MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER.--- By this order, we intend to dispose of above titled appeal filed by the appellant/department against the impugned order No,1168 dated 25.11.2014. The department agitated grounds of appeal as set-forth in the memo. of appeal.
2. Brief facts of the case as gathered from the record are that the taxpayer is an Individual in the business of manufacturing/distribution of vegetable and Animals Oil and fats is aggrieved by order under section 122(5A) of the Income Tax Ordinance wherein the tax liability under section 113 of Income Tax Ordinance has been determined at the rate of 1% of declared Sales without allowing rebate as admissible 0.80% under clause 8 of Part-III of Second Schedule of Income Tax Ordinance.
The learned ACIR issued show-cause notice on the point that the since the taxpayer is not distributor as such is not entitled to rebate of 0.80% as per provisions of clause 8 of Part III of Second Schedule. A.R. of the taxpayer furnished reply to the ACIR. After obtaining necessary replies proceedings were culminated by passing order under section 122(5A) of the Income Tax Ordinance, 2001. Being aggrieved from the order passed by the Additional CIR, the taxpayer filed instant appeal before the Commissioner who accepted the appeal of the taxpayer and directed the officer concerned to allow reduction of 80% while calculating the minimum tax under section
113. Being aggrieved from the above findings of the learned CIR(A), the department has come up in appeal before this Tribunal.
3. During proceedings before this Court, learned D.R. vehemently argued that the learned CIR(A) was not justified to issue direction to allow reduction of 80% of tax calculated under section 113 of the Income Tax Ordinance, 2001. Learned D.R. further argued that the learned CIR(A) was not justified to issue direction to allow reduction of 80% of tax calculated under section 113 of the Income Tax Ordinance, 2001 without considering the facts of the case and going into the case record, the taxpayer is manufacturer of cotton seed oil instead of cooking oil as declared by the CIR(A) in appellate order. According to learned D.R. the learned CIR(A) erred in issuing direction for tax reduction @80% as provided in clause (8) of Part-II of Second Schedule to the Income Tax Ordinance, 2001. The taxpayer is a manufacturer of Cotton Seed Oil which he supply to the Ghee manufacturer and not to any retailer or consumer, hence the taxpayer is not entitle to get benefit of tax reduction as rebate @ 80% as provided under clause (8) of Part-II of 2nd Schedule to the Income Tax Ordinance, 2001. Learned D.R. further pleaded that the ACIR was rightly charged minimum tax @ 1% as provided under section 113 of the Income Tax Ordinance, 2001. He therefore, prayed that the order of the learned CIR (A) may be vacated and that of the Additional CIR under section 122(5A) may be restored.
4. The learned counsel for the Respondent/taxpayer, on the other hand, strongly supported the order of the learned CIR(A). He vehemently contended that in the immediately preceding year i,e, tax year 2011 the tax was charged @ 1% on declared turnover in taxpayer's own case. However, on appeal the learned CIR(A) allowed the rebate of 0.80% on declared sales and this Tribunal has confirmed / upheld the order of CIR(A) (supra) (vide order bearing I.T.A. No, 247/KB/2013 (Tax Year 2011 dated 11-8-2015), and as contended by the learned counsel, the department has not filed reference / appeal in the Hon'ble High Court, hence the same had attained finality. He further contended that the word " manufacturer" is of wider term. The distributor may represent manufacturer or importer while the manufacturer. As such, for all practical purpose the instant taxpayer is a manufacturer cum distributor. He, thus, contended that the narrow definition of "manufacturer cannot be assigned. He vehemently argued that the definition of the word "distributor" has not been given in the Income Tax Ordinance, therefore, have to resort Black Law.
Dictionary, 8th edition as under:-- "A wholesaler, jobber, or other manufacturer or supplier that rolls chiefly to retailers and commercial users" (page 509).
5. He lastly, argued that in a number of cases the above definition of "Distributor" has been adopted, he, therefore, urged that the order of the learned CIR (A) being in line with the judgments of the Tribunal, may be upheld.
6. We have heard both the learned representatives and have gone through the records of the case as well as case laws cited at bar. For the sake of convenience, the relevant extract from the order of the learned CIR (A) is reproduced hereunder:-- "From perusal of record it transpires that the appellant being a manufacturer/processor of Cooking Oil and sale to the end consumers/retailers. The Additional Commissioner found that the appellant failed to pay the Turnover Tax under section 113(1) of the income Tax Ordinance, 2001 @ 1% on declared turnover issued show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 in response thereof the A/R of the appellant filed explanation in which he stated that the taxpayer paid the turnover tax under section 113(1) of the Income Tax Ordinance, 2001 by seeking rebate of 80% as per S.R.O. No,1086(I)/2010 dated 30.11.2011. The Additional Commissioner dis-satisfied with the explanation charged the turnover over tax @ 1% on declared turnover.
Further perusal of record shows that the appellant was, engaged in the business activity as of Processing of consumer goods i,e, Cooking Oil and also performed as a Distributor of the said products direct to Market and end-consumers. The business activity comes under the definition of consumer goods and liable for reduction of minimum tax under section 113(1) of the Income Tax Ordinance, 2001 @ 0.80% as per S.R.O. No,1086(I)/2010 dated 30-11-2011. The A/R of the appellant places reliance on various definitions of consumer goods/fast moving consumer goods. The all fast moving consumer goods have been included in the clause (8) by way of residuary goods, any goods/product qualify as fast moving consumer goods and are eligible for reduction of 80%.
The appellant business nature fall within the definition of consumer goods/fast consumer goods.
In view of above facts and discussion, I direct the Officer concerned to allow reduction of 80% while calculating the minimum tax under section 113(1) of the Income Tax Ordinance, 2001, as per clause (8) of Second Schedule to the Income Tax Ordinance, 2001 and S.R.O. No,1086(I)/2010 dated 30.11.2011, as the goods fall in the definition of consumer goods as well as fast moving consumer goods."
7. We have also gone through the relevant S.R.O. No 1086(1)/2010 dated 30-11-2011 which is also reproduced hereunder:-- "S.R.O. 1086(1)/2010, dated 30.11.2010. - 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, in Part III, after clause (7), the, following new clauses shall be added namely:- "(8) For the distributors of pharmaceutical products, fertilizers, consumers goods including fast moving consumers goods, the rate of minimum tax on the amount representing their annual turnover under section 113 shall be reduced by eighty percent.
(9) In cases of oil marketing companies, oil refineries and sui southern gas company limited, the rate of minimum tax shall be reduced to 0.5% only for the cases where annual turnover exceeds rupees one billion." (Underlining for emphasising)
8. The above SRO in an unambiguous terms provides that the rebate is allowable at the rate of 80% to the fast moving consumers goods. The issue involved in the amended assessment order was settled by the Tribunal, there, is plethora of the judgments of the Tribunal on this issue and settled by the Division Benches, inter-alia among others, in following cases:-- I.T.A. No, 55/KB/2013 of Messrs Super Rehman Oil Mills.
I.T.A. No, 54/KB/2013 of Messrs Rahman Solvent Plant and Cooking and Oil Mills, I.T.A. No, 5656/KB/2013 of Messrs Insaf Oil Mills, I.T.A. I.T.A. No, 59/KB/2013 Messrs Farooq Oil Mills, I.T.A.
No, I.T.A. No, 62/KB/2013 of Messrs Arfat Oil Mills, I.T.A. No, 247/KB/2013 in the case of Messrs Rehman Oil Mills and Machinery.
9. In the case of Universal the judgment was delivered by this Division Bench wherein the author of this judgment was co-signatory after giving exhaustive discussion observed that:-- "...........the Taxpayer being manufacturer and distributor is capable to earn a better margin of profit as compared with only distributor who even did not possess the title of goods. However, the goods being dealt in are of higher value and carry a small amount of profit. The higher value of product, lower margin of profit, fast moving goods and disproportionate charge of tax under section 113 @ 1% was the main purpose to allow certain concessions in the statue. Had the taxpayer made his sales through petrol pumps only, would have been entitled to more concession in terms of clause 11A(ii) of Part-IV of Part-IV of 2nd Schedule to the Income Tax Ordinance."
9. Further in the case of Messrs Rahman Oil Mills, bearing I.T.A. No, 247/KB/2013 for the tax year 2011, the issue was decided as under:-- "10. The learned Additional Commissioner has ignored the fact that the word "distributor" is of very wide terms and conditions the functions of manufacturer, importer, exporter more particularly the order is silent that the appellant has some one appointed their distributor for their products. After manufacturing of goods the manufacturer shall have to supply goods to the consumers and retailers as such the appellants in, these appeals being manufacturer are distributors as such are entitled to the benefit of Clause 8 of Part III of Second Schedule as held in the case laws cited herein above."
10. In the next year, the Division Bench of this Tribunal decided the case of the taxpayer bearing I.T.A.
No,185/KB/2015 (Tax Year 2012) titled as (supra) The CIR v. Messrs Rehman Oil Mills, Sukkur. The relevant extract is as under:-- "11. As the matter has substantially been decided and controversy has been put at rest we see no warrant to interfere with the order passed by the learned CIR(A) which is hereby maintained."
11. The Division Bench of this Tribunal has decided the case bearing I.T.A. No,241/KB/2015 wherein it has been observed as under: "Keeping in mind above mentioned prospects we reverted back to the facts of the case in hand as it is circumstances position of record that the Section 2 of Income Tax Ordinance, 2011 does not bear definition of distributor on the controversy clause 8 of Part-III of Schedule II of Income Tax Ordinance, 2001 says "for the distribution of pharmaceuticals products, fertilizer, consumer goods including fast moving consumer goods, the rate of minimum tax on their annual turnover as per section 112 shall be reduced be eighty percent."
Since in the instant case it is established that the taxpayer is a manufacturer of vegetable and animal oil, he processed raw material to ready to sale finished product and sell it directly to its consumer as the department failed to point out a single distributor deputize by the taxpayer, so keeping in mind this very aspect we are of the view that the taxpayer is entitle for the concession mentioned in clause-8 Part-Ill of Second Schedule.
So considering the above mentioned facts and circumstances and having coordinate jurisdiction following the dictum mentioned above hold by the learned brothers vide Order dated 11-08-2015 in I.T.A. No,56/KB/20I3 [CIR v. M/s. New Insaf Oil Mills]. We are of the view impugned judgment is not require any interference, the same is upheld. Resultantly, the appeal of the department is dismissed."
12. Further in the taxpayer own case bearing I.T.A. No,57/KB/2013 titled as Messrs Al-Sana Oil Mills, Sukkar wherein the Division Bench as observed as under:-- "The Learned Additional Commissioner has ignored the fact that the word "distributor" is of very wide terms and conditions the functions of manufacturer, importer, exporter more particularly the order is silent that the appellant has some one appointed their distributor for their products. After manufacturing of goods the manufacturer shall have to supply goods to the consumers and retailers as such the appellants in these appeals being manufacturer are distributors as such are entitled to the benefit of Clause 8 of Part-III of Second Schedule as held in the case law cited herein above."
13.Keeping in view the above ratios decidendi we are of the considered opinion that the taxpayer being manufacturer and distributors is capable to earn a better margin of profit as compared with only distributors who even did not possess the title of goods. However, the goods are being dealt in of higher value and carry of small amount of profit. The higher value of product lower margin of profit, fast moving goods and disproportionate charge of tax under section 113 @ 1% was the main purpose to allow certain concession in the statue.
14.Under the facts and circumstances of the case are that the department has failed to establish its claim, we have come to the conclusion that the taxpayer is entitled to grant relief from this Tribunal, therefore, we are inclined to agree with the findings of the leaned CIR(A) which is hereby maintained.
15. Consequently, the appeal filed by the revenue is hereby dismissed accordingly.