MOHSIN AKHTAR KAYANI, J. Through this single judgment, we intend to decide the captioned income tax references having similar questions of law and facts.
2. Brief and consolidated facts are that M/s. Telenor Pakistan (Pvt.) Ltd./applicant submitted its income tax returns for the years 2006, 2008, 2013, 2014 and 2015, which are treated as assessment orders of Commissioner Inland Revenue (CIR), Islamabad under Section 120 of the Income Tax Ordinance, 2001, against which show cause notices have been issued to the applicant alleging therein that the income declared by the applicant is erroneous. Likewise, when the applicant returned losses for the years 2006 and 2008, applicant's case was selected for audit under Section 177 of the Ordinance, which ultimately culminated into issuance of show-cause notice to the applicant. Pursuant to submission of reply by applicant to the show-cause notice. Additional Commissioner Inland Revenue, Islamabad amended the assessment of applicant by making certain additions on various grounds, as such, to the extent of losses returned by the applicant, issues relating to addition to fixed assets, activation tax, advertisement expenses and interconnect costs were decided against. The applicant being aggrieved thereby preferred an appeal before Commissioner Inland Revenue (Appeals), Islamabad, who vide orders-in-appeal, dated 25.07.2011 and 29.12.2016, dismissed the appeals of applicant. Consequently, the applicant tiled appeals before Appellate Tribunal Inland Revenue (ATIR), Islamabad, which were dismissed vide orders dated 05.06.2014, 28.11.2016 and 13.02.2018. Hence, the captioned income tax references.
3. Learned counsel for applicant contended that learned ATIR has failed to appreciate the fact that ACIR being officer of Audit Department Inland Revenue has no jurisdiction to invoke subsection (5A) of Section 122 of the Income Tax Ordinance, 2001, therefore, exercise of jurisdiction by ACIR over the tax affairs of applicant is illegal and without lawful authority; that applicant Company while paying sales tax against free air time is entitled to claim the sales tax so paid as expenses, but the learned ATIRs has failed to appreciate this fact and disallowed the sales tax on free air time, as such, learned ATIR has erred in upholding the decision of the fora below whereby actuarial loss on defined benefit plans has been disallowed to the applicant; that softwares along with licences are embedded softwares and are in part and parcel of the equipment used by the applicant, as such, the same do not fall within the definition of intangible as defined in Section 34(11) of the Income Tax Ordinance, 2001; that. applicant is responsible for payment of activation tax in terms of SRO dated 18.06.2001 and same is liable to be considered as an expenditure, but the learned ATIR has failed to appreciate the language of said SRO while dismissing the appeal of applicant; that learned ATIR as well as the for a below refused to allow the applicant exchange loss on the ground that such loss was unrealized and failed to take into consideration that the applicant company maintains its account on accrual method basis as opposed to cash basis, even otherwise, ACIR has erred in not allowing entire adjustment of unabsorbed depreciation and amortization loss brought forward from prior years, which is legally admissible under the Income Tax Ordinance, 2001.
4. Conversely, learned counsel for respondents opposed the filing of captioned income tax references on the grounds that forums below have passed a speaking order after proper appreciation of the facts and circumstances of the case, as such, the applicant company has failed to bring on record any defect in the impugned orders, which are liable to be maintained: that all the questions raised by the applicants and even proposed in the instant references are factual in nature, except the question of jurisdiction which requires determination as the question relating to depreciation of fixed assets, marketing, costs, expenses on account of activation tax, expenses on account of sales tax on free air time and exchange loss are question of facts which concurrently been upheld by the lower forums, therefore this Court in reference jurisdiction is not permitted to enter into factual controversies which have already been settled, hence all these references are liable to be dismissed.
5. Arguments heard, record perused.
6. Perusal of record reveals that the applicant Company through the captioned references has brought several questions of law before this Court to be answered, as such, many of the questions framed in the captained reference are identical, therefore, for the purpose of brevity, the consolidated and common questions of law in the captioned references are reproduced as under: I. Whether the impugned order passed by the learned Respondent No.1 can be termed as a speaking order as while passing the same, the learned Respondent Nod has failed to address the jurisdictional objection raised by the Petitioner against Respondent No.3, who can exercise jurisdiction under section 122(5A) only if the case of a tax payer is selected for audit and not otherwise?
II. Whether the learned Respondent No.1 has erred in hold in that the provisions of subsection (5A) of Section 122 of the Ordinance has been rightly invoked by the Respondent No.3, without considering the fact that tile pre-requisites to invoke the said subsection are missing in the instant case.
III. Whether the learned Respondent No.1 was right in placing the reliance on Order in ITA No.752/IB/2011 dated 05.06.2014, to disallow to the expenses incurred by the Petitioner for customers acquisition, hence, an allowable expense under subsection (1) of Section 20 of the Ordinance?
IV. Whether the learned Respondent No.1 is right to uphold the treatment of the fora below on account of advertisement publicity and royalty to PTA where under the said expenses are treated to be as of capital nature as opposed to the fact that such expenses are of recurring nature, hence allowable under the Ordinance?
V. Whether the Appellate Tribunal is right in upholding the decision of the fora below whereby the exchange loss claimed by the Petitioner has been disallowed in violation of the judgment of the august Supreme Court of Pakistan rendered in the case of General Tyre and Rubber, reported as 1993 PTD 383?
VI. Whether the learned Respondent No.1 was right to disallow the actuarial loss on defined benefit of plans, by placing reliance on an earlier decision of the Tribunal, without considering the fact that the said loss is a genuine business expenditure?
VII. Whether the learned Respondent No.1 was right in disallowing sales tax on free air time on account that the Petitioner's company did not book any revenue against free air time while ignoring the fact that the Petitioner had paid sales tax on the same which qualifies for an expense under subsection (1) of Section 20 of the Ordinance?
VIII. Whether the learned Respondent No.1 was right in disallowing deductions of Activation Tax on the plea that the same is a liability of the consumer and not that of the Petitioner without taking into consideration that only part of activation was borne by the Company and it meets all the tests of commercial expediency, the same is an expenditure incurred wholly and exclusively for the purpose of the business of the Petitioner in accordance with Section 20(1) of the Ordinance?
IX. Whether the Respondent No.1 was right in holding that the Petitioner is a with agent as per SRO 390(I)/2001, the Petitioner is liable to pay activation tax?
X. Whether the learned Respondent No.1 was right in holding softwares in the machinery as intangibles without taking into consideration that such soft wares are embedded softwares and are part and parcel of the equipment used by the petitioner Company and are not computer softwares as envisaged under Section 24 of the Ordinance?
XI. Whether the leaned Respondent No.1 was right in treating marketing Cost as intangibles for the reason that benefit of the same would have the effect for a period longer than one year without taking into consideration/relying on any evidence to substantiate such findings more so, when marketing expenses are for a limited period and are not of permanent nature and consist of marketing cost on year to year basis and in line with the industry practice?
XII. Whether the learned Respondent No.1 has erred in upholding the treatment of the fora below on account of Government grants, received from Universal Service Fund (USF) without considering the fact that subsidy from Federal Government is exempt under Clause (102A) of pars 1 of Second Schedule to the Ordinance?
7. During the course of arguments, Question XI i.e. relating to marketing expenses/cost has already been settled by the Alternate Dispute Resolution Committee constituted under section 134A of the Income Tax Ordinance, 2001 in case of M/s. Telenor Pakistan (Pvt.)Ltd. for tax year 2007/08, vide order dated 11.06.2018, therefore, said question stands disposed of in the light of said order being not pressed.
Activation Tax
8. While dealing with the question relating to Activation Tax (Questions VIII and IX), it has been observed the same has already been decided by this Court, vide judgment dated 07.03.2019, passed in ITR No.234/2011, whereby the relevant extract of judgment is as under:
7. Vide SRO No.390(I)/2001 dated 18.06.2001 issued by Ministry of Finance, Government of Pakistan, there was a levy at the rate of Rs.500 per set for activation of the cellular phone.
For ease of convenience, relevant notification is reproduced below:- GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE, ECONOMIC AFFAIRS, STATISTICS AND REVENUE (REVENUE DIVISION)
Islamabad, the 18th June, 2001 NOTIFICATION (CUSTOMS AND SALES TAX)
SRO No.390(I)/2001.----In exercise of the powers conferred by Section 19 of the Customs Act, 1969 (IV of 1969), subsections (3A) and (6) of section 3, clause (b) of subsection (13) and section 8, clause (a) of subsection (2) of section 13 and section 71 of the Sales Tax Act, 1990, the Federal Government is pleased to exempt customs dun) leviable under the First Schedule to the Customs Act, 1969 (IV of 1969), and sales tax on the import or, as the case may be, on the supply of cellular telephone sets (hand-held sets) to the extent that the combined effect of both the levies shall be one thousand rupees per such set, hereinafter called the said amount, subject to the following conditions, namely:
(i) No customs duty or sales tax shall be collected on such cellular telephone sets at the time of import or, as the case may be, at the time of supply, but the said amount will be charged, collected and paid by the cellular company operator at the time the sets are presented to the cellular company operator for activation or energization.
(ii) Omitted;
(iii) The cellular company operator shall, if not already registered, obtain registration under the Sales Tax Act, 1990;
(iv) No cellular telephone set' shall be activated or energized by the cellular company operator without charging and collecting the said amount.
(v) The said amount shall also be charged collected and paid on every new activation or energization done by the cellular company operator.
(vi) The liability to charge; collect and pay the said amount shall be on the cellular company operator who shall deposit same through a monthly tax return in terms of Section 26 of the Sales Tax Act, 1990 and rules made thereunder;
(vii) The cellular company operator shall, maintain proper records, whether in electronic form or otherwise of all the sets energized or activated after, payment of the aforesaid amount for a period of five years, and such records, shall be produced for inspection, audit or verification as and when required by all officer authorized by the Collector of sales tax and such officer shall not ask for proof of import of cellular telephone sets activated or energized; and
(viii) No adjustment of input tax shall be admissible to the cellular company operator or the buyer against the amount chargeable and payable under this notification.
Explanation.---For the purpose of this notification, a cellular telephone set (hand-held set) includes one battery and a battery, charger identifiable for use in connection with such mobile telephone set; provided that the amount payable under this notification shall not be effected on the ground that such battery or battery charger has not been presented or is not accompanied with such telephone set at the time of activation or energization.
Explanation 2.---For the purpose of condition (v), the expression "new activation or energization means a new connection or number given by the cellular company operator but does not include a change in number given to a customer due -to change in package or his location in Pakistan.
[C. No. 3(9)STLEP/2001] (Riaz Ahmad Khalid)
Addition Secretary The bare perusal of the above notification shows that liability to charge, collect and pay the said amount teas on cellular company and the referred amount was to be deposited through a monthly tax return in terms of section 26 of the Sales Tax Act, 1990. Moreover, under clause (viii), no adjustment of input tax was admissible to the cellular company operator or the buyer against the amount chargeable or payable under said notification. The charge was an indirect tax and was to be recovered from the customer. In this behalf the burden was on the customer and the cellular company was only a collecting agent.
8. The fact, that respondent did not pass on the burden and paid that amount in Government treasury from its own funds, is not tenable, especially when the respondent has claimed the same as an "expense for commercial expediency. Undoubtedly, the market is competitive and cut-throat competition exists amongst the cellular companies but the same is no justification for not paying on liability to the customers, as the levy was across the board and hot on any individual company.
9. As noted above, activation tax/charges were to be received from the customer and were not the liability of the cellular company.
10. The fact, that cellular company did not pass on the burden, is its own doing and cannot turn around to claim it is an expense. In this view of the matter, we are of the opinion that assessing officer has rightly disregarded the expense claimed by the respondent company regarding payment of activation charges for the Tax year 2008.
Hence, in the light of above referred judgment of this Court, the question relating to Activation Tax (Question VIII) his been answered as above.
9. While dealing with Question No. X i.e. relating to declaring the softwares in the machinery as intangibles despite the fact same are embedded softwares, we have gone through the concept of depreciation on fixed assets discussed by the assessing officer in order dated 30.05.2009, whereby fixed assets were number of software and licenses which have their use full life of more than one year were liable to be classified as intangible within the definition as term "intangible" in terms of Section 24(11) of the Income Tax Ordinance, 2001. The softwares and licenses were required to be amortized in terms of Sections 24(3) and 24(11) of the Ordinance by the company; as a result whereof, show-cause notice under Section 122(9) was issued, same was replied by the applicant company and it has been claimed by the applicant company that the software in question are not computer software as mentioned in definition of intangible in Section 24(11) of the Ordinance, but these are embedded softwares which are part and parcel of the equipments used by the company. Similarly. it has also been highlighted by the applicant company that the softwares arc depreciable items. While going through the record and arguments there is no cavil to proposition that different softwares are for specific purpose and tailor made supplied with equipments, however the supplier bifurcated the hardware and softwares parts of equipment and claimed separate prices for two components. We have gone through Section 24(11) of the Ordinance for intangibles which separately provides computer software's and licenses. The forums below have rightly observed every software's whether computer software's or system software's is developed to obtain determined results. The primary function of softwares remains essential the same wherever it is used for the purpose of receiving data and performing a sequence of function to produce certain result and as such, they fall within the definition of intangibles. Hence, the softwares and licenses are integral part of the equipment of the applicant company but at the same time softwares alone could not perform any function without the hardware equipment even the softwares could not be transmitted to the user permanently being its property, rather it has been controlled or managed by the vendor/supplier who upgrades the same with passage of time against charges/license fee from time to time, though the principal softwares is embedded part of the hardware. In view of above discussion, the entire issue relates to a factual controversy which has rightly been settled by the forums below and the question raised by the applicant taxpayer is not made out. The tax forums have rightly amortized the same while considering the pro and cons of each and every aspect by the arguments advanced by the applicant company before the lower forums as the equipments and softwares used therein are treated separately and distinctly by the Ordinance.
10. While considering the question relating to the disallowing sales tax on free air time i.e., Question No.VII, the learned counsel for applicant company contends that the sales tax paid on free air time is considered to be an expense as the applicant company in order to attract the customers offered free air time, resulting into increasing of their revenue falls within the concept of Section 20 of the Income Tax Ordinance, 2001 where deduction in computing income chargeable under the head of Income from Business for a tax year be allowed for any expenditure incurred by a person in the year wholly and exclusively for the purpose of business. Contrary to that the learned counsel for tax department referred the deductions which are not allowed in terms of Section 20(1) of the Ordinance and contends that in terms of Section 21(a) of the Ordinance, no deduction shall be allowed in computing the income of a person under the head of "Income from Business". While considering the arguments we are of the view that the applicant company adopted their own marketing strategy to increase the business or attract the customers provided free air time at their own end but such practice does not absolve them from payment of sales tax upon those free air time to the customers and when the sales tax has been paid, the same could not be allowed to be considered in terms of expenses under Section 20(1) of the Income Tax Ordinance, 2001 as the applicant company has not booked any revenue against the free air time, therefore, sales tax paid on free air time could not be made part of deductions. We have also gone through the record and it appears that the applicant was specifically directed to provide break up of sales tax paid against free air time but the applicant company remained unable to segregate the tax paid on account of free air time from consolidated figure of total sales tax paid by the applicant company and as such, the deduction are not allowed in terms of Section 21(a) of the Ordinance. Hence the decision passed by the lower tax forums is within four corners of law and no legal question is made out in this regard.
11. Similarly, Questions Nos. I and II require legal interpretation as the applicant company has raised objection of question of jurisdiction exercised by the tax officers under Section 122(5A) of the Income Tax Ordinance, 2001, and is regarding selection of audit and whether the officer who exercised the jurisdiction has considered the prerequisite to invoke the provision of subsection (5A) of Section 122 of the Ordinance in a proper manner. Learned counsel for applicant company contends that the respondent ACIR (Audit-II) LTU, Islamabad has failed to appreciate the fact that there exists no circumstances to invoke the provision of subsection (5A) of Section 122 of the Ordinance and as such, the said provision could only be invoked on material available on record at the time of assessm ent, whereby the ACIR has initiated a rowing inquiry in the affairs of applicant company hence the very assumption of jurisdiction suffers from illegality. In the light of arguments advanced by the applicant company we have gone through the law i.e. Section 122(5A) of the Ordinance, whereby the said provision deals with amendment of assessment in detail manner and provides different eventualities as to when and how the Commissioner may amend an assessment order treated as issued under Section 120 or under Section 121 of the Income Tax Ordinance, 2001, the minimum requirement of law is the satisfaction of the Commissioner who considers it necessary and may initiate an inquiry as he deems consider that the assessment order is erroneous in so far it is prejudicial to the interest of revenue, as such, the plain reading of this details provision only imposes a single restriction that no assessment shall be amended, or further amended, under this Section unless the taxpayer has been provided/with opportunity of being heard in terms of subsection (9) of Section 122 of the Income Tar Ordinance, 2001.
12. As per law, the Additional Commissioner was duty bound to amend the assessment order so as to bring the deemed order in harmony with law and as such, the only requirement to provide an opportunity of being heard has been extended before amending the order. The record reveals that the relevant information and data provided by the applicant taxpayer in the return has been scanned for correct arithmetical working of the tax demand, per se, this aspect does not put any clog upon the tax authorities to call for information as to whether the deemed order is within four corners of law or not. It has been observed by the forums below that the tax liability has not been assessed and calculated by the applicant company in accordance with provisions of law. In such eventuality, it is legal duty and obligation of the Additional Commissioner Audit to give effect to the provisions of law ill a strict manner and when he observed that the tax has not been calculated in a proper manner, he considered it to be erroneous on the part of applicant company, who is, avoiding the tax liability, resultantly the assessment order is considered to be prejudicial to the interest of revenue, where the jurisdiction in terms of section 122(5A) of the Ordinance has rightly been exercised even with the only condition of limitation to provide an opportunity to the applicant company of being heard in terms of Section 122(9) of the Ordinance as held in 2016 PTD 596 Islamabad (Pakistan Tobacco Company Ltd. v. Federation of Pakistan). Hence, no illegality has been observed in this regard, therefore, respondent No. 3 Additional Commissioner Audit-II has rightly invoked the provision of Section 122(5A) of the Ordinance.
Exchange Loss
13. The applicant company with respect to exchange loss has brought the following question of law (Question V) to be answered by this Court.
V. Whether the Appellate Tribunal is right in upholding the decision of the fora below whereby tile exchange loss claimed by the Petitioner has been disallowed in violation of the judgment of the august Supreme Court of Pakistan rendered in the case of General Tyre and Rubber, reported as 1933 PTD 383?
14. While dealing with the question of exchange loss raised by the applicant company in above referred question, we have hard the contention of learned counsel for applicant Company, who contends that exchange loss was unrealized by the tax forums and they have failed to take into consideration that the applicant Company maintains its account on accrual basis as opposed to cash basis. In accrual method, any expense incurred in ordinary course of business, though not paid, is an allowable expense. We have gone through the orders of the forums below and it has been observed that the exchange loss has been declared unrealized and same cannot be allowed as an expense. In order to resolve the controversy, we have gone through the provision of Section 34(1) & (3) of the Ordinance, which deals with the accrual basis accounting, whereby a person accounting for income chargeable to tax under the head "Income from Business" on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person. However, the subsection (1) if read with conjunction with subsection (3) of section 34 of the Ordinance, which says that an amount shall be payable by a person when all the events that determine liability have occurred and the amount of the liability can be determined with reasonable accuracy. As such, the concept of reasonable accuracy is a primary consideration for determining the question of exchange loss in the accrual basis accounting system. Similarly, the concept of currency conversion in terms of Section 71 of the Ordinance is also considered to be an important factor, where every amount taken into account under this Ordinance shall be in Rupees, and in subsection (2) of Section 71, it has been held that where an amount is in currency other than Rupees, the amount shall be convened to the Rupee at the State Bank of Pakistan rate applying between foreign currency and the Rupee on the date the amount is taken into account for the purposes of this Ordinance. We are of the view that forums below have rightly held that loss being notional in nature and not sustained by the applicant company is not an allowable expense, as a result whereof the exchange loss has rightly been disallowed to the applicant company. At this stage, the applicant has heavily relied upon 1993 PTD 383 SC (Commissioner of Income Tax Companies v. M/s. General Tyres and Rubber Company of Pakistan). We have gone through the ratio settled in this case law, however the facts and circumstances narrated in supra case are entirely different, where assessee company on account of technical assistance fee has paid the amount in terms of the agreement, however the increased amount paid on account of devaluation of Rupee vis-a-vis US Dollar could not be claimed as deduction because this enhanced amount was paid due to default committed by the assessee at the proper time, hence the case law referred is distinguishable.
15. We have also observed that the tax department have followed a consistent practice in the above mentioned decision on exchange loss and such practice could not be deviated from the interpretation already been made consistently by the tax department while relying the principle settled in PLD 1970 SC 453 (Nazir Ahmed v. Pakistan).
Actuarial Loss
16. The applicant company with respect to actuarial loss has brought the following question of law (Question VI) to be answered by this Court: "VI. Whether the learned Respondent No.1 was right to disallow the actuarial loss on defined benefit of plans, by placing reliance on an earlier decision of the Tribunal, without considering the fact that the said loss is a genuine business expenditure?
While hearing the pro and contra arguments of the parties that the assessing officer has added the same on account that the expenditure claimed being estimate of a provision to be incurred in future and as such, violative to Sections 20(1), 32(1) and 34(3) of the Ordinance. The actual loss as claimed by the applicant company was not ascertainable and is notional as held by the assessing officer. It has also been observed from the orders passed by the assessing officer that actual loss is purely an estimation based provision, which has not been approved by any provision of the Income Tax Ordinance, 2001. Similarly, the Income Tax Appellate Tribunal also gave a consistent view with the findings of the lower forums and held that actual loss on defined benefits is not an allowable expense and, as such this Court is in agreement with the concurrent findings, even no question of law is made out in this regard.
Marketing Cost The applicant company with respect to customer acquisition/advertisement, publicity and royalty to PTA claimed the expense in terms of Questions III and IV, which are reproduced as under: III. Whither the learned Respondent No.1 was right in placing the reliance on Order in ITA No. 752/IB/2011 dated 05.06.2014, to disallow the expenses incurred by the Petitioner for customers acquisition, hence, an allowable expense under subsection (1) of section 20 of the Ordinance?
IV. Whether the learned Respondent No.1 is right to uphold the treatment of the fora below on account of advertisement publicity and royalty to PTA where under the said expenses are treated to be as of capital nature as opposed to the fact that such expenses are of recurring nature, hence allowable under the Ordinance?
Learned counsel for applicant company has consented to give up these issues during the course of arguments as similar question (Question IX) has already been settled in terms of Para-7 of this judgment.
Government Grants
18. In the captioned references, the Government grants/USF have also been discussed as an issue through Question XII, whereby the Government grants were added to the income of the taxpayer company, whereby the applicant is aggrieved with the orders of respondent No. 1. Learned counsel for applicant contends that the treatment of forums below has been upheld on account of grant received by Universal Service Fund (USF) which are exempt under clause 102(A) of Part-1 of the Second Schedule to the Ordinance while placing reliance on earlier decision of the Tribunal, passed in ITAT No. 334/IB/2014. It has further been argued that grants from USF, are meant for provision of uninterrupted high quality telecommunication services in far-flung areas. Through such grants, the Federal Government encourages the telecommunication companies to setup and develop their telecommunication sites in such areas despite the fact that it may not be commercially viable.
19. While considering the arguments of the applicant company, the counsel for tax department contends that bare reading of clause 102(A) of Part-I of the Second Schedule to the Ordinance declares that USF is not the Federal Government, therefore, assessing officer has rightly added the income grant received by the applicant from USF.
20. We have considered the pro and contra arguments of the parties. In order to resolve the issue, it is necessary to discuss the USF which has been established by Federal Government in terms of Section 33A of the Pakistan Telecommunication (Re-Organization) Act, 1996. The plain reading of said provision refers that USF shall be under the control of Federal Government, which consists of grants made by the Federal Government and Provincial Government, prescribed contribution by licensees, sales proceeds from the auction of the rights to use radio spectrum, loans obtained from the Federal Government and grants and endowments received from other agencies. In terms of Section 33(B) of the Pakistan Telecommunication (Re-Organization) Act, 1996, the Federal Government shall have the power to administer the USF in such a manner as may be prescribed under the law in the following manner: The USF shall be utilized exclusively for providing access to telecommunication services to people in the un-served, under-served, rural and remote areas and other expenditure to be made and incurred by the Federal Government in managing USF.
The Federal Government while exercising the powers under Section 33(A) read with Section 57(2)
(a)(b) of Pakistan Telecommunication (Re-Organization) Act, 1996 made the rules known as Universal Service Funds Rules, 2006 for management and control of funds. Hence, while considering the analogy on USF as well as in the rules there is no cavil to proposition that it has been controlled by the Federal Government but U.S.F is a separate entity registered under the companies law and same has been registered in terms of Rule 10 of the Universal Service Funds Rules, 2006, the same has been reproduced as under for ready reference:
10. Creation of USF Company. - (1) The Federal Government shall within sixty days of the commencement of these rules cause incorporation of a USF company limited by guarantee in accordance with the Ordinance. The Federal Government may within seven days of such incorporation transfer an amount of fifty million rupees in the accused of USF company to enable it to meet its initial needs and capital expenditure.
(2) The Secretary Information Technology, and two officers of the Federal Government nominated by the Secretary shall prescribe their names to the memorandum and articles of association of the company.
In view of above, the USF company could not be called as a Federal Government, as it is evident from above referred provision that USF company is other than Federal Government, whereas the Federal Government has been explained and highlighted by the apex Court in the case reported as PLD 2016 SC 808 (Mustafa Impex v. Government of Pakistan), therefore, it is not permissible to intermingle the USF company, with the Federal Government in any manner under the law, hence, any grant extended to the applicant company is considered to be income of the company which could not be excluded, however the reference clause 102A of Part 1 of Second Schedule to the Ordinance is related to grants/subsidies from the Federal Government, which is not applicable in this case and U.S.F. could not be stretched into concept of Federal Government in any manner, hence the concurrent findings given by the forums below are upheld and maintained.
21. Besides the above referred discussion on each and every question, we are also of the view that all questions raised by the applicant Company are based on factual aspects, except the question of jurisdiction, whereby the jurisdiction of the High Court under Section 133 of the Income Tax Ordinance. 2001 is advisory in nature and same be exercised only on a proposition or question of law arising out of the decision passed by the Income Tax Appellate Tribunal, which is the last fact finding forum and as such, the High Court in reference jurisdiction cannot change the facts arrived by it. Reliance is placed upon 2015 PTD 515 Lahore (Commissioner Inland Revenue v. Macca CNC Gas Enterprises). Even otherwise, the learned counsel for applicant Company has failed to highlight any perversity in the impugned orders of the Income Tax Appellate Tribunal, whereby the concurrent findings of forums below are within four corners of law, which could not be interfered with unless any perversity has been highlighted and, as such, the questions proposed by the applicant Company are questions of facts, except the question of jurisdiction, therefore, the proposed questions are not to be considered questions of law arising out from the impugned orders, passed by the Income Tax Appellate Tribunal, therefore, all the references are answered in NEGATIVE.