2002 PLP (Trib (PTD)

4. Mode of payment by and recovery from industrial establishment. (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.

3. It was contended that these provisions lay down that Workers Welfare Fund will be charged on account of total income as was assessable under the Ordinance and is also chargeable in case of such assessees whose income was exempt under the specific provisions of section 48 of the Income Tax Ordinance. The condition (c) given in subsection (2) of section 48 of the Income Tax Ordinance specifically provides that income of the newly established undertakings set up in the areas specified in clauses (119), (120), (121) and (122) of the Second Schedule to the Income Tax Ordinance would be exempt from tax. It was stated that the exemptions under the Second Schedule are covered by section 14 of the Income Tax Ordinance, 1979 and section 14 does not find specific mention in section 4 of the Workers Welfare Fund Ordinance. Thus no Workers Welfare Fund would be charged in case of assesses whose income was exempt from tax under section 14 of the Income Tax Ordinance read with Second Schedule of the Income Tax Ordinance. In support of these contentions the cases referred to on behalf of the assessee were 1989 PTD (Trib.) 1004 and 1989 PTD (Trib.) 617 were cited before the first appellant authority.

4. The first appellate authority has discussed the case law referred to at bar but has stated that these cases pertain to the provisions of law as they existed before coming into effect of Finance Act, 1988. It has been stated in the order of the learned CIT(A) that through this amendment the heading of the Second Schedule had been substituted with the word `exemption' instead of the word 'exclusions'. Further, a proviso had been added to subsection (1) of section 14 of the Income Tax Ordinance which reads as under: "Provided that, where any income which is exempt from tax under any provision of the Second Schedule, such income, as may be specified in' the said Schedule and subject to such conditions as may be specified therein, shall be included in the total income, sohowever, that the tax shall not be payable in respect of such income." It has, therefore, been held by the learned CIT(A) that by virtue of insertion of this proviso the income exempt from tax under the Second Schedule was also to be included for the purposes of computation of total income and thus the total income so computed was chargeable to the Workers Welfare. Fund. In these circumstances, the appeals of the assessee were dismissed.

5. The learned counsel for the assessee reiterated the arguments advanced before the learned CIT(A). He stated that the proviso added to section 14(1) of the Income Tax Ordinance had not changed the provisions of law so as to charge Workers Welfare Fund in such cases also where income was exempt from tax. It was stated that the proviso in fact had been added mainly for the purpose of inclusion in the total income for rate purposes of the agricultural income which was hitherto before exempt from tax. The learned counsel argued that the charging section was section 4 of the Workers Welfare Fund Ordinance which remained unchanged after the insertion of the proviso to section 14(1) of the Income Tax Ordinance, 1979. It was stated that the case-law presented before the first appellate authority was still valid and Workers Welfare Fund could not be charged in case of the assessee whose income, was exempt under clause (118E) of the Second Schedule. The learned D.R. on his part supported the orders of the authorities below for the reasons stated therein.

6. We have considered the arguments given from both the sides. We tend to agree with the learned counsel for the assessee. The section charging Workers Welfare Fund is section 4 of the Workers Welfare Fund Ordinance. It clearly states that Workers Welfare Fund shall be charged in case of such assessees whose income is assessable under the Ordinance or would have been so assessable but for the exemption made by section 48 of the Income Tax Ordinance. There is no dispute that the income of the assessee was exempt under clause (118-E) of the Second Schedule. It has not been provided in section 4 of the Workers Welfare Fund Ordinance that Workers Welfare Fund will. be charged in case of such assessees also whose income was exempt under the provisions of section 14 read with Second Schedule to the Income Tax Ordinance. Accordingly the Workers Welfare Fund levied in both the years under appeal stands deleted.

7. As a result of the above discussion the appeals filed by the assessee stand accepted. C.M.A./M.A.K./137/Tax (Trib.) Appeals accepted.