2015 PLP 1863 (PTD)

FAISAL ARAB, C.J.

The petitioner, who is engaged in the business of providing safe deposit locker services, received a notice from respondent No.2 requiring it to register itself and pay sales tax on its revenue income under the Sindh Sales Tax on Services Act, 2011. The petitioner responded by claiming that it is not liable for registration under Sindh Sales Tax on Services Act, 2011 as only banking companies providing safe deposit locker or safe vault services are liable to pay sales tax on such services. The respondent No.2 did not find the response satisfactory and demanded sales tax. The petitioner challenged the demand by filing this petition.

2. Mr. Agha Faisal, learned counsel for the petitioner, referred to Tariff Heading No. 98.13 appearing in Part B of the Second Schedule to the Sindh Sales Tax on Services Act, 2011. For convenience sake, the relevant part of Tariff Heading 98.13 is reproduced as under:-- 98.13 Service provided or rendered by banking companies, insurance companies, cooperative financing societies, modarabas, mushari-kas, leasing companies, foreign exchange dealers, non-banking financial institutions and other persons dealing in any such services. 16% 9813.1100 Goods insurance 16% 9813.1200 Fire insurance 16% 9813.1300 Theft insurance 16% 9813.1400 Marine insurance 16% 9813.1500 Life insurance 16% 9813.1600 Other insurance including reinsurance 16% 9813.3000 Services provided or rendered in respect of leasing 16% 9813.3010 Financial leasing 16% 9813.3020 Commodity or equipment leasing 16% 9813.3030 Hire purchase leasing' 16% 9813.3900 Services provided or rendered in respect of modaraba and musharika financing 16% 9813.4000 Services provided or rendered by banking companies in relation to: 16% 9813.4100 Guarantee 16% 9813.4200 Brokerage 16% 9813.4300 Letter of credit 16% 9813.4400 Issuance of pay order and demand draft 16% 9813.4500 Bill of exchange 16% 9813.4600 Transfer of money including telegraphic transfer, mail transfer and electronic transfer 16% 9813.4700 Bank guarantee. 16% 9813.4800 Bill discounting commission 16% 9813.4900 Safe deposit lockers 16% 9813.4910 Safe vaults 16%

3. After referring to Tariff Heading 98.13, the counsel for the petitioner argued that the service of providing safe deposit lockers or safe vaults find mention only in sub-sub Tariff Headings 9813.4900 and 9813.4910 and both these sub-sub Tariff Headings fall under sub-Tariff Heading 9813.4000 which describes only the banking companies as service provider and none else and as the petitioner is not a banking company, it is not liable to pay sales tax on services covered, under sub-sub Tariff Headings 9813.4900 and 9813.4910. He maintained that the taxing provisions are to be construed strictly and in support of this contention, he relied upon a judgment of the Hon'ble Supreme Court in the case of Messrs Lucky Cement Factory Limited and others v. The Government of N.-W.F.P. reported in 2013 SCMR 1511. He also relied upon a judgment of this Court in the case of City Bank NA v. Commissioner Inland Revenue reported in 2014 PTD 284 Karachi, in support of his contention that where there are sub-sub Tariff Headings under a sub-Tariff Heading then sub-sub Tariff Headings are to be interpreted in the context of sub-Tariff Heading and the mention of other service providers elsewhere in the same Tariff Heading is of no relevance.

4. On the other hand, Mr. Khalid Zamir, Dy. Commissioner, Legal, Sindh Revenue Board argued that Tariff Heading 98.13 describes various service providers which not only include banking companies but by virtue of the phrase "other persons dealing in any such service" include anyone whose services are covered by Tariff Heading 98.13 and the petitioner renders services covered under Headings 9813.4900 and 9813.4910, it is liable to pay sales tax under Sindh Sales Tax on Services Act, 2011.

5. By virtue of Section 3 of Sindh Sales Tax on Services Act, 2011 all taxable services have been listed in the Second Schedule to the said Act. Tariff Heading 98.13 of the Second Schedule is relevant for the purposes of disposal of this case. Tariff Heading 98.13 at the very beginning describes the service providers who fall within its ambit. These are banking companies, insurance companies, cooperative financing societies, modarabas, musharikas, leasing companies, foreign exchange dealers, non-banking financial institutions and other persons dealing in any such services. Then through separate sub-Tariff Headings and sub-sub Tariff Headings various taxable services are described. When taxable services are described in sub- Tariff Headings, then they are relatable to all service providers mentioned in the main Tariff Heading 98.13. Where, however, taxable services are described in sub-sub Tariff Headings of a sub-Tariff Heading and this sub-Tariff Heading specifically describes a service provider then all services described in sub-sub Tariff Headings are relatable only to such service provider and none else. In other words, where a sub-Tariff Heading separately describes a particular service provider, and service provider of such sub-Tariff Heading connects itself with taxable services mentioned under its various sub-sub Tariff Headings, then the liability of tax for services mentioned in sub-sub Tariff Headings would fall only upon the service provider who is mentioned in the sub-Tariff Heading and no one else, irrespective of the fact that others have also been described as service providers elsewhere in the Tariff Heading. The rule of strict interpretation is to be applied in all taxing provisions. In the case reported in 2013 SCMR 1511, cited by the petitioner's counsel, the Hon'ble Supreme Court held as follows:-- "Even if the said phrase is open to two interpretations, according to the well settled principle of construction of taxing provisions, the meaning favourable to the subject is to be preferred. Furthermore, the taxing provisions are to be construed strictly and the intention to impose tax or duty must be shown by clear and unambiguous language".

6. It can be seen that sub-Tariff Heading 9813.4000 describes only banking companies and none else as service provider. Under this sub-Tariff Heading, there are ten sub-sub Tariff Headings listing various services. Hence, the service providers who are not described in sub-Tariff Heading 9813.4000 cannot be made liable to pay tax for services covered under these ten sub-sub Tariff Headings falling under sub-Tariff Heading 9813.4000. Had it been the intention of the legislature to generally connect all services described in Tariff Heading 98.13 with all service providers mentioned therein, then there was no need to separately describe a service provider in sub- Tariff Heading 9813.4900 and then connect that particular service provider with services described under its sub-sub Tariff Headings. An inter-connection between the service provider and the service it renders is to be established. In the present case, co-relation exists only between sub-Tariff Heading 9813.4000 describing banking companies as service provider with ten sub-sub Tariff Headings of services bearing numbers 9813.4100, 9813.4200, 9813.4300, 9813.4400, 9813.4500, 9813.4600, 9813.4700, 9813.4800, 9813.4900 and 9813.4910, therefore, only banking companies would be liable to pay sales tax on rendering these ten services.

7. However, this matter does not come to an end here as there is another aspect to this case which needs to be considered. Annexed with this petition is petitioner's Certificate of Incorporation No.1039, issued on 1st August, 1952. It is filed as annexure A-1. In this document, the petitioner is described as 'Habib Bank Safe Deposit Vault Ltd.' Then on 17th May, 1960, the petitioner got its name changed to 'Habib Bank Safe Deposit Vault Ltd.' in the records of the Registrar, Joint Stock Companies, Karachi. The document to this effect is also annexed with the petition as annexure A-2. From these two documents it is evident that the petitioner is either a sister concern or a subsidiary of Habib Bank Limited and change in the name may have been sought to distinguish petitioner's safe deposit locker business from the normal baking business. In its capacity as subsidiary or a sister concern of Habib Bank Limited, the petitioner even after change in its name, continued to have its office in the Habib Bank building. It is not at all necessary that the petitioner should engage itself in normal baking business in order to be described as a banking company. Any entity which is part of a bank and is engaged in providing safe deposit lockers services would also fall within the description of banking company. Therefore, merely dropping the word 'bank' from its name, the petitioner cannot distance itself from being a subsidiary or a sister concern of a bank or avoid being described as a banking company. Section 11 (6) of the repealed Companies Act, 1913 and Section 40(3) of the Companies Ordinance, 1984 read as follows:-- "11(6) The change of name shall not affect any rights or obligations of the company; or render defective any legal proceedings by or against the company; and any legal proceedings that might have been continued or commenced against it by its new name". "40.(3) The change of name shall not affect any rights or obligations of the company, or render defective any legal proceedings by or against the company; and any legal proceedings that might have been continued or commenced against the company by its former name may be continued by or commenced against the company by its new name".

8. Section 11(6) of the Companies Act, 1913 was in force when the change in the name was brought about. Both Section 11(6) of the repealed Act and section 40(3) of the Companies Ordinance, 1984 provide that, change in the name does not change the rights and obligations of a company. Had the petitioner continued with its old name 'Habib Bank Safe Deposit Vault Ltd.', it would have certainly been made liable to pay sales tax. Therefore, mere change of label would not change petitioner's character as banking company as even with the change in the name, the petitioner continued to retain its original status and can be made liable to pay sales tax on its services.

9. We conclude by holding that the petitioner being part of a banking company Habib Bank Limited is liable to pay sales tax on its services under the Sindh Sales Tax on Services Act, 2011 and dismiss this petition. MH/H-12/Sindh Petition dismissed.