TARIQ SALEEM SHEIKH, J. --- Through this reference application under Section 133(1) of the Income Tax Ordinance, 2001 (the " Ordinance"), the Department has urged that the following question of law has arisen out of order dated 23.03.2010 passed by the learned Appellate Tribunal Inland Revenue (the "Tribunal") in ITA No. 990/IB/2009 pertaining to the Tax Year-2007 which requires determination by this Court:--- Whether on the facts and in the circumstances of the case, the learned Tribunal was justified to hold that the tax collected under sub-section (2) of Section 233 of the Income Tax Ordinance, 2001 is not a final tax without taking cognizance of the fact that tax on any payment on account of Brokerage and Commission is deductible under sub-section (1) of the said section and sub-section
(2) is meant to elaborate a certain mode of payment of such Brokerage and Commission?
2. Brief facts of the case are that the Respondent is an individual who derived his income in the Tax Year-2007 as a dealer of M/s. Maple Leaf Cement Factory Limited ("MLCFL"). He filed his income tax return declaring net income at Rs. 425,000/-. He received Rs. 2,171,760/- from MLCFL on account of "commission on local sales of cement" on which tax in the sum of Rs. 217,176/- was deducted under Section 233 of the Ordinance. The return filed by the Respondent was deemed as an assessment under Section 120 of the Ordinance. However, on the subsequent scrutiny of the return, the Assessing Officer noted that the Respondent being an agent of MLCFL was not obliged to file return.
It should have rather filed statement under Section 115(4) of the Ordinance. The return so filed was not valid under the law and the assessment finalized under Section 120 was found to be erroneous insofar as the same was prejudicial to the interest of revenue. It was, therefore, amended under Section 122(5A) vide order dated 31.5.2008. The Respondent preferred an appeal before the CIR (Appeals) which was dismissed vide order dated 31.01.2009. The Respondent then filed second appeal before the Tribunal which was accepted vide order dated 22.03.2010. It held that the deduction in the present case was not full and final discharge of liability. As such, the Respondent was entitled to normal assessm ent and was to be treated according to law and rules applicable to the normal assessm ent. The Department has now come up in reference before this Court.
3. Since the controversy in this case revolves around Section 233 of the Ordinance, the same is reproduced hereunder for ready reference: "233. Brokerage and commission.-- (1) Where any payment on account of brokerage or commission is made by the Federal Government, a Provincial Government, a local authority, a company or an association of persons constituted by, or under any law (hereinafter called the "principal") to a person (hereinafter called the "agent"), the principal shall deduct advance tax at the rate specified in Part IV of the First Schedule from such payment".
4. A bare reading of Section 233 shows that sub-section (1) is the charging provision for tax on brokerage and commission. It ordains that the principal shall deduct advance tax at the rate specified in Part-IV of the First Schedule while making such payments. Sub-section (2) is not charging provision. It rather caters for a particular situation d is clarifactory in nature. It states that if the agent retains commission or brokerage from any amount remitted by him to e principal, it would be deemed that the principal had paid m the brokerage and commission and the principal would be lined to collect advance tax from the agent. It is noteworthy at even in such eventuality the tax would collected at the specified in Part-IV of the First Schedule as stipulated in b-section (1) of Section 233 which is 10% of the amount of payment. The said tax is covered under the presumptive tax grime in terms of sub-section (3) of Section 233.
5. The Tribunal has argued that commission is of o types: one is covered under Section 233(1) while the their falls within the ambit of Section 233(2) and the tax coIlected under the former is a final tax while under the latter adjustable. This argument is fallacious. This interpretation contrary to the language of the statute which is ambiguous. Division-II of Part IV of the Fire Schedule does of stipulate separate rate of tax under Section 33(11 and 33(2). Rather, it specifies one single rate of tax under section 233(1). Likewise, Section 168(3) provides that no tax resit shall be allowed for any tax collected or deducted that is final tax under Section 233. If sub-sections (1) and (2) of section 233 envisioned two distinct eventualities, the same would also have been reflected in Section 168(3).
6. The finding of the learned Assessing Officer and e CIR (Appeals) that the Respondent's Assessm ent under section 120 was liable to be amended under Section 122(5A) being erroneous and prejudicial to the interest of revenue is based on correct interpretation of law.
7. For the above reasons, we answer the proposed question in the negative, i.e. in favour of the Petitioner Department. Accordingly, this application is accepted.
8. Office shall send a copy of this judgment under the seal of the Court to the learned Tribunal in terms of Section 133(5) of the Ordinance.