CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---The captioned appeals have been filed by a private limited company against impugned appellate order dated 5-12-2013 passed by the learned Commissioner Inland Revenue (Appeals), Lahore in respect of tax years 2010, 2011 and 2012. The impugned order emanates from earlier appeals filed by the taxpayer in respect of amended orders passed by the Additional Commissioner Inland Revenue (ACIR), RTO, Lahore for short under section 122(5A) of the Income Tax Ordinance, 2001 (hereinafter referred as "Ordinance").
2. Facts leading to the instant appeals, briefly stated, are that the ACIR in the amended orders charged to the tax the claim of exempt income under Clause (126F) of Part 1 to the 2nd Schedule of the Ordinance and also charge minimum tax under section 113 of the Ordinance. Being aggrieved, the appellant taxpayer filed appeals before the learned CIR (Appeals) who vide his combined impugned order confirmed the action of the ACIR.
3. The appellant/taxpayer which derives income from executing construction contracts and other civil engineering projects filed returns of total income without audited accounts for the tax years 2010, 2011 and 2012 in the following manner:-- Tax Year 2010 2011 2012 Date of filing of Return30-9-2010 (Original) 1-10-11-2011 10-10-2012 (Original)
11-2011 (Revised)26-8-2013 (Revised Tax Year 2010 2011 2012 Net Sales Column left blankColumn left blank-- Gross Profit/(Loss)Column left blankColumn left blank-- Net Profit/(Loss)Column left blankColumn left blank-- Income/(Loss) relating to final and fixed taxColumn left blankColumn left blank-- Supplies -- Rs,4,250,996 Total contract receiptsRs,1,954,799,871Rs,10,633,640,301Rs,2,543,763,286 15% surcharge on proration for 3-1/2 months Rs,2,909,405 Total of final and fixed taxRs,110,529,712Rs,69,410,095 Rs,103,270,429 Tax paid/deductionRs,116,627,081Rs,103,455,574Rs,103,709,397 Tax payable / refundable(Rs,6,097,369)Rs,34,045,479 Rs,438,968 Final tax on business turnover/ net tax.Rs,110,529,712Rs,34,045,479 (Rs,438,968)
Tax already paidRs,2,031,173 Rs,1,821,811 Rs,1,555,968 Net tax refundable(Rs,8,128,542)(Rs,35,867,290)(Rs,1,994,936)
4. Later on, the concerned ACIR found the deemed assessments as erroneous in so far prejudicial to the interest of revenue and invoked section 122(5A) for the tax years 2010, 2011 and 2012 on the basis of the fact that the taxpayer wrongly claimed exemption from tax under Clause (126F) of Part 1 of the 2nd Schedule of the Ordinance on its contractual receipts which were otherwise chargeable to tax under section 153(1)(c) read with section 169 of the Ordinance. The learned ACIR proceeded to amend the deemed assessments for the years under consideration by taxing contractual receipts after disallowing claim of exemption of the taxpayer. Resultantly demands of income tax were created in the following manner:-- Tax Year 2010 (Rs,)
'Total Contractual receipts 1,954,799,871 Tax Year 2010 (Rs,)
Tax @ 6% 117,287,992 Less tax payments as claimed by the taxpayer in Annex-C1 (subject to verification).2,031,173 Balance tax 115,256,819 Tax Year 2011 (Rs,)
Total Contractual receipts 1,633,640,301 Tax @ 6% 98,018,419 Less verified tax payments as per report of the DCIR, E&C, Unit-04, Zone- I, RTO, Lahore vide letter No,104/04 dated 17-8-2012 excluding separate and final tax deduction on import 27,746, 699 Balance 70,271,720 Add refund issued on 3-9-2012 22, 600,814 Balance tax 92,872,534 Tax deducted on import at Rs, 107,070 is a separate and final tax for tax year 2011 Tax Year 2012 (Rs,)
Total Contractual receipts 2,543,763,286 Tax @ 6% 152,625,797 Less tax payments as claimed by the taxpayer in Annex-C1 (subject to verification) excluding separate and final tax on supplies.1,418,183 Balance tax 151,207,614 Tax deducted on supplies at Rs, 148,785 is a separate and final tax for tax year 2012
5. Being aggrieved with this treatment the taxpayer filed appeal before the CIR(Appeals) who upheld the treatment given by the ACIR. Now the taxpayer has come up before us with 22 grounds which are common for all the three years, out of these following were pressed:-- (1). "That the order of the learned Commissioner Inland Revenue, (Appeals), Zone-II, Lahore and the Additional Commissioner Inland Revenue, Audit Range, Zone-I Regional Tax Office, Lahore are against the law and contrary to the facts of the case.
(2) That the learned Commissioner (Appeals) was not justified in upholding the action of the Additional Commissioner Inland Revenue regarding rejection of claim of exemption under clause (126F) of Part-II to the Second Schedule to the Income Tax Ordinance, 2001.
(3) That Clause (126F) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 provides exemption from income tax to the persons located in or carrying on business inside the "most affected" and "moderately affected" areas of Khyber Pakhtunkhwa, FATA and PATA for a period of three years starting from tax year 2010. Therefore the order of the respondent is against the express provisions of the Ordinance.
(4) That the FBR explained vide C.No,4(1)ITP/2010-113914 dated 19-8-2010, that Clause (126F) provides exemption also to receipts liable to tax. under final tax regime including contract receipts. However, the learned respondents have ignored the binding instructions of FBR therefore the orders of the authorities below are liable to be cancelled
(5) That on the basis of Circular No,14 of 2011 dated 6-10-2011, the Commissioner issued exemption certificate to the petitioner for non-deduction of tax on receipts under section 153(1) (c) from projects located in "most affected and moderately affected areas". Therefore there was no dispute and confusion among the hierarchy of department that Clause (126F) provides exemption to FTR/PTR receipts also.
(6)That the FBR vide letter dated 7-6-2013 has withdrawn some clarification vide C.No,4(4)1TP/2012 dated 19-8-2010. However, the clarification vide letter C.No,4(1)1TP/2010-113914 is still intact as the letter number of the clarification withdrawn is different. Therefore proceedings initiated are not based on correct facts.
(7) That letter from FBR dated 7-6-2013 was only addressed to Commissioner Peshawar therefore meant for any action, if required, by Commissioner Peshawar only
(8) That the judgment of the Honourable Supreme Court of Pakistan reported as 2010 PTD 1809 has incorrectly been applied by the respondent No,2. In the said judgment, question before the Honourable Court was as to whether the profits and gains include income covered under other heads interest of income i,e, interest income assessable under section 30 of the Repealed Ordinance and exemption under Clause 176 is available to such income. The Honourable Court had held that the expression "profits and gains" only refers to income assessable under section 22 of the Repealed Ordinance, 1979 i,e, "income from business". It is nowhere held in the judgment relied upon by the respondent No,2 that FTR receipts are not covered under section 18 as "income from business".
6. We have heard both the parties and complete record perused. The main issue involved in his case is that of applicability of Clause (126F) on the basis of which refunds have been claimed by the taxpayer. Before proceeding further, it would be appropriate to reproduce the said Clause (126F) of Part 1 of the 2nd Schedule of the Ordinance, which was inserted through Finance Act, 2010: "(126F) Profits and gains derived by a taxpayer located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and ,PATA for a period of three years starting from the tax year 2010". [emphases supplied]
7. Since this is a matter of interpretation of statute viz-a-viz exemption clause, therefore we now proceed first to discuss the applicability of Clause (126F) in which is the key issue involved in this case. It is imperative to note that this Clause was enacted by the legislature to provide relief to the taxpayers whose businesses were adversely affected during the ongoing strife in the KPK, FATA and PATA for a period of three years. In order to further clarify the scope and applicability of this clause, the FBR issued Circular No,4(4)ITP/2009 dated 6th October, 2011 which is reproduced as under:-- "Clause (126F) was inserted in Part I of Second Schedule to the Income Tax Ordinance, 2001, through Finance Act, 2010, to grant fiscal relief to the taxpayers whose businesses were adversely affected during the on-going strife in the Khyber Pakhtunkhwa (KPK), Federally Admissible Tribal Areas (FATA), and the Provincially Administered Tribal Areas (PATA), for a period of three years w.e.f. tax year 2010. In follow up thereto, a number of communications were issued by the Board to define and clarify the parameters of Clause (126F) including SROs, Circulars, and letters, which being prone to varying interpretations, may have caused certain degree of confusion in some respects.
(2) Queries have been received in the Board as regards the availability of exemption under Clause (126F) with reference to the location of the taxpayer, the location of the business, and other allied matters. In supersession of all earlier clarifications issued by the Board, in order to streamline the operation of Clause (126F), and ensure its standardized implementation across the board, the instructions as contained in the succeeding paragraphs will henceforth apply.
(3) The word "located" as used in Clause (126F) can possibly have more than one dimension. The relevant scenarios along with the corresponding exemption/taxable status are outlined below:- Sr. # Situation Exemption/Taxability
(i) The taxpayer is located inside the affected and moderately affected areas (hereinafter 'the specified areas'), and his business is also carried on inside the specified areas.Exempt
(ii) The taxpayer is located outside the specified areas but his business is carried on within the specified areas.Exempt
(iii) The taxpayer is located inside the specified areas but his business is carried on outside the specified areas.Taxable
(iv) The taxpayer is located outside the specified areas, but his business is partly carried on inside the specified areas.Exempt to the extent of the income attributable to the business operations carried on inside the specified areas.
(4) Thus, it is apparent that the provisions of Clause (126F) have to be applied keeping in view the facts of each case.
(5) Accordingly, the filed formations may decide each case on merit in the light of above instructions upon filing of a claim in this regard by the taxpayer".
8. Subsequently the FBR issued another Circular No,4(4)ITP/2010 dated 7-6-2013 which is also reproduced as under:-- "(2) I am directed to state that Clause (126F) of Part-1 of the Second Schedule to the Income Tax Ordinance, 2001 granted exemption to "Profit and Gains" derived by a taxpayer located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for a period of three years stating from the tax year 2010. Black's Law Dictionary defines the expression.
'Profit: Most commonly, the gross proceeds of a business transaction less the costs of the transaction i,e, net proceeds, excess of revenues over expenses for a transaction, sometimes used synonymously with net income for the period.
Gains: profits, winnings, increment of value, difference between receipts and expenditures, pecuniary gain, difference between cost and sale price, appreciation in value, of worth of securities or property."
(3)Section 11 of the Income Tax Ordinance, 2001 enumerates the heads of income that constitute total income of a person. The subsequent sections provide the nature of receipts falling in each head of income, The term "profit or gains" has been used only in section 18 of the Income Tax Ordinance, 2001 while describing the receipts to be treated as income from business. The Honorable Supreme Court of Pakistan in its Judgment reported as UCH Power (Pvt.) Ltd. v. ITAT (2010 PTD 1809) has held that the expression "profit and gains" refers only to income chargeable under the head business. Therefore the conclusion is that the exemption under clause (126F) is restricted to profits and gains derived from business chargeable to tax under section 18 of the Income Tax Ordinance, 2001. Section 169(2)(a) of the. Income Tax Ordinance, 2001 clearly states that, incomes falling under the final tax regime are not chargeable under any head of income (including income from business) for computing the taxable income of a person.
(4)It is, therefore, clarified that the benefit of Clause (126F) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 is available only to income assessable under the head business income falling in normal tax regime and is not available for income under PTR/FTR or any other head of income.
(5)The earlier clarifications issued vide C.No,4(4)ITP/2012 dated 19-8-2010 and C.No,4(4)ITP/2011 dated 10-8-2011, being contrary to the relevant legal provisions, are hereby withdrawn."
9. The learned AR vehemently argued that FBR has no power to issue such clarification at a subsequent date in contradiction to its earlier interpretation of law. The learned AR has also taken the plea that the notice under section 122(5A) was issued on the basis of FBR's clarification letter and as such this clarification cannot be applied retrospectively. He has further contended that the Additional-CIR finalied the assessm ent without application of mind and simply by following the instructions of the FBR in a mechanical manner.
10.These arguments of the learned AR are without any basis as the impugned order has been passed by the ACIR after due deliberation and interpretation of clause (126F). It is not a matter of applying FBR's clarification letter with retrospective effect; rather it is a matter of application of clause (126F) on the basis of which the taxpayer has claimed refund. The taxpayer filed original statement for tax year 2010 on 30-9-2010 before any clarification issued by the FBR but subsequently revised the statement on 1-11-2011 after the FBR issued clarification, which according to the taxpayer, was in his favour. However, the taxpayer did not revise his statement when the FBR further clarified the applicability of clause (126F), this time according to the taxpayer, unfavourable to him. The taxpayer is always required to file true particulars of income and a declaration to this effect is signed at the bottom of the return/statement, hence, revision of return/statement just to seek refund and that too without filling vital columns of the statement cannot be endorsed as lawful.
11.Further, there is no evidence of the fact that the order has been passed in a mechanical manner rather the taxpayer was given an opportunity of being heard through issuance of notice under section 122(5A) wherein the taxpayer was confronted with the fact as to why his deemed assessm ent may not be amended due to the reason that his claim of refund is erroneous in so far as prejudicial to the interest of revenue. In the said notice, the taxpayer was confronted to show- cause as to why his deemed assessm ent may not be amended under section 122(5A) as his case does not fall within the ambit of clause (126F). After receipt of reply of the taxpayer, speaking order was passed wherein all the arguments of the taxpayer were rebutted properly.
12. Coming back to the applicability of clause (126F), it is evident from its language that intention of the legislature was to give fiscal relief to the taxpayers of KPK, FATA and PATA. In the instant case, the taxpayer is a private limited company whose office is located in Lahore and has been executing construction contracts of billion of rupees. By any stretch of imagination, this fiscal relief is not meant for such type of company, which has not even remotely been affected by the on- going strife in KPK, FATA and PATA.
13. From another angle, refund of the taxpayer claimed/issued on the basis of deemed assessm ent orders is not admissible due to the fact that Clause (126F) provides exemption to profits and gains of the taxpayer and not to the contractors. There is no provision in whole Income Tax Ordinance which provides exemption to contractors which otherwise fall under section 153(1)
(c) of the Ordinance by virtue of their contractual receipts which are subjected to final taxation. If the taxpayer who is a contractor, for the sake of argument, wants to claim refund under Clause (126F), he must file return of income declaring profits or gains, as the case may be, along with audited accounts as required under the law and then his claim of refund can be processed in accordance with Clause (126F). In this case, neither the taxpayer declared any taxable income in the relevant columns of the returns i,e,, column No,74 nor the taxpayer filed audited accounts at any stage to substantiate his claim.
14.Keeping in view these principles of interpretation regarding exemption, it would be appropriate to discuss what principles have already been laid down by the higher courts in this regard. i,e, Provisions granting exemptions or privileges have to be construed strictly (1993 PTD 306) against the person claiming the exemption or the privilege. It is for him to show that he is entitled to the exemption. If the rules do not refer to an item of capital there can be no exemption with regard to it.
(PLD 1966 SC 828). Where an exemption from taxation is claimed the words of the exempting clause must be strictly construed in favour of the state. It is based on the theory that the obligation to pay tax is co-extensive with the protection received by the subject and in obtaining an exemption from taxation the particular subject is seeking relief from the obligation at the cost of other assessees but when the words of the notification in its plain reading entitles to the exemption specified therein, the Court cannot go beyond the wordings of the clause to withhold that relief on the theory of equal obligation for equal protection, (PLD 1966 Dacca 523). Grants of tax exemptions have to be narrowly construed against taxpayer (1998 PTD 3835). All exemptions from taxation increase the burden on the other members of the community, they should be deprecated except to the extent permissible by the express language of the Statute Provisions granting exemptions or privileges have to be construed strictly against the person claiming exemption or privilege. The onus in this connection lies on the assessees claiming exemption to establish his plea. The exemption must be strictly construed and confined to the exemption itself and not extended beyond it 1973 PTD 361. Exemption provision in a taxing statute has to be construed strictly, (1993 PTD 306) and allowed in such case only where an assessee is able to establish that the same is covered by exemption provision on all force 2003 PTD 1805. Assessee has to prove himself to be within the four corners of the exemption provision (2002 PTD (Trib.) 783). Particular subject, which does not specifically stands exempted, cannot brought into the category of exemption by stretching the rules, which does not permit such interpretation (1998 SCMR 1950).
15. The learned AR also admitted before us that the income of the taxpayer is chargeable under section 18 of the Ordinance under the head business and profession and therefore the taxpayer has rightly claimed exemption of tax on his business income. However, when asked as to why the taxpayer filed/filled return cum statement under section 115(4) only contained in return under section 114 if his income is chargeable to tax under section 18, the learned AR came up with the plea that statement has been filed as his income is subjected to final taxation under section 169 of the Ordinance and he has claimed refund due to excessive deduction of tax. Needless to say that these two statements are clearly contradictory to each another. It would be appropriate to reproduce sections 9, 10 and section 18(1)(a) of the Ordinance below to further crystallize the issue:-- 9.Taxable income. ---The taxable income of a person for a tax year shall be the total income [under clause (a) of section 101 of the person for the year reduced (but not below zero) by the total of any deductible allowances under Part IX of this Chapter of the person for the year.
10.Total Income. ---The total income of a person for a tax year shall be the sum of the [---1 [(a) person's income under all heads of income for the year; and] [(13) person's income exempt from tax under any of the provisions of this Ordinance.]
18. Income from business.---(1) The following incomes of a person for a tax year, other than income exempt from tax under this Ordinance, shall be chargeable to tax under the head "Income from Business "--
(a) the profits and gains of any business carried on by a person at any time in the year;
16. Plain reading of the above section shows that total income of a person comprises of income under all heads including income from business under section 18 (1)(a) which clearly mentions the term "profits and gains" and this term has been used in Clause (126F) which grants exemption to profits and gains and NOT to the income covered under section 169 of the Ordinance. It would be imperative to note here that section 169(2), in turn, excludes all the incomes which are chargeable under any head of income meaning thereby that income subjected to final taxation does NOT fall within the scope of business income and profits and gains, hence, not exempt under Clause (126F).
In other words, only those profit and gains which are taxable within the meaning of section 18(1)(a) of the Income Tax Ordinance, 2001 have been given exemption in clause (126F) whereas the case of the taxpayer falls under D section 169(2)(a) of the Income Tax Ordinance, 2001 which states that "the income shall not be chargeable to tax under any head of income in computing the taxable income of the person" . These provisions of law thus make it abundantly clear that the case of the taxpayer does not fall under section 18 of the Income Tax Ordinance, 2001 rather it falls under separate block of income which is not covered under section 18 and, in turn, does not qualify for exemption under clause (126F).
17.Perusal of record reveals some interesting facts, the appellant taxpayer, in the original as well as in the revised returns/statements (for tax years 2010 and 2012), did not declare any exempt income in the relevant column. Had the income of the taxpayer been exempted as per his own claim, the taxpayer should have filled in the relevant column No,92 in tax return of 2012 and column No, 89 in the tax returns of 2011 and 2010. However, in all the three years, columns of exempt income have been left blank by the taxpayer meaning thereby that there was no exempt income during these tax years. Further the appellant itself filed statement in terms of 115(4) of the Ordinance which deals with the final tax regime, instead of filing regular return of income under section 114 of the Ordinance for claiming alleged exemption.
18.It is also pertinent to reproduce section 169 of the Income Tax Ordinance which states as under:-- "169. Tax collected or deducted as a final tax.--
(1) This section shall apply where--- (a)the collection of advance tax is a final tax under subsection (7) of section 148 [or subsection
(5) of section 234[or section 234A] ] on the income to which it relates; or (b)the deduction of tax is a final tax under [clauses (a), (b) and (d) of subsection (1) of section 151, subsection (1B) [or subsection (1BB)] of section 152,] [subsection (6)1 of section 153, [section 153A,] subsection (4) of section 154, I. subsection (3) of section 156,6[ 17 [subsection (2) of section 156A or subsection [(1) and] (3) of section 233[1] on the income from which it has been deducted
(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; and
(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.]
(3) Where all the income derived by a person in a tax year is subject to final taxation under the provisions referred to in subsection (1) or under sections 5, 6 [,] 7 [and 15], [(other than dividend received by a company)] [an assessment shall be treated to have been made under section 120 and] the person shall not be required to furnish a return of income under section 114 for the year.
[Explanation. ---The expression, -an assessment shall be treated to have been made under section 120 means,--- (a)the Commissioner shall be taken to have made an assessment of income for that tax year, and the tax due thereon equal to those respective amounts specified in the return or statement under subsection (4) of section 115; and (b)the return or the statement under subsection (4) of section 115 shall be taken for all purposes of this Ordinance to be an assessment order.][emphases supplied]
19. It is thus evident from the above that contractual receipts of the taxpayer fall under the scope of final tax liability on which no refund whatsoever or no exemption of tax is available in the whole scheme of Income Tax Ordinance. It is also to be noted that above interpretation of the law has also been endorsed by Messrs Naseem Zafar Associates the learned AR of the taxpayer vide their office letter No,161/2010/9748 dated 17-8-2012 in the following manner:-- "First of all we would like to state that the assessee company is a Government contractor which is involved in the business of construction of Roads and Dams. All the receipts of the company are taxable under clause (c) of the subsection (1) of section 153 of the Income Tax Ordinance, 2001 and tax deducted @ 6% is the full and final tax of the assessee company. Being the full and final tax the assessee company is liable to be assessed under PTR and is required to file the statement under sections 115(4) and 169 of the Income Tax Ordinance, 2001. Therefore,' the assessee company has filed the statement under section 115(4) instead of return under section 114 of the Income Tax Ordinance, 2001. As far as the revision of statement is concerned it was rightly revised by the assessee under subsection (4A) of section 115 of the Income Tax Ordinance, 2001. As per subsection (4A) of section 115 the statement can be revised at any time within 5 years at the end of the financial year in which the statement was furnished.
The necessity to revise the return was arose due to the reason that the clarification regarding the exemption under clause (126F) of the Part-I of the Second Schedule of the Income Tax Ordinance, 2001 was issued by the Board through Circular No,14 of 2011 dated 6th of October, 2011. The original statement was filed on 30-9-2010 and later on after the issuance of the Circular the statement was revised on 1-11-2011 to claim the exemption which is very much as per law. The copy of all the relevant documents is enclosed for your verification. We would further like to state that as per section 169 of the Income Tax Ordinance, 2001 the income shall not be chargeable to tax under any head of income in computing the taxable income if the deduction of tax is the final tax under clause (c) of subsection (3) of section 153 of the Income Tax Ordinance, 2001.
20.The above written statement at the part of taxpayer is in fact an admission that all the contractual receipts of the taxpayer are subjected to final taxation and no refund whatsoever is admissible on these contractual receipts.
21.The learned DR lastly argued that the taxpayer did not pay minimum tax under section 113 of the Ordinance for any of the tax years under consideration as the same was not applicable. Even if for the sake of argument, refund was admissible to the taxpayer, no exemption whatsoever was available from the provisions of section 113 by any stretch of imagination. This interpretation has also been endorsed by the honorable ATIR, Peshawar Bench in its judgment I.T.A. No,157 (PB) of 2012 dated 17-12-2012 as under: "The provisions of section 113 has overriding effect and any other provisions, even clause (126F) is to be referred to section 113 of the Income Tax Ordinance, 2001 is applicable to cases entitled to exemption under clause (126F) of Part-I of Second Schedule or any other provisions of Ordinance ibid. Clause (126F) 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 discussed facts section 113 of the ITO, 2001 prevails over clause (126F) of the Ordinance ibid and the taxpayer was/is liable to charge of minimum tax which has rightly been charged by the L/taxation order vide order under section 122(SA) of the ITO, 2001."
22. Considering the legal and factual position in totality, we feel it is inevitable to discuss the role of FBR while interpreting the fiscal statutes through circulars/clarifications. In light of provisions of section 206 of the Ordinance, 2001 FBR may issue circulars to provide guidance to the taxpayers and its functionaries. The circulars shall be binding on FBR functionaries but quite amazingly at the same time it shall not be binding on a taxpayer. Similarly any circular/clarification issued by the FBR is not binding on us being a judicial authority.
23.FBR is not empowered by the statute to clarify, interpret and explain the legal provisions of Ordinance. That is why taxpayers have intentionally been excluded from the domain of circular/clarification venture of FBR. The powers vested under section 206 of the Ordinance are of administrative nature having clear restriction to explain the legal issues.
24.A statute is required to be read as a whole and not in a piecemeal manner. Even otherwise FBR has no power to alter the tax liability of a person by issuing an S.R.O. or circular or by making a 'clarification' that is actually an "interpretation of law" in the garb of "clarification" which is also unwarranted under the law. The tax liability of a person can only be determined/altered/re- determined by competent legislature. The interpretation of law is the sole prerogative of the courts with the Hon'ble Supreme Court having the final say in the matter.
25. In a taxing statute, one can only look at the language, since there is no room for intendment or presumption. The same rule of taxation i,e, a person sought to be taxed can only be taxed when he comes within the letter of law is squarely applicable. Where law required an act to be done in a particular manner, it had to be done in that manner alone and such dictate of law could not be termed as a technicality. Where an order passed by any forum/authority or court is patently illegal or against express provisions of law, if allowed to stay intact tantamounts to and causes prejudice and serious breach of legal lights of taxpayers/citizens. To enjoy the protection of law and to be treated in accordance with law is the inalienable right of every citizen which off course includes taxpayer as general citizenry. The conflicting circulars issued by the FBR must have resulted in grace loss of revenue, therefore, the interpretation given by the FBR conflicting with the statutory provisions of clause (126F) of the Ordinance as discussed above is held to be patently illegal and a nullity in the eyes of law.
26. The receipt of the appellant was subject to final discharge of tax liability. The exemption given under Clause (126F) of Part 1 of the 2nd Schedule of the Ordinance is applicable only to the income taxable under the normal tax regime of taxation. If the legislature had intent to allow exemption to such like persons, who are admittedly subject to the final tax regime then a suitable provision should have been made in Part IV of the 2nd Schedule of the Ordinance read with clause (d) of subsection (1) of section 53. This provision stipulate that income or class of income or person or class of persons specified in Part IV of the 2nd Schedule of the Ordinance be exempted from the operation of any provision of the Ordinance, subject to any condition and to the extent specified therein. The case of the appellant squarely fall under clause (c) of subsections (1) and (3) of section 153 of the Ordinance. These provisions deals with the payment on account of contracts etc. and which are treated as final tax. The appellant/taxpayer has not been exempted from the applicability of any of these provisions. Therefore, its claim of exemption in terms of Clause (126F) of Part 1 of the 2nd Schedule of the Ordinance cannot be entertained. It is relevant to mention here that in the similar circumstances and facts certain classes of persons were exempted from the operation of provisions of section sections 182, 205, 235, 154 and 148 of the Ordinance in terms of following quoted clause (10A) of Part IV of the 2nd Schedule of the Ordinance, which was also inserted through Finance Act, 2010.
(10A)
(i)The provisions of serial No,5 of the Table given in subsection (1) of section 182 and clause (a) of subsection (1) of section 205 shall not apply to business located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA, provided that the principal amount of tax due is paid by the 30th day of June, 2010; (ii)the provisions of section 235, regarding advance tax on electricity, shall not apply to commercial and industrial consumers of electricity located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA till the 30th day of June, 2011; (iii)the provisions of section 154, regarding withholding tax on exports, shall not be applicable to the export of goods originating from the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA, till the 30th day of June, 2011: Provided that this clause shall only be restricted to the exporters based in the above areas; (iv)the provisions of section 148 shall not be applicable on the import of plant and machinery for establishment of businesses in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA till the 30th day of June, 2011: Provided that this concession shall not be available to the manufacturers and suppliers of cement, sugar, beverages and cigarettes; Explanation.---For the purpose of this Schedule,- (a)most affected areas means district Peshawar, Malakand Agency, and districts of Swat, Buner, Shangla, Upper Dir, Lower Dir, Hangu, Bannu, Tank Kohat and Chitral; and (b)moderately affected areas means districts of Charsadda, Nowshera, D.I. Khan, Batagram, Lakki Marwat, Swabi and Mardan] [emphases supplied]
27. Accordingly, in the instance case, we feel no hesitation to hold that the action of learned ACIR based on correct interpretation of exemption clause (126F) of Part 1 of the 2nd Schedule of the Ordinance and therefore he justifiably invoked the section 122(5A) of the Ordinance, which is squarely in accordance with law. Therefore, for the reasons recorded supra, the orders passed by both authorities are upheld and the appeals of the appellant/taxpayer rejected being devoid of any merit.
28.The appeals are disposed of in the manner and to the extent as indicated above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.