CH. ANWAAR-UL-HAQ, JUDICIAL MEMBER, --The titled five appeals pertaining to Tax Years 2006 to 2010 have been preferred at the instance of taxpayer, calling in question two separate orders both dated 25.10.2011, whereby learned CIR(A) disposed of taxpayer's appeals for tax years 2006 to 2007 and for tax years 2009 & 2010 separately.
2. Earlier these appeals were disposed of by this Tribunal vide order 29.11.2011. On Reference Applications u/s. 133 (1) of the Income Tax Ordinance, 2001, filed by the taxpayer, the Hon'ble Islamabad High Court vide ITRA Nos. 267 to 271 of 2011 dated 17.01.2012, has decided these Reference Applications in the following manner:- "10. In view of the above-said circumstances, we are of the opinion, that the impugned orders dated 29.11.2011 passed by the learned Tribunal are not sustainable. All the five Income Tax References are accepted; the impugned orders dated 29.11.2011 are set aside and the cases are remanded back to the Appellate Tribunal Inland Revenue, with the direction . That affording proper opportunity of hearing to the parties, the cases be decided afresh in accordance with law, rules and procedure, within three months. It would be in the interest of justice that these cases are placed for hearing/decision, before another Tribunal consisting of different members".
3. In the light of above directions of the Hon'ble Islamabad High Court, these appeals are taken up for fresh adjudication and are disposed of through this consolidated order.
4. The appellant/taxpayer assailed the above-referred orders of the learned CIR (A) pertaining to tax years 2006 to 2010, through following common grounds of appeals:---
(1) The learned Commissioner (Appeals) has erred in upholding the order of the Additional Commissioner Inland Revenue who acted without jurisdiction and erred in invoking the provisions of Section 122(5A) of the Income Tax Ordinance, 2001 to amend an assessment finalized under Section 120(1)(b) by declaring it erroneous and prejudicial to the interest of revenue.
(2) The learned Commissioner (Appeals) has erred in holding that the Additional Commissioner had valid jurisdiction to issue a notice under Section 122(5A) of the Ordinance and pass the amended assessm ent order in terms of Section 122(5A) of the Ordinance.
(3) The learned Commissioner (Appeals) was not justified in confirming the order of the Additional Commissioner who imposed tax on exempt profit on debt by treating the profit attributable to call and term deposits outside the scope of exemption available to the Appellant under Clause (74), Part-I of the Second Schedule to the Ordinance.
(4) That without prejudice to grounds of appeals supra, the learned Commissioner (Appeals) failed to appreciate that the exemption under Clause (74) referred above is wide enough to include both Profit on debt from bank accounts as well as from bank deposits and therefore the Additional Commissioner has erred in disallowing the exemption on profit on debt.
(5) The learned Commissioner (Appeals) has erred in confirming the order of the Additional Commissioner who extended the application of the provisions of Workers' Welfare Fund Ordinance, 1971 and charging WWF @ 2% of the total interest income.
Tax Years 2009 and 2010
(6) That without prejudice to grounds of appeal Nos. 3 & 4 above, the learned Commissioner (Appeals) has erred in not giving his decision on the contention/plea as to working of Profit on debt relating to call/term deposits from the figures appearing the consolidated financial statements as against the figures appearing in unconsolidated financial statements.
(7) That without prejudice to the fact that judgment of the Hon'ble Lahore High Court in WP No, 8763/2011 re: EPCT (Pvt.) Ltd., the learned Commissioner (Appeals) has deleted the levy of WWF on the appellant, he was not justified in commenting that on merits, the appellant is subject to levy of VVWF since other IPPs are voluntary paying VVWF.
5. The relevant facts for disposal of these appeals are that the taxpayer in this case is a public limited company which is engaged in the business of electric power generation, transmission and distribution. Returns for the tax years 2006 to 2010, were filed declaring NIL taxable income being exempt under Clause (132) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 which were deemed to treatment as assessments in terms of Section 120 (1) of the Income Tax Ordinance, 2001. Subsequently, the Additional Commissioner Inland Revenue (Audit), observed that the deemed assessm ents completed for all the years under appeal are erroneous insofar as prejudicial to the interest of revenue and needs to be amended in terms of Section 122 (5A) of the Income Tax Ordinance, 2001, mainly on the following two grounds:---
(i) The profits and gains of M/s. HUBCO from business are exempt from tax in terms of Clause (132) of Part-I of the Second Schedule to the Ordinance, but the taxpayer was required to pay WWF @2% of its accounting profit for the tax years 2006 to 2010 which they have failed to do so.
(ii) In the returns of income for tax years 2006 to 2010, the taxpayer claimed profit on debt/interest income as exempt/not offered for tax in terms of Clause (74) whereas the said exemption in respect of interest/profit on debt is restricted to bank accounts on deposits which are directly connected with the financial transactions relating to the operation of the company.
6. On the basis of above discrepancies, the taxpayer was called upon to Show-Cause as to why the deemed assessm ents for the years 2006 to 2010 may not be amended by resorting to the provisions of Section 122(5A) of the Income Tax Ordinance, 2001. The taxpayer/company duly responded to the Show-Cause notice issued and filed its explanation, however, the Additional Commissioner being not satisfied with explanation offered, amended the deemed assessments for years 2006 and 2010 vide two separate orders passed u/s. 22 (5A) of the Ordinance, whereby the taxable income, tax WWF for the tax years 2006 to 2010, was worked out as under:- Tax Year Taxable Interest IncomeTax ChargeableWWF Net Tax Payable 2006 242,329,36083,118,970 4,846,587 87,965,557 2007 113,984,110 39,096,550 2,279,682 41,376,232 2008 26,433,330 9,066,632 528,666 9,595,298 2009 13,626,089 4,769,131, 74,341,980 79,111,111 2010 18,559,759 6,495,916 109,376,740115,872,656
7. Being not satisfied, the taxpayer/company preferred appeals before the learned CIR (A) on a number of legal and factual grounds. However, the learned CIR (A) rejected these appeals vide impugned order and upheld the treatment as accorded by the Additional Commissioner at assessm ent stage.
8. Arguments heard and record perused. At the very outset of his arguments, the learned AR opted not to press the Ground Nos. 1 & 2 reproduced supra, regarding jurisdiction of the Additional Commissioner to invoke the provisions of Section 122 (5A) of the Income Tax Ordinance, 2001, hence, these grounds of appeal are not taken up for adjudication being withdrawn by the taxpayer.
9. As regards the issue of interest income and charge of WWF, these are disposed of in the following manner:- Interest Income/Profit on debt.
10. In the returns of income/financial statements for tax years 2006 to 2010, the taxpayer/company declared profit on debt/interest income which was not offered for tax being claimed exempt in terms of Clause (74) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001. However, it was observed by the Additional Commissioner that out of total cash/bank balances, the taxpayer invested portion of amounts towards term deposits/call deposits and these deposits being time specific are not utilized in the operation of the company project, therefore, profit earned on such deposits are not entitled to exemption under Clause (74) of Part-I of the Second Schedule.
Accordingly, the assessing authority/Additional Commissioner treated the profit earned on these term deposits/call deposits as taxable being not covered under clause (74) ibid. Consequently, the assessing authority treated these term deposits as taxable and made the additions accordingly in the tax years 2006 to 2010 which action was later on confirmed by the learned CIR (A) for the reasons as embodied in the body of the impugned orders.
11. The learned AR on behalf of taxpayer/company assailed the above action of the authorities below as contrary to law and facts of the case. It is submitted by the AR that profits and gains derived by the appellant are exempt from tax under Clause (132) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001. Similarly, the appellant also enjoys exemption (sic) reason that "exemption under the aforesaid Clause is restricted to interest earned on funds pertaining to such deposits which are utilized in ongoing project operations during the currency of a certain tax period." It is contended by the AR that this conclusion of the Additional Commissioner is illogical as funds in any account, whether placed in savings or time bound deposit accounts, will only earn profit/return when it remains unutilized in account.
12. The learned AR drawn our attention to the history of exemption available to the appellant in respect of "profit on debt/interest income". According to the AR, this exemption was initially introduced in the Income Tax Ordinance, 1979 (since repealed) when Clause (76A) was inserted in Part I of the Second Schedule via SRO 938(1)/94, dated 22nd September, 1994 and the relevant provisions read as under:- "(76A) Any interest or profit derived by Hub Power Company Limited on its deposits directly connected with financial transactions relating to the project operations."
According to the AR, initially exemption was available only in respect of interest or profit derived from deposits directly connected with financial transactions relating to the project operations.
However, through subsequent SRO 13(1)/95, dated 4th January, 1995, the scope of the exemption was enhanced roping in interest/ profit not only from bank deposits but also from accounts with financial institutions directly connected with financial transactions relating to the project operations. The amended provisions were to the following effect:--- "(76A) Any interest or profit derived by Hub Power Company Limited on or after the first day of July, 1991, on its bank deposits or accounts with financial institutions directly connected with financial transactions relating to the project operations."
It emerges from the above that the legislature has firstly expanded the scope of exemption given to the appellant and secondly made the exemption retrospective i,e, effective from 1st July, 1991.
This would mean that the intent of legislature is to exempt the appellant from taxation of profit on debt/ interest both from bank deposits as well as from accounts maintained with financial institutions with the condition that these are connected with financial transactions relating to the operations of the appellant.
13. It is submitted by the learned that the present Clause (74), Part-I of the Second Schedule to the Ordinance carries similar provisions as were available under Clause (76A) of the repealed Ordinance discussed above and therefore, there is absolutely no difference in their gist and application. It is contended by the AR that the legislature has not distinguished the term "bank deposits" as used in the exemption Clause with any other deposit. On the contrary, the Additional Commissioner has qualified the exemption by firstly stating that call term deposits differ from other deposits and secondly assuming that the funds placed in such time bound accounts cannot be utilized for the purpose of financial transactions relating to the operations of the appellant.
However, she has not specified as to on what basis she has formed the above opinion.
14. It is submitted by the AR that Section 26A of the Banking Companies Ordinance, 1962 authorizes the banks to accept deposits of money on P&L basis or free of interest or return in any form which, inter alia, includes call & term deposits as well. Neither the term "deposit" nor "bank deposit" has been defined under the laws of Pakistan. It is asserted by the AR that the taxpayer's income from bank deposits, which is exempt under Clause (74), does include call/term deposits as is evident from the following definitions:--- "In a bequest the phrase "my bank deposit at the M. Bank" means money deposited at the bank whether on current or deposit account" (Stroud's Judicial Dictionary of Words and Phrases, Sixth Edition Volume 1 Page 238).
"Bank deposit, money placed in a bank against which the depositor can withdraw under prescribed conditions" (Webster's Encyclopedic Unabridged Dictionary of the English Language - 1994 Edition).
Black's Law Dictionary (Sixth Edition - page 144) has defined Bank account and Bank deposits as under: "Bank account"
A sum of money placed with a bank or banker, on deposit, by a customer, and subject to be drawn out on the latter's check. Any account with a bank, including a checking, time, interest or savings account.
"Bank deposit"
Cash, checks, or drafts placed with bank for credit to depositor's account. Placement of money in bank thereby creating contract between bank and depositor.
15. In view of the provisions of the banking laws and the definition of bank account and bank deposit, it is asserted by the AR that, it is abundantly clear that the appellant's income the so- called call/term deposit squarely falls within the ambit of the term "bank account or deposit" and is exempt from tax under Clause (74) referred above.
16. It is further submitted by the AR that the legislature, in Clause (74) ibid or elsewhere, has not differentiated bank deposits from any other deposits or from "call/term deposits", It has only used the term "bank deposits" and the general dictionary meaning of the term is defined as "money placed in a bank against which the depositor can withdraw under prescribed conditions (Webster's Encyclopedic Unabridged Dictionary of the English Language - 1994 Edition). Accordingly, ascribing or assigning meanings to a term not used as such by the Legislature is against the spirit of Legislature which is not permitted under the law.
17. It is contended by the AR that while confirming the orders of the Additional Commissioner, the learned CIR(A) has not independently applied his mind and has not given due consideration to the expression "bank deposits or accounts directly connected with the financial transactions relating to the project operations". A careful examination of this expression will suggest that it is actually emphasizing that any bank account or bank deposit which is fed from funds generated from the Project operations would qualify for exemption. It means, if the funds placed in the bank account or bank deposit are fed from sources other than the financial transactions relating to the project operations would not qualify for exemption. For instance, any interest earned from the funds generated from any business other than electricity will not be eligible for exemption. It is contended by the AR that the Additional Commissioner and CIR (A) failed to appreciate it and wrongly attributed a different meaning to the exemption provision.
18. According to learned AR, the principles of interpretation of statutes guide that no surplus age can be attributed to the phrases/words used in a particular statute. This would mean that the provisions of law are to be read in the manner in which they are designed to mean and that no additional meanings can be assigned to them. It has been expounded by the Courts that the provisions of law are to be interpreted strictly according to the language used and not on the basis of assumptions. In this behalf the learned AR relied upon the House of Lords decision in Barclays Mercantile Business Finance Ltd. v. Mawson, wherein their Lordships refer to "purpose" or "purposive construction" a number of times. In Cape Brandy Syndicate v. IRC, Rowlatt J. Said. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied.
One can only look fairly at the language used."
' In WT Ramsay Ltd. v. CIR (1981) STC 174, Lord Wilberforce echod Rowlatt J's words and reiterated the following:--- "A subject is only to be taxed on clear words, not on intendment or on the 'equity' of an Act. Any taxing Act of Parliament is to be construed in accordance with this principle."
19. It is further submitted by the learned AR that the Courts in Pakistan have also expounded and upheld the above principles in a number of judgments, some of which are relied upon-
(i) 2000 PTD 280 (HC Kar.) - CIT v. Muhammad Kassim while interpreting a provision of statute, Court has to read the provision as it exists and not to deduce or infer the meaning in accordance with the existing test or the words or particular provision. Court is not supposed to add to or subtract any word(s) from any provision of a statute so as to give some meanings which obviously and plainly flows or can be inferred from it".
(ii) 1993 PTD 69 = 66 TAX 246 - (Supreme Court) - Mehran Associates v. Commissioner of Income Tax.
"The cardinal principle of interpretation of a fiscal statute seems to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for any intendment nor there is any equity or presumption as to a tax. A fiscal provision of a statute is to be construed literally in favour of a taxpayer and in the case of any substantial doubt the same is to be resolved in favour of the citizen."
20. As to the observation of the Additional Commissioner that profit on debt from call/term deposits earned by the appellant is not exempt since such call/term deposits are not related to the financial transactions directly relating to the operations of the appellant, it is contended by the learned AR that this observation has no basis since the Additional Commissioner has failed to specify as to on what grounds she has come to this conclusion as it needs to be appreciated that whatever profit on debt the appellant earns, it is derived from placement of funds generated from sale of electricity, which is well within the scope of financial transaction directly connected with the project operation and it cannot be termed as connected to any other operation by any stretch of imagination. It is contended by the AR that the Additional Commissioner has failed to appreciate that the appellant is involved solely in the business of generation and sale of electricity to WAPDA/NTDC only under the agreement with the Government of Pakistan. Funds are received from WAPDA for sale of electricity which are being used mainly for purchases of fuel etc., payment to O&M contractor, repayment of loan and interest, payment of taxes and duties etc., which are necessary for generating electricity. The balance amount, if not immediately required, is then placed in deposits with the financial institutions. As such all deposits (whether call, term or whatever name they are called) maintained with banks are generated from the operations of the project and thus are very much related to the operations of the appellant. According to the AR, the Additional Commissioner's assertion can only be said to be mere guess work on the basis of which, one cannot conclude that the assessment is erroneous as well as prejudicial to the interest of revenue.
21. It is submitted by the learned AR that the provisions of Section 122(5A) of the Ordinance require that before declaring an assessm ent to be neous and prejudicial to the interest of revenue the Commissioner must have cogent reasons to believe that the assessment is such that it is liable to amendment in terms of Section 122 of the Ordinance. If this test is applied to the conclusion drawn by the Additional Commissioner about the nature of call/ term deposits, it emerges that her conclusion is not supported by cogent and valid reasoning and rather is based on guess work. It is contended by the AR that the Courts have time and again held that mere suspicion or guess work cannot be made basis for amending/revising an assessment. Without having definite information/conclusive evidence which lead to conclude that the assessment is erroneous and prejudicial to the interest of revenue, action in terms of Section 122(5A) cannot be taken. To support his arguments, the learned AR relied upon the decision of this Tribunal reported as 2010 PTD 111, wherein, according to the learned AR, this Tribunal disapproved the invocation of Section 122(5A) of the Ordinance to amend the assessm ent by observing that mere suspicion could not be allowed to be a basis to invoke Section 122(5A) of the Ordinance. In the case reported as 2009 PTD 121, according to the learned AR, it was held by the Tribunal that amendments under Section 122(5A) should not be based on surmises and unsupported assertions.
22. In view of the above and to conclude his arguments on the point, it is submitted by the AR that the action of the Additional Commissioner in disallowing the exemption claimed by the appellant under Clause (74) of Part I of the Second Schedule to the Ordinance and taxing profit on debt from call/term deposits alleging them to be not related to financial transactions concerning the operations of the appellant is not supported by law or by facts and therefore, the amended orders are liable to be quashed.
23. On the contrary, the learned DR supported the orders passed by the authorities below and submitted that the assessing authority was justified to invoke the provision of Section 122 (5A) and has rightly term the term deposits as taxable. It is contended by the learned AR that the term deposit/call deposit being time specific and the funds in the aforesaid deposits are not utilized by the taxpayer in the operation of the company, therefore, profit earned on such deposits was not entitled exemption as provided under Clause (74), Part-I of the Second Schedule to the Ordinance.
24. We have heard the arguments put-forth by the learned representatives of both the sides and especially gone through the above-referred provision of law and case-law cited at the bar by the learned AR on behalf of taxpayer. The whole controversy revolves around the provision of Clause
(74) of Part-I of the Second Schedule to the Income Tax Ordinance, 2001 and whether call/term deposits can be construed to be directly connected with financial transaction relating to the project operations and as such benefit of exemption available in the said clause can be extended to these "term deposits". Here, we deem it appropriate to reproduce the definition of "bank deposits", "call/term deposits" and clause (74) of Part-I of the Second Schedule, for facilitation:--- "Term Deposit (definition)"
Term deposit is the popular name used for a savings product in Australia, New Zealand and Canada, but they are used throughout the world by both consumers and businesses to store cash for the future. Term deposits are also known as Certificates of Deposit in the United States, Bonds in the United Kingdom and Fixed Deposits in India and some other countries.
"Term Deposit (meaning)"
In deposit terminology, the phrase Term deposit refers to a savings account or certificate of deposit that pays a fixed rate of interest until a given maturity date. Funds placed in a Term Deposit usually cannot be withdrawn prior to maturity or they can perhaps only be withdrawn with advanced notice and/or by having a penalty assessed.
For example: A "Term Deposit" will often be used by individuals, businesses and financial institutions around the world as a means of storing their liquid funds for a fixed period of time for future use. In the retail market, term deposits are relatively safe investments when provided by insured financial institutions such as banks, savings and loan corporations and credit unions that are duly regulated within the country in which they operate. Also, while the phrase Term Deposit is in common usage in countries like Australia, Canada and New Zealand. Term Deposits are also known as time deposits in the United States, as Bonds in Great Britain, and as Fixed Deposits in India and some other countries.
Term Deposits involve putting cash into a saving account with a financial institution that pays a fixed rate of interest until a set maturity date. Funds cannot generally be withdrawn during the time frame covered by the Term Deposit unless a penalty is paid.
"Bank Deposits"
Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts at a banking institution, such as savings accounts, checking accounts and money market accounts. The account holder has the right to withdraw any deposited funds, as set forth in the terms and conditions of the account. The "deposit" itself is a liability owed by the bank to the depositor (the person or entity that made the deposit), and refers to this liability rather than to the actual funds that are deposited.
"Call Deposit/Bank Deposit (meaning)"
In deposit terminology, the term "call deposit" refers to a specific type of interest bearing investment account that allows a person to withdraw their money from the account without a penalty. In many cases the money can be withdrawn from a "call deposit" account without prior notification to the bank.
"Clause (74) of Part-I"
"(74) Any profit on debt derived by Hub Power Company Limited on or after the first day of July, 1991, on its bank deposits or accounts with financial institutions directly connected with financial transactions relating to the project operations."
From the bare perusal of the above provision of law, it is clear that profit on debt derived by the taxpayer on its banks deposits or accounts is exempt but the same is pre-condition to the fact that these deposits/accounts directly connected to the project operations of the taxpayer.
25. The taxpayer in the instant case invested portion of its money in the call/term deposits and now the question arises whether the term deposits can be construed to be directly connected with financial transaction relating to the project operations and as such benefit provided under Clause
(74) can be extended to such deposits or not?. The phrase "term deposit" generally refers to a saving account or certificate of deposit which pays a fixed fate of profit on maturity of a certain date. Funds allocated in such term deposit usually cannot be withdrawn prior to maturity otherwise it liable to a certain penalty to be payable. Term deposit being time bound, differ significantly in nature from checking accounts, therefore, it is obvious that funds deposited in such accounts being bound for a particular length of time would not be utilized in running the projection operations during the currency of that financial year. Accordingly, we are of the view that the interest income earned from such term deposits by the taxpayer does not cover the exemption as provided in Clause (74) ibid, until the same brought back to the regular stream of business operation. Since, the term deposits attract a higher profits compared to the normal deposits due to their long term removal from routine or ordinary course of company's business operation, therefore, the assessing authority was justified not to extend the benefit of exemption on such deposits. The clause (74) provides exemption only to bank deposits relating to routine business operation of the taxpayer and not either long term deposit. It is settled proposition at higher appellate fora that exemption provisions are to be strictly construed. Had the intention of the legislature been to extend exemption to entire profit on debts/interest income, the words "bank deposits" would have not been expressed in Clause (74) ibid.
26. The nutshell result of the above discussion is that the proportionate interest income earned by the taxpayer during the tax years under appeal on such time bound call/term deposit are not covered by the exemption provided in clause (74) of Part-I of the Second Schedule of the Ordinance. We find no force in arguments put-forth by the learned AR and the case-law cited at the bar which is not strictly relevant to the instant case. Under such circumstances, we find no reason to disturb the orders passed by the authorities below which is hereby maintained.
Consequently, the appeal of the taxpayer on this score is rejected.
Charge of WWF
27. In all the years under appeal, the assessing authority charged WWF @2% on taxable income of the taxpayer company in terms of Section 4 (1) of the Workers Welfare Fund Ordinance, 1971, which action was assailed by the taxpayer in first appeal; however, the learned CIR (A) upheld the action of the assessing authority.
28. It is contended by the AR that WWF has been charged without confronting the appellant, it is not only against the basic norms of justice but also against the spirit of Section 122(5A) of the Ordinance. It is submitted by the AR that the action of the assessing authority is against the well- established principle of natural justice viz. "audi alteram partem" which means that nobody can be condemned unheard. This maxim has been reiterated by the Superior Courts both of India and Pakistan time and again when it has been held that the action initiated violating this principle would be a nullity in law. Reliance in this behalf was placed on the following decisions:--- 2010 PTD 704 PLJ 2005 SC 936 1987 SCM R 1840
29. It is further submitted by the AR that WWF is leviable on an Industrial Establishment (1E) as described under the Workers Welfare Fund Ordinance, 1971 (WWF Ordinance) upon fulfilment of certain specified conditions. The Additional Commissioner has relied on the definition of the term IE as per Section 4(1) of the WWF Ordinance which reads as under:- "Every industrial establishment, the total income of which in any year of account commencing on or after the date specified by the Federal Government in the official Gazette in this behalf is not less man shall pay to the Fund in respect of that year a sum equal to two percent of its total income."
S 2(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 in 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 concern engaged in the growing of tea, coffee, rubber or cinchona; and
(vi) 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;
30. It is contended by the AR that the taxpayer does not fall in any of the categories of "industrial establishment" as referred to in clauses (i) to (vi). It is submitted by the AR that the taxpayer is engaged in generation of electricity and it has to be seen whether the term "electricity" would fall within the definition of "article". It is contended by the AR that electricity by definition is not an article in the context in which it is mentioned in the definition of industrial establishment. It is explained by the AR that the appellant is in the business of generating electricity or electrical energy, which is not a tangible object or a material thing, therefore, does not fall within the definition of the term 'article', and as such the appellant does not fall within the definition of the term 'industrial establishment' as defined under Section 2(0(i) of the WWF Ordinance.
31. It is further explained by the AR that the appellant produces electricity from 'oil' and not with the aid of 'electrical, mechanical, thermal, nuclear or any form of energy transmitted, mechanically and not generated by human or animal agency'. Thus even if 'electricity' was an article (which is denied) the appellant would still not qualify as an industrial establishment under Section 2(0(i) of the WWF Ordinance.
32. In view of the above, it contended that the appellant is not required to pay 2% of its profits to the Workers Welfare Fund and as such the levy imposed by the Additional Commissioner is not valid at all.
33. We have looked into the matter and after due consideration, we are not convinced with the submissions made by the learned AR at the bar. Under Article 260 of the Constitution of Islamic Republic Pakistan, 1973 "goods" has been defined as under:- "goods" includes all materials, commodities and "Articles".
34. It is now settled proposition of law that the electricity falls within the definition "goods", "article" produced, therefore, the establishment of the appellant company squarely fall within the definition of "industrial establishment" as provided in Section 2(f) of the Workers Welfare Fund Ordinance, 1971, duly reproduced supra. Accordingly, the taxpayer-company is liable to pay WWF on its "total income" during the tax years under appeals being an "industrial establishment" within the meaning of WWF Ordinance, 1971. As far as the AR's plea that WWF was charged in the case without firstly confronting it to the taxpayer, we find no force in the contention of the learned AR as the charge of WWF is consequence of the taxable income. If there is some taxable income the provisions of WWF automatically come in operation.
35. However, we are in agreement with the submissions of the learned AR that the taxpayer is not liable to pay WWF in accordance with the amendments introduced through Finance Acts, 2006 & 2008, as the said amendment made in law were declared unconstitutional and were accordingly struck down by the Hon'ble Lahore High Court, Lahore, vide W.P No, 8763/2011 in re: E.P.C.T. (Pvt.) Ltd. v. Federation of Pakistan, etc. We accordingly hold that the taxpayer is liable to pay Worker Welfare Fund (WWF) under WWF Ordinance, 1971, as it stood prior to the amendments made through Finance Acts, 2006 and 2008. .
36. The appeals of the taxpayer are disposed of in the above manner.