2010 PLP (Trib (PTD)

KHALID SIDDIQUI, (ACCOUNTANT MEMBER).

This appeal has been filed by the department against the order dated 25-6-2008 passed by the learned CIT(A-1), Karachi on the following grounds:- That the learned CIT(A) was not justified in annulling the order passed by Taxation Officer under section 122 (5A) of the Income Tax Ordinance, 2001 in treating the tax deduction under section 153, as adjustable. That the tax paid by the taxpayer under section 148 of the Income Tax Ordinance, 2001 as a commercial importer is a final discharge of tax liability.

2. In the instant case the assessee's deduction under section 153 of the Income Tax Ordinance 2001 on supplies of imported Urea and Sugar were claimed as adjustable by virtue of clause 47-A of Part-IV of Second Schedule to the Income Tax Ordinance 1979 (Repealed). The assessee's claim was disordered through initiation of proceeding under section 122(5A) of the Income Tax Ordinance, 2001 on the plea that the assessee's deductions were on reduced rate while these items falling under this category can't enjoy the benefit of clause 47-A of Part-IV of Second Schedule. The assessee preferred appeal against this treatment before learned CIT(A), who vide his order dated 25-6-2008 accepted the plea of the assessee against which the department is now in appeal before this Tribunal.

3. The learned representatives of both the parties heard.

4. It is the case of the Department that the learned CIT(A) without appreciating the relevant provisions accepted the plea of the assessee which is not justified. It was further contended that clause 47-A is applicable where tax stood deducted at import stage @ 6% and since in the case of assessee tax deduction is on reduced rates, therefore, they do not fall under the ambit of this clause. The learned AR, however, contended that clause 47-A does not attach any condition of `rate of deduction ` to quality to take advantage of above clause.

5. The learned CIT(A), while accepting the appeal of the assessee had observed as under:- "Based on the above, I hold that the Taxation Officer was not justified in treating tax deducted under section 153 of the Income Tax Ordinance 2001 on supply/sale of imported goods which were subject to reduced rate of tax deductions under section 148 (as per Clause 13G and 23 of the Part-II of Second Schedule) to be final discharge of tax liability. The said tax way rightly claimed by appellant to be adjustable tax. The claim of appellant was as per law. The assessing officer is directed accordingly. As the claim of the appellant as held above was according to law, hence the order under section 120 of Income Tax Ordinance, 2001 was not erroneous nor prejudicial to interest of revenue, hence, the action under section 122(5A) of Income Tax Ordinance, 2001 being illegal is annulled."

6. We have considered the arguments as well as perused the record, orders of the two officers below. We have seen that the controversy revolves around applicability of clause 47-A in the case of the assessee. The case of the department is that this clause is not applicable because deduction has been made @ 1% and is only applicable where deduction are made on normal rate of 6%.

7. We don't feel hesitation to state that learned DR has not been able to put forth any case-law or valid reason on the basis of which the benefit provided in clause 47-A could be denied while on the contrary there are various decisions of the Higher Appellate Forums wherein it is held that no further deduction would be made on suppliers where tax already suffered at import stage. Considering the above facts in view we find that order of the learned CIT(A) on this issue is quite justified and does not warrant any interference, which is accordingly upheld.

8. The appeal is disposed of in the manner as indicated above. [As per Khawaja Farooq Saeed, Chairperson.] While I fully agree with the conclusion drawn by my learned brother Accountant Member I respectfully supplement the same with further discussion. The provisions which are presently involved are sections 148 and 153 respectively. Both the provisions deal with withholding tax on imports and supplies respectively. I shall firstly refer section

148. The same reads as follows. "

148. Imports.

(1)

The Collector of Customs shall collect advance tax from every importer of goods on the value of the goods at the rate specified in Part-II of the First Schedule." (2) Nothing contained in subsection (I) shall apply to any goods or class of goods or persons or class of persons importing such goods or class of goods as may be specified by the Board]. [(7) The tax collected under this section shall be final tax on the income of the importer arising from the imports subject to sub-section (I) and this subsection shall not apply in the case of import of." Above section 148(1) makes the Collector Customs responsible for deduction of tax at source at the import stage. Further through section 148(7) the deduction made under section 148(I) has been made full and final discharge meaning thereby that a person who imports certain goods would not be required to pay any further tax on disposal and sale of the said item. This, therefore, is clear that no person would be required to pay any tax on its income/profit on sale on disposal of the imported goods on which withholding tax has been charged under the above provisions whatsoever. The other provision which is in respect of supplies reads as follows:

"153 Payments for goods and services.

(1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person

" a) for the sale of goods; b) for the rendering of [for providing of] services; c) on the execution of a contract, other than a contract for the [sale] of goods or the rendering of [for providing of] services, shall, at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division III of Part III of the First Schedule. (5) Subsection (1) shall not apply to

(a) a sale of goods where-- (i) The sale is made by the importer of the goods. (ii) The importer has paid tax under section 148 in respect of the goods; and (iii) The goods are sold in the same condition they were in when imported. (6) The tax deducted under this section shall be a final tax on the income of a resident person arising from transactions referred to in subsection (i) or (IA): Provided that subsection (6) shall not apply to companies in respect of transactions referred to in clause (b) of subsection (1): [Provided further that this sub-section shall not apply to payments received on account of

(i) advertisement services, by owners of newspapers and magazines; (ii) sale of goods and execution of contracts by a public company listed on a registered stock exchange in Pakistan [; and] (iii) the rendering of or providing of services referred to in sub-clause (b) of subsection (1): Provided that tax deducted under subsection (b) of subsection (I) of section 153 shall be minimum tax.] [(6A) The provisions of subsection (6) in so far as they relate to payments on account of supply of goods from which tax in deductible under this section shall not apply in respect of [a company] being a manufacturer of such goods. Withholding tax is deductible under section 153 (1) while the same has been made full and final discharge under section 153 (6). Thus, supply has been made specially a separate transaction and it has got nothing to do with the nature of the time of supply. Exception, however, has been provided in section 153 (5). This provision makes it very clear that if the item which is being supplied is the one which has suffered the tax in terms of withholding at the stage of import no withholding tax shall be charged. From the said amount if sold in the same form. For all practical purposes the matter ends here as there cannot be any doubt regarding that if a transaction which has been subjected to withholding tax at the stage of import it shall not be again subjected to withholding in case the time is sold in the same form to some other person. Obviously, if there is no withholding at the subsequent stage there is no question of its being full and final discharge and the earlier transaction becomes final for all practical purposes. The matter has not ended here. As already discussed by my learned brother in its order the provisions of Clause 47(A) of the Second Schedule Part-IV has further directed to not collect tax on such transactions from deduction at supply stage. For clarity reproduction of the same shall be of help: "[(47A). The provisions of section 153 shall not apply in respect of payments received by a resident person for supply of such goods as were imported by the same person and on which tax has been paid under section 148.]" Above provision of law further fortifies and makes it final in very clear terms that the amount of withholding at the stage of import is no consideration. It is the transaction which if complete shall hold good permanently and all subsequent transactions shall remain free from withholding tax at the supply stage. The action of the learned Accountant Member of holding the deduction at import stage to be as lawful and justified, therefore, needs no exception. I agree with his findings and accordingly hold the appeal to be as without merits. C.M.A./110/Tax (Trib.) Appeal dismissed.