Mr. Ravendar Kumar Vs Commissioner Inland Revenue, Cantt. Zone, RTO, Rawalpindi.

 APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I,

ISLAMABAD

ITA No.314/IB/2024

(Tax Year, 2022)

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Mr. Ravendar Kumar, Office No.1, First Floor, Malik Nisar Market, Adda Jallo Stop Near Burhan Interchange, Main G.T. Road, Hassan Abdal, Attock Hassan Abdal.		Appellant
	Vs
Commissioner Inland Revenue, Cantt. Zone, RTO, Rawalpindi.		Respondent

 

Appellant By:                                         Mr. Muneeb Ahmed, ITP

Respondent BY:                                     Ms. Romana Alam, DR

 

Date of Hearing:                                    07.03.2024

Date of Order:                                       07.03.2024

 

ORDER 

M. M. AKRAM (Judicial Member): The titled appeal has been filed by the appellant taxpayer against the Appeal Order No.477/2023-24 dated 31.01.2024 passed by the learned Commissioner Inland Revenue (Appeals-III), Rawalpindi for the tax year 2022 on the grounds as set forth in the memo of appeal.

2.      Brief facts culled out from the record are that the appellant filed his return of income in which the taxpayer failed to pay super tax as mandated by Section 4C of the Income Tax Ordinance, 2001 (“the Ordinance”). Accordingly, the department issued notice under section 4C of the Ordinance, 2001, in response thereto, the appellant filed a written reply which was not found satisfactory. Consequently, the Assessing Officer went ahead to finalize the proceedings and pass the impugned order as per show cause notice.  Felt aggrieved, the appellant preferred the appeal before the learned CIR(A) who vide Appeal Order No.477/2023-24 dated 31.01.2024 confirmed the order passed by the assessing officer. Still feeling aggrieved by this order, the appellant has now come up before this Tribunal and has assailed the impugned appellate order on a number of grounds.

3.      This case came up for hearing on 07.03.2024. Learned AR vehemently contended that the appellant declared his income for the tax year under consideration amounting to Rs.125,431,213/- and as such the provision of section 4C of the Ordinance could not be set into motion as the taxable income was less than Rs.150,000,000/-. He explained that the learned assessing officer had erred in law in calculating the income of Rs.153,335,000/- while accumulating the value of receipts under section 153(1)(a) of Rs.33,104,115/- without appreciating that the appellant had already declared his total income from all heads of income at Rs.4,946,022,353/-. Notwithstanding the foregoing, the learned AR for the appellant apprised that the receipts against which the tax was deducted under section 153(1)(a) of the Ordinance is a minimum tax and therefore, the concept of imputable income under the provision of section 2(28A) of the Ordinance applies to those persons who derive income chargeable to tax under final tax regime. He, therefore, contended that the assessing officer has erred in law in computing the imputable income of Rs.33,104511/- on the receipts against which the tax was deducted u/s 153(1)(a) which is the minimum tax liability. On the other hand, the Learned DR opposed the appeal. She contended that the learned CIR(A) has passed a speaking order and there is no infirmity in the impugned order. She, therefore, pleaded that the appeal be dismissed.

4.      We have heard the parties and perused the record. The submissions made on behalf of the appellant have substance. The super tax was brought into the Ordinance by way of section 4C, which was inserted through the Finance Act, 2022. It was assumed to be a one-time tax, but now has been made a permanent feature effectively increasing the rates to 10 per cent from the tax year 2023 onwards. The levy of super tax under the provision of section 4C was challenged before different High Courts. The Islamabad High Court (“IHC”) has recently handed down its judgment titled Fauji Fertilizer Company Limited v Federation of Pakistan and others, bearing Writ Petition No.4027 of 2022 in which it has allowed petitions challenging the imposition of Super Tax under Section 4C of the Ordinance. The said Judgment has held that Section 4C of the Ordinance to be ultra vires to Articles 18, 23, and 24 of the Constitution of the Islamic Republic of Pakistan. However, the Judgment has not struck down Section 4C but has held that it should be “read down”. The Sindh High Court decided that this tax is applicable for the tax year 2023 and not for the tax year 2022. Furthermore, it was decided that there cannot be any discriminatory rate of 10 percent as against four percent. The Lahore High Court however decided that super tax at the rate of four percent is valid for the tax year 2022, however, they have also agreed that there cannot be any charge at the rate of 10 percent. The matter is now pending before the Supreme Court of Pakistan and the court has asked to pay 50 percent of the tax demand.

5.      On this backdrop, we now turn to the merit of the instant case. Undisputedly, the appellant declared his income for the tax year 2022 amounting to Rs.125,431,213/- less than the threshold of income of Rs. 150 million prescribed in Division IIB of part 1 of the First Schedule to the Ordinance for the purpose of levy of super tax. The assessing office computed the imputable income of Rs.33,104,511/- against the tax of Rs.1,489,703/- deducted under section 153(1)(a) of the Ordinance which is a minimum tax in the case of the appellant and thereafter added it in the income declared by the appellant amounting to Rs.125,431,213/- by virtue of which the total income worked out at Rs. 158,535,724/- and thereafter he charged the super tax on the total income at the rate of 1 percent. The appellant contends that the concept of imputable income under the provision of subsection (28A) of section 2 of the Ordinance applies to those persons who derive income chargeable to tax under the final tax regime. The contention of the learned AR is well founded. For ease of reference, the provision of section 2(28A) is reproduced below:-

“Section 2(28A) “imputable income” in relation to an amount subject to final tax means the income which would have resulted in the same tax, had this amount not been subject to final tax;”          

The bare reading of the above provision of law clearly suggests that the imputable income relates to the tax which is a final discharge of tax liability under the Ordinance. Admittedly, in the instant case, the tax deducted under the provision of section 153(1)(a) was a minimum tax in the hands of the appellant, therefore, the assessing officer had erred in law in computing the imputable income against the minimum tax liability which is contrary to the above provision of law and subsequently added such imputable income in the declared income of Rs.125,431,213/- for the purpose of levy of super tax. When this legal position confronted to the learned DR, she frankly conceded the stance of the appellant and agreed that the imputable income could not be computed against the minimum tax liability. Therefore, the assessing officer has wrongly applied the provision of section 4C(2)(iii) of the Ordinance. Under the circumstances, the appeal of the appellant is accepted and the order passed by the assessing officer is annulled while the impugned order passed by the learned CIR(A) is vacated. The learned AR for the appellant apprised that during the appeal proceedings, the appellant paid the tax amounting to Rs.300,000/- against the disputed tax demand vide CPR No.IT-20230228-0101-2343338 dated 28^th February 2024. The respondent is directed to pay the said amount forthwith after receipt of this order.       

	Sd/-                       (M. M. AKRAM)                      JUDICIAL MEMBER
Sd/-              (NASIR IQBAL)   ACCOUNTANT MEMBER