunction with clause (b).

Here it may also be submitted that in fact, what Lord Wilberforce stated in the case of WT Ramsay is not unknown in our jurisdiction and is also the prevailing view of our Supreme Court. Reference in this regard may be made to the judgment of the Hon'ble Supreme Court in the case reported as Dr. Tariq Iqbal vs. Government of Khyber Pakhtunkhwa, 2019 SCMR 859. In this case, the Hon'ble Court was seized of interpretation of various provisions of the Khyber Pakhtunkhwa (Building Management, Control, and Allotment) Act, 2018, and the Rules framed thereunder. Before embarking on the interpretation, the Hon’ble Court observed that the same was to be done according to “the cardinal and well-settled principle of interpretation which requires that a purposive rather than a literal approach of interpretation be adopted...”. Thereafter, the Hon’ble Court referred to a few judgments wherein purposive interpretation was given, for example, in the case titled as Federation of Pakistan through Ministry of Finance and others v. M/s Noori Trading Corporation (Private) Limited and 14 others, (1992 SCMR 710). This was a judgment under the Central Excise and Salt Act, 1944 which is a fiscal statute. Therefore, even in our jurisprudence, the learned Courts have increasingly resorted to give effect to the intention of the Legislature instead of sticking to the literal interpretation.

9.       The clause (c) of subsection (2) of section 113 was inserted through the Finance Act, 2004 to allow adjustment of minimum tax paid in excess of tax payable as per Part-I, Division-II of First Schedule to the Ordinance. The said Division provides normal rates of tax applicable to the resident companies on the income not covered under the final tax regime (FTR). The intention of the legislature for the insertion of this sub-clause was to facilitate the loss-sustaining companies to overcome their liquidity problems. This was clarified by the FBR by issuing Circular No.17 dated 17.07.2004 that profit-yielding companies paying tax more than turnover tax do not get credit for their contribution toward the exchequer during the tax year where it sustained loss or lower income. In this backdrop, an amendment in section 113 was introduced to allow the facility of carry forward of minimum tax for the next five years for adjustment against normal tax liability. By relying upon the judgments of the Apex Courts cited supra in para (8) above, it is clearly established that the intention and purpose of the said clause have not been kept in mind while interpreting the provisions of section 113(2)(c) of the Ordinance by the lower authorities.   

10.  The reasoning adopted by the Hon’ble Sindh High Court is that clause (c) of sub-section (2) of section 113 confers a benefit, though the said clause is not giving the exemption in the strict sense, but it is in the nature of an exemption and therefore, principles of interpretation of an exemption clause shall apply to it as mentioned hereunder: -

(i)       An exemption provision is to be construed strictly and the onus is on the taxpayer to prove that he falls within the four corners of the exemption.

(ii)      If two reasonable interpretations are possible, the one in favor of the Department should be adopted (this is the opposite to the basic principles of reading charging sections of fiscal statutes).

(iii)      Once a taxpayer is able to demonstrate that he wholly falls within the four corners of the exemption, such taxpayer cannot be denied its benefit.

The learned Division Bench of the Sindh High Court applied the first two fundamental principles of interpreting exemptions to Section 113(2)(c) and thus construed such provision strictly and against the taxpayer. To the proper appreciation of the provision of section 113(2)(c), it is expedient to reproduce hereunder the said provision: -  

          “113(2)(c) where tax paid under sub-section (1) exceeds the actual tax payable under Part I, Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year.

Provided that the amount under this clause shall be carried forward and adjusted against tax liability for five tax years immediately succeeding the tax year for which the amount was paid.”

From a bare reading of the above provisions of clause (c) of sub-section (2) of section 113, it is evident that the above provisions allow adjustment of credit of tax paid in excess of the tax payable by a person as per Part-I, Division-II of the First Schedule to the Ordinance, against the normal tax liability of the immediate succeeding five tax years. This provision is in fact giving the taxpayer a credit of tax already excess paid against the normal tax liability of the immediate succeeding five tax years and therefore, the benefit provided under the said clause falls under the category of a tax credit. Thus, it is a beneficial provision and is not akin to the “exemption”. There is a marked distinction between the expression “exemption” and “tax credit”. The Hon’ble Supreme Court of Pakistan has been very aptly explained in detail the conceptual difference between the “tax credit” and “exemption” in the case titled H.M. Extraction Ghee and Oil Industries (PVT.) LTD and other Vs Federal Board of Revenue and another, (2019 PTD 1479) in terms that: -  

“8………………….For purposes of the question now before us, the three stages may be restated as follows: leviable (declaration of liability), payable (assessment), and recoverable. It is well established that an exemption inserts itself between the first two stages, i.e., between what is leviable and what is payable. In our view, a tax credit inserts itself between the second and the third stages, i.e., between what is payable and what is recoverable. It is perhaps for this reason that the learned Lahore High Court observed that an exemption and a tax credit are two sides of the same coin, the "coin" being the stage of assessment or what is payable. With respect, we are unable to agree. In our view, there is a conceptual difference between the two, and (as we will see) it is all the more pronounced in the case of income tax. If there is an exemption in the field then the second stage may not be reached at all (i.e., the tax may not be payable) if the exemption is whole. Of course, it may be reached partially if that be the nature of the exemption. On the other hand, in the case of tax credit the second stage must necessarily always be reached, and that too in full. It is only then that the credit manifests itself by interposing between what is payable (i.e., the assessment) and what is recoverable. This interposition may be complete (if the tax credit is 100%) or partial. Thus, the second stage of "assessment" (i.e., "payable") cannot be the "coin" of which an exemption on the one hand and a tax credit on the other are the two "sides". Put differently, in a fiscal statute there must always be the first stage: that can be affected by neither an exemption nor a tax credit. An exemption operates on and in relation to, the second stage: that stage may not be reached at all, or only partially. A tax credit does not bear on the second stage. Once that stage is reached, and crossed, then the tax credit is manifested, thereby blocking (as the case may be, either in whole or in part) the third stage. Or, to put the matter in Lord Dunedin's terminology an exemption may eliminate the need for an assessment altogether (if it is whole) or reduce it by the relevant amount if it is partial. A tax credit on the other hand has no bearing on the assessment. It comes into operation after assessment and when the question of recovery arises. In our view, this is a basic conceptual difference. It also has a certain consequence in income tax law, to which we now turn.”

According to the above judgment, in case of an exemption, the tax is leviable but not payable and in case of a tax credit, the tax is leviable and payable but not recoverable. However, under clause (c) of sub-section (2) of Section 113 the minimum tax paid is not recoverable since the same shall be “carried forward for adjustment against the tax liability of the subsequent tax year”.

11.     As explained above, the provision of section 113(2)(c) of the Ordinance is beneficial in nature, and therefore, it is an immutable principle of law that it is to be interpreted liberally, widely, and in favour of the taxpayer. Reliance may be placed on Shezan Limited v. Abdul Ghaffar, (1992 SCMR 2400) wherein it has been held that:

“20. The object of above section 18 of the Ordinance seems to provide protection to a tenant against the ground of default if he is unable to pay rent because of any change in the ownership of the rented premises on account of the sale, gift, inheritance, or by any other recognized mode of transfer. It is not uncommon that formalities to complete transfer of ownership in respect of an immovable property takes quite a long period and sometimes nobody accepts rent from the‑tenant during the interregnum till the completion of formalities. So ‑above section makes it mandatory on the part of the new owner to serve a notice under registered post upon his tenant and if the latter, upon the receipt of such notice, pays rent due within thirty days from the date‑when the intimation should, in the normal course, have reached the tenant he shall not be deemed to have defaulted. Since it is a beneficial provision, designed and intended for the benefit of tenants, it is to be construed liberally so that it may suppress the mischief aimed at, and may advance the remedy. I am, therefore, of the view that notice in terms of the above section is mandatory even when a transfer of ownership pertains to a partial interest. I may also observe that if a new owner of a premises fails to serve the above notice on his tenant and if the latter, without having knowledge of the transfer of ownership continues to pay rent to his previous landlord, he shall not be liable to pay rent to the new owner for the period, for which the tenant might have paid rent to the previous owner.” 

The ratio decidendi of the aforementioned case has been consistently followed in various other pronouncements of the Superior Courts including Al-Imdad General Trading Co. v. Pakistan; 2015 PTD 734, Commissioner Inland Revenue v. Wi-Tribe, 2018 PTD 1413 and Commissioner Inland Revenue v. Muhammad Aslam, (2019 PTD 381).

12.     The last argument of the learned AR for the appellant is also well-founded as the Hon’ble Lahore High Court in the case titled CIR Vs M/s Education Excellence Ltd, ITR No.255/16 which is later in time and the reference application filed by the Department was dismissed. In the said case, the judgment of the Hon’ble Sindh High Court was duly referred and considered. However, the learned Division Bench refused even to admit the Tax Reference and dismissed the same. The learned High Court clearly held that the findings of the learned ATIR were “rooted in law, and therefore, the questions framed by the appellant do not arise any legal issue requiring us to render our opinion thereon.” The questions raised in this case were as under: -

1.     Whether in the facts and circumstances of the case, the learned Appellate Tribunal Inland Revenue has correctly concluded that the benefit under section 113(2)(c) of Income Tax Ordinance, 2001 is available to the respondent taxpayer?

2.     Whether in the facts and circumstances of the case, the learned Appellate Tribunal Inland Revenue was justified to overrule the ratio settled by Honorable Sindh High Court in its judgment reported as 2013 PTD 1420?

In its judgment impugned before the Hon’ble Lahore High Court, the learned ATIR clearly held that a situation where due to declaration of loss no tax was payable or paid or nil or zero tax was paid under the normal law despite chargeable turnover for the purposes of section 113 could not be considered in a manner as to throw out the taxpayer from the ambit of section 113(2)(c) of the Income Tax Ordinance, 2001. The learned CIR (A) perhaps is not familiar with the legal position that in every case the learned Appellate Court is not required to give its independent reasoning and it had all the jurisdiction to merely approve the findings of the forum below which makes the judgment of the forum below as worthy of respect as when the learned Appellate Court gives its independent reasoning. Recently a similar question was raised in a review petition before the Hon’ble Supreme Court of Pakistan bearing C.R.P. Nos.104-L, 114-L of 2019 in C.P.258-L, 257-L/2019 titled as Farooq Hussain, etc. (C.R.P. No.104-L/2019) Salman Asghar, etc. (C.R.P. No.114-L/2019) Vs  Sheikh Aftab Ahmad, etc whereby vide order dated 18.08.2020, the review petition was dismissed. In the said judgment it was held that: -

“2. We have also noticed that one of the grounds for review is that the order under review is without any reason. The order passed by this Court on 01.08.2019 was as under: - 

"We have heard the learned counsel for the petitioners at some length and have gone through the impugned judgment of the High Court, the record of the case, and the law on the subject. We have not been able to take any exception to the reasoning of the impugned judgment and are of the view that it does not warrant any interference. Leave is, therefore, declined and these petitions are dismissed." 

It is emphasised that if this Court, having examined the judgment challenged before it, is satisfied with its reasoning and conclusions and is of the view that it does not call for any interference, this Court can simply endorse the impugned judgment and adopt the reasoning of the court below. In such a case, retracing the same path travelled by the court below appears to be an unnecessary exercise and a waste of public time – time which can be allocated to other cases where the decisions of the courts below have been overturned or modified. Finding no reversible error in the judgment, a concise, simple order can suffice. On the other hand, if the Court is to reverse or modify the judgment of the court below, the reasons for the reversal or modification must be set forth.

3.  This approach adopted by the court, is by no means a shortcut which is offensive to a fair trial under Article 10-A of the Constitution nor does it in any manner undermine due process and fair play. It is simply a creative way forward that spares the Court from writing opinions where a mere adoption of a well-reasoned judgment of the court below through a short order serves the purpose adequately. 

4. Nothing is cast in stone. Old practices evolve with changing times. Burgeoning population and the corresponding rapid increase in litigation require imaginative solutions. Courts all over the world have moved on to efficient time and case management techniques. Therefore this ground for review is absolutely misconceived.”  

By following the above judgment of the Apex Court, the learned CIR (A) has erred in law in holding that no opinion/findings were given by the Hon’ble Lahore High Court. 

13.     For what has been discussed above, the appeal of the appellant is accepted and both the orders passed by the lower authorities are vacated to the extent of the subject matter of the instant appeal.

14.     This order consists of (15) pages and each page bears my signature.  

 

	Sd/-  (M.M. AKRAM) JUDICIAL MEMBER
Sd/-  (IMTIAZ AHMED) ACCOUNTANT MEMBER