' YAHYA AFRIDI, J. --- Through this single judgment, this Court proposes to dispose of two Tax References, as common questions Of law are involved therein. The particulars of said References are as under:---
(1) Tax Reference. No, 10-P/2014. (Shaukat Khan and Company v. Commissioner of Inland Revenue Zone-II, Regional Tax Office, Peshawar).
(2) Tax Reference No, 11-P/2014. (Shaukat Khan and Company v. Commissioner of Inland Revenue Zone-II, Regional Tax Office, Peshawar)
' Facts
2. Petitioner-taxpayer is an Association of Persons ("AOP") deriving income from execution of construction contract and it filed income tax returns for-the Tax Years 2010 and 2011 under Presumptive Tax Regime ("PTR"). The returns for the Tax Years 2010 and 2011 were filed declaring receipts at Rs, 412,479,566 and Rs, 270,461,937 respectively; the learned Deputy Commissioner Inland Revenue Enforcement and compliance-XXII (B) Mardan, initiated proceedings under Section 161 read with Section 153 of Income Tax Ordinance, 2001 ("Ordinance") against .Petitioner for non- deduction of tax at source as "withholding agent or prescribed person" under Section 153(1)(a)
(supra); the total tax adjudged for the Tax Years 2010 and 2011 was Rs, 13606670 and Rs, 7814321 respectively, vide single order dated 22.1.2013; aggrieved thereof the petitioner-taxpayer filed appeals before Commissioner Inland Revenue (Appeals), Peshawar ("Commissioner"), which was accepted vide single order dated 13.5.2013 and it held that:--- ' Till the amendment in Section 153 brought in the law through Finance Act , 2011 the turnover was exclusive of the turnover relating to transaction which were subjected to collection or deduction of tax treated as deemed income and assessed as final discharge of the liability."
"The Taxation Officer has grossly erred by treating the taxpayer as withholding agent for the Tax Years 2010 and 2011 and thus the order appealed against was annulled."
' Aggrieved thereof, the Revenue filed appeals before learned Appellate Tribunal Inland Revenue, Peshawar Bench, ("Tribunal") against the orders of Commissioner, which were single order dated 19.9.2013.
Questions of Law.
3. The questions of law requiring determination of the Court in these fax References are:-
(I) Whether under the facts and circumstances of the case, the ATIR was justified to reject the findings of CIR (A) and remand the case back to DC (IR) when the payments of the tax-payer fall under PTR' paym ents and were included in Section 153(7)(v)(c), Income Tax Ordinance, 2001 through Finance Bill, 2011 for the purpose of prescribed person?
(II) Whether income tax department is justified in accepting tax-payer payments under PTR for the deduction of tax @ 6% for the relevant tax year while for treating under Sections 161/205 of ITO, 2001 consider the same paym ents under Section 113(1) of ITO, 2001?
(Ill) Whether the amendment made in Section 453(7)(v)(c) through Finance Act, 2011 and implemented for year 2012, onward had any retrospective effect for the previous tax years?
(IV) Whether learned ATIR was justified to hold amendment under Section 153(7)(c) just procedural and not substantive so for as the rights and interest of the tax-payer is concerned?
(V) Whether the case of the taxpayer falls in the definition of prescribed person when the gross receipts from the execution of contracts clause was excluded from the definition of the turnover in terms of Section 153(7)(h) till amendment through Finance Bill, 2011 in the Income Tax Ordinance, 2001."
4. Valuable arguments of learned counsel for the parties heard and record perused.
Opinion.
5. To appreciate and correctly determine the questions of law raised in the instant references, first it is crucial to first decide whether the amendment introduced in Section 153 of the Ordinance vide Finance Act, 2011 ("Amendment") applies to the two Tax Years under consideration or otherwise.
6. The Revenue argued that Amendment would be the governing law. However, the petitioner- taxpayer asserted that the Amendments, being prospective, would not be applicable to Tax Years 2010 and 2011.
7. This Court shall first consider the case set up by the Revenue, contending that the Amendment would apply to Tax Years 2010 and 2011. After the amendment introduced in Section 153 of the Ordinance, vide Finance Act, 2011, the same read as:--- Section 153(1) of Income Tax Ordinance, 2001 "(1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or
(a) for the sale of goods;
(b) for the rendering of or providing of services;
(c) on the execution of a contract, other than a contract for the sale of goods or the rendering of or providing of services, ' shall, at the time of making the payment, deduct tax from the gross amount payable (including sales tax, if any) at the rate specified in Division Ill of Part Ill of the First Schedule.
Section 153(7)(i) of Income Tax Ordinance, 2001 reads as: "(i) "Prescribed person" means:
(a) the Federal Government;
(b) a company;
(c) an association of persons constituted by, or under law;
(d) a non-profit organization;
(e) a foreign contractor or consultant;
(f) a consortium or joint venture;
(g) an exporter or an export house for the purpose of sub-section (2);
(h) an association of persons, having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year; Section 153(7)(v) of Income Tax Ordinance, 2001, reads: "(v) turnover" means:
(a) the gross sales or gross receipts, inclusive of sales tax and federal excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods;
(b) the gross fees for the rendering of services for giving benefits including commissions;
(c) the gross receipts from the execution of contracts; and
(d) the company's share of the amounts stated above of any association of persons of which the company is a member.
(emphasis provided)
8. The Amendment introduced in Section 153 of the Ordinance is to be applied prospectively for the following reasons:--- 'Firstly, it is by now a settled principle of law that unless the legislature expressly provides a taxing or a penal provision to be retrospective, the same would apply prospectively. The Finance Act, 2011 does not expressly provide the Amendment to have retrospective effect. Hence, the same would be applicable prospectively.
' Secondly, the Amendment expands the scope of a "prescribed person", as a "withholding agent', to collect advance tax on payments made. The Amendment, therefore, not only imposes an additional obligation upon the tax-payer to act as a "withholding agent' of collecting advance tax but it also imposes a pecuniary liability on him for failing to act and collect the same. Surely, in such circumstances a the Amendment would not have retrospective effect.
8. Moving on to facts of the present references, as noted earlier, the matter in dispute relates to Tax Years 2010 and 2011. As explained in sub-section (68) of Section 2 read with Section 74 of the Ordinance, the said Tax Years would relate to the following period:--- Tax Year Period 2010 1.7.2009 till 30.6.2010 2011 1.7.2010 till 30.6.2011
10. The Amendment introduced in the Ordinance, vide Finance Act, 2011, being prospective would take legal effect on 1.7.2011 and thus would not apply to the Tax Years in question, as the same ended on 30.6.2010 and 30.6.2011.
11. Surely, sub-clause (c) of clause-V of Section 153(7) introduced through the Finance Act, 2011, has clarified the term "turnover" by, "inter alia" incorporating fifty million rupees of the gross receipts from the execution of contracts. However, this provision would not be attracted to the Tax Years under consideration as found in the present references, as the same ended on 30.6.2010 and 30.6.2011, while the said provision would be applicable prospectively from 1.7.2011. This Court has been informed that the petitioner taxpayer has since 1.7.2011 duly acting is a "withholding agent" and deducting tax at source at the time of payments. This role of "withholding agent" and the liability accruing for failure thereof cannot be retrospectively saddled upon the petitioner taxpayer for any period before 1.7.2011 for the provision so introduced vide the Amendment having a prospective effect.
12. The Court deems it pertinent here to refer to the relevant law effective before 1.7.2010. Section 153 of the Ordinance, prior to the Amendment, read as under:--- Section 153(1) of Income Tax Ordinance, 2001 "(1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or:
(a) for the sale of goods;
(b) for the rendering of or providing of services;
(c) on the execution of a contract, other than a contract for the sale of goods or the rendering of or providing of services, shall, at the time of making the payment, deduct tax from the gross amount payable (including sales tax, if any) at the rate specified in Division Ill of Part Ill of the First Schedule.
Section 153(9) of Income Tax Ordinance, 2001 reads as: "(i) "Prescribed person" means: .(a) the Federal Government;
(b) a company;
(c) an association of persons constituted by, or under law;
(cc) a non-profit organization;
(d) a foreign contractor or consultant;
(e) a consortium or joint venture;
(f) an exporter or an export house for the purpose of sub-sectioR (1-A);
(g) an association of persons, having turnover of fifty million rupees or above in tax year 2007 or in any subsequent tax year;
13. The bare reading of the afore-mentioned provision clearly provides a "prescribed person" to act as a "withholding agent" by deducting tax from the gross amount payable at the time of making its payments on execution of a contract, as was the case of the present petitioner-taxpayer.
However, the term "prescribed person" explained in sub-section (9) of Section 153 ("supra") refers to an AOP having a "turnover" of over fifty million rupees. The term "turnover" has not been expressly explained or defined in the said sub-section, as has been done in the Amendment introduced vide Finance Act, 2011. In circumstances, when the term "turnover" was not explained or defined in Section 153 ibid, we are to take refuge from the general definition of the said term provided in the Ordinance and if the same is not defined therein, then the common ordinary dictionary meaning would have to be considered. In the present case, the term "turnover" was then defined under sub- section (70A) of Section 2 of the Ordinance, hence would be applicable. It reads:- "turnover' means turnover as defined in subsection (3) of Section 113."
' Whereas, Section 113 of the Ordinance, relates to minimum tax payable by a taxpayer depending on the circumstances and conditions provided therein. Sub-section (3) defines "turnover" as follows:--- "(3) "turnover" means--
(a) the gross sales or gross receipts, exclusive of Sales Tax and Federal Excise duty or any trace discounts shown on invoices; or bills, derived from the sale of good, and also excluding any amount taken as deemed income and is assessed as final discharge of the tax liability for which tax is already paid or payable;
(b) the gross fees for the rendering of services for giving benefits including commissions; except covered by final discharge of x liability for which tax is separately pal or payable;
(c) the gross receipts from the execution of contracts; except covered by final discharge of tax liability for which tax is separately paid or payable; and
(d) the company's share of the amounts stated above of any association of persons of which the company is a member."
(Emphasis provided)
14. Relevant to the present tax references, is clause-c of sub-section (3) of Section 113, "ibid" as it relates to execution of contract. The reading thereof, clearly provides that all the gross receipts from the execution of contracts would come within the purview of the term "turnover" except those which were covered by final discharge paid or payable by the taxpayer.
15. In the present references, the petitioner-taxpayer carried on the business of execution of contract and had paid Minimum Tax on the entire gross receipts arising out of its contracts. Hence, no part of the gross receipt was left uncovered from charge of tax liability and which !Had not been paid by the present petitioner. In such circumstances, there existed no "turnover" of the petitioner- taxpayer to come within the mischief of a "prescribed person" envisaged under Section 153 of the Ordinance.
16. This Court is of the view that the above anomaly in the law prompted the Revenue to introduce the Amendment vide Finance Act, 2011 whereby special provisions were introduced defining "turnover" in relation to a "prescribed person" in Section 153 of the Ordinance.
17. Accordingly, for the reasons stated hereinabove, the orders of the Commissioner are maintained being in accordance with law and that of the Tribunal dated are declared to be against the law and thus both the tax references are answered in the Positive in terms of the opinion rendered, Office is directed to send a copy of the judgment under the seal of the Court to the Worthy Appellate Tribunal Inland Revenue, Peshawar Bench, Peshawar.