SHAHID, PERVEZ MEMON, JUDICIAL MEMBER.---The instant appeal has been filed by the Taxpayer/appellant assailing the order dated 08.06.2016 passed by the learned CIR (Appeals-III), on the following grounds:--
(i) The Commissioner (Appeals) has erred in confirming the exparte order passed under section 4B(4) on April 4, 2016 by the Taxation Officer in haste against the show-cause notice dated March 16, 2016 rejecting appellant's request for keeping the proceedings in abeyance till the decision of the matter by the High Court in Constitutional Petition filed.
(ii) The Commissioner (Appeals) has patently erred in confirming the action of the. Taxation Officer invoking provisions of section 4B of the Ordinance) when any income of the appellant being a Collective Investment Scheme is exempt from tax under clause (99) of Part I of the Second Schedule.
(iii) The Commissioner (Appeals) has erred in not appreciating that exemption from "tax" available to the appellant also covers "supper tax" imposed under Chapter-II of the Ordinance, in view of the definition of term "tax" given in section 2(63) of the Ordinance.
(iv) The Commissioner (Appeals) has erred in holding that Super Tax is chargeable on the appellant in absence of a specific clause in Part IV, of the Second Schedule granting exemption from application of the provisions of section 4B of the Ordinance.
(v) The Commissioner (Appeals) has erred in relying on the judgments of the High Court in case of levy of internally Displaced Person Tax (IDPT) reported as 2010 and surcharge under section 4A for the flood victims in case of ICI Pakistan in C.P. No, 1488 of 2011 whilst maintaining levy of Super Tax on the appellant. It is submitted that these judgment relate to constitution validity of levying "tax on tax payable" and do not deal with the question of applicability of exemption from tax available under the Ordinance.
(vi)The Commissioner (Appeals) has also erred in observing that super tax has been paid voluntarily in at least three cases of Collective Investment Schemes (CIS) it is submitted that the aforesaid three taxpayers named in the appellant order are not CIS but "Foreign Institutional investors" having no exemption from tax under the Ordinance.
2. The background of the case is that the taxpayer/ appellant is a Public Limited Mutual Fund (collective investment schemes) and listed on Pakistan Stock Exchange. The return of total income for tax year 2015 was e-filed on iris e-portal. The taxpayer / appellant were liable to pay Super tax under section 4B of the Income Tax Ordinance, 2001. However, since the same was not paid, a show-cause notice was issued to the taxpayer/appellant by the officer under section 4B(4) of the Income Tak Ordinance, 2001. The taxpayer/appellant sought extension in time of 15 days were granted. On the next date no compliance was made neither adjournment, despite the fact that it was specifically conveyed to the appellant that no more extension shall be granted and therefore, compliance be ensured in due date.
3. Learned AR of the taxpayer argued that the appellant is exempted from tax under clause (99) of Part-I, 2nd schedule to the Income Tax Ordinance, 2001, therefore, super tax cannot be charged on such income and this is the only dispute between appellant and department. The definition of tax has been given in section 2(63) of the Ordinance and since super tax has been levied under Chapter-II of the Ordinance therefore, it: falls within the terms tax as defined under section 2(63) of the Ordinance. Levy of super tax on the appellant is patently erroneously and against the scheme of law. He prayed that the order passed by both below forum may be vacated!
4. Learned DR for the, department contends that section .4-B is special charging section meant for collection of funds for specific purpose of rehabilitation of temporary displaced persons the same is made applicable on all kinds of income above 500 million and the appellant has no exemption from specific provision under Part-IV of the 2nd Schedule to the Ordinance. Three cases of collective investment schemes under charge of same officer has vpluntarily paid super tax under section 4-B along with return. The order has been rightly passed therefore, appeal may be dismissed.
5. After hearing we have perused the material available on record which shows that 7 grounds have been taken in the appeal and all grounds are interconnected to each other. The gist of all the grounds is that whether super tax under section 4-B is leviable in presence of a specific exemption from tax, on any income derived by the appellant.
6. Term Tax defined in section 2 subsection (63) of the Ordinance. "Tax" mains any tax imposed order Chapter-II, and includes any penalty, fee or other charge or any sum or, amount leviable or payable under this Ordinance."
7. Super Tax has not been defined in the Income Tax Ordinance, IA 2001, however, in the Chambers Dictionary meaning of super tax has been provided which means "an extra or additional tax on large incomes (terms not in official use)"
8. In the Black's Law Dictionary meaning of various kinds of tax has been provided but there is no meaning of super tax therein. Meaning of additional tax has been provided in stopgap tax. A tax, usu. Temporary, levied during the term of a budget to cover an unexpected deficit- Also termed additional tax.
9. Before discussion on the issue in hand, it will be appropriate to reproduce FBR Circular No,2 of 2015 dated 24-07-2015 as under:-- Subject: FINANCE ACT, 2015--EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001.
Important amendments made in the Income Tax Ordinance, 2001 through Finance Act, 2015, are explained as under:--
1. Super Tax for Rehabilitation of Temporarily Displaced Person. [sections 2(28A) and 4B Fourth, Fifth Seventh and Eighth Schedule] Through Finance Act, 2015 a new section 4B has been introduced in the Ordinance, according to which super tax has been imposed for tax year 2015 on the income of individuals, association of persons and companies who are earning income of Rs, 500 million or above in tax year 2015. For banking companies super tax has been imposed irrespective of the quantum of income. Super tax shall be charged at the rate of 4% for banking companies and at a rate of 3% for person other than banking companies.
For the purpose of Super Tax, Income of the person has specifically been defined which includes all sources of income and shall be the sum total of the following; '
(i) Income from profit on debt, dividend, capital gains, brokerage and commission;
(ii) Taxable income under section 9 of this Ordinance which shall be the income of a person under all heads of income i,e, income under the head salary, income from property, income for business income from capital gains and income from other sources for the year if not included in clause (i)
(iii) Imputable income as defined in clause (28A) of section 2 which in relation to amount subject to final tax means income which results in the same tax if the said amount is not subjected to final tax excluding the amount specified in clause (1); and
(iv) Income computed under special procedure for computation of profits and gains of insurance business under Fourth Schedule, computation of profits and gains of a banking company and the Seventh Schedule and computation of capital gains on listed securities under Eight Schedule.
It may be pointed out that under section 4, tax is levied on taxable income only, whereas super tax is levied not only on taxable income but includes other amounts as referred above. Therefore, taxable income for the purpose of section ,4 and income for the purpose of section 4B are not the same. Moreover, super tax is a onetime levy on income as defined in. section 4B for tax year 2015.
Since super tax is payable for tax year 2015 only on the specified income, the concept of carry forward of any loss to succeeding tax year or brought forward of any loss of pervious tax year is not applicable because income or loss can neither be calculated for previous tax year nor for subsequent tax year for the purpose of section 4B. Therefore, for calculating the super tax, carry forward business losses shall not be set off against the income as defined in section 4B".
10. For the sake of convenience the definition, of tax, super tax, sections 4-B, 9 and 10 of the Income Tax Ordinance, 2001 is reproduced as under:-- "4-B Super tax for rehabilitation for temporarily displaced person.---(1) A super lax shall be imposed for rehabilitation for temporarily displaced persons, for tax year 2015, at the rates specified in Division HA of Part I of the First Schedule, on income of every person specified in Division 11A of Part-I of the First Schedule, on income of every person specified in the said Division.
(2) For the purpose of this section "income" shall be the sum of the following:--
(i) profit on debt, dividend, capital gains, brokerage and commission, clause (i)
(ii) taxable income under section (9) of this Ordinance, if not included in clause (i).
(iii)imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i)' and (iv ) income computed under Fourth, Fifth Seventh and Eighth Schedules.
(3) The super tax payable, under subsection (1) shall be paid, collected and deposited on the date and order in the manner as specified subsection (1) of section 137 and all provision of Chapter X of the Ordinance shall apply.
(4) Where the super tax is not paid by a. person liable to pay it, the Commissioner shall by an order in writing determine the super tax payable, and shall serve upon the person, a notice of demand specifying the super tax payable and within the time specified under section 137 of the Ordinance.
(5) Where the super tax is not paid by a person liable to pay it, the Commissioner shall recover the super tax payable under sub-section (1) and the provisions of Part IV, X, XI and XII of Chapter X and Part-I of Chapter XI of the Ordinance, shall, so far as may be apply to the collection of super tax as these apply to the collection of tax under the Ordinance.
(6) The Board may, by notification in the official Gazette, make rules for carrying out the purpose of this section. "Division IIA Rates of Super Tax Person Rates of Super tax Banking Company 4% of the Income Person, other than a banking company having income equal to or exceeding Rs. Million3% of the income"
"Section 9 of the Ordinance provides:-- Taxable income---The taxable income of a person for a tax year shall be the total income [under clause (a) of section 101 of the person for the year reduced (but not below zero) by the total of any deducible allowances under Part IX of this. Chapter of the person for the year.
"Section 10 of the Income Tax Ordinance provides:-- Total Income---The total income of a person for a tax year shall be the sum of the
(a) person's income under all heads of income for the year; and
(b) person's income exempt from tax under any of the provisions of this Ordinance.]
11. The Income or class of income, or person or class of persons specified in the 2nd schedule shall be exempted from tax under section 53(A) to the Income Tax Ordinance, 2001 subject to conditions and to the extent specified therein. Section 4-B is charging provision which seeks to levy super tax on income of individual and Associations B of persons and Companies for tax year 2015. The Income for levy of super tax has been enumerated in the section 9 of the Ordinance. There is no dispute between appellant and department regarding exemption available to the appellant under clause (99) of Part-I of the 2nd Schedule.
12. For application of section 4-B of Income Tax Ordinance, 2001 we should have to seek the taxable income as defined in the ibid provision and we will not touch the taxable income as defined in the section 2(64) of the Income Tax Ordinance. Clause-II of subsection (2) of section 4-B provides the taxable income under section 9 of the Ordinance, if not included in clause-1. When we paid a look on section 9, it indicates that a taxable income of person for a tax year shall be the total income under clause (a) of section 10. Section 10(b) relating to the person income exempted from tax under any provision this Ordinance, is not added in section 4-B to the Income Tax Ordinance 2001 meaning thereby section 4-B viz super tax will not be applicable on the persons income exempted from tax under any of the provision of this Ordinance.
13.For the forgoing reasons, we are of the considered view that order passed by the learned CIR(A) and ACIR are not in accordance with law, hence same are vacated and demand created is hereby deleted. Resultantly, appeal in hand is allowed.