1997 PLP (Trib (PTD)

4. Relying on para. 6(i) of circular 11 of 1991, dated 30-6-1991 wherein "supply of goods" has been defined to include supply of goods whether through a contract or otherwise on cash or credit basis; the C.I.T. (Appeals) held sales of milk to the appellant as supplies as mentioned in section 50(4) of the Ordinance.

5. Appellant's contention that fresh milk was an agricultural produce within the meaning of SRO 586(1)/91 of 30-6-1991 was not accepted. The judgments of Indian Courts on the subject were not considered to be binding on the Revenue Authorities.

6. Appellant's contention that insertion of the words 'including fresh milk' after the words "agricultural produce" vide a circular dated 12-6-1994 established the fact that agricultural produce always meant to include fresh milk was also not accepted with the observation that it was a new item added to the agricultural produce w.e.f. June, 1994.

7. Appellant's contention that amendment through the circular dated 12-6-1994 being procedural in nature hart to the considered retrospective repelled with the observation that addition of a new item namely "fresh milk" had extended and enlarged the scope of the existing circular of 1991 and the exemption extended through this circular was, therefore, available after 12-6-1994. In CIT (Appeal's) opinion, C.B.R. circular dated 6-7-1994 confirming that the exemption specified in S.R.O. dated 12-6-1994 was prospective in nature clinched the issue against the assessee.

8. On the question of applicability of section 50(4-A), appellant's plea was found by the CIT to be without any merit as incentive for supply of desired quantity and quality of fresh milk was considered to be in the nature of a commission as described in section 50(4-A) of the Ordinance.

9. Parties have been heard and the case law cited by the parties in support of their respective positions has been perused. According to appellant's A.R., payments for supply of agricultural produce were exempt from deduction of tax vide entry (V) in SRO 586(1)/91, dated 30-6-1991 as 'fresh milk' was nothing but an 'agricultural produce' as had been clarified through the amendment vide SRO 593(1)/94, dated 12-6-1994, Entry (V) in the circular dated 30-6-1991 originally read as under:

"(V) Persons receiving payments for a company exclusively for the supply of agricultural produce which has not been subjected to any process other than that which is ordinarily performed to render such produce fit to be taken to market. " The amended entry as a result of the amendment dated 12-6-1994 reads as under:

(V) Persons receiving payments for a company exclusively for the supply of agricultural produce, including fresh milk, which has not been subjected to any process other than that which is ordinarily performed to render such produce fit to be taken to market." Appellant's A.R. highlighted the use of singular verb 'has' and the expression 'such produce' to argue that the Government had merely clarified that fresh milk was an agricultural produce and insertion of the words "fresh milk" after the words "agricultural produce" retaining the rest of the entry clearly equated fresh milk with agricultural produce. It was contended that had the intention been otherwise, the words "fresh milk" could easily have been added at the end of the entry or by insertion of a separate entry. In support of the argument that the amendment being clarificatory and procedural in nature was retrospective, appellant's A.R. cited judgments of the superior Courts in the following cases:

(i) M/s. Hunza Textile Mills Limited v. Commissioner of Sales Tax 1973 PTD 544 (Lahore High Court) (ii) Rehman Corporation v. The ITO, (1985) PTD 787, (Karachi High Court). (iii) Central Insurance Company 1993 PTD 766 = 1993 SCMR 1232 (Supreme Court of Pakistan). In the case of M/s. Hunza Textile Milts Ltd. effect of a similar amendment made through an S. R. O. dated 11-12-1969 in the sales tax Notification No.9 of 27-6-1951 was examined by the High Court. Through the aforementioned amendment the words "including knitting wool" were inserted after the words "Woollen Yarn of all Sorts". On a question whether the amendment provision was applicable w.e.f the date of the amendment i.e. 11-12-1969 or was applicable retrospectively to the year 1964-65, the Honourable High Court held that the word 'including' was equivalent to "mean and include" and the words 'including knitting wool' after the words ' Woollen Yarn of all Sorts' were inserted with a view to resolve the controversy whether woollen yarn and knitting wool were the same commodities. The Honourable High Court further held that the amendment in 1969 having been made to clarify that the woollen yarn means and includes knitting 'Wool as well, was applicable to the year 1964-65.

10. In the case of Rehman Corporation, amendment in subsection (7-A) of section 50 vide Finance Act, 1984 was held as having been made to remove doubts as to the meaning and effect of the statute and was held to be retrospective in nature and applicable to a contract already awarded to the assessee on 15-8-1983. Though the law did not provide for deduction of tax on 15-8-1983 when the contract was awarded to Rehman Corporation and subsequent amendment adversely affected the existing rights of M/s. Rehman Corporation, the Honourable High Court held that the amendment made on 1-7-1984 being a clarificatory provision of a procedural nature had retrospective effect.

11. In the case of Central Insurance Company, the Honourable Supreme Court of Pakistan had held that C.B.R. had no authority to interpret any provisions of Income Tax Ordinance.

12. The CIT (Appeals) had misconceived a distinction between the facts of appellant's case and that of M/s. Rehman Corporation. In the case of M/s. Rehman Corporation effect of amendment in subsection (7)'of section 50 was under examination whereas in the case of appellant effect of amendment in subsection (4) of section 50 was involved. The two subsections provide a mechanism for collection of advance tax which is adjustable against the tax payable on the basis of assessment. The facts of appellants case were, therefore, on all fours with the facts of M/s. Rehman Corporation decided by the Karachi High Court.

13. The CIT (Appeals) appeared to be labouring under the impression that C.B.R's. letter dated 6-7-1994 clinched the issue against the appellant on the point of prospective application of the amended provision. There is a long line of judgments that question of judicial interpretation is beyond the powers of the Central Board of Revenue. In the case of Central insurance Company, the Supreme Court had observed that C.B.R. cannot issue any administrative directions of the nature which may interfere with the Judicial or quasi-judicial functions entrusted to various functionaries. The Supreme Court further observed that instructions and directions of the Central Board of Revenue were binding on the functionaries so long as they were confined to administrative matters and interpretations of any provisions could only be rendered judiciously by the Appellate Authorities, the High Courts and the Supreme Court and not by the Central Board of Revenue.

14. The C.I.T. (Appeals) had failed to appreciate the ratio of the judgments cited before him and had given undue weight to the clarification issued by the C.B.R. Seeking wisdom from the authoritative pronouncements' of the High Courts and the Supreme Court of Pakistan the question, whether the amendment in entry (V) of SRO-586 (1)/91, dated 30-6-1991 was retrospective, can only be answered in the affirmative. The benefit of amendment of a procedural provision which indisputably was of a clarificatory nature had wrongly been denied to the appellant. The assessment for assessment year 1993-94 was governed by the amended provision whereby fresh milk was to be considered as an agricultural produce supplies of which were exempted from application of subsection (4) of section 50 of the Ordinance. I.T.O's. Order on the point of tax under section 50(4) is, therefore, cancelled.

15. In view of our finding regarding effect of the amended provision, we need not go into the question of whether the sale of milk constituted "supplies" within the meaning of section 50(4) of the Income Tax Ordinance.

16. Rejection of appellant's contention denying liability to deduct tax under section 50(4-A) was claimed to have been made without examining the relevant records to determine the nature of the payments. It was contended that a detailed reply had been furnished to the I.T.O. on 15-12-1993 but without verifying .the contentions raised therein the Assessing Officer had proceeded to complete the proceedings on the same day. The CIT (Appeals) also did not examine the factual position and confirmed I.T.O's: action with certain observations dilating upon the concept of commission. Appellant's contention that the amounts in question represented payments of fixed ADDA RATES and additional amounts covering the costs like transport etc., and profit of the milk sellers was not examined by the CIT (Appeals). According to the A.R., these payments could appropriately be termed as additional purchase price notwithstanding nomenclature of commission used in the records. The above position was claimed to be supported by ledger accounts of milk suppliers, general vouchers, milk receipts statements, payments slip etc. which had been presented before the Assessing officer but were not examined by him. Appellant's contention that the issue was decided without a proper examination of facts on record appears to be correct. The order under section 52 relating to deduction on account of commission is accordingly set aside to be made afresh in accordance with law after a proper appraisal of facts.

17. The appeal succeeds as above. C.M.S./287/Trib. Appeal allowed.