2011 PLP (Trib (PTD)

This appeal has been filed by the CIR (Legal) RTO, Islamabad against the impugned Order No. 680 of 2009 dated 18-5-2010 passed by the CIR(A) Islamabad for the tax year 2007.

2. Brief facts of the case are that M/s. Competitiveness Supports Fund, an international non-governmental association having its registered office at Islamabad applied to the Commissioner (Legal) Division R.T.O., Islamabad for recognition of provident fund for its employees under section 2(48) of the Income Tax Ordinance read with Rule, 2001. The Commissioner (Legal) rejected the aforesaid application on the grounds that the applicant did not fall within the definition of employer as contained in Rule 14W Part-I of the 6th Schedule of the Income Tax Ordinance, 2001 which reads as follows:-- "employer" means any person who maintains a provident fund for the benefit of his or its employees, being an individual, a company or an association persons engaged in any business the profits and gains whereof are chargeable to income tax under the head "Income from Business"."

3. The respondent, i.e., Messrs Competitiveness Support Fund filed an appeal before the CIR(A) on the following grounds: (1)?? That Commissioner (Legal) was not justified to exclude the appellant from the definition of employer. (2)?? That Commissioner (Legal) erred in declaring that 5(b) of the trust deed and Rule 7(a) of the fund rules were in contravention of Rule 2(1)(e) of Part-I of the Sixth Schedule to the Income Tax Ordinance, 2001. (3)?? That Commissioner (Legal) was also not right to declare Rule 30 of the fund as contradictory to the Rule 2(1)(d) of Part-I of the Sixth Schedule of the Income Tax Ordinance, 2001. (4)?? Without prejudice to the above the appellant. is ready to amend rule of the fund or trust deed, wherever it is desired to bring them in consonance with the taxation statute."

4. The learned Commissioner of Inland Revenue (Appeals) in exercise of the powers conferred on him by Rule 94 of the Income Tax Rules, 2002 vacated the order of the Commissioner (Legal) declaring that the application for approval of provident fund fulfilled the criteria laid down in Part-I of Schedule Sixth of the Income Tax Ordinance, 2001. The Commissioner (Legal) filed a rectification application with the Commissioner of Appeals which also failed.

5. Eventually the Commissioner Inland Revenue (Legal) filed this appeal before this Tribunal on the following ground: "That the learned CIR (Appeals-II) was not justified to hold that jurisdiction to hear the appeal lies with him for which he relied upon the format of application provided in Rule-94 of the Income Tax Rules, 2002 which mentions "Commissioner Appeal alongside the F.B.R./C.B.R.". However, the jurisdiction of CIR(A) is not clearly mentioned in the body of Rule 94 itself. Moreover, in a parallel case of Messrs Comsat Institute of Information Technology, the CIR (A) held that an appeal under Rule 94 can be filed before C.B.R./F.B.R. alone and rejected the appeal of the Taxpayer."

6. The learned departmental representative argued that the CIR(A)'s jurisdiction was specified in para. 4 section 127 of the Income Tax Ordinance, 2001 and was limited to sections 121, 122, 143, 144, 162, 170, 182, 183, 184, 185, 186, 187, 188, 189, 161, 172 and

221. B Therefore, the learned CIR (A) has no jurisdiction in matters falling under section 2(48) of the Income Tax Ordinance, 2001 read with Rule 94 of the Income Tax Rules, 2002, being outside the ambit of his specified jurisdiction. The learned DR representing the appellant, further reiterated that the CIR (A)'s following decision was based on misconstruction of Rule 94 of the Income Tax Rules, 2002:-- Text of Order in Appeal "

94. Form of appeal in case of non-recognition or withdrawal of recognition.

(1) An appeal under sub-rule (1) of Rule 12 of Part-I of the Sixth Schedule to the Ordinance [against] the Commissioner's decision to refuse an application for recognition or to withdraw recognition shall be [made to Federal Board of Revenue in the following form [and] shall be verified in the manner indicated therein, namely:- FORM OF APPEAL IN CASE OF NON RECOGNITION OR WITHDRAWAL OF RECOGNITION To The Central Board of Revenue Islamabad Before the Commissioner (Appeals) The petition????? " Therefore the objection raised in the rectification application is unfounded and without legal strength. Rectification application stands disposed of as indicated above. The DR contented that the learned CIR (A) had no jurisdiction to accept an appeal against non recognition of provident fund as Rule 94 does not authorize him to do so.

7. The counsel for the respondent stated that Rule 94 designates F.B.R. as well as the Commissioner Appeal, being the appellate authority in case of non recognition of withdrawal of recognition of provident because the form of appeal appended to Rule 94 envisages vestiture of concurrent authority of appeal in the F.B.R./Commissioner of Appeals. The learned counsel for the respondent insisted that the learned CIR (A) rightly exercised his jurisdiction because Rule 94 of the Income Tax Rules, 2001 did vest the appellate authority in him. He further stated that the respondent was victim of red tapism of the R.T.O, which was refusing to give effect to the decision of the CIR(A) regarding recognition of his provident fund.

8. We have heard the arguments of the parties to the case. The single issue involved in this appeal is whether or not CIR(A), recognized the respondent's provident fund in exercise of lawful jurisdiction conferred on him by relevant law. Having examined the case record and hearing the arguments of both the parties, we find that neither section 127 of the Income Tax Ordinance, 2001 nor Clause 12 of Part-I of Sixth Schedule to the Income Tax Ordinance, 2001 nor Rule 94 of the Income Tax Rules, 2002 vests appellate authority in the office of CIR(A) in cases falling outside his specified jurisdiction like this case. In the presence of the aforesaid provisions of substantive law, the learned CIR(A) could not lawfully assume jurisdiction of the issue in question merely because the form of application appended to Rule 94 of Income Tax Rules, 2002 mentions the word "Commissioner (Appeals)" alongside the Central Board of Revenue, Islamabad. If the text of Rule 94 does not mention Commissioner of appeal, its mention in the form of appeal might have been a typographical omission or mistake. From the text of Rule 94 and clause 12 Part-I of Sixth Schedule to the Income Tax Ordinance 2001, it follows that the recognition or non-recognition of provident fund has been treated as an administrative matter and the appellate forum for a matter flowing from sub-rule (1) of Rule 12 of Part-I of the Sixth critical Schedule to the Ordinance has been stated to be the Federal Board of Revenue. Had there been a legislative intent to empower the Commissioner appeal, the Rule 94 would have stated so. Besides we find another defect in the Order-in-Appeal passed by the CIR(A). It has transpired that the adjudication authority in this case was assumed by the CIR(A), without having issued a show cause notice ignoring that the starting point of an adjudication proceedings is a show cause notice which was never issued in this case. We cannot imagine any adjudication proceeding which can commence without as show-cause notice. In view of the legal question involved in this case we have no hesitation in holding that the learned CIR(A) did not have jurisdiction to pass an appellate order in the case in question. Therefore, the order of the CIR(A) is set aside. being without jurisdiction. The respondent may approach the F.B.R. for remedy in this case.

9. This appeal is accordingly disposed of. C.M.A./23/Tax(Trib.)?????????????????????????????????????????????????????????????????????????? Order accordingly.