1989 PTD (Trib (PLP)

This departmental appeal is directed against the order of learned C.I.T. (A) recorded by her on 16th May, 1987, relating to assessment year 1985-86. The relevant facts giving rise to it are that the respondent, a Private Limited Co., filed its return claiming exemption under clause (122) of the Second Schedule of the Income Tax Ordinance and the same was accepted. However, subsequently the I.T.O. felt that, in any case, he should have charged Workers Welfare Fund. He, therefore, issued notice under section 156 of the Income Tax Ordinance and after hearing the respondent charged Workers Welfare Fund to the extent of Rs.1,20,

714. On appeal, however, it was contended before learned C.I.T. (A) that since the income of the respondent was exempt under clause (122) of the I.T. Ordinance, the I.T.O. fell in error in levying Workers Welfare Fund. The learned C.I.T. (A) has accepted this appeal and cancelled the order of the I.T.O. recorded under section 156 whereby he has levied Workers Welfare Fund. This time the department felt aggrieved and has come up in second appeal. Mr. A.R. Memon, the learned DR, has vehemently argued that the I.T.O. was directed by C B R to levy Workers Welfare Fund in all cases even if their income stood exempted under Second Schedule of the Income Tax Ordinance, hereinafter referred to as 'the Ordinance'. He further contended that the learned C.I.T. (A) did not give any reason in ordering its deletion hence her order was not sustainable in law. Mr. Farooq Ali, F C A the learned counsel for the respondent, however, inviting my attention to Section 4 of the Workers Welfare Ordinance, 1971, argued that the respondent could be saddled with the liability if its income was assessable to income-tax under the Ordinance. In his opinion the impugned order is unexceptionably sound and calls for no interference. I have heard both the learned DR as well as the learned counsel for the respondent. From perusal of the order it appears that the I.T.O. recorded his order under section 156 of the Ordinance with the following observation:- "Contention of the assessee is not forceful, because Workers Welfare Fund is being levied under Workers Welfare Fund Ordinance, 1971, and it has nothing to do with the fact that assessee's income is not liable to tax. The mistake is obvious from the record and it is therefore accordingly rectified under section 156 of the I.T. Ordinance. 1979, as under: On assessed income of Rs.66,15,404 @ 2/102=Rs.1,29,

714. The learned C.I.T. (A) on the other hand, has not subscribed to his point of view and agreeing with the contention of the respondent that since its income was exempted under clause (122) of the Second Schedule of the Ordinance, the Workers Welfare Fund was not liable to be charged, she has been pleased to direct the deletion thereof. I would, therefore, deal with this aspect in some details. Starting with Section 4 of the Workers Welfare Fund, firstly I reproduce it for ease of reference and it reads as under:- "Mode of payment by and recovery from Industrial establishments- (1) Every industrial establishment, the total income of which in any year of account commencing on or after the date specified by the Federal Government in the official Gazette in this behalf is not less than one lakh of rupees shall pay to the Fund in respect of that year a sum equal to two per cent of so much of its total income as is assessable under the Ordinance or would have been so assessable but for the exemption made by Section 48 thereof. (2) Every industrial establishment, which is liable under subsection (1) shall pay the amount due from it to the I.T.O. having jurisdiction over the industrial establishment for purposes of the Ordinance. (3) The industrial establishment shall, on or before the date on which it is required to furnish a return of - income under section 55 of the Ordinance, pay the amount due from it under subsection (1) calculated with reference to the total income reported in the said return. (4) At the time of making an assessment under the Ordinance or as soon. thereafter as may be, the I.T.O. shall, by order in subsection (1), if any, on the basis of the income so assessed after taking into account the amount paid by the industrial establishment under subsection (3) in respect of the year and the industrial establishment shall pay the amount so determined on or before the date specified in the order. (5) Any change by way of enhancement or reduction in the assessed income subsequent to the assessment made, under the Ordinance shall be given effect to by adjustment of the amount due under subsection (1). (6) Any amount paid by an industrial establishment under subsection (3) which is found, on the basis of an order in appeal or revision under the Ordinance, to have been paid in excess shall be refunded to it by the I.T.O. (7) The payment made by an industrial establishment to the Fund under subsection (1)` shall be treated as an expenditure for purposes of assessment of income-tax. (8) Where any industrial establishment fails to pay the amount due from it as required under this section, it shall, without prejudice to any other liability to which it may be subject under this Ordinance or any other law, be liable to pay an additional amount equal to eight per cent per annum of the amount due from it from the date on which it was originally payable to the date on which it is paid. (9) The provisions of the Ordinance relating to the mode and time of recovery of the income-tax leviable under the Ordinance shall, so far as may be, apply to the recovery of the amount due under subsection (1). " Now from perusal of this section it appears that the Legislature has used the expression 'total income' and `the Ordinance' in it. However, when I refer to section 2 of the Workers Welfare Fund Ordinance of 1971 it appears that the expression "Ordinance" and `total income have been defined by its clauses (fl) and (i) and they read as under:- - "

2. Definitions.--In this Ordinance unless there is anything repugnant in the subject of context- (b) ............................................ (c) ............................................ (d) ........................................ (e) ...................... . (f) ............................................ (ff) 'Ordinance' means the Income Tax Ordinance, 1979, (XXXI of 1979). (g) ....................................... (h) ............................................ (i) 'total income' has the same meaning as in the Ordinance. (j) ............................................ Thus, it is clear that the expression `total income' as used in the Workers Welfare Fund Ordinance carries the same meaning which has been ascribed to it under the Ordinance. Let me, therefore, now revert to Section 2 (44) of the Income Tax Ordinance and it reads as under:

"2 (44) `total income' means the total amount of income referred to in Section 11 computed in the manner laid down in this Ordinance; and includes any income which, under any provision of this Ordinance, is to be included in the total income of an assessee." Now, if we read Section 11 of the Ordinance it appears that it deals with the income of a resident or a non-resident together with the income which accrues or arises or is deemed to accrue or arise within or outside Pakistan. Thus, for the purposes of working out total income, all the income earned anywhere in the world is to be included however, from perusal of Section 4 as reproduced above it appears that though the Workers Welfare Fund is charged on the total income yet it is to be worked out at the rate of 2% of so much of total income of an assessee which is assessable under the Ordinance provided it is not less than 1 lakh in a particular year. Mr. Farooq Ali, the learned, counsel for the respondent, has argued that since the income of the respondent was not assessable in view of clause (122) of the Second Schedule of the Ordinance, Section 4 of the Workers Welfare Fund Ordinance did not apply in his case. His contention seems to be correct. By laying down the words "so much of the total income of an assessee which is assessable under the Ordinance", the Legislature has made its intention very clear that Workers Welfare Fund could be levied on that total income which was assessable under the Ordinance. On the 'other hand, Section 14 of the Ordinance has laid down that notwithstanding anything contained in the Ordinance, incomes or classes of income or persons or classes of persons, specified in the Second Schedule shall be exempted from tax' under this Ordinance subject to the conditions and to the extent specified therein. Now if we turn to Second Schedule it appears that it carries the heading of "Exclusions from Total Income". Thus, if the definition-of 'total income' as reproduced above is read with Section 14 and the Second Schedule it appears that the income which has been excluded by Section 14 read with Second Schedule would not fall within the definition of total income unless some provision of the Ordinance lays down that it should be included. Moreover, such total income would also be not assessable under the Ordinance in view of aforesaid provisions of the Ordinance. This conclusion further finds support from the omission of Section 14 in Section 4 of the Workers Welfare Fund Ordinance though Section 48 of the Ordinance has been specifically mentioned therein. Thus, had it been the intention of the legislature to make even the exempted income a subject-matter of Workers Welfare Fund, its last line would have read as follows:- -"Or would have been so assessable but for the exemption made by Section 14 or Section 48 thereof." It is true that the Workers Welfare Fund is a piece of beneficial legislation but, in any case, it is saddling tax-payers with additional liability. It is true that it is not a good purpose but since there is no Legislative Authority empowering the I.T.O. expressly or impliedly to levy Workers Welfare Fund on total income of an assessee which is not assessable under the Ordinance, the order of learned C.I.T. (A) appears to be correct. Let me mention at this juncture that the income, which is declared exempted under section 14 read with Second Schedule is not and cannot be deemed to be assessable as the I.T.O. has no power to levy any tax thereon under section 62 of the Ordinance. In a case reported as (1989) P T D (Trib.)

617. I have dealt with this aspect in some details and for h sake of brevity I just rely on the reasons given therein. In view of discussion made above the departmental appeal appears to be devoid of any merit and it stands rejected accordingly. M.B.A./639/T Appeal rejected.