2006 PTD 2368 (PLP)

HAMID FAROOQ DURRANI, J.

Reference in hand has been filed under section 133(1) of Income Tax Ordinance, 2001. Following is the formulation of questions of law as given in the petition:-- (i) Whether under the law and circumstances of the case the learned ITAT was justified in confirming the levy of Workers' Welfare Fund when the applicant had paid tax under section 80-DD of the Income Tax Ordinance. 1979 (late). (ii) Whether Workers' Welfare Fund is not an expenditure which has to be absolved against income whereas in the case of appellant the said Workers' Welfare Fund had not been absolved because of the facts the Company had paid tax under section 80-DD and not tax on income. (iii) Whether in the presence of payment of tax under section 80-DD because of the facts that tax on income and Workers' 'Welfare Fund was less than the tax paid under section 50(5) i.e. minimum tax in case of importer of edible oils, again charge of Workers' Welfare Fund enhanced the tax liability of the company which is a clear violation of statutory provision. (iv) Whether the payment of tax under section 80-DD does not fall under the presumptive tax regime and no Workers' Welfare Fund can be charged over and above the said tax. (v) Whether the Workers' Welfare Fund is an expenditure as per section 4(4) of the Workers' Welfare Fund Act and has to be absolved against income but in the case of the applicant the situation is altogether different. (vi) Whether the charge of Workers' Welfare Fund in case of payment of tax under section 80-DD negate the basic concept of minimum tax liability or not.

2. It is to be noted, at the outset, that the question enumerated at Serial No.2 above is ancillary to the one at serial No.1, though the same does not arise out of the assessment order. Similarly, questions at serial Nos.3 and 5 also do not arise out of the referred order passed by Income Tax Appellate Tribunal. The answer to questions at serial Nos.4 and 6 would be provided in the discussion hereinafter-regarding question at serial No.1. Needless to mention that the questions not arising out of the order of Income Tax Appellate Tribunal would not require verdict by this Court.

3. The petitioner is a private limited Company, which derives income from manufacturing of vegetable ghee and cooking oil. It also imports palm and other raw oil from abroad. The petitioner-Company filed income tax return for the assessment year 2002-2003 which showed the payment of tax under section 50(5) of the late Income Tax Ordinance, 1979 and claimed it to form the minimum tax liability as all types of payable on its income were less than the tax payable under section 80-DD of the Ordinance ibid. It was the case of the assessee Company that the tax payable on its income including Workers' Welfare Fund was less than the tax collected under section 50(5) of the Ordinance ibid being importer of edible oil, as such, the same formed the minimum tax payable under section 80-DD of the Ordinance. That the Assessing Officer, while issuing the .IT-30 form after charge of tax under section 80-DD, had added an additional amount as Workers' Welfare Fund. The assessee company filed an appeal before the Commissioner of Income Tax/Wealth Tax Appeals-1 Peshawar which confirmed the levy of Workers' Welfare Fund added through the assessment order. Aggrieved there-from the assessee company preferred an appeal before the Income Tax Appellate Tribunal which was rejected vide order, dated 20-5-2006.

4. Before proceeding further in the matter it would be useful to reproduce the contents of section 80-DD of Income Tax Ordinance, 1979 which are as follows:-- "80DD. Minimum tax on income of importers of edible oil, etc.

Notwithstanding anything contained in this Ordinance, or any other law for he time being in force, the tax collected under subsection (5) of section 50 on import of edible oils as raw material by an industrial undertaking shall be deemed to be the minimum amount of tax payable under the Ordinance and where the final tax liability determined under this Ordinance exceeds the amount collected under the said subsection, the said amount shall be adjustable against such liability."

5. A perusal of the above noted provision of law, transpires that it is in the nature of presumptive tax regime and is substantially of the same nature as section 80-D of the Income Tax Ordinance, 1979 which has been held to be valid by the Hon'ble Supreme Court of Pakistan in the case of Elahi Cotton Mills reported in PLD 1997 SC Page 852 (reference 2002 PTD 1023). For the sake of convenience the provisions of section 80D ibid are also reproduced below:- "80D. Minimum tax on income of certain persons.

(1) Notwithstanding anything 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 thereof shall be charged in the manner specified in subsection (2). Explanation

"

6. The charge contemplated under section 4 of the Workers' Welfare Fund Ordinance, 1971 is leviable with reference to income returned by an assesses and then determined by an Assessing Officer in accordance with the provisions of Income Tax Ordinance. The presumptive tax regime has done away with the concept of assessment of "total income" of an assessee, the levy contemplated in section 4 WWF has necessarily faltered away in respect of the assessee covered by such regime. The Madras High Court in the judgment reported as (1954) 25 ITR 79 had concluded that the word "assessment" meant not merely a computation of the income of the assessee but also the determination of the tax payable by him. The Calcutta High Court recounted the three well known stages of imposition of tax, namely, (a) liability to pay tax, (b) computation of tax payable and (c) recovery of tax. It was accordingly observed that every order which involved computation of income or determination of the amount of tax payable was not an order of assessment within the meaning of Income Tax Ordinance Act, 1922 (referred (1071) 81 IT-807). In another judgment reported as (1998) 125 ITR 630 the Madras High Court expressed the view that the word "assessment" normally connoted the entire process connecting from the submission of the return till the determination of tax' liability. The Supreme Court of India while considering the definition of the word "income" as well as "total income" concluded that an income in order to come within the purview of definition must satisfy two conditions. Firstly, it must comprise the total amount of income, profits and gains referred to in section 4(1) of the Act. Secondly, it must be computed in the manner laid down in the Act. In view of their Lordships if either of these conditions fails the income will not be part of the total income that can be brought to charge. (Reference (1975) 99 ITR 118).

7. In presumptive tax regime, while examined in particular reference with section 80DD, the tax collected on import of edible oil shall be deemed to be the minimum amount of tax payable unless exceeded by the final tax liability under the Ordinance. In case the tax collected under section 50(5) is held to be the minimum amount of tax payable by an assessee and in spite thereof subjected to Workers' Welfare Fund at a rate of 2% the charge will be excessive and disproportionate to the purpose for which it has been levied. It is settled law that deeming provisions in a statute cannot spell over to other provisions in the statute and are to be construed strictly within the four corners of their objects.

8. It is correct that instruction of section 80DD and other similar provisions have not rendered invalid the charging provision of section 4 of Workers' Welfare Fund Ordinance,.1971 is any manner. However, as noted earlier an income presumed to have been accrued to an assessee can neither be taken to be his total income nor the same can be said to have been assessed or assessable under the provisions of the Ordinance ibid. The basis for computation of the Fund vanishes in case of assessees covered by presumptive tax regime.

9. Where law expressly holds out to an assessee that in case of particular receipts the deduction made at source in respect thereof shall be construed as final discharge of liability under the Income Tax Ordinance, any further charge with reference to the provisions contained in another legislation cannot be justified. Same is the case where the law provides that the tax collected at the import stage shall be deemed to be the minimum amount of tax and where the final tax liability determined exceeds the amount so collected the said amount shall be adjustable against such liability. (Learned Income Tax Appellate Tribunal has upheld in the instant case that the tax under normal law is below the minimum tax payable by the assessee hence tax under section 88DD is levied).

10. The charging provision of section 4 of Workers' Welfare Fund Ordinance, 1971 are clear that the Legislature intended the charge on the real income of an industrial concern. There is nothing in these provisions, which can possible be extended, enlarged or stretched to hold that the levy was contemplated on presumptive income as well.

11. In the light of the above discussion we answer the first question in negative whereas questions Nos.4 and 6 have already been attended to in foregoing paras. S.A.K/151/P Order accordingly.