ORDER: MR. MUHAMMAD JAWED ZAKARIA (JUDICIAL MEMBER).--(1). By this single order, I intend to dispose the above titled appeals filed by the Department against the separate impugned order. The department has raised the common grounds of appeal for both the years which are reproduced as under:--
1. That the order of the learned Commissioner Inland Revenue (Appeals-II), Karachi is bad in law and contrary to the facts of the case.
2. That the Commissioner-IR (Appeals) was not justified to delete the minimum tax charged under section 113 on turnover for Tax Year 2011 without considering the facts that amendment in section 113 was made through Finance Act, 2010 (applicable for Tax Year 2011 onward) and individuals and AOP were also encompassed within the scope of minimum tax under section 113 of their turnover by using a previous year as Base Year i,e, 2009 and 2007 for individuals and Association of person
(AOP) with turnover of 50(M) rupees of above respectively."
2. Brief facts of the case as transpired from the record are that the taxpayer is an individual. Return of total income for both the years were filed. The case was selected for audit under section 214C of the Income Tax Ordinance, 2001 for the Tax Years 2011 and 2012 by the FBR through computer ballot held and deemed assessm ent under section 120 was amended by the ACIR under section 122(1) of the Income Tax Ordinance, 2001. During the course of scrutiny of income tax return/amended assessm ent under section 122(1) a discrepancy was found which rendered the amended assessm ent under section 122(1) erroneous in so far as prejudicial to the interest of revenue.
Therefore, a show cause notice under section 122(9) read with section 122(5A) of the Income Tax Ordinance, 2001 was issued by OIR for compliance for both the tax years. The above notice was properly served to the taxpayer. On the due date of compliance no compliance was made nor any application for adjournment was received from the taxpayer side. That the ACIR further amended assessm ent under section 122(5A) by charging turnover minimum tax under section 133 of the Income Tax Ordinance, 2001 and issued demand notices to the taxpayer for the tax years 2011 and 2012 accordingly.
3. Being aggrieved and dissatisfied with the treatment meted out by the ACIR, taxpayer filed appeal before the learned CIR(A) who vide his impugned order deleted the minimum tax charged under section 113 of the Income Tax Ordinance, 2001 by holding that:-- "The appellant being an individual declared its turnover to Rs, 41,972,028/- as evident from the impugned order passed under section 122(5A) of the Income Tax Ordinance, 2001 for the tax year under appeal, does not exceed the threshold limit of Rs, Fifty Millions. Hence, the minimum tax charged under section 113 of the Income Tax Ordinance, 2001, on the turnover below the threshold of Fifty Million is uncalled for and unwarranted. The same is hereby deleted."
4. Feeling aggrieved and dissatisfied with the impugned order passed by the learned CIR(A) now the department has come up in appeal before this Tribunal on the ground mentioned supra.
5. This court issued notice to the parties, in response thereto, Mr. Muhammad Aslam appeared on behalf of the Department as D.R. while Mr. Muhammad Ali, FCA, appeared on behalf of the taxpayer.
6. Initially, learned D.R., has argued that the order of the learned Commissioner Inland Revenue (Appeals-II), Karachi is bad in law and contrary to the facts of the case. Learned D.R. further contended that the Commissioner-IR (Appeals) was not justified to delete the minimum tax charged under section 113 on turnover for Tax Year 2011 without considering the facts that amendment in section 113 was made through Finance Act, 2010 (applicable for Tax Year 2011 onward) and individuals and AOP were also encompassed within the scope of minimum tax under section 113 of their turnover by using a previous year as Base Year i,e, 2009 and 2007 for individuals and Association of person (AOP) with turnover of 50(M). Finally, he has prayed that the impugned orders passed by the learned CIR (A) may be vacated.
7. On the other hand, learned counsel for the taxpayer strongly opposed the contentions made by the learned DR. Learned counsel has supported the order passed by the learned CIR (A). Return for the tax years 2011 and 2012 taxable income were filed within due date. He has further contended that during the audit proceedings no discrepancy was found. Learned counsel for the taxpayer further argued that the ACIR has grossly erred in invoking provision of section 122(5A) and his apprehension of the provisions of section 113 of the Income Tax Ordinance, 2001 is purely misconceived and the same is also not applicable in the case of the taxpayer where the turnover of the tax years 2011 and 2012 declared and on which minimum tax was levied which was less than required threshold of 50 millions. Learned counsel for the taxpayer further pleaded that while amending order for the tax year 2011 and 2012 has brushed aside the same on the frivolous ground based on his own assumptions conjectures and surmises, the ACIR has stated in the impugned order that the logic behind the law denoting tax year 2009 is to make 2009 as base year and since turnover of taxpayer in that self assumed base year i,e, 2009 was exceeding threshold of Rs, 50(M), than in the tax years 2011 and 2012 turn over tax is livable despite declared sales/turnover of below Rs, 50(M). The learned AR vehemently urged that this interpretation of law by the ACIR is not only illogical, baseless, self presumed but also against the clear intention of the provisions of Section 113 of the Income Tax Ordinance, 2001. Learned counsel for the taxpayer contended that the impugned order passed by the learned CIR(A) is legal, lawful and within the framework of law.
8. Both the learned representatives appearing at the bar have been heard and have carefully examined and also perused available case record. Before dilating upon the issues contested, it would be appropriate to go through Section 113 of the Income Tax Ordinance, 2001, which reads as follows:-- "113 Minimum tax on the income of certain persons.--(1) this section shall apply to resident company, individual (having turnover of fifty million rupees or above in the tax year 2009 or in any subsequent tax year) and an association of persons (having turnover of fifty million rupees or above in the tax year 2007 or in any subsequent tax year) where, for any reason whatsoever allowed under this Ordinance, including any other law or for the time being in force:-- a. Loss for the year; b. The setting off of a loss of an earlier year; c. Exemption form tax; d. The application of credits or rebates; or e. The claiming of allowances or deductions (including depreciation and amortization deduction) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than on-half per cent of the amount representing the person's turnover from all sources for that year: Provided that this subsection shall not apply in the case of a company, which has declared gross loss before set off of depreciation and other inadmissible expenses under the Ordinance. If the loss is arrived at by setting off the aforesaid or changing accounting pattern, the Commissioner may ignored such claim and proceed to compute the tax as per historical accounting pattern and provision of this Ordinance and call other provision of the Ordinance shall apply accordingly."
9. After perusal of the above quoted section and arguments of the learned counsel for the taxpayer, It is observed that the learned CIR (A) has rightly deleted the minimum tax charged under section 113 on turnover for the tax years 2011 and 2012 while going through the above provisions it is noted that section 113 of the Income Tax Ordinance, 2001 is applicable to individual having turnover of fifty millions or above in tax year 2009 or in any subsequent year. The word "or" used by the legislature means that where turn over for the year 2009 or in subsequent tax years exceeds the threshold of Rs, 50(M) only then this section would become applicable, therefore, the interpretation of the OIR "base year" i,e, tax year 2009 is preposterous. It is also observed that the taxpayer being an individual declared turnover Rs, 41,972,028/- for the tax year 2011 and tax year 2012 its turnover to Rs, 47,789,484/- as evident from the impugned order passed under section 122(5A) of the Income Tax Ordinance, 2001 for the tax years under appeal, does not exceed the threshold limit of Rs, Fifty Million. It is opined that benchmark of turnover/sales has to be considered independently for each year. This is so because turnover itself is a year-on-year phenomenon and levy for one year could not be imposed by reference to bench marking of turnover for any preceding year. The taxpayer could only remain liable to turnover in any year where the turnover for such year exceeds Rs, 50 (million). Keeping in view the above facts and circumstances of the case, I have come to the conclusion that the department has failed to establish its claim/contention and could not refute or repudiate the arguments of the learned A.R. therefore, the impugned Order passed by the learned CIR(A) is found legal, lawful and in accordance with law, hence no interference is required in it.
10.Consequently, both the appeals filed by the revenue are hereby dismissed accordingly.