2005 PLP (Trib (PTD)

3. After hearing the arguments we find that the assessee in his return declared net loss at Rs.419,453 and paid minimum tax as required under section 80-D of the Ordinance. During the assessment proceedings he claimed that his declared version has to be accepted as the payment of tax being under presumptive tax regime is not open to scrutiny. The Assessing Officer however did not accept this contention, and proceeded to frame the assessment. Before proceeding further it is advisable to reproduce hereunder section 80-D of the late Income Tax Ordinance: 80-D. Minimum tax on income of certain persons.

(1) Notwithstanding any thing contained, in this Ordinance or any other law for the time being in force, where no tax is payable (or paid) by a company or a (registered firm), an individual, an association of persons, an unregistered firm or a Hindu undivided family resident in Pakistan or the tax payable (or paid) is less than one-half per cent, of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said' company or a registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family and tax thereon shall be charged in the manner specified in subsection (2). Explanation.

For the removal of doubt, it is declared that the expressions "where no tax is payable or paid" and "or the tax payable or paid" apply to all cases where tax, is not payable or paid for any reason whatsoever including any loss of income, profits or gains or set off of the loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including depreciation) admissible under any (a registered Firm) provision of this Ordinance or any other law for the time being in force. (2) The company (or a registered firm), an individual, an association of person, an unregistered firm or a Hindu undivided family (which, not being a company, does not qualify for assess ment under the Self-Assessment Scheme under subsection (1) of section 59) referred to in subsection (1) shall pay as income Tax- (a) an amount, where no tax is payable (or paid), equal to one-half per cent of the said turnover and (b) an amount, where tax payable (or paid) is less than one-half per cent of the said turnover, equal to the difference between the tax payable (or paid) and the amount calculated in accordance with clause (a). Explanation.

For the removal of doubt, it is declared that "turnover" means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts.

4. A bare reading of this section shows that in the given cases where no tax is payable or paid is less than one half percent of the turnover an amount equal to one-half per cent of the turnover has to be paid as tax. The assessee in the case in hand has done the same and claimed that the case cannot be scrutinized in an exercise under section 62 of the Ordinance. His arguments are two fold. Firstly, that section 80-D having commenced with a non-obstante clause overrides other provisions of Ordinance and the payment of tax under section 80-D of Ordinance is full and final discharge of the tax liability and secondly by the very use of word payable in subsection of section 80-D of the Ordinance it is the assessee only who has to determine as to what is the tax liability and after that the Assessing Officer cannot open it for scrutiny. Incidentally section 80-D of the Ordinance came under discussion in the Ellahi Cotton Mills case viz. 1997 PTD 1555 = PLD 1997 SC 582 and we find some extracts worth reproducing: (40) Adverting to the impugned newly-added section 80-D, it may be stated that we have already pointed out hereinabove that sections 80-C and 80-CC cannot be equated with section 80-D as the same is founded on different basis. It may again be observed that section 80-D is based on the theory of minimum tax. It envisages that every individual should pay a minimum tax towards the cost of Government. The object of the minimum tax is to ensure that the tax-payers, who receive substantial amounts from exempt sources, pay at least some tax on their economic incomes of the year. This is achieved by reducing or disallowing certain itemized deductions. We may again observe that a large number of assesses though generally earn profits but on account of various tax concessions including tax holidays, depreciation allowance etc. under Schedule-II and deductions allowed under the various provisions of the Ordinance, show loss instead of any net profit, with the result that they do pot contribute any income tax towards the public exchequer. (41) We may observe that during the course of arguments, the question arose, as to whether in view of non obstante clause in section 80-D, an assessee can carry forward loss under section 35 of the Ordinance from year to year. Mr. Ilyas Khan, the learned counsel for the Income Tax Department, has orally as well as in his written submissions answered the above query in the affirmative. It appears to be correct legal position. It may be stated that non obstinate clause in section 80-D is for the purpose of liability to pay minimum tax of half per cent on the annual turnover. This will exclude any provision of the Ordinance which may be inconsistent with it. But the same does not exclude the application of other provisions of the Ordinance which are not inconsistent with section 80D. There seems to be no conflict between above section 80-D and section 35 of the Ordinance, and hence the same remains available to assessees. To claim business loss or to carry forward the same under section 35 of the Ordinance from year to year, is not affected by the above levy of half per cent, on the annual turnover under section 80-D as was submitted by the learned counsel for the Income Tax Department Mr. Ilyas Khan, orally as well as in his written submissions. (45) The learned counsel for the appellants have vehemently contended that the Indian Supreme Court in spite of the non obstinate clause in subsection (1) of section 44-AC of the Indian Income Tax Act, 1961 held that the other provisions relating to filing of income-tax returns, claiming depreciations and losses etc. were applicable even to the assessees covered under section 44-AC(1). According to them, the assessee under section 80-D, have stronger case then the above Indian case inasmuch as under section 80-D an assessee whose earning is more than which can be subject to half per 'cent, tax on annual turnover, remains subject to assessment order. Whereas the assessee whose earnings are less, not subject to any assessment. According to them, they should also be given the option to get their assessment orders framed on the basis of the various provisions of the Ordinance. We have given our serious thought to the above contention but, in our view, the above Indian case is distinguishable from the instant case. If there is no turnover of an assessee during a particular assessment year he is not liable to pay any tax under section 80-D. However, if there is one transaction amounting to Rs.1,00,000 in a year his liability under the above provision would be to pay Rs.500 i.e. half per cent of the turnover in the assessment year involved. The minimum tax is payable at the rate of 1/2% by those assessees who do not declare their income equivalent to the amount which can- be subject to tax at the rate of half per cent on the basis of turnover. Payment at the rate of half percent by them under section 80-D is in the total discharge of their minimum tax liability. However, the assessees who earn more than the above amount, remain liable to file income-tax returns or to get their assessment orders framed in terms of the provisions of the Ordinance."

5. From the above it thus appears that any provision of the Ordinance which is not in conflict with section 80-D shall remain operative regardless of the fact that an assessee has paid tax under section 80-D of the Ordinance. Besides this in 1998 PTD 1804 re: Pakistan Burma Shell v. Federation of Pakistan, it was held as follows:-- "that in case of section 80-D of the Ordinance, a return has to be filed and in case the tax payable by an assessee is more than one-half percent, the same will be assessed and paid accordingly. In case, no tax is payable or the tax payable is less than one-half per cent, such tax has to be paid."

6. Thus section 80-D of the Ordinance stipulates a payment of l minimum tax in certain given cases and appears to be a charging section whereas section 62 is a machinery section dealing with the quantification and adjustment, of the computation furnished. In the case in hand the Assessing Officer, while rejecting the claim of the assessee for not opening the case observed that provisions of section 62 are not in conflict with section 80-D of the Ordinance which has been upheld by the learned CIT(A). We find that the very dictum of the Ellahi Cotton Mills case as reproduced above in relation to section 80-D of the Ordinance provides framing of assessment under section 62 in cases where returns had been filed under section 80-D and minimum tax had been paid. The contention of the assessee is, therefore, groundless and cannot be accepted. 7.So far as the other grounds are concerned, the first appellate authority remanded the case for re-examination of the issues relating to the payment made to the WAPDA and an amount received on account of the committee with an observation that these issues be decided afresh on merits after providing an opportunity to be heard to the assessee. No prejudice seems to have been caused to the assessee. We do not find anything worth interfering. Besides this, no intervention is required regarding the add-backs which have been found by the first appellate authority to be reasonable and well justified. Resultantly, we do not find any force in the appeal which is rejected. H.B.T./328/Tax (Trib.) Appeal dismissed.