' Through this order we intend to dispose of the cross appeals filed by the Taxpayer and the Department against the decision of Learned ACIR(Appeals-II), Karachi vide his Orders Nos. 44/204 and 45/204 dated 30-6-2010 for the tax year assessment years 1996-1997 and 19971998. The grounds of appeal filed by the rival parties are reproduced below: Grounds of appeal filed by the Appellant/Taxpayer: "(2) That the order passed by the learned Inspecting Additional Commissioner under section 66A of the Repealed Income Tax Ordinance, 1979 dated 30-6-2010 is barred by limitation within the meaning of section 66A(2) of the Repealed of Income Tax Ordinance, 1979.
(3) That under the provision of section 66A(2) of the Repealed Income Tax Ordinance, 1979 the order passed dated 12-11-1998 cannot be revised after 12-11-2002 i,e, after the expiry of four years from the date of the order sought to be revised.
(4) Without prejudice to the ground (2) and (3) the learned Additional Commissioner has erred in Taxing the Bonus shares issued by the Company/Appellant.
' Grounds of appeal filed by the Department: "(2) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred in deleting the levy of Workers Welfare Fund (WWF) by placing reliance on sub-clause (vi) of clause (f) of Section 2 of the Workers Welfare Ordinance, 1971.
(.4) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred in ignoring the fact that appellant was not owned by Government.
(4) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred to consider majority of shares 60.43% to Government as "establishment which is owned by Government" as per clause (vi) of clause (f) of section 2 of the Workers Welfare Fund Ordinance, 1971.
2. Brief facts of the case are that the appellant a public limited company incorporated in Pakistan and listed on the Karachi, Lahore and Islamabad Stock Exchange; majority shares of the appellant company are owned by the Government. The main activity of company is transmission and distribution of natural gas in Sindh and Balochistan. The company is also engaged in certain activities related to gas business including the manufacturing of gas meters and construction contracts for laying of pipeline through an "industrial establishment"
3. The instant three appeals viz I.T.As. Nos.26 and 27/KB of 2011 ,filed by the Tax Payer (SSGC) against the order passed by the Additional Commissioner under section 66A of the Repealed Income Tax Ordinance, 1979 dated 30-6-2010 and I.T.A. No,693/KB of 2011 filed by the department against the order passed by Commissioner Inland Revenue (Appeals) dated 10-4-2011 with reference to levy of Worker's Welfare Fund.
4. Mr. M. Jawaid Khurram Advocate represented the Tax Payer (SSGC) and Mr. Badar Uddin Qureshi DR. Represented the department.
5. The learned counsel of the Taxpayer submitted that the orders under section 62 of the Repealed Income Tax Ordinance, 1979 were passed on 12-11-1998 and as per provision of section 66A of the Repealed Ordinance 1979 the limitation expired on 13-11-2002. He further submitted that in both cases the proceedings under section 122(5A) of the Income Tax Ordinance, 2001 initiated on 30-9- 2002 and 28-10-2002 in respect of assessment year, 1996-1997 and 1997-1998 respectively whereby the department taxed, bonus shares. The issue ,of invoking the provision of section 122(5A) of the Income Tax Ordinance 2001 in the case of Tax payer (SSGC) was subject matter of appeals references /civil appeals till the Honorable Supreme Court of Pakistan and stand decided in favour of Taxpayer vide orders of Honorable Supreme Court C.A. No,1625 of 2006 and C.A. No,2684 of 2006 dated 22-6-2009 which stand reported (2009) 100 Tax 81 (S.C.Pak). The learned counsel of the Taxpayer further submitted that subsequently the tax department initiated proceeding under section 66A of the Repealed Income Tax Ordinance, 1979 vide notice dated 15-6-2010 which stand finalized vide order dated 30-6-2010 Whereby the Additional Commissioner again taxed the bonus shares in the assessm ent years 1966-1997 and 1997-1998 respectively on the following basis:-- "The Honorable Supreme Court of Pakistan, in Para 54 of its judgment dated 22-6-2009 in the case of Messrs Eli Lilly Pakistan (Pvt.) Limited reported as 2009 SCMR 1279 = 2009 PTD 1392 has given the following finding:- "It appears that the respondents (taxpayers) have been trying to take advantage of the technicalities, but we are afraid, they must fail. If their cases do not fall within the ambit of provisions of section 122 on account of the same being prospective, they cannot exclude their assessments from the purview of section 65 of the Repealed Ordinance merely because of the lapse of the draftsman who omitted subsection (1) of section 239 at the amendment stage. Had the provisions of subsection (1) of section 239 of the Ordinance continued on the statue book, there would have been no ambiguity and no difficulty at all. In that eventuality, the assessments up to the period ending on 30 June, 2002 could be governed by the relevant provisions of the Repealed Ordinance as if the ordinance had not come in force."
' The august apex Court, in Para 57 of the said judgment, while dealing with the question of treatment of assessments of the period, preceding the enforcement of the Income Tax Ordinance, 2001, i,e,; before 1st of July 2002, in furtherance of the aforesaid findings has given the following direction: "As already noted, section 65 of the Repealed Ordinance Provided a period of five years for additional assessment and such assessments were to be dealt with under the said provision in accordance with original section 239(1) of the Ordinance. The learned High Court failed to take into consideration this aspect of the matter and did not direct that the assessments completed under the Repealed Ordinance would be subject to the provisions of the said Ordinance, as originally; provided in un-amended section 239(1), but not clearly and properly provided in the Ordinance at the amendment state. We fill this lacuna in the impugned judgments and direct that the assessment of any year ending on or before 30th June 2002 would be governed by the Repealed Ordinance and shall be dealt with as if the Ordinance had not come into force".
' The apex Court has, thus, issued a binding direction that the assessments in respect of any year ending on or before 30th June, 2002 shall be dealt with under the repealed Ordinance.
' In pursuance of these binding directions of the august Supreme Court, the proceedings in respect of your case for assessment year 1996-97 are being undertaken through this notice under section 66A read with section 66 of the Income Tax Ordinance 1979, as per Hon'ble Supreme Court's verdict."
' The learned counsel of the SSGC in support of his arguments submitted that the above contention of the tax department is misconceived with reference to application of Repealed Income Tax Ordinance 1979, the Additional Commissioner has failed to appreciate that the honorable Supreme Court has laid down a very clear principle stating that the assessments of any year ending on or before 30th June 2002, would be governed by the Repealed Ordinance, 1979 and shall be dealt with as if the Ordinance, 2001 had not come into force and in no way time limit for initiating proceedings under section 66-A or 65 have been extended by the apex Court and in support of his contention Court placed reliance on the decision of the honorable Lahore High Court in Writ Petition No,1236 of 2010 dated 27-4-2012. Wherein the Honorable Lahore High Court taking into consideration the above noted Paras i,e, are 54 and 57 from the judgment of the Honorable Supreme Court dated 22- 6-2009 has held that:-- "As per above pronouncement of the august Supreme Court, the assessment in the present case is to be governed by the repealed Ordinance, therefore, 66A of the repealed Ordinance becomes operational. Notice under section.66A of the repealed Ordinance can only be issued within four years from the date of assessment as provided, in section 66 4(2) of the Ordinance.
' The assessment order is dated 26-6-2003, therefore, the impugned order dated 14-1-2010 under section 66-A of the Income Tax Ordinance, 1979 is time barred.
' The argument of the respondent that limitation will run from 7-10-2006 when under section 122(5A) of the Income Tax Ordinance, 2001 was passed, is flawed as section 66(A) of the repealed Ordinance clearly provides that the Inspecting Additional Commissioner may call for or examine the record of any proceedings under the repealed Ordinance and therefore, order passed under.
Income Tax Ordinance, 2001 cannot be considered to be proceedings under the repealed Ordinance. The impugned order is also in violation of the principle settled in the judgment by the august Supreme Court of Pakistan quoted above. The impugned show cause notice is, therefore, in violation of section 66-A(2) of the Income Tax Ordinance, 1979 and cannot be maintained and is hereby set aside. This petition is allowed in the above terms".
' The learned Authorized representative of the Taxpayer in support of his contention also placed reliance on a decision of Appellate Tribunal Inland Revenue I.T.A. No,613/KB of 2010 dated 24-1-2011 wherein this Tribunal also in the light of the above referred decision of the Apex Court has held that:- "Bare reading of these Paras show the honorable Supreme Court of Pakistan have laid down a very clear principle stating that the assessments of any year ending on or before 30th June, 2002, would be governed by the Repealed Ordinance and shall be dealt with as if the Ordinance had not come into force. Nowhere in these paras, time limit for initiating proceedings under section 66-A or 65 have been extended by the Apex Court. Therefore we feel that Taxation Officer has misunderstood and misinterpreted above referred judgment of honorable Supreme Court of Pakistan and have passed orders under section 66-A of Income Tax Ordinance, 1979 for all these Assessment Years much beyond the time limit provided under the law Secondly, all the three Assessment Orders were earlier subject to action under section 122(5A) of Income Tax Ordinance, 2001 on similar ground and those orders could not stand the test of appeal and were annulled by the Income Tax Appellate Tribunal vide order dated 5-9-2006. So by initiating fresh proceedings under section 66-A in June 2010, Taxation Officer has acted beyond his jurisdiction. Departmental Representative at the time of hearing could not file any documentary evidence to prove that Show Cause Notices issued on 10-6-2010, were properly served on the taxpayer. Accordingly proper opportunity of being heard has also not been provided to the taxpayer in view of above, we held that the orders passed under section 66-A of Repealed Ordinance for assessment years 2000-2001, 2001-2002, 2002-2003 have been passed without lawful jurisdiction and are also time barred and are thus annulled accordingly."
6. The DR Mr. Badaruddin Qurshi on his turn could not rebut the contentions of the learned AR as narrated above.
7. Having identical facts of the instant appeals and giving parallel treatment, it is held that the order revised under section 66A of the repealed Ordinance, 1979 for assessment years 1996-1997 and 19971998 are without lawful jurisdiction being barred by limitation, hence annulled.
' DEPARTMENTAL APPEAL (I.T.A. NO.693/KB of 2011.
8. The department contested the appeal on following grounds:--
(1) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred in deleting the levy of Workers Welfare Funds (WWF) by placing reliance on sub-clause (vi) of clause (f) of section 2 of the Workers Welfare Ordinance, 1971.
(2) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred in ignoring the fact that appellant was not owned by Government.
(3) That the learned Commissioner Inland Revenue (Appeals-III), Karachi has erred to consider majority of shares 60.43% to Government as "establishment which is owned by Government" as per clause (vi) of clause (f) of Section 2 of the Workers' Welfare Ordinance, 1971.
Mr. Badar uddin Qureshi the DR submitted that the Commissioner Inland Revenue (Appeals) has failed to appreciate that the respondent (SSGC) is an "Industrial Establishment" and as such charge of Worker Welfare Fund within the meaning of section 4 of the Worker Welfare Ordinance, 1971 read with section 221 of the Income Tax Ordinance, 2001 is in accordance with law and such the order passed by the DCIR be restored.
9. The AR of the Taxpayer submitted that appellant is a public limited company incorporated in Pakistan and listed on the Karachi, Lahore and Islamabad Stock Exchange, 60.43% shares of the appellant company are owned by the Government, the main activity of the company is transmission and distribution of natural gas in Sindh and Balochistan. The company is also engaged in certain activities related to gas business including the manufacturing of gas meters and construction contracts for laying of pipeline through an "industrial establishment".
' The definition of 'industrial establishment' as given in clause 2(f) of WWF Ordinance is reproduced below:- "(f) "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 aid 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;
(iii) any concern running a public transport service;
(iv) any concern engaged in the carriage of men and goods by inland mechanically propelled vessels;
(v) any establishment, to which the West Pakistan Shops and Establishment Ordinance, 1969 (W.P.
Ordinance No, VIII of 1969), for the time being applies;
(vi) any concern engaged in the growing of tea, coffee, rubber or cinchona; and
(vii) any other concern or establishment which the Federal Government may, by notification in the Official Gazette, declare to be an industrial establishment for the purposes of this Ordinance, ' But does not include any concern or establishment which is owned by Government, or by Corporation established by Government or by a Corporation the majority of the shares of which is owned by Government;"
The learned counsel submitted that the Tax Payer (SSGC) is covered by the exclusion provided in section 2(f) of the Workers Welfare Fund Ordinance, 1971. The provision of exclusion shows that an industrial establishment would not include a concern or establishment which is owned:
(i) by Government;
(ii) by a Corporation established by Government;
(iii) by a Corporation the majority of shares of which is owned by the Government He further submitted that in view of fact that 60.43% shares are owned by the Government and as such the appellant not only falls in the first category "by the Government" but also falls in the third category "by a corporation the majority of shares of which are owned by the Government and placed reliance on judgment of the High Court of Sindh in case of Pakistan Petroleum Ltd. In I.T.R.As.
Nos. 198, 199, 200, 201, 202 all of 2007 [reported as 2009 PTD 662] where in Honorable H.C.Held as under:-- "4.1. After a careful examination of the above reasons we have reached the conclusion that the decision of the Tribunal on this point cannot be sustained.
4.2. From a perusal of the above extract is seems that the learned Accountant Member is of the opinion that the terms "concern" and industrial establishment" denotes two separate entities and has concluded that the oilfield mentioned in sub .Clause (ii) of clause (f) of section 2 is the industrial establishment and the concern mentioned in this sub section is the applicant company and therefore, for the applicant to fall within the exclusion-III to section 2(f)(vi) the applicant company should have been owned by the corporation majority of shares of which are held by the government. This interpretation in our considered opinion is against the settled principles of interpretation that while interpreting a statute the words should be read in its plain meaning and no words should be added or deleted to arrive at the interpretation of the statute. Learned Accountant Member has sought to add another medium i,e, company between the 'concern or establishment' and the 'corporation in which the majority shares are held by the government'. As pointed out by us, this interpretation is not only against the settled principles of interpretation i,e, it has been arrived at by adding the word 'company' in the statute but also leads to absurd and illogical interpretation that any applicant who wishes to become entitled to the exclusion (III) provided in section 2(f)(vi) must first form subsidiary company which must own concern or industrial establishment and then they form a holding corporation/company which will held 100 per cent shares of this company and the majority shares of this holding corporation/company must be owned by the government.
4.3. We regret we cannot subscribe to this interpretation. We agree with the learned counsel for applicant that the word "or" used between the word "concern" is in disjunctive sense and if either the concern or establishment is owned by a corporation, majority shares of which are held by the government, such industrial establishment is entitled to exemption from the levy of Workers Welfare Funds.
4.4. At this juncture, we would like to refer to section 4 of the Workers Welfare Funds Ordinance, 1971, which is the charging section and provides that income of every industrial establishment which during any accounting year is not less than Rs,500,000 shall be chargeable to the Workers Welfare Funds Ordinance at the rate of 2 per cent of its total income.
4.5. When we review section 2 (f) (vi) of the Workers' Welfare Funds in the light of the charging section 4, we arrive at the conclusion that in the case of the applicant company the industrial establishment is the oilfield, which is owned and operated by the applicant company and therefore, since the industrial establishment the income of which is chargeable to Workers'
Welfare Fund under section 4, is owned by the applicant company and it is an admitted fact that 93 per cent of shares of the applicant company are owned by the government, therefore, it falls within the provision of exclusion - III to Clause 6 of section 2 (f).
4.6. As far as the terms "company" and "corporation" are concerned there is no dispute by the respondents that term 'corporation' includes a 'company'. Even otherwise the learned counsel for the applicant has relied on a number of judgments of the superior courts to establish that the term corporation includes company.
4.7. We are, therefore of the considered opinion that the applicant company is entitled to exemption from the levy of Workers Welfare Funds as it falls within the third category of exclusion provided by section 2(f) (vi)"
' The learned counsel of the taxpayer submitted that the position of exclusion available to appellant is well established. This treatment has never been disputed by the Income Tax department in the past years even in the assessment year 1998-1999 when this matter was taken- up by the then Taxation Officer and after filing reply dated April 5, 1999. The taxation officer had not drawn any adverse inference in the aforesaid assessment and as such department accepted the contention of the company. Further, the department has also accepted the position that WWF is not leviable and dropped the proceedings initiated for rectification under section 221 of the Ordinance for the tax years 2003 to 2007.
' The AR of the taxpayer vehemently submitted that the charge of Workers' Welfare Fund in case of appellant does not fall under the ambit of section 221 of the Ordinance, 2001 relating to the rectification of mistake apparent from records. The appellant has not offered WWF in its return of income due to applicability. Of exclusion provided under section 2(f) of WWF Ordinance and therefore it was not a mistake apparent from the records. The learned AR in order to support the contention that the rectification in the aforesaid matter is outside the scope of section 221 of the Ordinance he relied on the following case-laws:--
(a) Commissioner of Income Tax v. Abdul Ghani reported as PLD 2007 SC 308 = 2007 PTD 967 "It, therefore, cannot be said to be a mistaken or inadvertent finding or an error floating on the face of the judgment so as to be rectifiable under section 156 of the Ordinance. Rectification under section 156 of the Ordinance is permissible if the error is apparent, obvious and floating on the face of the judgment and can be rectified without long drawn arguments and proceedings for appreciating facts and interpretation or application of any provision of law."
(b) Commissioner of Income Tax v. National Food Laboratories reported as 1992 SCMR 687 = 1992 PTD 570.
"Section 35 of the repealed Income Tax Act, 1922, hereinafter referred to as 'The Act' confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised Suo moto or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it.
Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassess the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to 'rectification' of the order. Any mistake which is not patent and obvious on the record cannot be termed to be an order which can be corrected by exercising power under section 35."
' The learned counsel of the respondent also submitted that the Appellate Tribunal Inland Revenue in I.T.A. No, 920/KB of 2011 dated 3-1-2012 and in I.T.A.'No,350/KB/2011 dated 13-5-2011 has inter alia held that the levy of Worker Welfare Fund by invoking section 221 of the Income Tax Ordinance not narrated under law due to the fact that the provision of section 221 of the Income Tax Ordinance, 2001 cannot be invoked when there is a dispute of interpretation of law.
10. The learned A.R of the Taxpayer defendant besides above contention drawn our attention about a reported judgment 2011 PTD (Trib.) 748 and stated that it has been held therein that only the Taxation Officer had the jurisdiction to pass order for levy and/or recovery of WWF and not DCIR and/or Additional Commissioner and in the result the learned Tribunal held that the order passed by the DCIR was without jurisdiction. Since the appellant is a Corporation established by Government and the majority of shares i,e, 60.43% are owned by the Government, which fact has duly been substantiated from the audited accounts for the period under consideration. Therefore, we are of considered opinion that the appellant enjoys exemption in terms of sub-clause (vi) of clause (0 of section (2) of the Workers Welfare Fund Ordinance, 1971, on the grounds that the corporation established by Government and as well as majority shares held by the Government. As such the departmental appeals being without, any merit and hereby dismissed.
11. All three appeals have disposed of as above.