MRS. AMBREEN ASLAM, JUDICIAL MEMBER.---- Through this order we intend to dispose of the titled appeal filed by the department against the Order bearing No.221/A-I dated 30.03. 2015, passed by the learned Commissioner Inland Revenue (Appeals-I), Karachi on the following grounds:
1. That the order of the learned CIR (Appeals) is bad in law and on facts of the case.
2. That the learned CIR (Appeals) was not justified to annul the order passed unde r section 205 of the Income Tax Ordinance, 2001, charging default surcharge on account of failure to pay advance tax under section 147 on account of tax paid under section 1 13.
3. That the learned CIR (A) failed to appreciate that the provision of subsection (4AA) of section 147 was declaratory in nature, and hence was applicable retrospectively ,
4. That the learned CIR (A) failed to appreciate that every company whose income was charged to tax for the latest tax year under the Ordinance was liable to pay advance tax for the year under subsection (1) of section 147, and since the aggregate of the person's turnover on which tax was payable under section 113 was be treated as the income of the person for the year chargeable to tax under clause (a) of subsection (2) of section 113, hence advance tax was payable on it under section 147 even in the absence of subsection (4AA), which only clarified the law on the subject"
2. Brief facts of the case, as gathered from the record, are that the taxpayer is a private limited company and is engaged in the business of trading and distribution of the Petroleum products and health care items. After issuing a show-cause notices under section 205 of the Income Tax Ordinance, 2001 and obtaining considering the replies furnished by the A.R. of the taxpayer has proceeded to charge default surcharge under section 205(IB) of the Income Tax Ordinance, 2001 on account of short payment of quarterly installments of advance tax for the tax year 2004, thus, raised the demand of Rs.2.37 M.
3. Against said treatment meted out from Officer Inland Revenue, the taxpayer preferred appeal before learned Commissioner-IR (Appeals) who decided appeal of the taxpayer by passing Order dated 30.03.2015 with the following observations: "The contention of the A.R is considered and found correct, it is noted that the officer has not correctly appreciated the applicability of law in the case of the appellant. The provision of subsection (4AA) of Section 147 was inserted in Income Tax Ordinance, 2001 through Finance Act, 2009 whereby , the tax liability under section 113 has been allowed to taken into account while working out payment of advance tax liability .
Before this insertion there was no provision available whereby minimum tax under section 113 could be taken for determining advance tax liability , The provision of subsection (4) of Section 147 as it was applicable to the tax year 2004 was same in substance as it is existed presently in the statue whereby the amount of advance tax due for a quarter is required to be computed according to the formula given thergn. According to subsection (1) every taxpayer whose income was charged to tax for the latest tax year other than clauses a to d has been held liable to pay advance tax for the year. Thus, the basis was with respect to income charged to tax for the latest tax year and in case of losses where turnover tax is paid were not liable to pay advance tax till insertion of subsection (4AA) in tax years 2007 and 2009, when tax liability under section 113 is also suggested to consider while working out advance tax liability . This subsection is applicable from subsequent to tax year and the officer has wrongly gave it retrospective application in the appellants case for the tax year 2004 which is unjustified, hence, deleted.
In view of above discussion, there is no short payment of advance tax liability made by the appellant and no default was committed, therefore, levy of default surcharge is out of context. The impugned order is therefore, annulled.
Appeal Succeeds."
4. Being aggrieved and dissatisfied with the Order bearing No.221/A-I dated 30-03-2015 passed by learned CIR (Appeals), the department preferred titled appeal before this Tribunal.
5. On the date of hearing, Mr. Arslan, learned D.R., attended Court proceedings on behalf of the appellant/department while Mrs. Asra Rauf, FCA, attended on behalf of respondent/taxpayer .
6. The learned D.R. argued that the order passed by the learned CIR(A) is bad in law and on the facts of the case and was not justified to annul the order passed under section 205 of the Income Tax Ordinance, 2001, charging default surcharge on account of failure to pay advance tax under section 147 on account of tax paid under section
113. The learned D.R. further stated that the learned CIR (A) failed to appreciate that the provision of subsection (4AA) of section 147 was declaratory in nature, and hence was applicable retrospectively .
7. The learned D.R. further pleaded that the learned CIR (A) also failed to appreciate that every company whose income was charged to tax for the latest tax year under the Ordinance was liable to pay advance tax for the year under subsection (1) of section 147, and since the aggregate of the person's turnover on which tax was payable under section 113 was be treated as the income of the person for the year chargeable to tax under clause (a) of subsection (2) of section 113, hence advance tax was payable on it under section 147 even in the absence of subsection (4AA), which only clarified the law on the subject.
8. On the other hand, learned representative of taxpayer agitated that the officer determined the liability of quarterly installment of advance tax on the basis of minimum tax due as per return of income. Whereas, the taxpayer had correctly discharged his advance tax liability under section 147 of the Income Tax Ordinance, 2001 paying aggregate tax of Rs.12.576 Million on due dates. She further pointed out that the Officer Inland Revenue wrongly determined the advance tax liability based upon minimum tax paid under section 113 of the Income Tax Ordinance, 2001 for which subsection (4AA) was inserted in section 147 through Finance Act, 2007 and 2009. Prior to this no law was in field under which taxpayer was required to pay advance tax under section 147 on the basis of minimum tax paid in previous tax year . Hence, payment of advance tax is not applicable for the tax year 2004 in this case.
9. Learned representative of the taxpaye r vehemently opposed the arguments advanced by the learned D.R. and fully supported the order passed by the learned CIR (Appeals) which according to him is self-speaking and strongly opposed the contentions made by the learned D.R. and denied the assertions of the learned D.R. It is submitted that the order passed by the learned CIR (Appeals), by all means, is legal, lawful and in accordance with the relevant provisions of law. The learned CIR (Appeals) has thoroughly discussed the assertions of the appellant/taxpayer according to the facts and circumstances.
10 We have considered the arguments advanced by the learned representative of the appellant/department and taxpayer/respondent so also perused the case record including impugned order and the grounds containing in the appeal. To decide the instant appeal the question before us is whether the impugned order requires interference?
11. Precisely department alleged against the taxpayer that every company whose income is charged to tax for the latest tax year is liable to pay advance tax for the year in terms of subsection (1) of Section 147 and the aggregate of person's turnover on which tax is payab le under section 113 on the income of the person for the year chargeable to tax under section 1 13(2)(a) so the tax was payable in terms of Section 147 even in absence of subsection (4AA).
12. Whereas the stance of the taxpayer is that the taxpayer correctly discharged advance tax liability in terms of section 147 by paying aggregate tax of Rs.12.576 million on due dates and the department erroneously determined the advance tax liability on the basis of section 113 and subsection (4AA) was inserted in Section 147 through Finance Acts, 2007 and 2009 and prior to this no law was in field under which taxpayer was required to pay advance tax under Section 147 on the basis of income tax paid in previous year .
13. Keeping in mind above assertions of the parties we feel appropriate to mention here that term advance tax refers to paying a part of yearly income tax payable in advance, advance income tax should be paid in advance instead of paying income tax in lump sum, the taxpayers are facilitated to pay the same in installments on due dates..
14. In the present case the DCIR was of the view that the taxpayer made short payment of the quarterly advance tax installments therefore he levied default surcharge on the taxpayer , in this context, we feel necessary to mention here that the assessment year under consideration is 2004 and in that year companies were required to pay advance tax on the basis of tax assesse d of latest tax or assessment year and section 147(4) was substituted in the Income Tax Ordinance in Finance Act, 2009 and admittedly , the assessment year of the taxpayer is 2004 and the advance tax liability in terms of Section 113 of Income Tax Ordinance, 2001. Section 147(4AA) was inserted through Finance Act, 2007 and 2009 and the said inclusion of above clause not interpret, the same will be intrigue retrospectively .
15. So keeping in view above facts and circumstances, we are of the view that the impugned order does not require any interference. Officer unjustly observed that the short payments made in quarterly advance tax payments. So the impugned order upheld, in result appeal of the department is dismissed.
16. Appeal stands disposed of f in the manner as indicated above.