2005 PLP (Trib (PTD)

S. HASAN IMAM (JUDICIAL MEMBER).

By this order we would prefer to decide M.A. (Rectification) No. 743/KB of 2001 moved in I.T.A. No.147/KB of 2001 by Messrs Civil Aviation Authority.

2. Facts leading to present Rectification Application are that a Raffle Scheme was introduced by Civil Aviation Authority at the directives of Prime Minister of Pakistan. As per this scheme raffle tickets issued by the Civil Aviation Authority were to be sold and every month beginning 1999 a draw was to be held and the winner of the draw was to be given a car already on display at the Quaid-e-Azam International Airport. Civil Aviation Authority issued a letter of intent to the applicant and the scheme was based on such letter of intent. The issue that Civil Aviation Authority or S.N. Car Complex is responsible to deduct tax under section 50(7C) of the Ordinance. The Assessing Officer held S.N. Car Complex to be a person responsible for deduction of tax and treated it as defaulter under section 52 of the Income Tax Ordinance, 1979. The learned CIT(A) maintained the order of the Assessing Officer. However, the Tribunal reserved the finding of the learned CIT(A) and held Messrs Civil Aviation Authority as the person liable to deduct tax under section 50(7C) of the Ordinance.

3. Being aggrieved and dissatisfied from the order of the Tribunal, dated 31-1-2001 passed in I.T.A. No. 147/KB of 2000/2001, the Civil Aviation Authority preferred a Reference Application bearing I.T.A. No.147/KB/2000-2001 for the reasons (i) Messrs Civil Aviation Authority has been condemned unheard as no notice was issued before imposing liability of Messrs Civil Aviation Authority under section 52 read with section 50(7C) of the Ordinance. The decision has been given on the basis of letter of intent without considering the Licence Agreement sub-clause (31) of the Agreement which clearly speaks out that the Licensee Messrs. S.N. Car Complex shall also deposit the advance tax under section 57 of the Ordinance, 1979 along with the payment of Licence Fee (iii) The order of the Tribunal is percurium as Messrs Civil Aviation Authority has been condemned unheard in the absence of proper documents in its favour. The Tribunal however, recalled the order, dated 31-1-2001 vide order, dated 4-11-2001. The initial finding of the Tribunal in appeal in I. T. A. No. 147/KB of 2000-2001 and in M.A. No.743/KB of 2002 are reproduced hereunder:-- I.T.A. No.147/KB of 2000-2001: "It is evident from a bare reading that `person responsible has to deduct tax on winning from a raffle ticket, even if the payment is made in kind. The rate prescribed in the First Schedule for deduction was 7.5% subsequently raised to 10% by Finance Act, 1999. The only question for us to decide is whether appellant was the person responsible for deduction of tax. From, examination of the scheme of Raffle draw we are convinced that this scheme was entirely conceived and operated by a Civil Aviation Authority, the only thing is that they did not invest any amount in the purchase of car, such investment was made by the appellant-assessee. Appellant/assessee, on the investment/ property was to recover from sale of raffle tickets. The prizes were notified and given by Civil Aviation Authority itself, therefore, in our considered opinion appellant was not the person responsible for deduction of tax. We may also mention that this tax is to be recovered from the winners and Civil Aviation Authority failed to do so. However, the tax department may make enquiries from the holders of these cars regarding recovery of the tax which would be full and final statement in their hands as per section 80-B of the Income Tax Ordinance." M.A. No.743/KB of 2002: "From the perusal of para. 5 of the order of the Tribunal it appears that the Tribunal held that the person who is liable to deduct tax under section 50(7C). of the Ordinance was the person (Messrs Civil Aviation Authority) but this finding was given without considering the license agreement, therefore, the contention of the learned counsel of Messrs Civil Aviation Authority appears to be correct that firstly Messrs Civil Aviation Authority was condemned unheard and the decision of the Tribunal was percurium as the licence agreement was not considered. In view of this and in the interest of justice, we think that it would be appropriate, if order in this case is recalled so that a proper order after the hearing Messrs Civil Aviation Authority may be passed. We therefore, recall the order passed in I.T.A. No. 147/KB of 2000-2001 and order that the appeal be fixed for hearing on 15-2-2003."

4. Admittedly subsection (7C) of section 50 is clear that person responsible is under legal obligation to deduct tax of winning a car from a raffle ticket. The rate prescribed in the First Schedule for deduction of tax is also not disputed and settled in the order, dated 31-1-2001. The Tribunal initially determined the responsibility for deduction of tax and held that it was the legal duty of Civil Aviation Authority to deduct the tax as the prices were notified and given by Civil Aviation Authority itself.

5. We have heard the learned representatives of the two parties and have also gone through the record. Mr. Ahsan Laliwala appearing on behalf of Messrs Civil Aviation Authority argued that order of the learned ITAT is percurium as the learned Bench Members have not been properly supported to arrive at a proper conclusion and reliance on mere letter of intent, dated 23-12-1998 without taking into consideration the licence agreement for grant of licence and permission to operate car raffle scheme between Messrs Ahsan Car. Complex and Civil Aviation Authority, dated September 3, 1999 for operation from January 1, 1999 is absolutely unjustified and not based on correct facts. He also relied upon clause (31) of the Agreement which read as under: "The licensee shall pay and clear all taxes and' charges to the concerned agencies with respect to the business or premises levied under any law and shall submit immediately copies of such receipts, challans. or payment as may be required in writing by the licensor/Airport Manager. The licensee shall also deposit the advance tax under section 50 Assessing Officer of the Income Tax Ordinance, 1979'along with the payment of Licence Fee."

6. Contrary to above arguments, Mr. Nadeem Iqbal, Advocate appearing on behalf of Messrs S.N. Car Complex argued that scheme was initiated on the directive of the Prime Minister to Civil Aviation Authority. The rules have been laid down by the Civil Aviation Authority, draw was held by them and the prices were also distributed by them, whereas the role of Messrs S.N. Car Complex in the entire scheme is only to provide the car for display and recover the expenditure from sale of raffle tickets supplied by Civil Aviation Authority. It is added that tickets were neither sold nor initiated by his client. Contrary to terms of agreement, counsel also referred letter of intent, dated 23-12-1998; (i) They shall being (sic) the car on their own and operate the scheme on behalf of Civil Aviation Authority. (ii) Civil Aviation Authority reserves the rights to frame rules on the matter from time to time and change without prior notice. (iii) The rules shall be binding on the operative party. (iv) Civil Aviation Authority, shall regulate entire scheme.

7. The counsel also stressed that when the tickets have been, supplied and prices have been given by Civil Aviation Authority, there remains no responsibility of Messrs .S.N. Car Complex to deduct tax.

8. Perusal of the record further shows that the Tribunal relied upon a letter of intent, dated December, 23, 1998 while the respective licence agreement for grant of licence and permission to operate car raffle scheme executed between Messrs S.N. Car Complex and Civil Aviation Authority, dated September 3, 1999 was not taken into consideration. The licence agreement has been executed between Civil Aviation Authority and Messrs S.N. Car Complex, the status of the two as per agreement is that of licensor and licensee respectively. In the head-note it is mentioned that licensee has applied to the licensor for grant of a licence/permission to operate car raffle scheme at Jinnah Terminal Karachi, Para-1 of the agreement relates to the status of the licensee which is hereunder: "It is clearly undertaken by the licensee that the contents of this License Agreement or any part thereof shall not be deemed, claimed, construed or interpreted in a manner, amounting to creation of an easement, lease ,or any other interest except what is explicitly stated in this licence agreement, in favour of the licensee and in respect of the premises. It is also clearly understood that the licensee shall have the status of contractor and shall not consider to be a servant or agent or tenant of the licensor in any manner, the licensor shall be deemed to be in exclusive position of the premises at all the times."

9. The condition (b) provides that each raffle ticket shall cost Rs.200 Civil Aviation Authority's share on each ticket shall be Rs.20 i.e. 10% of the total sale proceeds. Further details of sub-para (b) are hereunder: -- "The price of each Raffle ticket shall be Rs.

200. CAA share on each ticket shall be Rs.20 i.e. 10% of the total sale proceeds. To illustrate, for a car priced at Rs.6,00,000 including overheads and other incremental costs, the total ticket sold will be 3,300 and the CAA share shall be equivalent to price of 300 tickets, likewise for other big and small cars, licensee will produce a proof to the effect of the price of the car to the licensor on which the number of tickets to be sold will be determined by the licensor."

10. It is settled vide special conditions Appendix-A to agreement in question that the shares of Civil Aviation Authority and S.N. Car Complex are 90% and 10% respectively of the total sale proceeds whereas clause (31) of the Agreement clearly provides that the licensee shall pay and clear all taxes and charges to the concerned agencies with respect to business and premises, levied under any law and licensee shall also be liable to deposit the advance tax. First line of clause 31 also refers to question involve that "all taxes and charges related to concerned agencies with respect to business shall be paid by the licensee and such information shall be furnished to the licensor." In the circumstances, it appears that it is the legal responsibility of the licensee to deduct the tax from the winner of the Raffle ticket and also to pay and clear all taxes and charges to the concerned agencies with respect to the business or premises. It is worth mentioning that apart from the responsibilities of the assessee to pay all the taxes which includes withholding tax, status of the assessee is further defined vide condition `B' of Appendix' A, special condition of contract. The relevant part in this context is hereunder: "It is also clearly understood that the licensee shall have the status of Contractor."

11. We have given earnest consideration to the rival arguments, addressed by the contending parties. We have also perused the relevant records, impugned orders, documents, case papers, statutory law and agreement in writing. We, on the basis of facts and law involved in this case, of the considered opinion that the best evidence to determine the liability is an agreement admittedly executed between the two parties as well Appendix A containing special conditions as part and parcel of the agreement. As such sufficient evidence is on record to hold that it is the utmost responsibility of the contractor/assessee to deduct withholding tax from the winner of the car, awarded in car Raffle Scheme. The contents of the licence agreement and special conditions laid down in Appendix-A in no way legally in writing or impliedly make the Civil Aviation Authority responsible for payment of tax and withholding tax. A contractor cannot go beyond the contents of the agreement, specially when all the basic requirements have been brought in black and white through terms of agreement. Even otherwise, it would be improper and unjustified to float on presumptions, gathering and deriving the circumstances to forego the conditions of the agreement. As a result thereof, the licensee/contractor is exclusively responsible for deducting the tax under section 50(7C) and not the Civil Aviation Authority.

12. It is important that as per assessment order it is an agreed assessment, as on confrontation as per assessment order the Proprietor of Messrs S.N. Car Complex, Mr. M. Shehzad furnished a Letter bearing No.SNCC/270/2000, dated 26-2-2000, dated 25-2-2000 during the course of assessment, wherein he categorically admitted that "tax has not been collected as he had no knowledge regarding the same and that the department had also not informed regarding the issue." In view of the admission of default, that the pleas taken later on appears to be afterthought, in order to come out from the clutches of section 52 of the Income Tax Ordinance, besides ignorance of law is also no excuse and C there is no provision of law of informing the assessee regarding his liabilities pertaining to withholding obligations. Consequently, we find that order of the Assessing Officer, holding the appellant as assessee in default for non-deduction of tax from winner of the car under Raffle Tickets Scheme is justified hence call for no interference. As such, the order confirming the treatment passed by the learned CIT(A) is maintained. C.M.A./423/Tax (Trib.) Appeal dismissed.