MUHAMMAD RAZA BAQIR, (ACCOUNTANT MEMBER).--This order shall dispose of the titled appeal filed by the taxpayer against the impugned order dated 01.04.2015 passed by the learned Commissioner Inland Revenue (Appeals), Faisalabad for the Tax Year 2011 on the following grounds:-
1. That the learned CIR(A), RTO, Faisalabad was not justified to upheld the amendment made under sections 122(5A) and 122(9) of the Income Tax Ordinance, 2001 by learned Addl. Commissioner IR Audit-01, Zone-II, RTO, Faisalabad to charge the turnover tax under section 113 of the Income Tax Ordinance, 2001 @1 % inspite of charging of turnover tax at reduce rate @0.20% by allowing the relief of 80% to treat a fast moving consumer goods as per clause 8 of 2nd Schedule Part III to the Income Tax Ordinance, 2001.
2. That the learned CIR(A), RTO, Faisalabad was not justified to upheld the amendment of the work back the transportation service charges at Rs.26,106,600/- by calculation of deducted tax @2% Rs.522,132/- on service provider on behalf of principal company or/on the basis of hire transportation service provider.
That the learned Addl. Commissioner IR Audit-01, Zone-II, RTO, Faisalabad was not justified to add total transportation service receipts in total income inspite of allowing the cost of fare paid to truck/vehicle owners.
2. Facts briefly stated are that the taxpayer is a dealer of petroleum products. During the tax year under appeal, the taxpayer rendered transport services amounting to Rs.26,106,600/- against which withholding tax under section 153(1)(b) of the Income Tax Ordinance, 2001 (hereinafter called "the Ordinance") was deducted @ 2% amounting to Rs.522,132/-. After scrutiny of the record by the Additional Commissioner it was found that minimum tax under section 113 of the Ordinance was not paid which rendered the assessme nt erroneous as well as prejudicial to the interest of revenue.
On the basis, show-cause notice was issued and reply thereto contending that the taxpayer is an oil dealer and petroleum products fell within the category of "Fast Moving Consumers Goods" whereupon minimum tax under section 1'13 of the Ordinance 0.20% as per Clause (8) Part-III, Second Schedule to the Ordinance. Having accepted the contention, the deemed assessment was rectified under section 221 of the Ordinance charging minimum tax @0.20%. Again scrutinizing the record by succeeding Addl. Commissioner, it was observed that the petroleum products were not fallen under "Fast Moving Consumers Goods" and also not covered under clause (8), Part-III, Schedule-II to the Ordinance. Therefore, he charged minimum tax @1 %. Again taxpayer was informed by way of issuance of show-cause notice for amendment under section 122(5A) of the Ordinance. In response to the show-cause notice, reply was submitted by the taxpayer which was considered and found it unconvincing and amendment assessment under section 122(5A) was finalized by the adjudicating authority.
3. Being aggrieved with the treatment given by the Additional Commissioner, the taxpayer filed appeal before learned CIR(A) who decided the case vide order No.7308 dated 01.04.2015. Being dissatisfied with the treatment meted out by the first appellate authority, the taxpayer preferred appeal before this forum
4. The case was heard today on 15.06.2015. During the course of hearing the learned AR reiterated the contentions already made in the written grounds of appeal. Learned DR opposed the appeal on the ground that the points raised by the AR have already been elaborately discussed by the first appellate authority and the learned AR has not been able to rebut the observations/findings of CIR (Appeals).
5. We have gone the facts of the case and carefully considered the contentions of both the rival parties at bar. The main issue involved in this case is regarding the date of application of S.R.O.
57(1)/2012 dated 24.01.2012. The learned AR contends that the said notification has retrospective application whereas the department is of the opinion that the said notification is to be applied prospectively from the tax year 2012 and not from the tax year 2011 to which the subject case relates. Copy of the notification has- also been perused. The said notification does not contain any specific provision extending its application with retrospective effect. It is a general principle of law that all notifications take effect from the date of issuance unless specified otherwise in any notification. Following the same ratio S.R.O. 575(1)/2012 dated 24.01.2012 is applicable only from the date of its issuance and it cannot be applied retrospectively.
6. In view of the foregoing, we are of the considered view that the learned first appellate authority has rightly upheld the order of Additional Commissioner and discussed all aspects of the case in detail. The appellant/Taxpayer has failed to point out any legal or factual infirmity in the appellate order and has not put forth any legal citation or evidence to rebut the observations and findings of the learned Commissioner (Appeals). We, therefore, find no infirmity in the order of the learned Commissioner (Appeals) which is maintained and upheld. Accordingly the appeal under reference is dismissed.
Sd/- (MUHAMMAD RAZA BAQIR)
ACCOUNTANT MEMBER (CH. SHAHID IQBAL DHILLON)
JUDICIAL MEMBER
7. CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).---After having gone through the proposed order of my learned brother, the Accountant Member, I do not find myself in agreement with the findings arrived at by him. In my opinion the contentions raised during the course of hearing have not been appreciated in its true perspective and the appeal merits acceptance. It may also be pertinent to mention that the taxpayer has challenged the impugned order on two grounds which are duly incorporated in the opening paragraph of the order of my learned brother. However, unfortunately, the learned Accountant Member, might has lost sight and did not adjudicate the ground relating to transportation service charges. My findings on both the issues are as under:- Turnover tax under section 113:
8. The contention of the taxpayer in this regard is that he is a dealer of petroleum products which falls under the category of Fast Moving Consumers Goods, therefore, as per clause (8) Part-III Second Schedule to the Ordinance he is entitled to 80% rebate in the minimum tax in accordance with S.R.O. 575(1)/2012 dated 24.01.2012. On the contrary, the stance of the department is that the said SRO dated 24.01.2012 is to be applied prospectively from tax year 2012. The learned Accountant Member upheld the treatment accorded by the Taxation Officer and at page 3 in para 5 held as under: ".....The learned AR contends that the said notification has retrospective application whereas the department is of the opinion that the said notification is to be applied prospectively from the tax year 2012 and not from the tax year 2011 to which the subject case relates. Copy of the notification has also been perused. The said notification does not contain any specific provision extending its application with retrospective effect. It is a general principle of law that all notifications take effect from the date of issuance unless specified otherwise in any notification. Following the same ration S.R.O. 575(1)/2012 dated 24.01.2012 is applicable only from the date of its issuance and its cannot be applied retrospectively." (underlined for emphasis).
9. I have carefully gone through the above findings and observed that the same are self contradictory. On one hand it is held that S.R.O. 575(1)/2012 is applicable only from the date of its issuance but on the Other ignored the date of order on which it has been passed. In the instant case the order was passed on 22.01.2015 and the SRO in question was issued on 24.01.2012, therefore, even according to the above quoted findings, the taxpayer is entitled to 80% rebate in the minimum tax. I may further add that the Tribunal has already allowed such benefit in a number of cases for the tax year 2011 and reference in this regard can be made to I.T.As. Nos.1203 to 1205/LB/2014 dated 10.06.2014. Moreover, the Apex Court of the country in its reported judgment 2005 SCM R 492 has already laid down a principle of law that the executive orders or notifications, which confer right and are beneficial, would be given retrospective effect and those adversely affect or invade upon vested right cannot be applied with retrospective effect. Keeping, this position in view. I am of the considered opinion that the findings of the learned Accountant Member on this issue are not correct appreciation of law and the taxpayer is entitled to the benefit of 80% rebate in the minimum tax as provided in Clause (8) Part-III Second Schedule to the Ordinance.
Transportation service charges:
10. The learned AR stated that the taxpayer is an oil dealer and he had to provide transport services to its principal company PARCO for which he has incurred heavy expenses which resulted into 'Nil' income. He further stated that the appellant is not the owner of carriage vehicles and as a dealer is bound to bring the product from PARCO Depot to the purchase premises i.e Petrol Pumps. The tax was deducted on the carriage receipts by the principal whereas the dealer (taxpayer) has no income over and above from the payments made to vehicles owners.
Further contended that the Taxation Officer has erred in law to add the flood surcharge @ 15% in the total tax under section 5A of the Ordinance while working back the carriage receipts. He submitted that a similar contention of the taxpayer has already been accepted by the department in the tax year 2013 whereby only inadmissible expenses have been added to the declared income.
In support of his contention the learned AR has produced copies of assessment order as well as the order of CIR(A). Thus the addition of total worked back transportation service charges is neither in accordance with law nor the succeeding or preceding history of the case.
11. I have given due consideration to the averments advanced by the learned AR on the issue and feel convinced that the addition under this head was made without bringing any justifiable reason on record. Admittedly the taxpayer had to provide transport services for carriage of petroleum products to its principal and in that connection had to obtain vehicle on rent and for which had to incur expenses, hence, the addition of total receipts is not justified particularly when the department itself has allowed reasonable expenses in the tax year 2013. Therefore, in the facts and circumstances of the case I feel it appropriate to remand the case to the Taxation Officer on this issue for passing the order afresh after providing reasonable opportunity of hearing to the taxpayer keeping in view the treatment accorded in the tax year 2013.
Sd/- (CH. SHAHID IQBAL DHILLON)
JUDICIAL MEMBER
12. Since a difference of opinion has arisen the case is forwarded to the Hon' able Chairperson for nomination of the third Member to resolve the following questions: i. "Whether in the facts and circumstances of the case the benefit of S.R.O. 575(1)/2012 dated 24.01.2012 can be extended for the tax year 2012 when the amended order has been passed on much latet date i.e. 22.01.2015 ? ii. Whether in the facts and circumstances of the case the application of above SRO is retrospective when it is beneficial to the taxpayer in the light of judgment of the Hon' able Supreme Court of Pakistan cited as 2005 SCM R 492.
Sd/- (CH. SHAHID IQBAL DHILLON)
JUDICIAL MEMBER (MUHAMMAD RAZA BAQIR)
ACCOUNTANT MEMBER
13. MUHAMMAD RAZA BAQIR (ACCOUNTANT MEMBER).---I beg to differ with the opinion expressed in the preceding paragraphs by my learned brother Judicial Member. It is an established law that all the enactments and notifications come into operation with effect from the date of issuance of the notifications/enactments or from the date as specified in the said notifications. Section 5 of the General Clauses Act, 1897 specifically provides that all enactments and notifications shall come into operation on the day it receives the assent. Section 53(2) of the Income Tax Ordinance, 2001 also provides that all notifications shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued.
Section 5 of the Sales Tax Act, 1990 lay down that if there is a change in the rate, tax shall be charged at such rate as is in force at the time of supply and in case of imported goods at the rate as is in force on the date on which a Goods Declaration is filed. Section 10 of the Federal Excise Act, 2005 incorporates identical provisions by specifically mentioning that the value and rate of duty applicable to any goods or services shall be the value and rate of duty on the date on which goods are supplied or the services are rendered. In case of goods imported or exported sections 79 and 104 of the Customs Act, 1969 provide that the value and rate of duty shall be charged as is in force on the date when the Goods Declaration Is filed before the Customs authorities.
14. The perusal of afore cited provisions of law vividly shows that in all tax statutes of the contrary it has been unambiguously specified that the duty or tax shall be charged at the rates as are applicable particular point in time and not retrospectively. These legislative provisions have already stood the test of judicial scru tiny before the superior courts of the country. I, therefore, feel that this issue does not involve any further clarification or explanation.
15. As regards the judgment of the honourable Supreme Court as referred to at para 9/ante, the same is distinguishable as the said judgment does not relate to taxes and the public money. In the light of the said judgment it cannot be distinguished that the notifications involving administrative instructions or procedural matter, if beneficial to the general public can be applied retrospectively.
However, notifications and enactments involving public money cannot be extended retrospectively even if these are beneficial to the taxpayer. Such retrospective application is fraught with risk to the revenue and may play havoc with the public money. Besides, it may create a chaos as up to what period notifications can be extended in the past. Added to this if this principle of retrospective application is accepted, salary increase announced by the Government at the time of budget or reduction of duties and taxes at import or local stage may be demanded retrospectively causing incessant bleeding of public money.
16. In view of foregoing, the undersigned does not endorse the opinion of the learned Judicial Member and the questions framed by him.
Sd/- (MUHAMMAD RAZA BAQIR) ACCOUNTANT MEMBER (CH. SHAHID IQBAL DHILLON)
JUDICIAL MEMBER CH. SHAHID IQBAL DHILLON, (JUDICIAL MEMBER).---I have already given my findings in the Dissenting Note which are duly based on the judgment of the Honourable Supreme Court of Pakistan cited as 2005 SCM R 492. In my humble opinion the ratio decided in the aforesaid case has binding force and in fact we have followed the same in a numerous cases out of which one is referred as I.T.As. Nos.1203 to 1205/LB/2014 dated 10.06.2014, therefore, no further dilation is required.
However, the case is referred to the Honourable Chairperson for nomination of the Referee Member to resolve the above proposed questions.
Sd/- (CH. SHAHID IQBAL DHILLON)
JUDICIAL MEMBER Tahir Javaid, ITP for Appellant.
Rehan Safdar, DR for Respondent.
Date of Hearing: 2nd. October, 2015 Date of order: 2nd October, 2015.
17. NAZIR AHMAD (JUDICIAL MEMBER).---The matter has been referred to me by the Honourable Chairperson, to decide the difference of opinion, which has been arisen between the learned Members of the Division Bench while deciding the above titled appeal. I have heard the arguments of the representatives of both the parties and have also perused the above referred views of my both learned brothers, impugned order of learned CIR (Appeals), assessment order, case laws and other relevant record of the case. The following question is referred for decision:-
(i) Whether in the facts and circumstances of the case the benefit of S.R.O. 57(1)/2012 dated 24.01.2012 can be extended for the tax year 2012 when the amended order has been passed on much later date i.e. 22.01.2015?
(It seems that due to typographical mistake the tax year is wrongly mentioned 2012, as the tax year under consideration is 2011.)
(ii) Whether in the facts and circumstances of the case the application of above SRO is retrospective when it is beneficial to the taxpayer in the light of judgment of the Hon'ble Supreme Court of Pakistan cited as 2005 SCM R 492.
18. As is evident from the grounds of appeal given on the first page of draft order authored by my learned brother Accountant Member that two grounds were raised in the memo. of appeal but only the first ground regarding imposition of turnover tax under section 113 has been adjudicated by the learned Accountant Member whereas the second ground of appeal remained un-adjudicated. On his turn, the learned Judicial Member besides differing by putting a dissenting note on the issue of imposition of turnover tax under section 113 has also adjudicated the second ground of appeal regarding transportation service charges raised as per memo. of appeal. Whereas learned Accountant Member although has replied the first issue when the matter came for countersignature to him but refrained to give his opinion on the second issue of transportation charges meaning thereby that there is no dispute regarding the transportation charges as decided by learned Judicial Member in his draft order.
19. Keeping in view the above, I will also restrict myself to the questions formulated on the issue of turnover tax under section 113. I have gone through the divergent views of my learned brothers and noted that precisely the issue revolves around the claim of the taxpayer, which is two fold. Firstly, being a dealer of petroleum products he is entitled to claim 80% relief by treating the petroleum product as fast moving consumer goods (FMCG) as per clause 8 of Part-III of the Second Schedule to the Ordinance and secondly, the amendment brought in the said clause through S.R.O.
57(1)/2012 dated 24.01.2012 vide which the petroleum agents and distributors registered under the Sales Tax Act, are entitled to claim 80% rebate on turnover tax and being remedial and curative in nature, the said SRO is retrospective in its applicability for the period under consideration i.e. tax year 2011.
20. To ascertain the above said legal controversy, it will be beneficial to go through the provisions available on the statute book at the relevant time, as well as SRO 57, which read as under:- Clause "(8) For the distributors of pharmaceutical products, fertilizers, consumer goods, including fast moving consumer goods, the rate of minimum tax on the amount representing their annual turnover under section 113 shall be reduced by eighty percent."
S.R.O. 57(1)/2012 dated 24.01.2012 is also reproduced hereunder:-- "In exercise of the powers conferred by subsection (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the said Ordinance, namely:-- In the aforesaid Schedule,-
(a) in Part III, after clause (11), the following new clauses shall be added, namely,-
(13) For the petroleum agents and distributors who are registered under the Sales Tax Act, 1990 and rice mills and dealers, the rate of minimum tax under section 113 on the amount representing their annual turnover under section 113 shall be reduced by eighty per cent.
21. The, bare perusal of the clause 8 of Part-III of Second Schedule to the Ordinance reproduced above follows that the concession of 80% on turnover tax is applicable to the distributors dealing in FMCG whereas in the instant case from the record it is not established that the taxpayer/appellant is a distributor of petroleum product rather he is a dealer of petroleum product, therefore, the above proviso, in my considered opinion, can only be extended to distributor. As far as the S.R.O.
57(1)/2012 dated 24.01.2012 is concerned, there is no doubt that the Government by issuing the said SRO has extended the concessional rate to the persons dealing in petroleum product feeling the harshness but the question is that whether this SRO can be extended to the past years or not. To find the reply to this question we have to go through section 53(2) of the Ordinance, which for the sake of brevity is reproduced hereunder:--
53. Exemptions and tax concessions in the Second Schedule.--
(1) ....................
(2) The Federal Government may, from time to time [, pursuant to the approval of the Economic Coordination Committee of Cabinet, whenever circumstances exist to take immediate action for the purposes of national security, natural disaster, national food security in emergency situations, protection of national economic' interests in situations arising out of abnormal fluctuation in international commodity prices, removal of anomalies in taxes, development of backward areas and implementation of bilateral and multilateral agreements], by notification in the official Gazette, make such amendment in the Second Schedule by--
(a) adding any clause or condition therein;
(b) omitting any clause or condition therein; or
(c) making any change in any clause or condition therein, as the Government may think fit, and all such amendments shall have effect in respect of any tax year beginning on any date before or after the commencement of the financial year in which the notification is issued."
22. The language of the above provision is self-explanatory, it simply envisages that effect of any amendment brought by the Federal Government from time to time in second schedule shall be effective for a tax year in the beginning or after the commencement of the financial year in which the said notification is issued by the Government.
23. I also laid my hands on a recent judgment of Honourable Lahore High Court reported as T.R.
No.51 of 2011 recorded in the case titled as CIR, Zone-II, RTO, Multan v. Mrs. Ambreen Fawad Company, Pak Arab Fertilizers Ltd., Multan, in which on the similar issue of giving retrospective effect to the insertion made in 2nd schedule, his lordship has in a very clear terms held as under:-- "The legal position that emerges is that generally beneficial legislation is to be given liberal interpretation, however for the said legislation to have a retrospective effect, the beneficial legislation must carry curative or remedial content. Such legislation must, therefore, either clarify an ambiguity or an omission in the existing law and must therefore be explanatory or clarificatory in nature. While beneficial legislation is to be liberally interpreted, in order to advance the beneficent object of the statute, it in no manner means that "beneficial legislation" or "liberal interpretation" necessarily includes or interchangeably means retrospective application of the statute. Unless the legislation is remedial, curative, explanatory or clarificatory, it cannot be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature. Reliance with advantage is placed on "Commissioner of Income Tax v. Shahnawaz Ltd. and others" (1993 SCM R 73) and "State Bank of Pakistan v. Messrs Faisal Spinning Mills Limited" (1997 SCM R 1244).
In the present case there was no ambiguity or anomaly existing in the law, as it stood prior to Finance Act, 2010. Section 5 of the Ordinance was and is the charging section for the imposition of tax on dividends. Clause 103B of Part-I of the Second Schedule to the Ordinance simply introduced a conditional exemption in the year 2010 which does not remedy or cure any ambiguity or omission in the law. On the contrary it provides an exemption from tax for the first time, which was not in existence in the year 2008. Hence to label Clause 103B as remedial or curative legislation is misconceived. The case-law relied upon by the learned counsel for the respondent assessee on beneficial legislation supports the view taken by us. For the above reasons we are of the view that Clause 103B does not have a retrospective effect and has no application to the Tax Year 2008. In this view of the matter, the question of law raised in the instant reference along with references mentioned in Schedule A is decided in favour of the Tax Department."
24. In the case in hand a similar type of situation emerges where clause 13 was inserted through SRO for a reduced rate to the taxpayer dealing in petroleum product in the 2nd schedule to the Ordinance which in my considered opinion, keeping in view the above discussion is not applicable retrospectively. Moreover, the case laws of (trib.) relied on by the learned AR have also becomes distinguishable hence not applicable.
25. As far as the reliance placed by learned Judicial Member on the judgment cited as 2005 SCM R 492 is concerned, the learned Accountant Member has very amicably replied in his order at para 15 and I agree with his view point that notifications containing administrative instructions are procedural whereas the notifications containing beneficial legislation to the general public can be applied retrospectively but notifications involving public money cannot be given effect retrospectively even the same are beneficial to the taxpayer. Therefore, both the questions referred to the undersigned are replied in negative.
Sd/- NAZIR AHMAD, JUDICIAL MEMBER