NASIR ASLAM ZAHID, J. -By this judgment we propose to dispose of Sales Tax Reference No. 4 of 1972 as well as Reference -No. 5 of 1972. Except for the fact that Sales Tax Reference No. 4/72 relates to assessm ent year 1961-62 and Sales Tax Reference No. 5/72 relates to assessment year 1962-63, the facts are similar in both cases, assessee is the same and the question referred by the Income Tax Appellate Tribunal (Karachi Bench) Karachi is also identical and which is as follows: - "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that rule 19 of the Sales-Tax Rules, 1951 was inapplicable?
2. Very briefly the facts relevant for decision of the present reference are that the assessee assembles radios of the famous brand `Philips' and there is another concern carrying on business in Pakistan under the, name of `Philips Electrical Company' (hereinafter referred to as `the Company'). It is an admitted position that these two companies, namely the assessee and the Company are associated/inter-related or affiliated companies within the meaning of the words used in rule 19 of the Sales Tax Rules. Under an agreement entered into between these two companies the entire goods assembled/manufactured by the assessee were agreed two be sold to the Company. This agreement was executed on 29-9-1955 and it took effect from 15-11-1954.
Now the prix at which the goods were sold by the assessee to the Company was different and admittedly lower than the price at which the Company sold the same products, after having purchased the same under the aforesaid agreement from the assessee, to consumers in Pakistan.
For the relevant years in question, namely assessment years 1961-62 and 1962-63, it is an admitted position that the Company was not selling its products to any whole sellers meaning thereby that sales were made di--rectly by the Company to the consumers. The point in issue was whether for the assessm ent years in question, the price on which sales-tax was chargeable from the assessee was the sale price at which the goods were sold by the assessee to the Company, or at the price at which the same goods were in its turn sold by the Company to the consumers. The Tribunal decided in favour of the assessee that for the assessment years in question, sales Tax was chargeable from the assessee on the sale price at which the goods were sold by the assessee to the Company and not at the price at which the goods were sold by the Company to the consumers. The case of the Department before the Income Tax Tribunal was that in the facts and circumstances of the case, rule 19 of the Sales Tax Rules was applicable. However, the Income Tax Tribunal decided otherwise holding that rule 19 of the Sales Tax Rules was in--applicable on the facts and in the circumstances of the case in respect of the assessment years to question.
We may here refer to certain legal provisions which are relevant for the purposes of answering this reference. Section 3 of the Sales Tax Act, 1951 inter alia provides for levy and collection of sales tax on the value of all goods produced or manufactured in Pakistan payable by the manu--facturer or producer, and the value of the goods means, according to section 3 (2) as the sale price. Section 2
(16) defines sale price. We may then reproduce rules 18 and 19 of the Sales Tax Rules which read as under :- "(18) The `wholesale price', for the purposes of the rules in this part, means the price for which, the manufacturer or producer regularly sells his taxable goods of like quality and value in the ordinary course of business to bona fide independent wholesalers in representative whole sale quantities in the territory in which the sale is made."
"(19) Where a manufacturer or producer sells his taxable goods to wholesalers and others the tax shall be paid on the wholesale price except where otherwise determined by the Sales Tax Officer.
Where the vendor and the purchaser are inter-related, associated or affilia--ted concerns, or where one is subsidiary to the other, the whole sale price established by either of them by sales to independent whole--salers, shall be the value on which the tax is payable, except where otherwise determined by the Sales Tax Officer."
4. It is contended by Mr. Nasrullah Awan, learnt counsel for the Commissioner of Sales Tax, that as it is admitted by the assessee that the Company and the assessee were inter-related/associated or affiliated concerns, rule 19 is applicable to the case of sales made by the assessee. In our view a reading of rule 19 shows that it is applicable in two situations. It is firstly applicable where a manufacturer or producer sells his taxable goods to whole-sellers and others in which case the tax is payable on the wholesale price. This is not the situation here as the case of the assessee for the assessm ent years in question, which is an admitted position, is that sales were not made by the assessee to wholesallers and others. In fact sales were only made to one concern, namely the Company. Then the other situation where rule 19 is attracted is where the vendor or purchaser are inter related/associated or affiliated concerns or where one is subsidiary to the other. In such a situation the wholesale price established by either of them by sales to independent wholesellers is taken as the value an which the tax is payable. This is also not a case as far as the assessee is concerned as no sales were made either by the assessee or by the Company to any inde-- pendent wholesalers. As observed earlier, the Company, for the assess--ment years in question has made sale directly to consumer and no t~ to independent wholesalers. In the circumstances we are of the view, that the Income Tax Tribunal was correct in holding the rule 19 was not applicable to the assessee as far the assessment years in question are concerned.
5. We may here refer to the contention raised by Mr. Nasrullah Awan, learned counsel for the Commissioner of Sales Tax, based on rule 22-A, which rule was added to the Sales Tax Rules through Notification No. SRO 733 (K)/63, dated 21-9-1963. This rule 22-A is follows: - "(22-A) Notwithstanding anything to the contrary contained in rules 18, 19, 20, 21 and 22, where a manufacturer or producer sells goods to any person other than a bona fide independent whole- seller, the tax shall be payable on the price at which the goods are actually sold except where otherwise determined by the Sales Tax Officer."
This rule is dated 21-9-1963 and, according to Mr. Nasrullah Awan himself, it was made applicable with effect from 1-7-1963. Obviously, therefore, rule 22-A could not be applicable to the assessment years in question as the period under the assessment years in question expired on 30-6-1962. The notification by which this rule was added to the Sale Tax Rules itself provided that it would be applicable with effect from 1-7-1963, as observed. In the circumstances, learned counsel for the Commissioner of Sales Tax cannot call in aid of rule 22-A as far as the assessment years in question are concerned. The argument on the basis of rule 22-A not being relevant, we are not making any comments or reference to the res--pective contentions raised by both the learned counsel in that context.
6. In the circumstances, the question referred to us by the Tribunal is answered in the affirmative.