JUDGMENT MUHAMMAD SAIR ALI, J.- Through this judgment ITA Nos. 196, 197 and 198 of'2O0O are dealt with and. Decided together being between the same parties involving identical questions of law.
2. Alleging default of the statutory obligation to deduct tax at source under sub-section (4) of Section 50 of the repealed Income Tax Ordinance, 1979 by the appellant (i.e. a private limited company), the Deputy Commissioner of Income Tax served a show-cause notice. On failure to furnish a reply, the assessee appellant was declared to be an assessee in default under Section 2 ibid and was consequently charged to the tax. The Commissioner of Income Tax (Appeals), Zone- Ill, Lahore accepting assessee's appeal through order dated 26.11.1998 held the assessee not to be a "prayer" to attract sub-section (4) of Section 50 ibid for the reason that the paid up capital of the appellant was below Rs. 1.5 million.
3. Upon the departmental appeal, the learned Income Tax Appellate Tribunal, Lahore on 18.12.1999 reversed the order of the Commissioner of Income Tax and resorted that of the Deputy Commissioner of Income Tax by observing that:- "5. Notification No. SRO 368(l)/94, dated March 7, 1994 exempted Companies vide its Clause (1) whose paid-up capital is below Rs. 1.5 (M) from deduction of tax under Section 50(4) as payers.
This notification has not been protected by sub-section (10) of Section 50 of _ ' the Income Tax Ordinance if read with the proviso (ii) to sub-section (4) of Section 50.
Thus, the contention of the Revenue appears to be correct that no exemption on the basis of - paid-up capital is available to companies.
According to latest law, all the companies irrespective of their paid-up capital are required to' deduct tax under Section 50(4) of the Income Tax Ordinance from the payments made by them under that section, in view of .This situation, it would be fair if the impugned appellate order of the learned Commissioner in all. The three years is cancelled and the orders passed by the DCIT under Section 52 are restored."
4. The assessee thus filed the present appeal against the above-said order of the learned Income Tax Appellate Tribunal praying for an opinion of this Court on the following questions:- "1. Whether on the facts and circumstances of the case, the non-obstinate clause of sub-section
(10) of Section 50 . Of the Income Tax Ordinance, 1979 as amended by the Finance Act, 1995, saved the Notification No. SRO 368(l)/94, dated 7.5.1994 which created exemption in respect of companies as prayers as regards withholding tax deduction under sub-section (4) of Section 50 ibid?"
"2. .Whether on the facts and circumstances of the case, the Assessing Officer of the payer can exercise jurisdiction under Section 52 of the Income Tax Ordinance, 1979 in view of Karachi High Court judgment in Tapal Energy case?"
5. On hearing the learned counsel for the parties we believe that the answer to the tangled question at No. 1 emerges from the chronological account of the amendments made in the proviso to sub-section (4) of Section 50 of the Income Tax Ordinance, 1979'[hereinafter referred as "the Proviso"].
6. in the Scheme of 1979 Ordinance, Section 50 was legislated under Chapter IV titled "Payment of tax before assessm ent". This section was enacted to provide for the deduction of income tax at source, it prescribed the procedure for the deduction, collection, accounting, adjustment, credits thereof, rates and modes of the deduction, it also provided for the exemption from the obligation to deduct the tax at source. From time to time notifications, memos., instructions and letters were issued by the Revenue to implement and enforce the objects of this section.
7. Under Clause (a) to sub-section (4) of Section 50 ibid a person responsible for making payment for the supply of goods or the services rendered or the execution of a contract was to deduct advance tax at the time of making such payment at the rate and subject to the conditions prescribed therein. The maker of the payment was termed as "payer" and the person receiving the payment was termed as "recipient".
8. "The Proviso" to the sub-section (4) of Section 50 ibid related to the exemption from the tax deduction obligation under the said Section 50(4). The "Proviso" originally read as under:--- "Provided that nothing contained in clause (a) or clause (b) shall apply to-
(i) any payment made on account of the refund Of any security deposit; or
(ii) any payer or recipient or class of payers or recipients as may be specified in this behalf by the Central Board of Revenue by notification in the official Gazette."
9. Under the above reproduced clause (ii) of the Proviso to sub-section (4) Notification No. S.R.O.
368(l)/94, dated 7.5.1994 was issued by the CBR to specify the "payers" exempted from the obligation to deduct tax at source. The "payers" so exempted included "companies whose paid up capital was below Rs. 15 million" and also others. The notification reads as under:- "in exercise of the powers conferred by clause (ii) of the proviso to sub-section (4) of Section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979), hereinafter referred to as the Ordinance, and in supersession of its Notification No. S.R.O. 828(l)/91, dated 24th August, 1991, the Central Board of Revenue is pleased to specify the following to be the payers, or the classes of payers to whom the said sub-section shall not apply, namely:-
(i) Companies whose paid-up capital is below Rs. 1.5 million;
(ii) Registered firms whose capital (total of closing balance of partners' capital accounts) as per the balance sheet in respect' of the latest assessment year is below Rs. 1.5 million;
(iii) Persons, being exporters of goods, making payments on account of supply of such goods as are purchased in respect of goods exported outside Pakistan: Provided that- (a)--------------
(b) ------------ - (c)-------------
10. Finance Act, 1994 substituted the above "Proviso" by the following:- "Provided .That nothing contained in clause (a) or clause (b) shall apply to any payment made on account of the refund of any security deposit."
11 The "Proviso" was again substituted by the Finance Act of 1995 as under:- Provided that-
(i) nothing contained in clause (a) or clause (b) shall apply to any payment made on account of the refund of any security deposit and
(ii) Nothing contained in sub-section (10) shall apply to companies as payers."
12. The statutory provision relating to the exemption from tax deduction obligations under "the Proviso" to sub-section (4) of Section 50 thus, underwent changes from time to time. Under the original "Proviso" ho advance tax was deductive (i) on the refund of a security deposit; and (ii) by the "payers" or class of "payers" or from the payments to "recipients" or class of "recipients", specified by the CBR. On substitution of the "Proviso" through Finance Act of 1994 exemption to.
Deduct tax at source was restricted and allowed only on the refund of the security deposits. CBR's power to specify the exempted "payers" or "the recipients" was withdrawn. Through the Finance Act of 1995 "the Proviso" was again replaced. Exemption on account of the refund of security deposits was kept intact under clause (i) of the "Proviso" substituted in 1995. Its Clause (ii) however was altogether a new addition providing that nothing contained in sub-section (10) of Section 50 was to apply to companies as "payers".
13. By Finance Act of 1995 alongwith the substitution of "the Proviso",, sub-section (10) to Section 50 was also added ancient read that:- "Notwithstanding the omission of the first proviso to sub-section (2A), clause (c) of sub-section (4), and the provisos to sub-section (4A), sub-section (5), subsection (5A), sub-section (6A), sub-section (7B) and sub-section (7BB), and substitution of the proviso to sub-section (4) under the Finance Act, 1994 (XII of 1994)-,- and without prejudice to the provisions of Section 6 or Section 24 of the General Clauses Act, 1897 (X of 1987), all the notification? Issued under the aforesaid provisions till the 30th day of June, 1994, shall be deemed to have been validly made and continue to remain in force until specifically repealed or amended."
14. The above reproduced sub-section (10) was added in Section 50 ibid to provide for the solution to the complexities that had arisen upon 1994 withdrawal of Central Board of Revenue's power to exempt the "payers" or "recipients" from the obligation to deduct tax at source. The troubling questions were as to whether upon withdrawal of such powers from the CBR (through 1994 amendment), the exemption notifications issued prior to the 1994 amendment survived or not. And that what was the legal status or legal life of the notifications issued( by the CBR till 30th day of June, 1994; the date of substitution "of the Proviso".
15. The two provisions of 1995 [the newly enacted sub-section (10) and the substituted "Proviso" to sub-section
(4) ] read cumulatively provided the answer to the above questions. Sub-section (10) ibid resuscitated, validated and continued notifications issued till 30th June, 1994 notwithstanding "the omissions" of the various provisions or "the substitution" of the "Proviso" under Finance Act of 1994.
Through the fiction of law and the strength of non-obstinate clause of sub-section (10) ibid, despite omissions of various provisions from and substitution of "the Proviso" on the statute book, the notifications issued till 30th of June, 1994 under such omitted or substituted provisions were reanimated, resurrected, reinforced and validated through amendments made in the Income Tax Ordinance, 1979 through the Finance Act of 1395.
17. The Notification No. SRO 368(l)/94 i.e. The subject-matter of the present appeal, was one such notification which borrowed its life, legality and enforceability from the above-referred sub-section
(10) of Section 50 as:--
(i) This notification was issued on 7.5.1994 i.e. Prior to the cut-off date of 30th June, 1994; and
(ii) it was issued under Claus (ii) of the Proviso to sub-section (4).
As such the registered firms whose capital was below Rs. 1.5 million and the exporters of the goods (per applicable conditions) being specified as the "payers" under this notification, continued to enjoy exemption from the applicability of sub-section (4) ibid from deducting income tax at source.
18. Although the above notification dated 17.5.1994 had also specified the companies with paid up capital below Rs. 1.5 million, as the exempted "payers" and the above-referred sub-section (10) had provided for the continuity and validity of this notification, yet continuance of such exemption in the case of the companies, was withheld through a corresponding amendment in "the Proviso" to subsection (4) ibid. Clause (ii) of "the Proviso" substituted under the Finance Act-of 1995 denuded the companies of the exemption by providing that "nothing contained in subsection (10) shall apply to companies as "payers". The Legislative instrument i.e. The Finance Act of 1995 thus excluded the companies from the benefit of the revived exemption which was originally allowed in a subordinate/sub-legislation i.e. Notification dated 7.5.1994.
18: The Legislature as such expressed its intention not to exempt a company on the basis of paid up capital from the obligation of deducting income tax at source under sub-section (4) of Section 50 of the late Income Tax Ordinance, 1979. Answer to Question No. 1 thus is that although the Notification No. SRO 368(l)/94, dated 7.5.1994 was validated and continued through sub-section
(10) of Section 50 ibid yet exemption granted to the companies with paid up capital below Rs. 5 million was discontinued.
19. Question No. 2 as proposed was neither raised nor considered or adjudged upon by the learned Tribunal wherefor the same is not a question arising from the order dated 18.12.1999 of the learned Tribunal deserving an expression of opinion by this Court..
20. The appeals of the assessee thus fail and are accordingly dismissed. .