Through this income tax appeal the taxpayer has contested the impugned order passed by CIR (A), Peshawar dated 14.06.2012, whereby the appeal of the taxpayer/appellant was rejected. The grounds taken in appeal are as under:---
(1) Income of the appellant is exempt under clause 126F of the Second Schedule to the Income Tax Ordinance, 2001. Hence, cannot be taxed under Section 113 of the Income Tax Ordinance, 2001.
(2) Section 113 of the Income Tax Ordinance, 2001 (as applied by the department) is contradictory to clause 126F.
(3) Section 113, itself says that turnover does not include the PTR receipts.
(4) According to Section 113(2C), the tax is adjustable, where it is adjustable against tax liabilities, when there is not tax liability, then Section 113, cannot be invoked.
2. Brief facts of the case as per record are that the taxpayer/appellant being a private limited company, deriving income from execution of construction contracts. Revised return was filed for tax year 2011 declaring non-exempt receipts of Rs. 25,639,521/- and exempt receipts at Rs.
72,782,583 with claim of refund of Rs. 40,272,257/- as income was claimed exempt under clause 126-F of Part of the Second Schedule to the Income Tax Ordinance, 2001. The return was assessm ent order in terms of Section 120 of the Ordinance. On examination of record taxation officer observed that respondent was liable to pay turnover tax under Section 113 of the Ordinance 2001 on the declared turnover. He, therefore, issued show-cause notice with intent to amend the assessm ent under Section 122(5A)/122(9) of the Ordinance, 2001 by confronting the taxpayer.
Matter was not replied by the taxpayer/appellant instead of providing proper opportunity of being heard by the Additional Commissioner (1R) amended the deemed assessment order and levied minimum tax under Section 113 of the Ordinance, 2001. Being dissatisfied from the order passed by Additional Commissioner (IR) respondent filed appeal before the L/CIR (A), who rejected the appeal on behalf of the taxpayer, hence present before us.
3. L/DR and AR have been heard. L/DR supported the impugned order passed by the CIR (A). The L/AR of the taxpayer repeated the arguments as have been recorded in the orders passed by the first appellate authority.
4. We have heard the arguments of the parties and have perused the relevant orders It was argued before the L/CIR (A) that the amendment of order under Section 122(5A) of the Ordinance 2001 is not applicable in the case of taxpayer as neither the deemed assessment order was erroneous nor prejudicial to the interest of justice. The L/CIR (A) turned down the arguments of the L/AR of taxpayer. While on account of levy of minimum tax L/CIR (A) observed that taxpayer derives its income in the most and moderately affected areas, therefore, is exempt from the operation of Section 4(1) of the Income Tax Ordinance, 2001 by virtue of exemption available under clause 126-F and Section 113 are not mutually exclusive. Both these provisions are to be seen together and in harmony and not in isolation as is the settled principle of interpretation of statutes. If read together, there is no conflict between the two provisions. The provisions of Section 113 has overriding effect and any other provisions, even clause 126-F is to be referred to Section 113 and hence governed by Section 113 of the Income Tax Ordinance, 2001. Section 113 of the Income Tax Ordinance, 2001 is applicable to cases entitled to exemption under clause 126-F of Part-I of Second Schedule or any other provisions of the Ordinance ibid which has an overriding effect over other provisions of Ordinance ibid. Clause 126-F does not have an overriding effect over other provisions of the Ordinance rather this clause is subservient to Section 113 of the ITO, 2001, which has overriding effect over all other provisions of the Ordinance ibid as elaborated. In view of the above discussed facts Section 113 of the ITO, 2001 prevails over clause 126-F of the Ordinance ibid and die taxpayer was/is liable to charge of minimum tax which has rightly been charged by the L/taxation officer vide order under Section 122(5A) of the ITO, 2001.
5. Appellant through ground of appeal reproduced supra at Serial No.3 has agitated that income of taxpayer is taxable under Presumptive Tax Regime hence turnover does not include the PTR receipts. We are persuaded to agree with the contention of appellant that income of taxpayer falls under the PTR. In such-like situation filing of statement under Section 115(4) is the requirement of law. The statement filed as such is deemed assessment under the term of Section 169(3) as deemed assessm ent order under Section 120(l)(b) of the Ordinance, 2001. The Section 11 of the Ordinance ibid prescribed the various heads of income which are as under:-
71. Heads of income.- (1) For the purpose of the imposition of tax and the computation of total income, all income shall be classified under the following heads, namely:-
(a) Salary;
(b) Income from Property;
(c) Income from Business;
(d) Capital Gains; and
(e) Income from Other Sources.
For each head of income separate section of law has been allotted. Section 18 of the Ordinance, 2001 prescribes the business income; which is at par with Section 22 of the Ordinance, 1979 (repealed). While explaining the "profit & gains" the Hon'ble Supreme Court of Pakistan vide its judgment reported as 102 TAX 69 has held that "profits & gains" are related to business income only. In the case of appellant, the income is assessable under PTR as per Section 169(2) of the Ordinance, 2001. Such income is not taxable under any of the heads of income as envisaged in Section 11 of the ITO, 2001, and no tax under any other provision of Income Tax Ordinance, 2001, except the tax withheld under Section 169(2) read as under:- "169(2) Where this section applies:-
(a) the income shall not be chargeable to tax under any head of income in computing the taxable income of the person;
(b) no deduction shall be allowable under this Ordinance for any expenditure incurred in deriving the income:
(c) the amount of the income shall not be reduced by:-
(i) any deductible allowance under Part IX of Chapter III; or
(ii) the set off of any loss;
(d) the tax deducted shall not be reduced by any tax credit allowed under this Ordinance;
(e) there shall be no refund of the tax collected or deducted [unless the tax so collected or deducted is in excess of the amount for which the taxpayer is chargeable under this Ordinance]."
The income of taxpayer does not fall under the provision of Section 11 of the Ordinance.
6. The above discussion leads us to the conclusion that in case of Presumptive Income no tax under Section 113 of the Ordinance is chargeable, therefore, it is deleted.
Order accordingly.