1. JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).--Out of these five appeals four are against the consolidated impugned orders of the learned CIT(A) dated 22-10-2008 for the assessment years 2000-2001 to 2002-2003 and Tax Year 2003 on the following common grounds:-- "That the learned CIT(A) Lahore has wrongly confirmed the order under sections 62/132 of the Income Tax Ordinance, 1979 read with section 129 of the Income Tax Ordinance, 2001 made by Taxation Officer, Audit-1, Coys. Zone-I, Regional Tax Office, Lahore."
2. While the remaining one appeal for the tax year 2006 is against the impugned order of the learned CIT(A) dated 13-5-2008 on the following ground:- "That the learned CIT(A) Lahore has wrongly confirmed the order under section 170(4) of the Income Tax Ordinance, 2001 made by Taxation Officer/ACIT, Enforcement and Collection Unit-3, Enforcement Division-I, Regional Tax Office, Lahore."
3. Learned counsel giving the facts of the case has contended that in the assessments for the years under review originally the presumptive incomes against imports were finalized adopting the value of imports inclusive of the sales tax. The assessee filed first appeal contending thereon that the said issue has already been resolved upto the level of the honourable Supreme Court of Pakistan and he in this respect placed reliance on the following decisions:--
(1) 2003 PTD (Trib.) 735 which is for the assessee's on case.
(2) 2005 PTD (Trib.) 280 in this case the difference of opinion was arisen but ultimately it was decided that the import value should be adopted excluding the sales.
(3) 1994 PTD 848 (Lahore High Court)
(4) 2005 PTD 194 (Supreme Court of Pakistan)
4. The learned CIT(A) set aside the assessment but the Assessing Officer has again finalized the assessm ent by assessing imports value exclusive of sales tax on the grounds that the department had filed appeal before the Honourable High Court against the above orders of this Tribunal reported 2003 PTD (Trib.) 735. The assessee again filed appeal before the learned CIT(A) which has been dismissed placing reliance on the decision of the Karachi Bench of this Tribunal in the case reported as 2006 PTD (Trib.) 2895 which was based upon the decision of the Karachi High Court in Writ Petition No.598 of 2008. The learned counsel has contended that the action of the authorities below is contrary to law and against the facts and circumstances of the case. He has contended that the finding of the honourable Supreme Court of Pakistan on the issue cannot be reversed by the honourable High Court. He has contended that in the assessee's on case the department has not filed any appeal against the order of this Tribunal before the honourable High Court as neither any notice was served on the assessee so far nor any order in this respect has been placed before this Bench. He is therefore of the view that the order of this Tribunal reported as 2003 PTD (Trib.) 735 is still in the field which is in the case of' the assessee. He has further contended that for the tax years 2004 and 2005 the contention of the taxpayer has been accepted by the department and the refund for these years has also been issued. According to learned counsel it is a settled principle that the assessee's on history in the similar circumstances would be the best guide for making the assessment. He is therefore of the view that since the order of this Tribunal in assessee's on case is still in the field. Therefore the department was not justified to follow the decision made in other cases. Learned counsel regarding decision of the honourable High Court reported as 2005 PTD 1328 on which the Taxation Officer has placed reliance has contended that the facts and law point of that case are quite different from the case of the assessee. Distinguishing that case from the instant case of the assessed, he has submitted that decision of the honourable High Court relates to section 80-DD of the late Ordinance whereby the Tax collected on the import the inclusion of amount of sales tax towards income of importer could not be deemed to be income of importer and not to be subjected to payment of income tax. We have further noted that in the case of the present assessee in the previous assessment years, this Tribunal has already held that the tax liability under section 80-C of the repealed Income Tax Ordinance, 1979 be calculated exclusive of Customs duty and Sales Tax placing reliance on the decision of this Tribunal and the decision of the honourable High Court. Learned counsel representing the assessee in this regard has placed before us the order of this Tribunal dated 1-12- 2007 in I.T.A. No.1102/LB/2006 (Assessment Year 1998-99). Considering all these cases referred by the learned counsel for the assessee and due to the fact that in the case of the assessee himself version of the assessee has been accepted by the department in the subsequent tax years, therefore, there was no justification for deviating from the previous history and the subsequent treatment. Specifically due to the fact the department has accepted the version of the assessee for the tax years 2004-2005 and the refunds have been allowed for these two years. The consolidated impugned order of the learned CIT(A) for the assessment years 2000-2001 to 2002- 2003 and tax years 2003 keeping in view these facts and circumstances is vacated and all the assessm ent orders passed for these four years are cancelled. The Assessing Officer is directed to follow the directions made by the learned CIT(A) in accordance with the previous history of the case in accordance with the decisions of this Tribunal for the previous assessment years.
5. Regarding appeal for the Tax Year 2006 we have found that the deemed assessment under section 120(1) in the case of the appellant was based on the Tribunal's order in his on case relating to previous assessm ent years and the refund was created and the appellant as per history moved an application for issuance of refund. The Taxation Officer rejected the refund application against which the assessee filed appeal before the learned CIT(A) which has also been rejected. It has been contended by the learned counsel for the assessee that the order of the Taxation Officer under section 170(4) is void ab-initio, having no lawful jurisdiction and against the history of the case. He has in this regard referred the decisions of this Tribunal in the case of the assessee and have also submitted that the department has already issued refund for the Tax Years. 2004 and 2005 but for the year under review the application has been rejected without any justification. The learned counsel in this regard has also contested the orders of the officers below, on the basis of the decision of this Tribunal reported as 2007 PTD (Trib.) 1780 wherein it has been held that the duty of the Refund Authority was restricted to the extent of the cross check of the documents for calculation of the amount of refund and to satisfy that no other tax was outstanding against him before issuance of the refund, validity and legality of the various claims of the assessee in his return which practically was the deemed assessment order was not his responsibility and he was not supposed to check the vires thereof. It has further been held that the process of issuance of refund was only a consequential action and the assessment and refund proceedings were two separate independent matters. Proceedings with an application filed by the assessee for refund, scrutiny of the return would amount entering into the purview of section 120 of the Income Tax Ordinance, 2001. Learned counsel on the basis of this decision has contended that the Refund Assessing Authority in this case has entered into the jurisdiction which was available to the Assessing Authority and therefore the rejection of the refund application under section 170(4) is without jurisdiction and liable to be annulled on this score also.
6. On the other hand the learned D.R. Is supporting the impugned orders but he is unable to rebut the above said contentions made by the learned counsel of the appellant.
7. After considering the relevant provisions of law and in view of the principle laid down by this Tribunal in the above referred decision reported as 2007 PTD (Trib.) 1780 we find no justification for rejecting the refund application filed by the assessee under section 170(4) of the Ordinance, 2001 for the tax year 2006. The impugned order of the learned CIT(A) in this respect is therefore vacated and the order passed by the Taxation officer for the year under review is cancelled and the Taxation Officer is directed to issue refund in accordance with law if no other liability is outstanding against the taxpayer.
8. All the five appeals filed by the assessee are allowed in the manner referred above.
9. (JAWAID MASOOD TAHIR BHATTI) Judicial Member DISSENTING NOTE. AMJAD IKRAM ALI (ACCOUNTANT MEMBER).---I have given anxious consideration to all the case-law relied upon by learned brother. The judgment of Lahore High Court 1994 PTD 848 was delivered as the counsel of government conceded. The Lahore High Court therefore did not discuss the law on the subject and gave verdict without dilating on law the subject. The Supreme Court vide its judgment 2005 PTD 194 refused to grant leave to appeal on the ground that Collector of Customs who was the collecting authority did not contest the claim of taxpayer. The Supreme Court also noted that Income Tax Department has not filed any petition against the Lahore High Court order 1994 PTD 848. The Supreme Court refusal was on the ground that there was no issue in fact as neither the Collector of Customs contested the matter nor the Income Tax Department has filed any petition against said judgment of High Court. For clarity para-5 of Supreme Court judgment is reproduced hereunder:- "Para-5 of the order:-- "In the instant case the Authorities of Customs Department are merely collectors of tax on behalf of the Income Tax Department. The Income Tax Department has not filed any petition against the impugned judgment despite the Act that it was a party in the writ petition and was represented by the same learned counsel Mr. Muhammad Ilyas Khan, Advocate. The Collector of Customs though a party in the writ petition and never contested the matter, had never appeared and had never filed any comments."
10. The matter has neither been thrashed either at the Lahore High Court level nor at the Supreme Court level. This factum has been taken cognizance of in subsequent judgment of Sindh High Court 2005 PTD 1328.
2. The case reported as 2005 PTD 280 is also based on the Lahore High Court judgment which has been discussed above. Similarly Tribunal's order 2003 PTD (Trib.) 735 is also based on case-law discussed above.
3. CIT(Appeals) has relied on the following case-law in order to uphold addition of sales tax for determining value for income tax.
(i) Karachi High Court decision in Writ Petition No.598 of 2001.
(ii) 2005 PTD 1328.
11. (i.e) 2006 PTD (Trib.) 2859.
12. These judgments are briefly discussed hereunder.
4. In case reported as 2005 PTD 1328 Writ Petition 598- (Karachi High Court) the issue was that of inclusion of value of sales tax for the purpose of collecting income tax under section 50(5) on edible oil as has been given in explanation II of said subsection. The High Court observed as under:-- "The tax under sub-clause (5) of section 50 of the Ordinance is collected on the value determined under section 25 of the Customs Act, 1969 (hereinafter referred to as the "Act"), which provide that for the purpose of determining the value, the normal price, of an imported goods shall be determined by including in the price, duties and taxes applicable in Pakistan. Sub-clause (5) of section 50 of the Ordinance provides that the Collector of the Customs shall, in the case of every import of goods, collect advance tax computed on the basis of the value of such goods as increased by the customs duty and sales tax, if any, levied thereon at the rate specified in the First Schedule and credit for the tax so collected in any financial year.
13. As regards the case of Ramna Pipe and General Mills Ltd., (supra), we have gone through it, but failed to conceive how the proposition laid down in the said matter is applicable to the instant case.
14. Having gone through section 25 of the. Act and sub-clause (5) of. Section 50 of the Ordinance, at the time of collecting the income-tax on the import of the goods, value of the goods is to be taken as value of the goods determined under section 25 of the Act along with customs duties and sales tax, if any, to be 'paid on it."
5. It would be observed that while on the one hand the honourable High Court has not agreed with the proposition of non including sales tax. for the purpose of determining income tax liability under section 80DD despite Ramna Pipe and General Mills uncontested refusal to grant appeal and on the other hand given specific finding. The ratio of this judgment applies to the instant case. The matter of calculation on commercial imports is para meteria the same as that of calculation of income, tax on import of edible oil.
6. In the case reported as 2006 PTD (Trib.) 2859 the Karachi Bench has discussed the case-law on the subject including cases referred by my learned brother and held that sales tax is liable to be added for the purpose of section 148 of the Income Tax Ordinance, 2001 on the basis of earlier finding of Sindh High Court in the matter of section 50(5) of the repealed Ordinance. The Tribunal observed as under:-- "Section 148(7) read with definition of value of goods under section 148(9) and further read with section 109 of the Income Tax Ordinance, 2001 are very much clear and leave no doubt so as to form different opinion that customs duty and sales tax shall be included in the value of the imported goods.
15. We are therefore, the considered opinion that admission on the part of the Departmental representative contrary to the statutory law has no legal significance, as such the order of the Lahore High Court which is purely based on admission cannot be relied upon as an authoritative judgment on this issue. This Sindh High Court has passed a specific order on relevant issue taking into consideration subsection (5) of section 50 and section 80C of the Income Tax Ordinance, 1979 (repealed). In this context we would like to refer the order recorded in Constitutional Petition No.598 of 2001 in case of Messrs Madina Enterprises Ltd. v. Federation of Pakistan and others wherein, the Hon'ble High court held as under:-- "The tax under sub-clause (5) of section 50 of the Ordinance is collected on the value determined under section 25 of the Customs Act, 1969 (hereinafter referred to the "Act"), which provides that for the purpose of determining the value, the normal price of an imported goods shall be determined by including in the prices, duties and taxes applicable in Pakistan. Sub-clause (5) of section 50 of the Ordinance provides that the Collector of 'the Customs shall in the case of every import of goods, collect advance tax computed on the basis of the value of such goods as increased by the customs duty and sales tax, if any, levied thereon at the rate specified in the First Schedule and credit for the tax so collected in any financial year."
16. "Having gone through section 25 of the Act and sub-clause (5) of section 50 of the Ordinance, at the time of collecting the income tax on the import of the goods, value of the goods is to be taken as value of the goods determined under section 25 of the Act along with customs duties and sales tax, if any, to be paid on it."
7. Since authoritative explanation of law has been made by Karachi High Court and followed by ITAT Karachi Bench I find no reason to differ with them. Finding of third member is required in the light of discussion above. The question is reproduced here under:- "Whether for the purpose of collection of tax under section 50(5)(b) read with explanation 1 of section 50(5) of repealed Ordinance and sections 148(1) and 148(9) of new legislation, the value of the goods imported shall be the value as increased by the customs duty and sales tax if any levied thereon?"
17. (Tax Year 2006)
18. The issue involved is the same as discussed above but has assumed a new dimension as refund has been rejected under section 170(4).
2. The CIT(Appeals) has relied upon the discussion regarding method of calculation of income tax referred in earlier part and has upheld rejection of refund despite ITAT Order No.382/LB of 2007. I have perused the order of ITAT Order No.382/LB of 2007, Wherein it was held that enforcement wing has no right to determine the status of assessee or whether taxpayer was liable to assessment under PTR or normal law. This case is of a different nature. The issue involved here was determining overpaid tax in terms of section 170(3). The contents of return revealed the value on which income tax was liable to be deducted and taxpayer had worked out lesser tax liability and claimed refund.
19. The Taxation Officer held that refund in fact was not due as the tax liability had been incorrectly worked out. The case here is that there has no excess payment in terms of section 170(3) as apparent from the declaration of taxpayer.
3. If for argument sake income tax was not payable on the quantum of sales tax then the .Proper course for taxpayer was to go for the legal remedy by approaching for a lower rate deduction certificate or go in writ petition against the Collector. The taxpayer cannot be allowed to voluntarily admit liability to pay income tax on sales tax before the Collector of Customs and take a somersault and claim refund thereof in Income Tax Department. The question to the resolved is as under:-- "Whether Taxation Officer justifiably refused to refund as there was no excess payment in terms of section 170(3) in the light of case-law discussed earlier."
20. (AMJAD IKRAM ALI) Accountant Member (JAVAID MASOOD TAHIR BHATTI) Judicial Member
21. NAZIR AHMAD (JUDICIAL MEMBER).---The matter has been referred to me by Honourable Chairperson, arising out of the decision recorded in above titled appeal. I have heard the arguments of the representatives of both the parties and have also perused the above referred views of my both learned brothers, impugned order of learned CIT(A), assessment order, case-laws and other relevant record of the case. The following questions are referred for decision:--
(i) "Whether for the purpose of collection of tax under secsection 50(5)(b) read with explanation 1 of section 50(5) of repealed Ordinance and sections 148(1) and 148(9) of new legislation, the value of the goods imported shall be the value as increased by the customs duty and sales tax if any levied thereon?"
(ii) "Whether Taxation Officer justifiably refused to refund as there was no excess payment in terms of section 170(3) in the light of case-law discussed earlier."
22. At the first instance I intend to answer the above question No.(i), which pertains to assessment years 2000-2001, 2001-2002, 2002-2003 and tax year 2003. On the issue contained therein while passing the ATIR order dated 29-10-2009 my learned brother Judicial Member by placing reliance on the following decisions:--
(i) 2003 PTD (Trib.) 735 which is for the assessee's on case.
(ii) 2005 PTD (Trib.) 280 in this case the difference of opinion was arisen but ultimately it was decided that the import value should be adopted excluding the sales tax.
23. (i.e) 1994 PTD 848 (Lahore High Court).
(iv) 2005 PTD 194 (Supreme Court of Pakistan). ----Accepted the appeal of the taxpayer by way of drawing the following conclusion:-- "Considering all these cases referred by the learned counsel for the assessee and due to the fact that in the case of the assessee himself version of the assessee has been accepted by the department in the subsequent tax years, therefore, there was no justification for deviating from the previous history and the subsequent treatment. Specifically due to the fact the department has accepted the version of the assessee for the tax year 2004-2005 and the refunds have been allowed for these two years. The consolidated impugned order of the learned CIT(A) for the assessm ent years 2000-2001 to 2002-2003 and the tax year 2003 keeping in view these facts and circumstances is vacated and all the assessment orders passed for these four years are cancelled.
24. The assessing officer is directed to follow the directions made by the learned CIT(A) in accordance with the previous history of the case in accordance with the decisions of this Tribunal for the previous assessm ent years."
25. With the above-mentioned finding, the case was sent to my learned brother Accountant Member for counter signatures, who in his turn instead of endorsing the view point taken by my learned brother Judicial Member, affixed the dissenting note on it. While passing his divergent views on the issue under consideration, he termed the case-laws relied by my learned brother Judicial Member to be not applicable with the remarks given against each case-law given below:-- Case-Law Remarks 1994 PTD 848 (Lahore High Court)This Judgment was delivered as the counsel of Government conceded. The honourable Lahore High Court, did not discuss the law on the subject and gave verdict without dilating on law on the subject.
26. 2005 PTD 194 (Supreme Court of Pakistan)Vide this judgment the honourable Supreme Court of Pakistan refused to grant leave to appeal on the ground that Collector Customs who was the collectiong authority did not contest the claim of taxpayer. Therefore, the matter was not thrashed out at the level of Apex Court of Pakistan.
27. 2005 PTD (Trib.) 280 in this case the difference of opinion was arisen but ultimately it wasThis reported case is also based on the honourable Lahore High Court judgment reported as 1994 Decided that the import value should be adopted excluding the sales.PTD 848, which has been discussed above.
28. 2003 PTD (Trib.) 735 which is for the assessee's own caseThis Tribunal's order is also based on the case-law discussed above.
29. After rejecting the reliance placed by my learned brother Judicial Member, my learned brother Accountant Member by placing reliance on a reported judgment cited as 2005 PTD 1328 (Karachi High Court) and specifically on the following ratio settled in another reported judgment of this Tribunal cited as 2006 PTD 2859 (Trib.):-- "Section 148(7) read with definition of value of goods under section 148(9) and further read with section 109 of the Income Tax Ordinance, 2001 are very much clear and leave no doubt so as to form different opinion that customs duty and sales tax shall be included in the value of the imported goods.
30. We are, therefore, the considered opinion that admission on the part of the Departmental representative contrary to the statutory law has no legal significance, as such the order of the Lahore High Court which is purely based on admission cannot be relied upon as an authoritative judgment on this issue. This Sindh High Court has passed a specific order on relevant issue taking into consideration subsection (5) of section 50 and section 80C of the Income Tax Ordinance 1979 (repealed). In this context we would like to refer the order recorded in Constitutional Petition No.598 of 2001 in case of Messrs Madina Enterprises Ltd. v. Federation of Pakistan and others wherein the honourable High Court held as under:-- "The tax under sub-clause (5) of section 50 of the Ordinance is collected on the value determined under section 25 of the Customs Act, 1969 (hereinafter referred to the "Act"), which provided that for the purpose of determining the value, the normal price of an imported goods shall be determined by including in the prices, duties and taxes applicable in Pakistan. Subsection (5) of section 50 of the Ordinance provides that the Collector of the Customs shall in the case of every import of goods, collect advance tax computed on the basis of the value of such goods as increased by the customs duty and sales tax, if any, levied thereon at the rate specified in the First Schedule and credit for the tax so collected in any financial year."
31. "Having gone through section 25 of the Act and sub-clause (5) of section 50 of the Ordinance, at the time of collecting the income tax on the import of the pods, value of the goods is to be taken as value of the, goods determined under section 25 of the Act along with customs duties and sales tax, if any, to be paid on it." ---arrived at the conclusion that while colleting tax the actual value of goods shall be increased by the customs duty and sales tax, if any levied.
32. On the point of applicability of the case-laws relied by my learned brother Judicial Member I find myself in agreement with my learned brother Accountant Member. However, it is pertinent to note that the years under consideration pertain to assessment years 2000-2001, 2001-2002, 2002-2003 and tax year 2003. Since, Income Tax Ordinance, 1979 was repealed and new Income Tax Ordinance, 2001 came into force i.e.f. 1-7-2002, therefore, according-to the ratio settled in the case Eli Lilly Pakistan (Pvt.) Ltd., and others reported as 2009 PTD 1392 the assessm ent completed under repealed Income Tax Ordinance, 1979 ought to be governed by the old law while the assessments of the, post-enforcement period of the Ordinance shall be governed by new law i.e. Income Tax Ordinance, 2001.
33. Assessm ent years 2000-01, 2001-02 and 2002-03 fall under the repealed Income Tax Ordinance, 1979, and sections 50(5) and 50(5)(a) of the same deals with the issue under consideration, which provides that:-- Section 50(5) Notwithstanding anything contained in any law for the time being in force.
34. Section 50(5)(a) "The Collector of Customs shall, the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increased by the customs duty and sales-tax, if any, levied thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessm ent year, in which the "said date, as referred to therein, falls whichever is the later."
35. Perusal of above section 50(5) of the late Ordinance would reveal that the same is a non-obstante provision of law having overriding effect over any law in force for the time being including the repealed Income Tax Ordinance, 1979. It is important to note that in section 50(5) the phrase "any law for the time being in force" has been used, in contrast to the other similar provisions, the words "notwithstanding anything contained in this ordinance" have been used. The connotation "any" used in this subsection expands the scope of the provisions for the purposes of overriding effect on to all the laws. Whereas the other connotation restricts the overriding effect to the provision of the Income Tax Ordinance alone. The connotation "any" has two different colours, I meaning and uses and is capable to be applied differently, but in the context of the subject and situation in which they have been used. The connotation has diversity of meanings and may be employed to indicate "all". Or "every" as well as "some" or "one". Therefore, it clearly follows that meaning of the said words used in the statute are dependent upon the context and subject matter of the statute. Reliance in this behalf can be placed on case reported as 2006 PTD 2502. Therefore, the provision has an overriding effect over the provisions of other laws including the Income Tax Ordinance.
36. Now, we come to clause (a) of subsection (5) of section 50. It transpires that it provides a procedure for collection of tax at the import stage and requires the Collector of Customs to collect advance income tax from the importers of goods on the basis of value of such goods as .
37. Increased by the custom duty and sales tax. The said advance tax has to be collected on the rates specified in the first schedule to the repealed Income Tax Ordinance, 1979. The language of clause
(a) of subsection (5) of section 50 suggests a method of determining value on which the tax has to be collected by the Collector of Customs. It is a matter of common knowledge that sales tax whether deducted or collected does not constitute part of cost or value. However, in case of end consumer alone it constitutes part of the sale in the normal parlance and understanding of costing method. But such principle of working out value or cost of a thing is not relevant for the purposes of section 50(5) of the repealed Ordinance. The legislature a its wisdom has determined a value alone for the purposes of deduction of tax and for that reason it has specifically been stated in the said subsection that the tax has to be computed on the basis of value of such goods as increased by custom duty and sales tax, if any levied thereon at the rates specified in the first schedule.
38. Therefore, it clearly follows that while collecting tax the actual value as understood in the normal parlance shall be increased by the custom duty and sales tax, if any levied.
39. It is important to state here that earlier the word "leviable" was used in subsection (5) of section 50, which was later-on substituted with "levied" through Finance Act, 1995. The subsequent change in the terminology shows that prior to amendment through Finance Act, 1995 notwithstanding the tax actually levied, the increase in the value of goods . So imported was subject to increase for the purposes of collection of tax. Whereas after the amendment referred to above, the sales tax or custom duty actually levied was taken for the purposes of increase in the value of goods imported.
40. Here, I also want to throw light on the provisions of section 80C of the Income Tax Ordinance, 1979, which is also a non-obstante provision of law having an overriding effect over the other provisions of the Income Tax Ordinance, 1979 for the reason that the same starts with the words "notwithstanding anything contained in this Ordinance or any other law for the time being in force".
41. Therefore, it clearly indicate that the said provision has an overriding effect not only in respect of provisions of Income Tax Ordinance alone but also on any other law in force for the time being.
42. The perusal of provisions of section 80C, subsection (1) reveals that it creates a fiction of law by stating that whether any amount referred to in subsection (2) is received by or accrues or arises or is due to accrue or arise to any person, the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the first schedule. Despite the fact that ordinarily the imported goods or value thereof cannot be considered as income of a tax payer but the legislature has power to create a fiction thereby treating some transaction as income notwithstanding its meaning or understanding in the normal course of business. Therefore, the legislature has held that any amount received or accrued or arises or is deemed to arise or accrues to any person and which have been defined in subsection (2) of section 80C, the same shall be treated as income of such person. The validity of the provision so challenged by the taxpayers before the Apex Court for the reason that the fiction created by law was totally against the norms of normal understanding and practice. The Hon'ble Supreme Court in the case reported as PLD 1997 SC 582 held that provisions of section 80C are intra-vires and defines the legislature powers of the State.
43. The provisions of subsection (2) define and explain the amounts which have been referred in subsection (1) of section 80C. For the purposes provision of subsection (2) of section 80C are reproduced for convenience of reference:-- "(2) The amount referred to in subsection (1) shall be the following namely:--
(a) Where the person is a resident,--
(i) the amount representing payments on which tax is deductible under subsection (4) of section 50, other than payments on account of services rendered;
(ia) the amount representing payments from which tax is deductible under subsection (4A) of section 50;
(ii) the amount as computed for the purposes of collection of tax under subsection (5) of section 50 in respect of goods imported not being goods imported by any industrial undertaking as raw material for its on consumption;
(in) the amount on which tax is collectable under subsection (5AAA) of section 50; (i.e) the amount on which tax is deductible under subsection (7A) of section 50 in respect of lease of right to collect Octroi duties, tolls, fees or other levies, by whatever name called; and
(iv) the amount on which tax is deductible under subsection (7H) of section 50;
(b) Where the person is a non-resident, the amount representing payments on account of execution of a contract for construction, assembly or like project in Pakistan on which tax is deductible under subsection (4) of section 50: Provided that nothing in this section shall apply to amounts referred to in clauses (ia), (in) and (i.e) of subsection (3) in respect of any assessment year commencing on, or after, the first day of July, 2002".
44. Tax year 2003 fall under Income Tax Ordinance, 2001 and section 148 deals with the issue under consideration. Subsections (7) and (9) further throw light on the section 148 to make its provisions crystal clear, which read as under:-- SECTION 148(1) "Imports.---(1) The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part-II of the First Schedule."
45. Section 148(7) [(7) The tax collected under this section shall be a final tax on the income of the importer arising from the imports subject to subsection (1) and this subsection shall not apply in the case of import-
(a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its on use;
(b) fertilizer by manufacturer of fertilizer; and
(c) [motor vehicles] in CBU condition by manufacturer of [motor vehicles] [(d) large import houses, who,-
(i) have paid-up capital of exceeding Rs.100 million; '(ii) have imports exceeding Rs.500 million during the tax year; (i.e) on total assets exceeding Rs.100 million at the close of the tax year;
(iv) is single object company;
(v) maintain computerized records of imports and sale of goods;
(vi) maintain a system for issuance of 100% cash receipts on sales;
(vii) present accounts for tax audit every year; (viii)is registered with Sales Tax Department; and
(ix) make sales of industrial raw material of manufacturer registered for sales tax purposes.] Section 148(9) In this section-- "Collector of Customs" means the person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969), and includes a Deputy Collector of Customs, an Additional Collector of Customs, or an officer of customs appointed as such under the aforesaid section; ["value of goods" means the value of the goods as determined under the Customs Act, 1969 (IV of 1969), as if the goods were subject to ad valorem duty increased by the customs-duty, federal excise duty and sales tax, if any, payable in respect of the import of the goods.] When the above mentioned provisions are read collectively, then we are left with no other alternative except to draw an inference as drawn earlier by this Tribunal in its reported judgment cited as 2006 PTD (Trib.) 2859 that provisions of Income Tax Ordinance, 2001 on the issue under consideration are the same in the sense and in this context provisions of repealed Income Tax Ordinance, 1979.i.e., except change of sections, there is no difference between the two sections, which are fully applicable in the present case.
46. Therefore, in view of the above detailed discussion, I concur the finding of my learned brother Accountant Member that the value of goods imported shall be the value as increased by the customs duty and sales tax, if any levied thereon, for all the years under consideration. The answer to Question No. (i) is in positive.
47. TAX YEAR 2006 Now, I come to the controversy arisen between my two learned brothers regarding entitlement of refund to the taxpayer for the tax year 2006. As per facts on record the taxpayer filed return, which was taken as an assessment order in terms of section J.20(1) of the Ordinance. On the basis of that assessm ent order, the taxpayer claimed refund amounting to Rs.4,673,389 for the year under consideration on account of excess deduction of tax under sections 148 and 153 of the Income Tax Ordinance, 2001, which was rejected by the taxation officer on the plea that refund has been claimed on the basis of wrong calculation of tax by excluding the component of sales tax from the value of commercial imported goods. In appeal the learned CIT(A) also upheld the action of the taxation officer by terming the same to be justified. While resolving the issue under consideration at the level of this Tribunal by my two learned brothers went on two separate tracks, one leading to in favour of the action of both authorities below adopted by learned Accountant Member whereas the other track lead in favour of the taxpayer adopted by my learned brother Judicial Member. While rendering favour to the taxpayer my learned brother Judicial Member was of the view that it was not the duty of refund authority to ascertain the validity 'and legality of various claims of the assessee in his return and he was not supposed ,to check the vires thereof. He was also of the view that the process of issuance of refund was only a consequential action as the assessm ent and refund proceedings were two separate independent matters. In this regard reliance was placed on a reported judgment cited as 2007 PTD (Trib.) 1780. At the first instance my learned brother Accountant Member doubted the applicability of the reported judgment supra relied by my learned brother Judicial Member by giving his on finding, which reads as under:- "This case is of a different nature. The issue involved here was determining overpaid tax in terms of section 170(3). The contents of return revealed the value on which income tax was liable to be deducted and taxpayer had worked out lesser tax liability and claimed refund. The Taxation Officer held that refund in fact was not due as the tax liability had been incorrectly worked out. The. Case here is that there has no excess payment in terms of section 170(3) as apparent from the declaration of taxpayer. "
48. After carefully going through divergent view supra and also the reported judgment relied by my learned brother Judicial Member i.e., 2007 PTD (Trib.) 1780, which is very clear on the issue under consideration. In the light of said judgment, I am also of the considered opinion that the refund application was filed by the taxpayer as per section 170(1) of the Income Tax Ordinance, 2001, which was rejected by the taxation officer by discussing the merits of the case instead of following the procedure as provided in section 170. This issue has already been settled by the Tribunal in a reported judgment cited at (2008) 97 Tax 153 (Trib.) in which it has been held in unequivocal manner that:-- "Rejection of refund application---Annulment of order by CIT(A)---Validity---Whether Taxation Officer while disposing of application for refund has exercised authority of other officers although he had no power to adjudicate issue with regard to status of income of assessee---Held yes--- Whether under section 170 power of issuance of refund does not include power to discuss nature of business of assessee as well as dilation on issue whether same is case of presumptive income or not---Held yes."
49. The bare perusal of section 170 and above extract of the reported judgment clearly reflects that in case of refund application filed by the taxpayer, the taxation officer shall proceed to arrive at actual amount to be refunded and then issue refund within a period of 45 days (now 60 days) without discussing nature of business of the taxpayer. In the case in hand, the refund application filed by the taxpayer was rejected by the taxation officer on the ground that refund has been claimed on the basis of wrong calculation of tax by excluding the component of sales tax from the value of commercial imported goods. By doing so the taxation officer had acted beyond his jurisdiction as in the presence of an order under section 120(1) of the Income Tax Ordinance, 2001, he was not authorized and has got no power under the law to discuss the status of the case. On receiving refund application filed by the taxpayer, the taxation officer will proceed according to the provisions of subsection (3) of section 170 to arrive at actual amount of refund as provided ,in subsections (a), (b) and (c) of section 170(3), on the basis of which he could reject or accept the refund claimed by the assessee within a period of 45 days (now 60 days) but cannot discuss the nature of business to base his rejection of refund. There is a plethora of judgments on the issue under consideration; however, in order to further strengthen my view point, reliance is placed on a reported judgment cited as 2009 PTD (Trib.) 1026, the relevant extract of which is given as under:-- "Refund issuing authority should not travel beyond his jurisdiction in striking at the root of assessm ents---If there was any illegality or mistake in the assessments the relevant provisions of law in this regard could be invoked."
50. "In the aforementioned judgment this Tribunal -has held that the duty of the refunding authority is controlled to the extent of the cross check of the documents for calculation of the amount of refund only and to satisfy that no other tax is outstanding against him before issuance of the said refund. The validity and legality of the various claims of the assessee in his return which practically is the deemed assessm ent order is not his responsibility hence he is not supposed to 'check the vires thereof."