CH. ANWAAR UL HAQ (JUDICIAL MEMBER).--- This Tribunal issued show cause notice under section 221 of the Income Tax Ordinance, 2001, pertaining to the tax years, 2004, 2005 and 2006, whereby Messrs Idara-e-Kissan, was given an opportunity of being' heard in terms of section 221 ibid, as to why the earlier order passed by this Tribunal dated 10-2-2010, recorded in I.T.As. Nos. 1319 to 1321/LB of 2009 (Tax Years, 2004 to 2006) may not be rectified in terms of subsection (2) of Section 221 of the Income Tax Ordinance, 2001. The office was also directed to treat the said show cause as Applications for Rectification (Suo moto) and registered the same accordingly.
2. In view of the above titled Miscellaneous Applications (suo moto) were firstly fixed for hearing on 13-5-2014 and for the purpose show cause notice along with hearing notices were issued to the taxpayer, [Messrs Idara-e-Kissan], on the address given on Memo of Appeal as Messrs Idara-e- Kissan, 40-Shahrah-e-Roomi, Walton Road, Lahore. The said notices were also issued to the AR of the taxpayer in main appeals, Mr.Asif Hashmi, Advocate. These notices were received in the office of Mr. Asif Hashmi, by one Mr.Usman Afzal, which were later on returned by him on 12-5-2014 on the ground that he has no connection with Messrs Idara-e-Kissan and that these notices were received by him mistakenly. On the given date of hearing i.e. 13-5-2014, nobody turned up to attend the hearing proceedings. Accordingly, the case was adjourned for hearing today i.e. On 2-7-2014.
For the said date of hearing, the office has issued show cause notice / hearing notice through UMS on the given address of Messrs Idara-e-Kissan. It is pertinent to mention here that the office has made effort to obtain tax profile of the taxpayer available on the FBR's e-portal where the taxpayer's registered office is given as 40-Walton Road, Lahore, therefore, these notices were again issued at the said address of the taxpayer. The office has also made effort to serve these notices through Office of Inland Revenue and for the purpose a written request dated 25-6-2014 was also made. All these efforts made by this Tribunal to engage the taxpayer in proceedings and disposed of the matter in accordance with the provisions of section 221 of the Income Tax Ordinance, 2001, have gone futile as nobody turned up on behalf of the taxpayer today to attend the rectification proceedings.
3. In view of above, we left with no other option but to decide the present rectification Applications [suo moto] in the absence of taxpayer ex parte and decide the same on merits after hearing the learned DR.
4. The relevant facts in brief are that the taxpayer filed returns of income for tax years, 2004, 2005 and 2006 declaring business loss of Rs.17,554,081, Rs.5,637,282 and Rs.31,458,021 respectively which were deemed to be treated as assessment in terms of section 120 of the Income Tax Ordinance, 2001. However, the assessing officer found that the taxpayer has failed to pay liability of minimum tax under section 113 of the Income Tax Ordinance, 2001, as defined in section 80(2)(b)(v) of the Ordinance. Accordingly, the deemed assessments for the years were rectified under section 221 of the Ordinance and minimum tax was charged under section 113 in the year 2004 at Rs.4,456,377, in 2005 at Rs.38,53,935 and in 2006 at Rs.2,828,118. Being aggrieved, the taxpayer preferred appeal before the learned CIR(A) and assailed the action of the assessing officer on the ground that the taxpayer being an institution registered under the Societies Registration Act, 1980, is not a company within the meaning of section 80 of the Income Tax Ordinance, therefore, the taxpayer was not liable to pay minimum tax under section 113 of the Ordinance. To support his arguments, the 'learned AR had placed reliance on the judgment of the Hon.'ble Supreme Court of Pakistan recorded in Civil Appeals Nos.1477 to 1484 dated 7-11-2008. The learned CIR (A) being convinced with the submissions of the learned AR has deleted the minimum tax charged under section 113 in all the years under appeal. The relevant para of the order of the learned CIR(A) is reproduced here- under:-- "Having heard the rival arguments in the perspective of the authoritative pronouncements of the High Court and Supreme Court of Pakistan on the issue of difference between body corporate "formed by" or "under" any law for the time being in force and those required to be registered only "under" any law, am left with no doubt in my mind that the appellant society formed by private individuals and subsequently registered under the Societies Registration Act, 1860, does not fall within the ambit of the definition of a company as deemed in section 80(2)
(b) (v) of the Ordinance, 2001. Therefore, the levy of minimum tax under section 113 of the Ordinance for all the three years under review is legally void and it is ordered to be deleted".
5. The department assailed the above order of the learned CIR(A) before this Tribunal on the ground that the learned CIR(A) was not justified to delete the levy of minimum tax under section 113 which was levied in accordance with law. However, this Tribunal being convinced with the above finding of the learned CIR(A) rejected the appeals of the Revenue vide order dated 10-2-2010, recorded in I.T.As. Nos.1319 to 1321/LB/2009 (Tax Years, 2004 to 2006) which is now subject matter of rectification under section 221 through present applications for rectification [suo moto]. The operative part of the order of this Tribunal reads as under:-- "The only issue involved in this case is whether the respondent/taxpayer was a company within the meaning of section 80(2) (b) (v) of the Income Tax Ordinance. It shall be expedient to reproduce the provisions of section 80(2) (b) (v) of the Ordinance.
80. Person.---(2) For the purposes of this Ordinance--
(a) "association of persons" includes a firm a Hindu undivided family, any artificial juridical person and any body of persons formed under a foreign law, but does not include a company.
(b) "company" means -
(i) a company as defined in the Companies Ordinance, 1984 (XLVII of 1984);
(ii) a body corporate formed by or under any law in force in Pakistan;
(iii) a modaraba;
(iv) a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies;
(v) a trust, a co-operative society or a finance society or any other society established or constituted by or under any law for the time being in force; The Honourable Supreme Court of Pakistan has already decided this legal question in its judgment in Civil Appeals Nos. 1477 to 1484 dated 7-11-08. The operative part of the judgment of Apex Court is reproduced as under:- "Thus, we are clear in our mind while agreeing with learned High Court, that clause (b) of the Ordinance' brings into its ambit only those body corporate which are created by some law for the time being force. Such are only those societies which are directly established, constituted and created by the relevant statute itself. While, on the other hand, a body formed by private individuals and subsequently registered under some law would not be a body formed under that law, rather, it would be a body formed otherwise but registered under the law. The formation, creation and constitution of a body under the law is, therefore, altogether different from a body required merely to be registered under some law"
Thus there remains no ambiguity regarding the status of the respondent / tax payer that he is neither a society established under the law or constituted by the law."
6. We have heard the arguments of the learned DR who was of the view that this Tribunal was erred in law while rejecting the appeal of the taxpayer as the taxpayer is a company within the meaning of section 80(2)(b)(v) of the Income Tax Ordinance, 2001, is under legal obligation to pay minimum tax under section 113 ibid.
7. The comparison of definition of "company" as defined under subsection (16) of section 2 of the repealed Income Tax Ordinance, 1979 and under subsection (2) of section 80 of the Income Tax Ordinance, 2001,is given as under:--{{TABLE}} Repealed Income Tax Ordinance, 1979 Income Tax Ordinance, 2001 2(16) "company" means--
(a) company as defined in the Companies Act, 1913 (VII of 1913); or
(b) a body corporate formed by or under any law for the time being in force; or
(bb) a trust formed by or under any law for the time being in force; or
(c) a body corporate incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; or
(cc) a modaraba as defined in the 80(2)
(b) "company" means -
(i) a company as defined in the Companies Ordinance, 1984(XL VII of 1984);
(ii) a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies;
(iii) a modaraba;
(iv) a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies;
(v) a trust, a co-operative society or a finance society or any other Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980 (XXXI of 1980); the Government of a Province; a foreign association, whether incorporated or not, which the Central Board of Revenue may, by general or special order , declare to be company for the purposes of this Ordinance for such assessm ent year or years (whether commencing before, on or after the first day of July, 1979 as may be specified in the said order; {{TABLE}} society established or constituted by or under any law for the time being in force.
8. Hon'ble Supreme Court of Pakistan in the case re: CIR v. Messrs Lahore Cantt. Cooperative Housini Society and 7 others, reported as 2009 PTD 799 (Civil Appeals Nos, 1477 to 1484 dated 7-11-2008), interpreted the definition "society" and "company" under the repealed Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001 for the purpose of levy of minimum tax. "Operative part" of the said judgment which reads as under: "10. Coming to the intention of the legislature as to whether the Cooperative Societies like respondents, were intended to be included into the definition of Company under section 2(16) of the Ordinance. We would observe empathetically that the respondent-societies were not so included. We are also positive that the legislature itself, while enacting the latest Income Tax Ordinance of 2001, was conscious of the fact that such Societies are not so included in the definition of Companies as provided by section 2(16) of the Ordinance. While enacting Income Tax Ordinance of 2001, such Cooperative Societies were included in the definition of Company.
Section 80(2)(v) of the Income Tax Ordinance of 2001 reads as under:- "a trust, a cooperative society or a finance society or any other society established or constituted by or under law for the time being in force; This subsequent inclusion of Cooperative Societies by positive act of legislation is a conclusive proof of the fact that the same were excluded in the earlier enactment."
9. The said judgment of the Apex Court has also been followed by the Hon'ble Lahore High Court in re: CIR (Legal Division), Multan v. Messrs Multan Educational Trust, Multan, reported as 2014 PTD 420.
Relevant excerpt from the said judgment is reproduced here-under:--
10. In the present case, the respondent Society has been duly formed under the Act by complying with the provisions of the Act and by getting registered with the Registrar of Joint Stock Companies under section 1 of the Act. For the above reasons, we cannot come to terms with the respondent. The judgment assumes that a Society under Societies Registration Act, 1860 is already established through an independent instrument (deed, etc.) and subsequently is merely registered under the Act. Hence, the act of registration plays no role in its formation. As a result, any such society is neither established nor constituted or under the Act. The basic flaw in the judgment is that it fails to consider the import of section 1 of the Act (reproduced above). The above provision unambiguously provides that if seven or more persons subscribe their names to a Memorandum of Association and file the same with the Registrar of Joint Stock Companies, a Society is formed under the Act. Therefore, a Society under the Act is actually "formed" under the umbrella of the Act by complying with the procedure provided under Section 1 of the Act and does not have any legal existence prior to it.
11. For the above reasons, we hold that respondent society is established and constituted under the Act and squarely falls within the definition of "Company" under section 80(2) (b) (v) of the Ordinance.
12. Even though not cited by the learned counsel for the parties, we find it important to refer to the judgment of the august Supreme Court of Pakistan reported as Commissioner of Income Tax/Wealth Tax Companies Zone-II, Lahore v. Messrs Lahore Cantt. Cooperative Housing Society, Lahore and 7 others (2009 SCMR 715 = 2009 PTD 799) wherein Cooperative Housing Society registered under the Cooperative Societies Act, 1925 was held not to be "company" under Income Tax Ordinance, 1979. The said case is distinguishable inasmuch as section 5 of the Cooperative Societies Act, 1925 (Act) provides that "a society which has as its object the promotion of the economic interest of its members in accordance with cooperative principles or a society established with the object of facilitating the operations of such a society, may be registered under this Act with or without limited liability". Here the act of registration under the statute, does not establish or constitute a Society as the same stands established prior to registration under any instrument of law. The august Supreme Court of Pakistan held that such a society is not 'formed" by or under the Act. The facts of the present case and the legislative framework of Societies Registration Act, 1860 is different, hence, the cited judgment is distinguishable.
13. For the above reasons, the legal position that emerges is that a Society registered under Societies Registration Act, 1860 is a body corporate established and constituted under the Act and, therefore, falls within the definition of a "Company" under section 80(2) (b) (v) of the Ordinance.
14. As far as, the minimum tax is concerned, section 113 of the Ordinance is unambiguous and is applicable on companies; hence, respondent assessee is liable to minimum tax subject to qualification that minimum tax is not chargeable in Tax Year 2008".
10. On examination of subject file/s at the time of hearing of some other identical appeal, wherein the taxpayer made reliance on the subject decision of this Tribunal and claimed same treatment, it transpired that while dealing the subject appeal/s of the department this Tribunal confirmed the impugned order of the learned CIR(A) whereby she deleted the levy of tax under section 113 of the Income Tax Ordinance, 2001 relying upon the above quoted judgment of the Apex Court and considered it as "operative part" of the judgment of the Apex Court, which is dealing with the provisions of repealed Income Tax Ordinance, 1979. Relevant portion of the order of this Tribunal has already been reproduced in para-5 of this order.
11. We are of the firm opinion that while deciding subject appeal/s pertaining to the issue of definition of the "Company" under the Income Tax Ordinance, 2001, the Division Bench-II of this Tribunal inadvertently followed the observation given by the learned CIR(A) read with the observation of Hon'ble Supreme Court of Pakistan quoted above dealing with the definition of "company" as defined under section 2(16) of the repealed Income Tax Ordinance, 1979 as reproduced above at para-7. Since, the above quoted mistake is apparent from the face of the appellate order of this Tribunal and therefore the same is rectified in terms of section 221 of the Income Tax Ordinance, 2001. Accordingly, it is held that the taxpayer being a "company" as defined in section 80(2)(b)(v) of the Income Tax Ordinance, 2001, is liable to pay minimum tax under section 113. Therefore, the minimum tax charged by the assessing officer through orders passed under section 221 in tax years, 2004 to 2006 respectively; being in accordance with law is hereby upheld. Consequently, the consolidated order passed by the learned CIR(A) dated 22-4-2009 is vacated and appeals of the department are accepted. Order of this Tribunal dated 10-2-2010 recoded I.T.As. Nos. 1319 to 1321/LB of 2009 (Tax Years, 2004 to 2006), is accordingly modified/rectified to the above extent. 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.