CH. ANWAAR UL HAQ (JUDICIAL MEMBER).---The titled appeal pertaining to tax year 2005, has been preferred at the instance of taxpayer, arises out of order dated 11.01.2013 passed by the learned CIR(A), Lahore.
2. Relevant facts in brief are that the taxpayer in this case is a cooperative society deriving income from manufacturing of cycles and motorcycles under the brand name "SOHRAB". Assessment for the tax year, 2005 was amended under section 122(5A) of the Income Tax Ordinance, 2001 wherein minimum tax under section 113 was imposed for the reason that during the year loss was determined. Subsequently, the taxpayer preferred an application under section 221 of the Ordinance on the ground that the taxpayer being a cooperative society, minimum tax under section 113 is not leviable in the case. However, the said application was rejected by the assessing officer. The rejection of application under section 221 was assailed by the taxpayer before the learned CIR(A) who vide impugned order rejected the appeal of the taxpayer after observing that section 113 is applicable in the case of resident company and the definition of company as contained in section 80(2)(b) includes cooperative society. Hence this appeal.
3. The learned AR on behalf of the taxpayer assailed the orders of the authorities below as contrary to law and facts of the case. It is asserted by the learned AR that assessing authority was not justified to reject the application for rectification under section 221 filed by the taxpayer which action was later on illegally confirmed by the learned CIR(A). It is contended by the AR that the taxpayer being a cooperative society is not liable to pay minimum tax in terms of section 113 of the Income Tax Ordinance, 2001. It is further asserted by the learned AR that the rate of tax applicable to a company or an individual which ever is beneficial will be applicable in the case of instant society as minimum tax under section 113 is not applicable on individuals, therefore, the taxpayer is not required to pay tax under section 113 ibid. To support his arguments, the learned AR relied upon the judgment of the Hon'ble Supreme Court of Pakistan reported as 2009 PTD 799. It is asserted by the learned AR that by following the said judgment of the apex Court, this Tribunal in the case of a taxpayer titled as CIT. v. Messrs Idara-eKissan, Lahore, decided vide order dated 10.02.2010, recorded in I.T.As. Nos. 1319 to 1321/LB/2009, has, inter alia, held that minimum tax under section 113 is not leviable in the case of a society. On the contrary, the learned DR supported the orders passed by the authorities below and contended that the taxpayer has rightly been charged minimum tax under section 113 as the taxpayer falls in the definition of "company" as contained in section 80(2)
(b) of the Income Tax Ordinance, 2001.
4. We have heard the arguments put-forth by the learned representatives of both the sides and have carefully gone through the available record and carefully perused the case law cited by the learned AR at the bar. After due consideration, we find that no exception can be taken to the treatment as accorded by the learned CIR(A) which is found to be fair and reasonable and also consistent with the statutory stipulation obtaining in law. The sole issue involved in the case that whether the Cooperative Society, such as the present taxpayer, falls in the definition of company or not? The law in this behalf is very much clear. Here, we deem it appropriate to reproduce the comparison of definition of "company" as defined in subsection (16) of section 2 of the repealed Income Tax Ordinance, 1979 and in Income Tax Ordinance, 2001, as under:-- 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 Modaraba Companies and Modaraba (Flotation and Control) Ordinance, 1980 (XXXI of 1980);
(d) the Government of a Province;
(e) 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 assessment year or years (whether commencing before, on or after the first day of July, 1979) as may be specified in the said order;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 society established or constituted by or under, any law for the time being in force.
From the bare reading of the above provision of law, it is crystal clear that the "Cooperative Society" is specifically included in the definition of "Company", hence, the same is liable to pay minimum tax as contained in section 113 of the Income Tax Ordinance,2001.
5. Hon'ble Supreme Court of Pakistan in the case re: CIR v. M,essrs Lahore Cantt. Cooperative Housing Society and 7 others, reported as 2009 PTD 799 (Civil Appeals Nos.1477 to 1482 dated 07.11.2008), 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 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."
6. 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 by 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-H, 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 co-operative 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".
7. As regards taxpayer's reliance on the decision of this Tribunal supra 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 reads as under:-- "The only issued 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 (XL VII 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 contry 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 1482 dated 07.11.08. 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."
In the said decision of the Tribunal while deciding appeal/s pertaining to the issue of definition of the "Company" under the Income Tax Ordinance, 2001, the Division Bench 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" under the repealed Income Tax Ordinance, 1979. Hence, the same is an order "per incurium".
8. In view of the above observation made by us, case law relied upon and clear cut statutory stipulation obtaining in law, we are inclined to maintain the order passed by the learned CIR (A) which is hereby maintained.
9. Appeal of the taxpayer being filed without any merit or substance is hereby rejected.