APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I,
ISLAMABAD
ITA No.1531/IB/2022
(Tax year, 2018)
ITA No.1532/IB/2022
(Tax year, 2019)
& MA (Stay) Ext No.1392
& 1393/IB/2022
(Tax years, 2018 & 2019)
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Mr. Yasir Abbas,
Haripur |
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Appellant
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VS |
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Commissioner
Inland Revenue, RTO, Abbottabad |
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Respondent |
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Appellant
by: |
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Mr. Saif Uddin Khilji, ITP |
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Respondent
by: |
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Mr. Naveed Hassan, DR |
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Date
of hearing: |
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22.08.2022 |
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Date
of order: |
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22.08.2022 |
O R D E R
M.
M. AKRAM (Judicial Member): The titled appeals along with the extensions
in stay applications have been filed by the appellant taxpayer against Orders dated
31.05.2022 passed by the learned Commissioner Inland Revenue (Appeals-III), RTO,
Rawalpindi for the Tax Years 2018 and 2019 on the grounds as set forth in the
memo of appeal. The facts of the case and the question involved in these
appeals is identical, therefore, these appeals are being decided through this
common order.
2. Brief facts of the case are that the
appellant is an individual and derives income from the business. The appellant filed
his income tax returns for the tax years 2018 and 2019. The returns so field were
treated to be assessment orders in terms of Section 120(1)(b) of the Income Tax
Ordinance, 2001 (“the Ordinance”). Later on, during the examination of the
relevant record, the concerned Additional Commissioner Inland Revenue (Add
CIR) observed that the said assessment orders were erroneous in so far as prejudicial
to the interest of revenue as according to him that during the examination of the
tax returns for tax years under consideration it was observed that the
appellant taxpayer declared income at Rs.978,864/- and Rs.2,594,907/- in
respect of tax years 2018 and 2019 respectively and paid the tax thereon at Rs.66,330/-
and Rs.89,236/- respectively but he failed to pay minimum tax @ 1.25% amounting
to Rs.1,205,012/- and Rs.1,228,691/ respectively in term of section 113(1) of
the Ordinance resulted in the loss of Revenue to the Government Exchequer
amounting to Rs.1,128,207- and Rs.1,131,988/- Accordingly, show cause notices
were issued to the taxpayer under section 122(5A) of the Ordinance. In response,
the appellant filed replies which were found unsatisfactory. Resultantly, the
Assessing Officer held the deemed assessment orders as erroneous in so far as prejudicial
to the interest of revenue in terms of Section 122(5A) ibid and passed the amended
orders as per show cause notices. The appellant taxpayer being aggrieved, filed
appeals before the learned CIR (A) who decided the appeals against the
appellant vide orders dated 31.05.2022. Being aggrieved, the appellant has now
come up before this forum and has assailed the impugned orders on a number of
grounds.
3. This case came up for hearing on 22.08.2022. The main thrust of
arguments of the learned AR was that section 113(1) of the Ordinance was
amended through the Finance Act, 2021 whereby the turnover as mentioned in the
said provision was increased from ten million to a hundred million to levy
minimum tax and the said amendment being beneficial and curative in nature
would apply retrospectively. He highlighted the legislative changes in the said
provision before the said amendment and contended that while enhancing the
turnover from ten million to a hundred million, the year i.e tax year 2017 has
not been changed as earlier the tax year was also changed correspondingly while
enhancing or reducing the turnover. According to him thus, the non-changing tax
year i.e 2017 clearly suggests that the amendment made through Finance Act,
2021 would apply retrospectively. He, therefore, contended that the appellant
was not obliged to pay minimum tax as his turnovers in both the tax years were
less than a hundred million. Hence, the charge created by the assessing officer
under section 113 ibid and subsequently confirmed by the learned CIR(A) is
unsustainable in law. On the contrary, the Learned DR opposed the appeals on
the ground that the learned Commissioner (Appeals) has passed speaking orders
and there is no illegality or lacuna in these orders. He, therefore, pleaded
that the appeals be dismissed.
4. We have heard the arguments advanced by both parties and
perused the record. The following core issue is involved in the instant case
for determination by this Tribunal: -
Whether the substitution of the word “hundred” in place of
the word “ten” in subsection (1) of section 113 of the Ordinance through
Finance Act, 2021 would apply retrospectively to the principle of interpreting
curative and remedial legislation?
For convenience the relevant
provision of section 113 before and after an amendment is reproduced below;-
Before amendment:
113.
Minimum tax on the income of certain persons.- (1) This section
shall apply to a resident company, permanent establishment of a non-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.
After amendment;
113.
Minimum tax on the income of certain persons.- (1) This section
shall apply to a resident company, permanent establishment of a non-resident
company, an individual (having turnover of hundred million rupees
or above in the tax year 2017 or in any subsequent tax year) and an association
of persons (having turnover of hundred 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.
The crucial point of divergence
between the parties is the applicability of the amendment made through the
Finance Act, 2021 and in simple terms, the contest is as to whether the same
would apply to the case of the appellant for the tax years 2018 and 2019 or
otherwise.
5. 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. Maxwell on the Interpretation of Statutes
(Twelfth Edition) deals with the issue of the presumption against prospectively
by articulating the following rule:
“It is a fundamental rule of English law that no statute shall be
construed to have a retrospective operation unless such a construction appears
very clearly in the terms of the Act, or arises by necessary and distinct
implication.”
In the present case, the Finance
Act, 2021 provides:
" 1.
Short title and commencement.—(1) This Act shall be called
the Finance Act, 2021.
(2) It shall unless specified otherwise, come into force on the first day of July, 2021.” (Emphasis supplied)
Sub-section (2)
of section 1 of the Finance Act, 2021, highlighted above, clearly and expressly
provides for its provisions to take effect from the 1st day of July 2021. This
being so, there can be no cavil to its applicability commencing from the 1st day
of July 2021 and not for any period prior thereto.
6. Now
we come to the proposed question. It is an elementary
rule for tax laws that the law that exists in a particular tax year or tax
period is applicable to determine the tax liability. Reliance in this respect
may be placed on the judgment titled Shahnawaz (Pvt) Limited vs
Federation of Pakistan etc, (2011 PTD 1558). The argument of
the learned AR for the appellant has been based on the premise that the
amendment in question was a remedial and curative enactment which are generally
retroactive in their application. One must understand the meaning and scope of
beneficial, remedial, and curative legislation to appreciate this contention.
“Beneficial Legislation” may be
explained as under:
“A statute which purports to confer a benefit
on individuals or a class of persons, by relieving them of onerous obligations
under contracts entered into by them or which tend to protect persons against
oppressive act from individuals with whom they stand in certain relations.” [N.S.
Bindra, Interpretation of Statutes, Tenth Edition]
“Curative statutes”
may be explained thus:
“Curative statutes are those which attempt to
cure or correct errors and in proceedings, particularly which seek to give
effect to contracts and other transactions between private persons which
otherwise would fail to produce their intended consequences on account of some
statutory disability or a failure to comply with some technical requirement.” [Earl
T. Crawford, The Construction of Statutes]
“Remedial statutes”,
on the other hand, are:
“The statutes which are enacted to improve a
prior enactment for some of its defects or even to reform the existing law to
meet the new situation covered by the enactment.” [S.M. Zafar, Understanding
Statutes, Fourth Edition]
It
may be added:
“A
Remedial Act is defined by Blackstone, as “one made to supply such defects and
abridge such superfluities in the common law as arise, either from the general
imperfection of all human laws, from the change of time and circumstances, from
the mistake and unadvised determinations of unlearned (and even learned)
Judges, or from any other cause whatever.” After quoting this definition,
Craies, observes this definition is too narrow for the operation of Remedial
Acts and is not confined to common law, but extends also to prior enactment.
What is known as Remedial Act is an Act introduced by parliament to remedy what
parliament perceives to be an existing problem on account of some obscurity in
the words of the statute.” [S.M. Zafar, Understanding Statutes, Fourth Edition]
7. The
question as to whether beneficial, remedial, or curative legislation has a
retrospective effect is of vital importance. Generally speaking, retroactive
legislation is looked upon with disfavour. However, beneficial enactments are
given liberal construction and are given retrospective effect if they are
curative or remedial. In Commissioner Inland Revenue Zone-II, Regional
Tax Office, Multan v. Mrs. Ambreen Fawad Co. Pak Arab Fertilizers Limited,
Multan, (2014 PTD 320), a learned Division of the Hon’ble High Court
dilated on this issue and observed:
“11. The legal position that emerges is that general beneficial legislation is to be given a liberal interpretation. However, for the said legislation to have a retrospective effect, the beneficial legislation must carry curative or remedial content. Such legislation must, therefore, either clarify an ambiguity or an omission in the existing law and must therefore be explanatory or clarificatory in nature. While beneficial legislation is to be liberally interpreted, in order to advance the beneficent object of the statute, it in no manner means that “beneficial legislation” or “liberal interpretation” necessarily includes or interchangeably means the retrospective application of the statute. Unless the legislation is remedial, curative, explanatory, or clarificatory, it cannot be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature. Reliance with advantage is placed on “Commissioner of Income Tax v. Shahnawaz Ltd. and others” (1993 SCMR 73) and “State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited.” (1997 SCMR 1244).
In the book "Understanding
Statutes" by Mr. S.M. Zafar, Chapter VII, titled "Curative Remedial
and Penal Act", is encompassing important judgments from Pakistan's
jurisdiction on the subject, including a relevant excerpt from the notable
foreign books on the interpretation of the statute. Relevant portions are
reproduced for the facility:-
"American Jurisprudence on remedial statutes:
Whereas legislation which has been regarded as remedial in its
nature includes statutes which abridge superfluities of former laws remedying
defects therein, or mischief thereof implying an intention to reform or extend
existing rights, and having for their purpose promotion of justice and the
advancement of public welfare and important and beneficial public objects, such
as the protection of health, morals, and safety of society, or of public
generally.”
Crawford States:
Therefore, Remedial Acts are those enacted in order to improve and
facilitate remedies already existing for the enforcement of rights and the
redress of wrongs or injuries as well as to correct defects, mistakes, and
omissions in a former law.
A Remedial Act is defined by Blackstone; as
"One made to supply such defects and abridge such
superfluities in the common law as arise, either from the general imperfection
of all human laws, from the change of time and circumstances, from the mistake
and unadvised determinations of unlearned (and even learned) Judges, or from
any other cause whatever."
After quoting this definition,
Craies, observes this definition is too narrow for the operation of Remedial
Acts and is not confined to common law, but extends also to prior enactment.
What is known as Remedial Act is an Act introduced by parliament to remedy what
parliament perceives to be an existing problem on account of some obscurity in
the words of the statute. The question of whether remedial statutes can be
given retrospective effect has been considered by Crawford in his
"Statutory Construction" (1940 Edn.) in para. 282 as follows:
"Even remedial statues may be subject to the principles
hereinto force discussed, opposing any construction which will give the
enactment retrospective operation. Yet, since remedial statutes are usually
looked upon with favour by the Courts, they should be liberally construed. But
there appears to be considerable confusion in the cases with reference to
giving remedial Acts retrospective effect through construction. If the rule of
liberal construction is to be applied, as it obviously should then any doubt
should be resolved in favour of retrospective operation, if the such operation
does not destroy or disturb vested rights, impair the obligations of contracts,
create new liabilities violate due process of law or contravene some other
Constitutional provision, and if such operation will carry out the intention of
the legislature as ascertained through the application of the principle of
liberal construction. In other words, a statute relating to remedial law may
properly, in several instances, be given retrospective operation."
As stated in American Jurisprudence:
"A retrospective law, in a legal sense, is one which takes
away or impairs vested rights acquired under existing laws or creates a new
obligation and imposes a new duty, or attaches a new disability, in respect of
transactions already past. Hence, remedial statutes, or statutes relating to
remedies or modes of procedure, which do not create new or take away vested
rights, but only operate in furtherance of the remedy or confirmation of rights
already existing, do not come within the legal conception of a retrospective
law, or the general rule against the retrospective operation of statues a
fortiori, a statute or amendment which furnishes a new remedy, but does not
impair or effect any contractual obligations or disturb any vested rights, is
applicable to proceedings begun after its passage, though relating to acts done
previously thereto. A new statute, which deals with the procedure only, would
prima facie apply to all actions, which have accrued or are pending and future
actions. There is, however, a definite exception that the remedy provided by
the statute will not ipso facto reach a case when before the statute there was
no remedy at all. However, statutes or amendments relating to the procedure are
not necessarily retrospective in their operation. Such Acts are undoubtedly
within the general rule against retrospective construction where the effect of
giving them a retrospective operation will be to impair the obligation of
contracts or to disturb vested rights, and in such cases will not be given a
retrospective operation unless there is some language in the statute indicating
such legislative intent. Where the language of a Remedial Act clearly relating
to past transactions is broad enough to extend to like causes in the future, it
will be construed to operate prospectively also if a contrary intent is not
manifest."
8. In
Hitendra Vishnu Thakur v. State of Maharashtra, (AIR 1994
SC 2623), the Indian Supreme Court laid down the following principles regarding
the ambit and scope of an amending Act and its retrospective application:
i. A
statute which affects substantive rights is presumed to be prospective in
operation unless made retrospective, either expressly or by necessary
intendment, whereas a statute which merely affects procedure unless such a
construction is textually impossible, is presumed to be retrospective in its
application, should not be given an extended meaning and should be strictly
confined to its clearly defined limits.
ii. Law relating to forum and limitation is procedural in nature,
whereas law relating to the right of action and right of appeal even though
remedial is substantive in nature.
iii. Every litigant has a vested right in substantive law but no such
right exists in procedural law.
iv. A procedural statute should not generally speaking be applied
retrospectively where the result would be to create new disabilities or
obligations or to impose new duties in respect of transactions already
accomplished.
v. A
statute which not only changes the procedure but also creates new rights and
liabilities shall be construed to be prospective in operation unless otherwise
provided, either expressly or by necessary implication.
9. A
five-member bench of the Indian Supreme Court in the case of Commissioner
of Income Tax-I, New Delhi v. Vatika Township Private Limited,
(2014) 367 ITR 466 was dealing with the issue of whether the proviso added to
section 113 of the Income Tax Act, 1961 through Finance Act, 2002 was to
operate prospectively or being clarificatory and curative in nature had a retrospective
operation. Regarding the general principles for interpretation of a statute, it
was stated as under:
“31. Of the various rules guiding how a legislation has to be
interpreted, one established rule is that unless a contrary intention appears,
a legislation is presumed not to be intended to have a retrospective operation.
The idea behind the rule is that a current law should govern current
activities. Law passed today cannot apply to the events of the past. If we do
something today, we do it keeping in view the law of today and in force and not
tomorrow's backward adjustment of it. Our belief in the nature of the law is founded
on the bedrock that every human being is entitled to arrange his affairs by
relying on the existing law and should not find that his plans have been
retrospectively upset. This principle of law is known as lex prospicit non respicit:
law looks forward not backward. As was observed in Phillips vs. Eyre, a
retrospective legislation is contrary to the general principle that legislation
by which the conduct of mankind is to be regulated when introduced for the
first time to deal with future acts ought not to change the character of past
transactions carried on upon the faith of the then existing law.
32. The obvious basis of the principle against retrospectivity is
the principle of 'fairness', which must be the basis of every legal rule as was
observed in the decision reported in L'Office Cherifien des Phosphates v.
Yamashita- Shinnihon Steamship Co. Ltd. Thus, legislations which modified
accrued rights or which impose obligations or impose new duties or attach a new
disability have to be treated as prospective unless the legislative intent is
clearly to give the enactment a retrospective effect; unless the legislation is
for purpose of supplying an obvious omission in a former legislation or to
explain a former legislation.”
10. It is in this background, that it can be construed that the
"Purpose of Remedial and Curative Legislation" is to abridge
superfluities, remove defects or mischief, from existing law, with an intention
to redress wrongs and injuries being impinged upon the existing rights. Such
legislation can be applied retrospectively if the intention of the legislature
is manifest in the amending law itself. In other cases, though liberal
construction by the competent court, after declaring it remedial or curative
for the furtherance of remedy or confirmation of the rights already existing.
Even such legislation cannot be applied retrospectively if it curates new
rights or takes away existing rights or affects the past and closed
transactions.
If this test is
applied to the proposition, under discussion, a necessary corollary would be
that at the relevant time no right was available to the taxpayer to pay minimum
tax under section 113 of the Ordinance inter alia to an
individual having a turnover of a hundred million rupees or above
in the tax year 2017 or in any subsequent tax year till the closure of tax years 2018 and 2019 as the amendment was made
in subsection (1) of section 113 through Finance Act, 2021 w.e.f 1st
July 2021, hence, could not be applied retrospectively. In the present case,
the law as it existed before the promulgation of the Finance Act, 2021 had no
ambiguity regarding the levy of minimum tax in the preceding tax years. It may
also be emphasized that the present amendment did not remove any ambiguity or
supplied any omission regarding the legal position to levy minimum tax under
section 113 ibid. To construe amendments in section 113 as curative, remedial,
or clarificatory in nature would thus be contrary to the established principles
of construction of statutes. Amendment was made in the Ordinance through
Finance Act, 2021 which was promulgated on 01.07.2021. It will take effect from
that date. Thus, the answer to the proposed question is in the negative against
the appellant.
11. For what has been discussed above, this court does not find the
amendments made in subsection (1) of section 113 of the Ordinance through the Finance
Act, 2021 to have any retrospective application. As
the result, these appeals fail and are accordingly dismissed. Since the main
appeals of the appellant have been decided, therefore, the applications for
interim relief have become infructuous.
12. This
order consists of (11) pages and each page bear my signature.
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-SD- (M.
M. AKRAM) JUDICIAL
MEMBER |
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-SD- (MUHAMMAD
IMTIAZ) ACCOUNTANT
MEMBER |
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