MUNSIF KHAN MINHAS (JUDIICAL MEMBER).---The instant appeals have been filed by the Department against the order passed by the learned CIR(A-I), Islamabad for the tax years 2002- 2003, 2003, 2006 and 2007 on the following common grounds:--
(a) That the order of the learned CIR (Appeals-II) Islamabad is bad in law and against the fact of the case.
(b) That the CIR (A-II) Islamabad was not justified to delete the WWF on the ground that WWF was not leviable. Taxpayer Company itself charged WWF for the assessment years, 1999-2000 and 2000-2001 on the basis he deleted WWF for the assessment years 2002-2003, 2003, 2006, 2007.
(c) That the Appellate may be allowed to and or alter any grounds of appeal on or before the date of hearing.
3. Brief facts leading to these appeals are that the taxpayer is a private limited company deriving income from manufacturing and sale of pipes. It was observed that the taxpayer company being a manufacturer failed to charge WWF for the years under consideration, accordingly show cause notices confronting the appellant with this issue were issued which remained un-complied with.
Accordingly WWF was charged as per detail in the orders. Being dissatisfied with the treatment given by the learned Assistant Commissioner Inland Revenue, taxpayer preferred appeal before learned CIR(A) who after considering the facts and figure observed as under:-- "In view of the appellate decisions in the case I fail to understand that how the impugned orders are being passed without discussing even the existence of the appellate orders when the issue has already been adjudicated upon by CIT(A). Further only a single opportunity of being heard has been allowed and a stereotype order passed. In view of the above situation the orders being bad in law without even consulting the record, accordingly the orders are annulled."
Being aggrieved with the action meted out by the learned CIR(A), the department has come up in appeal before this Tribunal on the grounds raised supra.
4. The A.R. Contended that contribution to WWF is the proportional share of company as approved by the Board of Governors of the Fund. The Telecom Foundation, Welfare Fund was established under S.R.Os. 1194 and 1195 dated 27-11-1991 as charitable endowment fund for the benefits and welfare of existing and ex-servicemen of the B Telecom Foundation and its subsidiaries. These were allowable expenditure under the repealed Income Tax Ordinance, 1979. The PTCL and Telecom Foundation who on 40 % & 60% shares respectively in the respondent No. 1 's company are not liable to WWF; As such the respondent No.1, being owned by them is also not liable to the WWF.
5. On the other hand the D.R. Opposed the contention and drew attention towards to the definition of "Industrial Establishment" that includes an establishment engaged in a manufacturing. The T.F.
Pipe is manufacturing pipes and, therefore, cannot be excluded from the purview of the "industrial establishment" falling under charitable endowment fund. The definition of "industrial establishment" is given as under:-- industrial establishment" means--
(i) any concern owning or managing a factory, workshop or other establishment in which articles are produced, adapted or manufactured with the and of electrical, mechanical, thermal, nuclear or any other form of energy transmitted mechanically and not generated by human or animal agency;
(ii) any concern working a mine or quarry or natural gas or oilfield; (i.e) any concern running a tramway or motor omnibus service;
(iv) any concern engaged in the carriage of men and goods by inland mechanically propelled vessels;
(v) any concern engaged in the growing of tea, coffee, rubber or cinchona; and
(vi) any other concern or establishment which the Federal Government may, by notification in the official Gazette, declare to be an industrial establishment for the purpose of this Ordinance, but does not include any concern or establishment which is owned by Government or by a Corporation established by Government or by a Corporation the majority of the shares of which is owned by Government.
6. The appellant's allegation that the respondent ignored the definition as contained in the Charitable Endowment Act, 1890 is untrue. The D.R. Further contended that the orders passed do not suffer legal infirmity.
7. The D.R. Further contended that the Taxpayer is a separate and independent entity which is registered under the Companies Ordinance, 1984. Moreover the nature of business of the Taxpayer is different from its parent company as it derives incomes from the manufacturing and sales of pipes which fall within the purview of "manufacturer" under the definition of industrial establishment. The D.R. While concluding his arguments stated that the mere fact that the PTCL, or Telecom Foundation holds some shares of the Taxpayer company, does not confer any entitlement upon the Taxpayer to claim immunity from payment of WWF. The D R.
Wondered that if PTCL or the Telecom Foundation hold share of P.C. Hotel, would the income of the P.C. Hotel still be exempt from WWF. Therefore, the vacation Of rectification order passed by the respondent No.02 is without any lawful authority.
8. We have considered arguments of both the sides along with the relevant record. We also cannot agree with the A.R that the Taxpayer enjoy exemption from WWF. The A.R's argument that the Taxpayer being a subsidiary of a holding or parent company entitled to exemption from WWF, automatically and mutatis mutandis enjoys the same exemption status as its parent company does, is not acceptable. The taxpayer's claim of immunity from WWF is based on the sole ground that its parent companies, PTCL and Telecom Foundation, who happen to hold 60 and 40% of its shareholding, are not liable to pay WWF. We find this reasoning without substance. The learned D.R's argument that the Taxpayer is an industrial establishment and a separate entity independent of its holding or parent company is quite persuasive. We, therefore, declare that WWF is chargeable from the Taxpayer. The Order passed by the Commissioner, Inland Revenue (Appeals-II) in respect of the above assessm ent and tax years is vacated and orders passed by Officer Inland Revenue hereby stand restored. The Departmental appeals succeed accordingly. .