This reference emanates from order of tie learned Appellate Tribunal Inland Revenue (Headquarter), Islamabad ("Tribunal") dated 27.07.2012. The basic question proposed for our consideration is as follows: Whether on the facts and in the circumstances of the case, the learned ATIR was justified to hold that provisions of section 221 of the Income Tax Ordinance, 2001 were not attracted in the instant case?
2. Learned counsel for the applicant Submitted that the learned Commissioner (Appeals) and the learned Tribunal had erred in holding that the order of the learned Commissioner Inland Revenue dated 30.06.2009 passed under Section 221 of the Income Tax Ordinance, 2001 ("Ordinance") was liable to be annulled for it was based on a change of opinion and not rectification of a mistake.
3. In terms of factual background learned Commissioner Inland Revenue (Peshawar) by order dated 01.12.2014 issued an exemption for purposes of Section 152(5A) of the Ordinance allowing the respondent to make certain payments to a Mauritian Company. The learned Commissioner Inland Revenue (Peshawar) was of the view that the respondent had entered into a contract for royalty and technical services and the payment-in-question to be made to the Mauritian Company was not liable to deduction of withholding tax. By order dated 30.06.2009 the learned Commissioner Inland Revenue (Islamabad) issued an order under Section 221 of the Ordinance holding that the payment made by the B respondent to the Mauritian Company was liable to withholding tax as the expense have been incurred and paid in Pakistan. The learned Commissioner (Appeals) by order dated 18.10.2010 held that the order of the learned Commissioner Inland Revenue (Islamabad) dated 30.06.2009 was liable to be annulled as it constituted change of opinion regarding interpretation of provision of the Pak-Mauritius Tax Treaty and not rectification of any mistake apparent from the record for which purpose provisions of section 221 of the Ordinance could be employed. The tax department then filed an appeal before the learned Tribunal. One of the arguments taken by the respondent before the learned Tribunal was that the order of the learned Commissioner Inland Revenue (Peshawar) under Section 152(5A) of the Ordinance allowing the making of certain payment without deduction of tax could only be rectified prior to release of such payments by the taxpayer and as payments pursuant to such order dated 01.12.2004 had already been made such order could not be rectified under Section 221 of the Ordinance.
4. The learned Tribunal agreed and upheld the order of the learned Commissioner (Appeals). In view of this factual background we are of the opinion that the question of law proposed for our consideration has been aptly addressed by the learned Commissioner (Appeals) and the learned Tribunal. The learned Commissioner (Appeals) held that the order of the learned commissioner Inland Revenue dated 30.06.2009 constituted a change of opinion on part of the tax department as in the said order it had been held that, the previous order of the learned Commissioner Inland Revenue (Peshawar) dated 01.12.2004 was based on misunderstanding of provisions of the Pakistan Mauritius Tax Treaty. In other words the learned Commissioner Inland Revenue (Islamabad) came to the conclusion that the learned Commissioner Inland Revenue (Peshawar) had misinterpreted provisions of a treaty in granting exemption from, withholding tax in exercise of powers under Section 152(5A) of the Ordinance. The learned Commissioner (Appeals) correctly stated that the reasoning in the said order in view of the facts of the case constituted a change of opinion and not the rectification of any mistake apparent from the record. The learned Tribunal agreed with the learned Commissioner (Appeals).
5. The Ordinance vests no power in Commissioner Inland Revenue to undertake a review of its previous order in exercise of authority under Section 221 of the Ordinance in the aftermath of an exemption having been issued under Section 152(5A) of the Ordinance to make payments to a foreign company without withholding any tax in view of provisions of a tax treaty between Pakistan and a foreign state. Such exemption could not be withdrawn retrospectively after a period of four years on the basis that the Commissioner granting such exemption had misinterpreted provisions of the treaty. In the event that there were two reasonable interpretations of the provisions of the treaty which were possible and the learned Commissioner Inland Revenue (Peshawar) by order dated 01.12.2004 opted for one such interpretation, such exercise of judgment could not be overridden after a period of four years by another Commissioner to prefer a different interpretation of the treaty provisions. Such exercise would tantamount to a review of the decision previously made and not a rectification of any mistake apparent from the record for purposes of Section 221 of the Ordinance. Given that after appreciation of the factual background, the learned Commissioner Appeals as well as the learned Tribunal came to the conclusion that the exercise of judgment by the learned Commissioner Inland Revenue (Islamabad) by order dated 30.06.2009 amounted to a change of opinion leading to the review of a prior order and not rectification of a mistake, we find that the question, of law has been correctly addressed the order of the learned Tribunal dated 18.10.2010. The scope of Section 221 of the Ordinance has been appreciated by the learned Tribunal in its true perspective and needs no interference. The reference is answered accordingly.
6. A copy of this order is directed to be sent to the Registrar of the learned Tribunal under the seal of this Court.