1999 PLP (Trib (PTD)

There is also another judgment delivered by Full Bench reported as 1998 PTD (Trib.) 291 wherein it is held as under:

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58. Applying above meanings to word 'technical' to the nature of job performed by the non-resident company we find that the job performed is on all fours to the rendering of technical services. The definition 'fees for technical services' is inclusive of the provision of services of technical or other personnel and the nature of job already explained above shows that the Assessing Officer has rightly held that the remuneration paid by the assessee company to the non resident does not fall within the purview of industrial or commercial profits so as to attract the exemption provisions contained in the 'agreement for avoidance of double taxation between U.S.A. and Pakistan." Referring to another case reported as 1998 PTD (Trib.) 1264, the question which came for the consideration of the bench was as to whether the receipts of a non-resident consultant company, which provided log data to Pakistan oil drilling company, could be treated as fee for technical services in terms of the Explanation to section 12(5) of the Ordinance and taxed at the rate specified under section 80-AA of the Ordinance. After thorough appraisal and appreciation of various Articles of the Contract and after giving detailed reasoning, it was held in this judgment that the receipts of the assessee company clearly fell in the purview of "fee for technical services" as defined in the Income Tax Ordinance. The Assessing Officer had, therefore, rightly taxed the same under section 80-AA of the Ordinance and the CIT(A) had rightly confirmed this action. Hence, there is hardly any justification for the interference in the matter. In the scenario we are of the considered opinion that the activities carried out by the non-resident consultants company are in no way construction, assembly or the like projects which have been specifically excluded from the ambit of technical services chargeable to tax under section 80-AA of the Ordinance. In fact the non resident consultants company was not engaged in actual drilling process. Its activities were rather rendering subsidiary technical services. The technical services can be', rendered through advice which is based on technical information and data collected through technical personnel by using technical equipments and tools. It is thus concluded that end products of the assessee company was collection of scientific data and its interpretation and that physical activities were simply incidental to that end. So far as the employment of highly skilled personnel, use of sophisticated equipment by the assessee company for the purpose of collection of subsurface data and giving of expert advice are concerned, it was nothing but a technical service and the fees received in this connection squarely fell in the definition of fee for technical service in terms of the Explanation to section 12(5) of the Ordinance being the non resident consultants. Since, the assessee company was engaged in collecting technical data from the subsurface / subsoil area through its technical equipments and personnel and necessary analysis were made and suitable advice was given to the oil drilling companies, therefore, these activities were clearly covered by the definition of "fee for technical services", as given in section .12(5) of the Income Tax Ordinance, and were chargeable to tax at the rate specified in section 80-AA of the Ordinance. It is further held that specific provisions of section 80-AA of the Ordinance, because of non obstante clause contained therein, would naturally override the general provisions of sections 22, 23 and 24 of the Ordinance. Therefore, the Assessing Officer was fully justified in assessing the non resident consultant company under section 62 read with section 80-AA of the Ordinance. Consequently by rejection the contention of the assessee we confirm the order of the Assessing Officer whereby he treated the receipts of the non resident consultants company as fee for technical services and- taxed them under the provisions of section 80-AA of the Ordinance. The next contention of the learned A.R. is that as to determine whether a particular contract is a construction, assembly or like projects or not, no exhaustive explanation or interpretation has been given in the Income Tax Ordinance, 1979. He, however, referred to Indian Income Tax Law to contend that according to that law the construction, assembly or like projects are such in which the activities virtually amounted to carrying on business for which considerable expenditures are to be incurred in the execution of contract. We do not concur to such contention because it is always the end result which specifies the character of the receipts. Incurring of substantial amount of expenditure is nothing to do to ascertain the exact nature of the activities carried out by the assessee. This objection of the assessee, therefore, stands overruled. The other plea of the learned A.R. is that since the amount received by the non-resident consultant company represented payments on account of execution of a contract, the tax was to be deducted at source at the rate of 6% of the receipts under section 50(4) of the Ordinance, therefore, it should be assessed under section 80-C(2)(b) of the Ordinance as final discharge of its tax liability, having no other source of income. This contention of the learned A.R. is devoid of any force because we have already held in the earlier part of this order that the services provided by the non-resident consultant company fell within the definition of "fee for technical services" in terms of the Explanation to section 1:2(5) of the Ordinance and were chargeable to tax at the rate of 15-% of such receipts, deemed to be income of the non-resident consultant company under section 80-AA of the Ordinance. So, we need not to dilate upon this objection of the assessee more. The next contention of the learned A.R. is that discriminatory treatment is given to the assessee by the-Assessing Officer by treating its receipts as fees for technical services. He stated that in another foreign non resident company namely M/s. Bureau of Geophysical/China Petroleum Technology and Development Corporation, engaged in similar business; i.e. acquisition of seismic data, tax was deducted from her under section 50(4) read with para. E(ii)(a) of Part I of 1st Schedule of the Ordinance at the rate of 6 % on .account of execution contract for construction, assembly or like projects in Pakistan rather than fee for technical services by the Tax Department whereas the assessee was charged to tax @ 15 % on its receipts. This contention of the assessee is without any substance because two wrongs do not make one right. We would also like to add that the order made by one Assessing Officer does not have binding effect on the other Assessing Officer on the similar issue. Only the judgments/orders of the higher Appellate Authorities are followed or adopted for the purpose of consistency. The learned A.R. further argued that the assessee-company be paid damages of Rs.70,000 per month as the Assessing Officer violated the provisions of section 81 of the Ordinance. This contention of the assessee is misconceived. This Tribunal is not empowered to award damages decree against the Assessing Officer. Actually no remedy is available with the assessee within the four corners of the Income Tax Ordinance for this purpose. It is worth mentioning that where the Assessing Officer has made or passed any order, the appropriate remedy available in the Income Tax Ordinance is either to institute appeals before the appellate forums for revisional jurisdiction can be invoked before the Tax Authorities. In any case, section 81 of the Ordinance does not relate to finalization of assessment within 15 days from the date of service of the notice upon the Assessing Officer under subsection (1) of this section, where a person is likely to leave Pakistan. In fact, the assessee was obliged to accompany return or returns of income alongwith the notice as is laid down under section 81(2) of the Ordinance but it failed to do so. In view of this position, the Assessing Officer was fully justified in issuing a notice under section 56 of the Ordinance to the assessee in directing to furnish its return of income for the year under appeal and formulating its assessment under section 62 read with section 80-AA of the Ordinance. The learned A.R. of the assessee has also furnished an additional ground of appeal during the course of appeal proceedings. It is contended therein that as per Articles VII of Convention made between Islamic Republic of Pakistan and Canada for the avoidance of double taxation, the provisions of section 80-AA of the Ordinance do not apply to the facts of the present case. Rather the business profits of the non-resident consultants company are covered by the provisions of sections 22, 23 and 24 of the Ordinance. Upon having perused the Convention for avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income, it is noted that Article VII is dependent upon Article V of the Convention which mentions about permanent establishment. According to Article V, for' the purposes of this Convention, the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried and Article VII clearly hints out that the profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on or has carried on business in the other contracting States through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them, as is attributable to- that permanent establishment; or sales of goods or merchandise of the same or similar kind as those sold or from other business activities of the same or similar kind as those effected, through that permanent establishment. The other clauses of Article VII of the Convention i.e. from 2 to 7 explain the mode and the method of apportionment of profit and expenses in the determination of the profit of a permanent establishment. So, Article VII is hanging down on Article V of the Convention and cannot be read solely. However, from perusal of the documents furnished by the learned A.R. it is noticed that the assessee took different stands with regard to the above contention during the course of the assessment proceedings. At one point of time he applied for exemption certificate under subsection (3) of section 50 of the Ordinance while on the other point of time it requested the Department vide its letter dated 11-1-1997 that the assessee's activities be considered as execution of contract by non-resident consultant company and tax be deducted under section 50(4) at the prescribed rate of 6% and the tax so deducted be treated its final discharge of the liability. This shows the wavering mind of the assessee because he was not definite personally as to whether the subject contract was executed through an agent or by establishing branch office/permanent establishment in Pakistan. Since, the learned A.R. of the assessee has neither substantiated this contention with any documentary evidence nor adduced any material evidence either before us or any of the two authorities below we, therefore, do not find any substance in the contention of the assessee and dismiss the same. The learned A.R. further argued that consideration for technical know-how is covered by the definition of "royalties" as given in para. 4(b) of the Article XII of the convention. Although he conceded that the assessee's case is not covered under Article XII, but it was asserted that if Article XII does not apply, then the assessee's case necessarily get covered under Article VII which deals with business income. We have already held that income of the assessee is not "income from business for profession" assessable under section 22, but in fact is governed by special provisions of section 80-AA. Therefore, Article VII which relates to business profits is not relevant to the assessee's case. We have also .gone through the one reported case-law in re: 1993 PTD 739 and three unreported decisions of the Tribunal bearing I.T.As. Nos.914/IB of 1991-92, 266/113 of 1993-94 each, dated 27-5-1996. I.T.As. Nos.1133-1134/IB of 1995-96, dated 25-6-1996 and I.T.As. Nos. 18 and 19/113 of 1994-95, dated 24-6-1996 referred to by the learned A.R. of the assessee in support of his contentions on all the points discussed above and observed that none of the case comes to the rescue of the assessee because the judgment of these cases revolved around altogether different set of facts. Hence, need not to be discussed for the purpose of brevity. By vacating the order of the First Appellate Authority and restoring that of the Assessing Officer, we dismiss the assessee's appeal pertaining to assessment year 1997-98, being devoid of any force. C.M.A./51/(Trib.) Appeal dismissed.