APPELLATE TRIBUNAL
INLAND REVENUE (PAKISTAN)
KARACHI
BENCH, KARACHI
ITA
No.1198/KB/2019
(Tax Year 2015)
ITA
No.1199/KB/2019
(Tax Year 2016)
ITA
No.1200/KB/2019
(Tax Year 2017)
ITA
No.1201/KB/2019
(Tax Year 2018)
Mr.
Abdullah Hanif Prop: Jumani Traders;
Karachi. ………………………… Appellant
Versus
The
Commissioner Inland Revenue,
Zone-VI,
CRTO,
Karachi. ………………………… Respondent
Appellant by : Mr. Basharat Qureshi & Mr. Taimoor Ahmad Qureshi, Advocates
Respondent
by : Mr. Naveed Dost, DR
Date of hearing : 09.06.2021
Date
of order : 09.06.2021
O R D E R
M M Akram, Judicial Member: The titled appeals have been filed by the
appellant taxpayer against the impugned consolidated order No.47 to 50/2019
dated 19.09.2019 passed by the learned Commissioner Inland Revenue
(Appeals-III), Karachi for the tax years 2015 to 2018 on the grounds as set
forth in the memos of their respective appeals. The facts of the case and the
question involved in all these appeals are the same and identical, therefore, these
appeals are being decided through this consolidated order.
2. The brief facts giving rise to the appeals
are that the Appellant is an individual and engaged in the business of textile
goods. The Appellant filed his income tax returns for the tax years 2015, 2016,
2017, and 2018 by paying tax liability @ 0.10% on his gross turnovers basis in
terms of proviso to Clause (45A)(a) of Part-IV of the Second Schedule to the Income
Tax Ordinance, 2001 (“the Ordinance”)
amounting to Rs.68,008/-, Rs.150,451/-, Rs.23,497/- and Rs.118,978/-
respectively. The returns so filed by the Appellant were treated to be assessment
orders by the fiction of law under section 120(1)(b) of the Ordinance.
Subsequently, the Assessing Officer founds the deemed orders passed under
section 120 ibid were erroneous in so far as prejudicial to the interest of
revenue on the sole ground that the Appellant had to pay minimum tax under
section 113 of the Ordinance for the reason that the Appellant case does not
qualify to the benefit enshrined in Clause (45A). On the basis of the foregoing
facts, the Assessing Officer issued show-cause notices for each tax year under
section 122(9) read with 122(5A) of the Ordinance by confronting with the
issues for amending all the deemed orders for the tax years 2015 to 2018. In
response to the notices, the Appellant submitted his reply which was considered
and found unsatisfactory by the Assessing Officer who ultimately passed the
amended orders all dated 22.04.2019 under section 122(5A) of the Ordinance.
Felt aggrieved, the Appellant preferred the appeals before the learned CIR(A)
who vide consolidated order dated 19.09.2019 confirmed the treatment accorded
by the Assessing Officer. Still feeling aggrieved, the Appellant has now come
up before this Tribunal and assailed the impugned consolidated order on a
number of grounds.
3. This case came up for hearing on
09.06.2021. The learned AR for the Appellant contended that both the
authorities had erred in law by not following the judgment of this Tribunal
decided on the same issue in favor of the taxpayers. Thus, the Appellant has
been treated discriminately. In support, he placed on record the copy of the
judgment of this Tribunal bearing ITA No.1468/KB/2018. It has been stated that
both the authorities have misinterpreted and misconstrued the provision of
Clause (45A) of Part-IV of the Second Schedule to the Ordinance. Further
contended that both the authorities have wrongly observed that the aforesaid
Clause would only be applicable to taxpayers who were already registered under
the Sales Tax Act, 1990 and those taxpayers who get themselves registered by
the 30th June, 2011. He explained that had it been the intention of the
legislature then this Tribunal would have not passed an order for the tax year
2012 in another case. He asserted that the legislature cannot create such
discrimination which is even otherwise against the mandate of Article 25 of the
Constitution. He, therefore, pleaded that the appeal be accepted.
4. On the contrary, the learned DR has
supported the orders of the lower authorities and vehemently contended that the
impugned order passed by the learned CIR(A) is a speaking order and there is no
infirmity in the impugned order. He, therefore, prayed that the appeal be
dismissed.
5. We have heard
the rival contentions, perused the material on record, and duly considered
facts of the case in the light of the applicable legal position. The following
legal question is involved in the instant case for consideration and to be dilated
upon by this Tribunal:-
i. Whether under the
facts and in the circumstances of the case, the appellant was required to get
it registered by 30.06.2011 to qualify for the benefit of relief extended to
yarn trade under 1st proviso to sub-clause (a) of Clause (45A) of
Part-IV of Second Schedule to the Ordinance?
Before dilating upon the question, it would be beneficial to
reproduce hereunder the relevant provision of law which is under dispute that
is Clause (45A) of Part-IV of Second Schedule to the Ordinance:-
“(45A) (a) The rate of
deduction of withholding tax under clause (a) and (b) of sub-section (1) of
section 153 shall be one percent on local sales, supplies, and services
provided or rendered to the taxpayers falling in the following categories
namely:-
i.
Textile and articles thereof;
ii.
Carpets;
iii.
Leather and articles thereof including artificial leather
footwear;
iv.
Surgical goods; and
v.
Sports goods;
Provided
that withholding tax under clauses (a) and (b) of sub-section (1) of section
153 shall not be deducted from sales, supplies, and services made by traders of yarn to the above-mentioned
categories of taxpayers. Such traders
of yarn shall pay minimum tax @ 0.1% on their annual turnover on monthly basis
on 3oth day of each month and a monthly withholding tax statement shall
be e-filed under the provisions of section 165 of this Ordinance.
(b)………………………..
(c) provision
of sub-clauses (a) and (b) shall be applicable only to the cases of sellers,
suppliers, service providers of the above-mentioned
categories of sales tax zero-rated taxpayers, who are already registered and to those taxpayers who get themselves registered by the 30th
June, 2011.” (Emphasis supplied)
The question raised is exclusively relatable to the interpretation
of Clause (45A) ibid. We straightaway
go to the relevant clause reproduced hereinabove. It is an admitted fact and
there is no dispute that the Appellant during the tax years under consideration
supplied the yarn to the taxpayers falling in the categories enumerated in
sub-clause (i) of Clause (45A)(a) mentioned above. As per the Department, the Appellant
could not get it registered by 30.06.2011 to qualify for the benefit of relief
extended to yarn trade under 1st proviso to sub-clause (a) of Clause
(45A) ibid. According to the Department, the benefit of exemption has been
restricted to a class of yarn traders who got themselves registered by 30th
June, 2011 for qualifying the benefit of exemption but none of the words of the
clause suggest that exemption is open-ended and can be extended to those who
get themselves registered after 30th June, 2011. If the benefit of
exemption is made available irrespective of the fact whether the date of
registration falls on or before 30.06.2011 or not, it will make sub-clause (c)
of Clause (45A) redundant. On the other hand, the Appellant submitted that he
had started his business in the year 2014, and immediately thereafter, he
himself registered under the Sales Tax Act, 1990 w.e.f 27.09.2014. Prior to
initiation of business, the law does not permit the Appellant to register itself
under the Sales Tax Act, 1990. The learned AR, therefore,
challenged the levy of minimum tax @ 1% under section 113 of the Ordinance on
the gross turnover by stating that it is discriminatory on the ground that the
sellers, suppliers, or service providers who were registered after the cutoff
date of 30.06.2011 shall pay minimum tax at the rate of 1% whereas those, who
registered on or before 30.06.2011 have to pay minimum tax @ 0.1%. There is no
intelligible criterion for the said discrimination having nexus to the purpose
of the law. As a consequence, whereof the case of the Appellant is that the
application of Clause (45A) of Part-IV of the Second Schedule to the Ordinance
is discriminatory and it violates Article 25 of the Constitution of Islamic
Republic of Pakistan, 1973 (hereinafter
referred to be “the Constitution”).
BACKGROUND OF CLAUSE (45A)
6. Initially
the clause (45A) was inserted through SRO 288(I)/2011 dated 1st
April 2011 in Part-IV of Second Schedule to the Ordinance. The said clause was
subsequently substituted vide SRO 333(i)/2011 dated 2nd May, 2011
whereby inter alia proviso to sub-clause (45A)(a) was inserted which relates to
the new category of Yarn Traders. Under the said proviso, it has been declared
that withholding tax under clauses (a) and (b) of
sub-section (1) of section 153 shall not be deducted from sales, supplies, and
services made by traders of yarn to the above-mentioned categories of
taxpayers. Such traders of yarn shall pay minimum tax @ 0.1% on their annual
turnover on monthly basis on the 30th day of each month and a monthly
withholding tax statement shall be e-filed under the provisions of section 165
of this Ordinance.
OPINION
7. To
begin with, in the interpretation of all laws, there is a presumption against
ineffectiveness. “A textually permissible interpretation that furthers rather
than obstructs the document’s purpose should be favored”. “This follows
inevitably from the facts that (i) interpretation always depends on context;
(ii) context always includes evident purpose; (iii) evident purpose always
includes effectiveness”. (Reading Law: The
Interpretation of Legal Texts by Antonin Scalia and Bryan A. Garner)
8. Upon reading Clause
(45A), it is evident that it relates to the withholding of tax and the proviso
relates to the Yarn Traders. When sub-clause (a) is examined, it will be seen that
it relates to the withholding agents of the following categories who are
required to withhold the tax @ 1% on local sales, supplies, and services
provided or rendered to them irrespective of the status of registration of
sellers, suppliers or service providers:-
i.
Textile and
articles thereof;
ii.
Carpets;
iii.
Leather and articles
thereof including artificial leather footwear;
iv.
Surgical goods;
and
v.
Sports goods;
PROVISO
As regards the true intention of the effect of
a proviso, it has been said in Reading Law: The Interpretation of Legal Texts
by Antonin Scalia and Bryan A. Garner that a proviso conditions the principal
matter that it qualifies—almost always the matter immediately preceding.
“Properly speaking, a proviso is a clause that
introduces a condition by the word provide. A provision “is introduced to
indicate the effect of certain things which are within the statute but
accompanied with the peculiar conditions embraced within the proviso. It
modifies the immediately preceding language.
Because of regular abuse of provisions,
however, the rule that a proviso introduces a condition has become a feeble
presumption. One now often finds provided that introducing not a condition to
an authorization or imposition, but an exception to it, or indeed even an
addition to it. And the authorization or imposition that it modifies is often
found not immediately before but several clauses earlier. Because of the
variable meaning and variable reach of provisos, they have come to be
disfavored by knowledgeable drafters.”
The proviso to Clause (45A) must, therefore, be construed
in the context of the general proposition regarding the true construction of
the term “proviso” as set forth above. By applying the aforesaid settled rules,
proviso to sub-clause (a) envisages that withholding
tax under clauses (a) and (b) of sub-section (1) of section 153 shall not be
deducted from sales, supplies, and services made by traders of yarn to the above-mentioned categories of
taxpayers. Such traders of yarn shall pay minimum tax @ 0.1% on their annual
turnover on monthly basis on the 30th day of each month and a monthly
withholding tax statement shall be e-filed under the provisions of section 165
of this Ordinance.
Sub-clause (b) of Clause (45A) is not relevant for the time being to the
issue under consideration therefore, there is no need to interpret it.
As far as sub-clause (c) is concerned,
the plain reading clearly suggests that it relates to the recipient of goods
and services that has been categorized in five sales tax zero-rated
sectors/taxpayers enumerated in sub-clause (a) of Clause (45A), who are already registered and to those taxpayers who get
themselves registered by the 30th June, 2011. Therefore, the terms “who
are already registered and to
those taxpayers who get themselves
registered by the 30th June, 2011” used in the said
clause must be construed in relation to the five categories of the taxpayers
mentioned in sub-clause (a) above. Thus, sub-clause (c) is not concerned with the
sellers, suppliers, or service providers who are supplying the goods and
providing or rendering the services to the above-mentioned categories of five
zero-rated taxpayers. Therefore, the interpretation of the department is
misconceived and not tenable.
In view of the above, the answer to the
question is in negative, in favour of the Appellant.
9.
For what has been discussed above, the appeals of the Appellant are accepted
and both the orders passed by the lower authorities are vacated.
|
|
Sd/- (M.M. AKRAM) Judicial Member |
|
Sd/- (HABIBULLAH KHAN) 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
No comments:
Post a Comment