2010 PLP 2003 (PTD)

EJAZ AFZAL KHAN, C.J.

This reference application raises the following question of law:- "Whether, the ITAT, on the facts and in the circumstances of the case, was legally justified to delete additional tax under section 88 whereas at the relevant time refund was neither established nor created on the record of the assessee".

2. Learned counsel appearing on behalf of the applicant contended that deletion of additional tax under section 88 of the Income Tax Ordinance, 1979 was unjustified when at the relevant time no refund was created. He by referring to the cases of Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi v. Commissioner of Sales, Central, Zone-B, Karachi (2006 SCMR 1577) and Messrs Bisvil Spinners Ltd. v. Superintendent, Central Excise and Land Customs Circle Sheikhupura and another (PLD 1988 Supreme Court 370), contended that Statutes imposing pecuniary burden are to be construed strictly and not liberally to make out a case for the benefit of the person taxed.

3. As against that, the learned counsel appearing on behalf of the respondent, contended that refund was already created and established at the relevant time, as such, deletion of additional tax under section 88 of the Ordinance was perfectly justified. Even if, it be otherwise, he added it being a question of fact rather than of law cannot be gone into by this Court while being seized of a reference. He next contended that where the assessees are not paid any interest on delayed refund, the Department on the principle of parity is not supposed to charge the additional tax.

4. We have gone through the record carefully and considered the submissions of the learned counsel for the parties.

5. Creation of refund is not disputed on the record. What is disputed is its adjustment against the tax payable because of its subsequent creation. Now the question crops up whether the creation of refund, which relates to the year preceding the assessment year can be termed as subsequent so as to justify refusal of its adjustment against the tax payable. Before we answer the question, it is worthwhile to refer to section 88 of the Ordinance which reads as under:

"

88. Charge of additional tax for failure to pay tax with the return.

Where any assessee fails to pay tax under section 54 or the tax so paid is less than the tax payable under that section, he shall be liable to pay additional tax at the rate of twenty four per cent, per annum of the amount not paid or the amount by which the tax paid by him falls short of the tax payable under that section, as the case may be, and such additional tax shall be calculated from the first day of October or the date on which the tax was payable, whichever is the later, to the date on which the tax is paid or the date on which an order under subsection (1) of sections 59, 59-A, section 62, section 63 or section 65, as the case may be, is made, whichever is the earlier."

6. A perusal of the above quoted provision reveals that assessee becomes liable to pay additional tax, when he fails to pay the tax under section 54 of the Ordinance or the tax paid is less than the tax payable under that or any other section enumerated above. Creation of refund or its adjustment against the tax payable is quite outside the ambit of this provision, if we construe it according to the plain meanings of the words used therein. It is section 104, which envisages the adjustment of refund against the tax payable. But it has to be seen when the tax becomes payable and when the refund becomes due. The tax becomes payable under section 54 of the Ordinance on furnishing the return of income. It becomes payable under section 59,59-A, 62,63 or 65 on completion of assessment. Assessment, in our view, does not mean determination of what is payable. It also includes determination of what is refundable. As both of them are interconnected with and have deep bearing on each other, determination of the former, as far as it is possible, must coincide with that of the latter notwithstanding they are dealt with by different provisions of the Ordinance. It is all the more desirable when refund relates to the year preceding assessment year. When confronted as to why so much slackness on the part of the Income Tax Officer, the learned counsel for the appellant, submitted that the respondent may have filed the application for rectification belatedly. When seen in this background, the learned Appellate Tribunal by off setting the refund of the tax payable was perfectly justified to delete the additional tax. The moreso when it arises out of the preceding assessment year.

7. Yes, the Statute imposing pecuniary burdens are to be construed strictly rather than liberally as held in the cases Pakistan Machine Tool Factory (Pvt.) Ltd., Karachi v. Commissioner of Sales, Central, Zone-B, Karachi and Messrs Bisvil Spinners Ltd. v. Superintendent; Central Excise and, Land Customs Circle Sheikhupura and another (supra), but it does not mean that the Statute be strained and stretched to an extent where even the due benefit should be denied to the person taxed. We do not agree with the contention of the learned counsel for the applicant that the learned Appellate Tribunal has construed- the provisions of the Ordinance liberally to benefit the person taxed. It, as a matter of fact, has construed it, according to the recognized principles regulating the understanding and interpretation of Statutes. We, therefore, have no hesitation to answer the question in the affirmative. This reference stands disposed of accordingly. S.A.K./260/P Answer in affirmative.