' This appeal has been filed by the appellant against the Order No,29 of 2012 dated 28-9-2012 passed by the learned CIR(A-IV),. Islamabad for the Tax year 2011 on the following grounds:--
(1) That the Assessing Officer has passed an order under section 221 of the Income Tax Ordinance, 2001 without appreciating facts of the case and without giving tax reduction @ 80% under Part-III of the Second Schedule of the Income Tax Ordinance, 2001, to the distributors of consumers goods including fast moving consumer goods.
(2) That Assessing Officer and CIR(A-IV) have failed to appreciate the fact that the appellant is the distributor of tyres and tubes and had paid his minimum tax @ 20% on total turnover, and has passed the order in illegal manner by imposing minimum tax @ 1% of total turnover, and ignored Clause 8 of Part III to the Second Schedule of the Income Tax Ordinance, 2001. The Commissioner Appeals grossly erred to hold that this argument is not entertainable at this stage, as "the legal ground can be taken at any stage of proceedings". Moreover, this ground was also raised before Assessing Officer during the personal hearing with him, but he does not put any heed to it and passed the impugned order in an illegal manner, Furthermore, the appellant has paid minimum tax @ 0.2 % amounting to Rs,299, 725 which also supports the version taken by the appellant.
(3) That the appellant is distributor of Tyre and Tube which is a fast moving consumable good.
This fact can also be ascertained from the declared version of G. P ratio from the returns of the previous years, which ranges from 2 % to 3% of the total turnover. In the year under consideration the declared G. P. Ratio is 2.91% of the Total Turnover, and if the version of Assessing Officer will be accepted then after paying the minimum tax @ I% the G. Ratio will be reduced to 1.91% which will render impossible for the appellant to bear the huge expenses of distribution business. That is why special reduction in the minimum tax liability has been allowed to the distributor of fast moving goods. Furthermore, the appellate Tribunal Inland Revenue in its decision dated 28-7-2006 held the G. @ 3.5 in the case of present appellant for that year.
(4) That the Assessing Officer has passed an order under section 221 of the Income Tax Ordinance, 2001 in highly unjustified manner and arbitrarily imposed a huge amount of tax in an illegal manner.
2. Brief facts of the case are that taxpayer, an individual was liable to pay minimum tax @ 1% under section 113 of the Income Tax Ordinance, 2001 as the declared sales of the appellant for the tax years 2010 and 2011 were above Rs,50 million. Accordingly a show cause notice under section 221 of the Income Tax Ordinance, 2001 was issued to the appellant requiring him to explain as to why due tax @ 1% had not been paid by him. In response to this the AR of the Taxpayer pointed out that amendment was made in section 113 of the Income Tax Ordinance, 2001 through Finance Act, 2010 whereby cases of AOPs and individuals were also applicable in the provision of minimum tax regime. He further stated that the taxpayer had no objection for charging of minimum tax for tax year 2011 on the declared turnover for the said year but benefit of 80% reduction be allowed as per clause 8 of Part-III of 2nd Schedule. Accordingly minimum tax of Rs,1,886,378 was assessed to be payable by the appellant for the tax year 2011. Being dissatisfied with the treatment given by the Officer Inland Revenue the taxpayer preferred appeal before learned CIR(A-IV) who after considering the facts, confirmed the order passed by officer inland Revenue with following observations:-- "I have examined the facts of the case. The exact nature of business of the appellant has not been mentioned in the body of the order hence the claim of the appellant regarding selling of tyre and tubes cannot be verified. Furthermore, it seems that his stance regarding application of section 113 of the Income Tax Ordinance, 2001 in light of provision of clause (8) of Part III of the Second Schedule to the Income Tax Ordinance, 2001 was not argued before the officer of the department.
In fact he has not even paid tax @ 0.2% as per his contention. The total tax paid by him is only 0.04% of declared turnover. Furthermore, this argument is not entertainable at this stage in light of section 128(5) of the Income Tax Ordinance, 2001. Furthermore to me, the term "fast moving consumer goods" will include consumer goods which can last for a short duration and will not include the tyres and tubes for that matter. The appeal is therefore, rejected and the order of the departmental officer is confirmed."
6. Feeling aggrieved with the treatment given by the learned CIR (A-IV), the Taxpayer has come up in 2nd appeal before this Tribunal on the grounds mentioned above.
7. In order to justify his stance learned AR argues that the Assessing Officer has passed an order under section 221 of the Income Tax Ordinance, 2001 without appreciating facts of the case and without giving tax reduction @ 80% under Part-III of the Second Schedule of the Income tax Ordinance, 2001, to the distributors of consumers goods including fast moving consumer goods. He further argues that Assessing Officer and CIR(A-IV) has failed to appreciate the fact that the appellant is the distributor of tyres and tubes and had paid his minimum tax @ 20% on total turnover, and has passed the order in illegal manner by imposing minimum tax @ 1% of total turnover, and ignored Clause 8 of Part III to the Second Schedule of the Income Tax Ordinance, 2001.
The Commissioner Appeals grossly erred to hold that this argument is not entertainable at this stage, as the legal ground can be taken at any stage of proceedings". Moreover, this ground was also raised before Assessing Officer during the personal hearing with him, but he does not put any heed to it and passed the impugned order in an illegal manner, Furthermore, the appellant has paid minimum tax @ 0.2 % amounting to Rs,299,725 which also supports the version taken by the appellant. He also argues that the appellant is distributor of Tyre and Tube which is a fast moving consumable good. This fact can also be ascertained from the declared version of G.P ratio from the returns of the previous years, which ranges from 2 % to 3% of the total turnover. In the year under consideration the declared G.P Ratio is 2.91% of the Total Turnover, and if the version of Assessing Officer will be accepted than after paying the minimum tax @ 1% the G.P ratio will be reduced to 1.91% which will render impossible for the appellant to bear the huge expenses of distribution business. That is why special reduction in the minimum tax liability has been allowed to the distributor of fast moving goods. Furthermore, the appellate Tribunal Inland Revenue in its decision dated 28-7-2006 held the G.P @ 3.5 in the case of present appellant for that year.
8. We have heard the arguments and perused the record. The definition of consumer goods including fast moving consumer goods has not been defined in the Income Tax Ordinance, 2001 therefore the reference can be taken from the web search and different law dictionaries. As a result of search from these sources the consumer goods including fast moving consumer goods can be defined as under: Goods: ' Goods can be divided into two types;
(1) Capital Goods
(2) Consumer Goods.
Capital Goods:-- Any tangible assets that an organization uses to produce goods or services such as office buildings, equipment and machinery. Consumer goods are the end result of this production process.
Consumer Goods: Consumer goods are those goods which are used by the final consumer as a person. These goods are further classified into two categories.
Durable Consumer Goods: Consumer durable goods have significant life span, often three years or more. Examples of consumer durable goods include cars, house hold goods, home appliances, consumer electronics furniture, sports equipment and toys.
Non-Durable Consumer Goods: Consumer non-durable goods are purchased for immediate or almost immediate consumption and have a life span ranging, from minutes to three years. Examples of Non durable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, Rubber (Tyres and Tubes), plastics, textiles, clothing and footwear.
To test that whether a consumer goods is a fast moving goods or not can be ascertained from the characteristics of consumer goods including -fast moving consumer goods which are as under:-
(a) Frequent Purchase
(b) High Turnover and Low gross Profit Rate
(c) Extensive sale network ' The appellant is the distributor of consumer goods including fast moving consumer goods therefore, the reduction specified under section 8 of Part-III to the second schedule of Income Tax Ordinance, 2001 shall be granted. The said clause is reproduced hereunder for ready reference: [(8) For the distributors of pharmaceutical products, fertilizers, consumers goods including fast moving consumers goods, the rate of minimum tax on the amount representing their annual turnover under section 113 shall be reduced by eighty percent.]
9. Learned DR has not objected to allowance of 80% reduction but requested that evidence of being distributor placed before the Tribunal is to be verified. Certainly it is prerogative of the department to verify the same and if these certificates are proved to be bogus, the department can file rectification application against the order in question. The appellant is an authorized dealer for distribution of Tyre and a tube for three companies that is the General Tyre and Rubber Company of Pakistan Limited, Panther Tyres Limited, Bridgestone Private Limited. Certificates from these companies have also been attached for perusal of this Tribunal. Hence the Orders dated 14- 5-2012 and 28-9-2012 passed by the Inland Revenue Officer and CIR(A-IV) are cancelled. The reduction @ 0.80% under section 8, Part-III to the second schedule of the Income Tax Ordinance, 2001 is hereby granted to the appellant. The appeal is disposed of in the manner as indicated above.