ASIM HAFEEZ, J.----Instant reference application assails order dated 06.03.2013 of learned Appellate Tribunal Inland Revenue, Lahore (`Appellate Tribunal'), whereby taxpayer's appeal was allowed, and concurrent orders of the authorities were annulled.
Connected reference applications and variously filed Constitutional Petitions raise and involve identical legal issues and are heard along, details whereof are ITR No.1295/20, ITR No.1296/20, PTR No.201/13, ITR No.29/2016, ITR No.28/2016, PTR Nos.87 and 88 of 2014, ITR No.91/2015, ITR No.306/2015, ITR No.305/2015 and ITR No.92/2015, W.P. No.6343/2013, W.P. No.17834 / 2012 W.P.No.17835/2012, W.P.No.27650/2012 and W.Ps. Nos.34375 and 34315 of 2017.
2. Fundamentally, the controversy raised calls for determination of the scope and effect of the proviso, added while inserting sub-clause (iii) to the second proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001 - sub-clause (iii) and proviso were inserted through Finance Act, 2009. Department's interpretation is that subsequently added proviso - often called as 'third proviso' during the hearing - had substituted first proviso to subsection (6) of section 153. And taxpayer's assertion is that third proviso had separate existence, without offending the scope and applicability of first proviso.
3. Third proviso declares that tax deducted under sub-clause (b) of subsection (1) of section 153 of the Ordinance, 2001 [Section 153 (1)(b)] - relating to rendering of or providing of services shall be minimum tax.
4. Upon examining variously proposed questions of law, raised in the context of circumstances specific to each case, we consider it appropriate to articulate the controversy and frame elementary questions, encapsulating legal issues, commonly involved in these reference applications and constitutional petitions. Re-settled questions of law are reproduced as,
(i) Whether the third proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001 inserted through Finance Act, 2009 - would be construed to except out or limit the effect of first proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001?
(ii) Whether the first proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001 and the third proviso to subsection (6) of section 153 of the Income Tax Ordinance, 2001 - inserted through Finance Act, 2009 - are mutually exclusive or inconsistent to the extent of repugnancy, and if so, whether proviso latter in time shall prevail, attracting the principle of implied repeal?
(iii) Whether the Circulars, variously, issued by the FBR, expressing conflicting explanations / opinions would influence the textual interpretation of first and third proviso(s) to subsection (6) of section 153 of the Income Tax Ordinance, 2001?
5. Learned counsel representing the department, in variously filed reference applications, submit that third proviso, added through Finance Act, 2009, had, in fact and law, effaced classification between the corporate and non-corporate sector(s), for the purposes of transactions coming within the ambit of Section 153(1)(b) of the Ordinance. And upon insertion of third proviso, the tax deducted on the transactions relating to the rendering of or providing of services, in terms of Section 153(1)(b) of the Ordinance, shall form part of determination of volume of turnover, liable to minimum tax. Adds that a distinct class of taxpayer, created through first proviso to subsection (6) of section 153 of the Ordinance, 2001 (`first proviso') - comprising of the companies stood invalidated / repealed. Submits that clarification of the third proviso by the Federal Board of Revenue (FBR) through Circular No.6 of 2009 was retracted, and FBR lately clarified the position through subsequent instrument, i.e., Instruction No.1(25) WHT/2009 dated 26.04.2011, whereof tax deducted in lieu of rendering or providing of services shall form part of computation of minimum tax, both for the corporate and non-corporate sectors. Hence, no benefit of Circular No.6 dated 18.08.2009 could be claimed by the taxpayer(s).
6. Conversely, learned counsel for the respondent(s) / taxpayers defended the exclusivity of the first proviso, despite insertion of third proviso. Adds that exclusion of the corporate sector, envisaged by the first proviso, would remain valid and effective and deduction of tax by the companies shall not be construed as final tax, in the context of transactions under reference, otherwise treated as final tax in terms of subsection (6) of section 153 of the Ordinance, 2001.
Further submits that implied repeal of first proviso was neither intended by the legislature nor same could be inferred, upon inserting third proviso, which construction, if implemented, would render first proviso superfluous / redundant. Argued that first and third proviso(s) cater for different classes of taxpayers, which distinction should he maintained while employing time tested interpretative principle of harmonious construction of conflicting provisions of law - first and third provisos in the case at hand.
7. Submissions heard.
8. At the outset, it is clarified that amendments brought through the Finance Act, 2011 to Section 153 of the Ordinance, are not relevant for the purposes of adjudicating upon the present controversy - covering the Tax years 2010 and 2011. Pivotal issue is whether third proviso has invalidated the existence, effect, and applicability of the first proviso. Before proceeding to decide the questions raised, it is expedient to reproduce relevant clauses of Section 153 of the Ordinance, as appearing in the statute book at the relevant Tax years.
"153. Payments for goods and services. -- (1) Every prescribed person. making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person--
(a) for the sale of goods;
(b) for the rendering of or providing of services;
(c) on the execution of a contract, other than a contract for the sale of goods or the rendering of or providing of services, shall, at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division III of Part III of the First Schedule.
(1A) Every exporter or an export house making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person for the rendering of or providing of services of stitching, dying, printing, embroidery, washing, sizing and weaving, shall at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division IV of Part III of the First Schedule.
(2) --------------------- [ ]
(4) ---------------------
(5) ---------------------
(a) ---------------------
(i) ---------------------
(ii) ---------------------
(iii) ---------------------
(b) ---------------------
(ba) ---------------------
(bb) ---------------------
(c) ---------------------
(d) --------------------- [ ] "153(6) The tax deducted under this section shall be a final tax on the income of a resident person arising from transactions referred subsection (1) or (1A): Provided that subsection (6) shall not apply to companies in respect of transactions referred to in clause (b) of subsection (1); Provided further that this subsection shall not apply to payments received on account of-
(i) advertisement services, by owners of newspapers and magazine;
(ii) sale of goods and execution of contracts by a public company listed on a registered stock exchange in Pakistan and
(iii) the rendering of or providing of services referred to in sub-clause (b) of subsection (1)
Provided that tax deducted under sub-clause (b) of subsection (1) of section 153 shall be minimum tax".
[Emphasis supplied]
9. Legislative intent is explicit. In terms of subsection (6) of section 153 of the Ordinance, 2001, tax deducted on the income of the resident person, regarding the transactions, referred under subsection (1) or (1A) of Section 153 of the Ordinance, 2001, shall be the final tax. First proviso to subsection (6) of section 153 of the Ordinance, 2001 added through Finance Act, 2006 - provided that subsection (6) would not apply to the companies in respect of transactions, referred to in clause (b) of subsection (1) of section 153 of the Ordinance, 2001.
Second proviso has its own relevance, which was added through the Finance Act, 2007, whereby payments received on account of transactions identified in sub-clauses (i) and (ii) were excluded from the applicability of subsection (6) of Section 153.
10. There is no dispute that before insertion of sub-clause (iii) and third proviso - both added through the Finance Act, 2009 tax deducted on the transactions by the persons, except the companies, relating to rendering of or providing of services, referred in sub-clause (b) of subsection (1), was treated as final tax. The third proviso declared that tax deducted under sub- clause (b) of subsection (1) of section 153 shall be minimum tax.
11. Now we come to the elementary issues, whether the first proviso per se stood repealed or rendered ineffective upon insertion of third proviso and whether tax deducted with respect to the transactions under sub-clause (b) of subsection (1) of Section 153 shall be considered as part of the turnover, liable to minimum tax - both corporate and non-corporate. sectors. The controversy at hand cannot be resolved without examining the cause and effect of re-enacted Section 113 of the Ordinance, 2001 - inserted through the Finance Act, 2009, particularly the definition of expression 'turnover' in terms of subsection (3) of section 113, ibid. It is expedient to reproduce relevant portions of Section 113 of the Ordinance hereunder, Section 113 (1)
"113 (3) turnover means,
(a) the gross receipts, exclusive of Sales Tax and Federal Excise duty or any trade discounts shown on invoices, or bills, derived from the sale of goods, and also excluding any amount taken as deemed income and is assessed as final discharge of the tax liability for which tax is already paid or payable;
(b) the gross fees for the rendering of services for giving benefits including commissions; except covered by final discharge of tax liability for which tax is separately paid or payable;
(c) the gross receipts from the execution of contracts; except covered, by final discharge of tax liability for which tax is separately paid or payable; and
(d) the company's share of the amounts stated above of any association of persons of which the company is a member."
[Emphasis Supplied]
12. It is the case of the' department that taxpayer, a private limited company, renders computer programming services, which services were covered under clause (b) of subsection (1). of. Section 153, hence, tax deducted on the transactions shall be the minimum tax, while banking upon so- called third proviso.
13. Before dilating upon the questions, it is essential to ascertain the mischief sought to be addressed by insertion of sub-clause (iii) to second proviso and the third proviso. The re- enactment of section 113 of the Ordinance has its own relevance, in the context of the controversy.
Applicability of subsection (6) of Section 153 of the Ordinance was denied to the companies in terms of first proviso, suggesting that tax deducted by the companies relating to the transactions under sub-clause (b) of subsection (1) of section 153 of the Ordinance shall not be treated as final tax - clearly indicating that such deduction was treated as part of the normal tax regime, instead of Final tax regime (FTR). It is pertinent to mention that minimum tax is not a tax per se, in its own class, but prescribe minimum amount of tax payable, subject to the conditions, by the prescribed person, when normal income could not be taxed otherwise. Section 113 of the Ordinance provided mechanism for computation of, minimum tax, determinable in terms of the volume of turnover, limits whereof are prescribed. Interestingly, the turnover, in terms of clause (b) of subsection (3) of, re-enacted section 113 of the Ordinance, means gross fees for rendering of services other than those covered by final discharge of tax liability, for which tax is separately paid or payable.
14. Now we attend the controversy, i.e., incidence of insertion of sub-clause (iii) to the second proviso and the third proviso. To contextualize controversy, it is iterated that before insertion of sub- clause (iii) to the second proviso, deduction of tax relating to transactions under sub-clause
(b) of subsection (1) of section 153 of the Ordinance, 2001 by the persons, other than companies, was treated is final tax. And without sub-clause (iii) to second proviso tax- deducted by non- corporate sector, relating to the providing of services, could not be classified as income under Normal Tax Regime (NTR). This is the precise mischief intended to be addressed by inserting sub- clause (iii) and proviso thereto, and purpose whereof was to change the regime/classification of tax, from final to normal.
15. Therefore, the submission that third proviso had the effect of repealing first proviso, effecting that tax deducted by the companies, relating to the transactions covered under sub-clause (b) of subsection (1) of section 153 of the Ordinance, comes under the minimum tax regime is misconceived and result of overlooking the effect of re-enacted section 113 of the Ordinance, 2001 - Arguments raised may assume some relevance in the context of the then Section 113, before being omitted by Finance Act, 2008.
16. It appears that insertion of third proviso, in the wake of reenacted section 113 of the. Ordinance, 2001 is. unnecessary. With insertion of sub-clause (iii) to second proviso, the tax deducted on transactions covered under sub-clause (b) of subsection (1) of section 153 of the Ordinance, 2001 goes out of the ambit of FTR, hence, classified as income under NTR. Therefore, exclusion from the ambit of FTR would otherwise bring income under NTR, which would be liable to minimum tax, provided the conditions in section 113 of the Ordinance, 2001 are met. In view of the above, no case of express or implied repeal of first proviso was made out, which exclusively deals with the companies and third proviso to sub-clause (iii) to second proviso covers person(s), except the companies. It is a misconception to relate to or construe the third proviso as repealing first proviso, both are mutually exclusive and co-exist harmoniously - dealing with two different and distinct classes of persons. Therefore, harmonious / conjoint reading of first and third provisos is imperative, to avoid redundancy or super lousiness, when both provisos could survive independently - in the context of relevant Tax years.
17. Another submission by counsels representing department that no benefit regarding construction of third proviso was available in the wake of subsequent instructions by FBR - in supersession of instructions contained in Circular No.6 - is meaningless as far as interpretation of the law - involving rights claimed by the taxpayers - is concerned. Circulars / Instructions issued cannot be construed or extended status superior to the text of the law. The scope of the circulars / instructions need not be discussed any further.
18. In view of aforesaid, questions are answered as follows. (i) Question is answered in the negative.
(ii) Question is answered in the affirmative, declaring that, at relevant time, first and third proviso(s) to subsection (6) of section 153 of the Ordinance are mutually exclusive and co-exist in harmony - catering to a separate class of taxpayers and there is no incidence of repugnancy between first and third proviso(s) of subsection (6) of section 153 of the Ordinance.
(iii) Question is answered in the negative.
19. Reference applications are disposed of in terms of the answers expressed to the re-settled questions.
20. Office shall send a copy of this order, under seal of the Court, to learned Appellate Tribunal, in terms of subsection (5) of section 133 of the Ordinance, 2001.