Minimum tax liability

Phrase 'turnover from all sources' used in S.113(1) of the Income Tax Ordinance, 2001 [as it existed prior to its omission by the Finance Act, 2008] was to be read in conjunction with the meaning of 'turnover' provided in S.113(3), which was exhaustive in nature and nothing further could be added thereto

Phrase 'turnover', thus, did not cover all sources under various heads of income.

Aggregate of the declared turnover as defined in S.80D of the Income Tax Ordinance, 1979 from the sale of goods, rendering, giving or supplying of services or benefits or execution of contracts had to be taken into account for determining the minimum tax liability of 0.5% of the turnover

If no tax, for whatever reason, was payable/paid, then the amount worked out at the rate of 0.5% of the turnover would be the minimum tax payable

If the tax payable/paid was less than 0.5% of the turnover, then the minimum tax payable would be the difference/balance between the tax payable/paid and 0.5% of the turnover

Similar analysis would apply to S.113 of the Income Tax Ordinance of 2001[as it existed prior to its omission by the Finance Act, 2008], where the aggregate of the taxpayer's turnover from the sale of goods, rendering of services or giving of benefits including commissions and the execution of contracts had to be taken into account in order to determine the minimum liability of 0.5% of the turnover for each tax year (or 1% of the turnover for each tax year, depending on the tax year involved, as S.113 was subsequently amended vide Finance Act, 2013 and the percentage of minimum liability prescribed therein was increased to 1%).

Exclusion of amounts treated as deemed income and assessed as or covered by final discharge of tax liability for which tax was separately paid/payable from the term 'turnover' could not be implied in the provisions of S.80D if the Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001, as the same had not been so expressed.

Said phrases were to be necessarily read in conjunction with the explanation to S. 80D(2) of the Income Tax Ordinance of 1979 for the purposes of determination of minimum tax liability

Word 'turnover' specifically defined in S. 80D of the Income Tax Ordinance 1979 could not be interpreted in a way so as to widen or enlarge the scope of the said section by interpreting 'turnover' to include income from 'all sources'.

Nothing in the wording of S.80D of Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001 suggested that for the purposes of calculating the turnover for the said sections receipts of income subject to the Presumptive Tax Regime were excluded

Minimum tax payable under S.80D of the Income Tax Ordinance, 2001 was leviable on the aggregate of declared turnover from all sources including receipts covered by Ss. 80C & 80CC of the Income Tax Ordinance, 1979

Minimum tax payable under S. 113 of the Income Tax Ordinance, 2001 was leviable on the aggregate turnover from all sources including receipts and tax under the Presumptive Tax Regime of the Income Tax Ordinance, 2001

Legislature did not intend that tax already paid/payable in respect of deemed income which was assessed as final discharge of the tax liability under S.169 of the Income Tax Ordinance, 2001 or under any other provision of the said Ordinance would be excluded from the purview of 'tax payable or paid', because the Legislature did not expressly provide so.

Mere filing of a statement under S.143B of the Income Tax Ordinance, 1979 (as opposed to a return under S.55 which was for the Normal Tax Regime) for income falling under the Presumptive Tax Regime (i.e. Ss. 80C, 80CC etc.) was not a reason to bring it out of the definition of 'turnover' when the law, i.e. the explanation to S. 80D(2), expressly provided otherwise

Same applied to the corresponding provisions of the Income Tax Ordinance, 2001, in that mere filing of a statement under S.115(4) of the Income Tax Ordinance, 2001, which (section) was pari materia to S.143B of the Income Tax Ordinance, 1979, did not mean that the income contained in such statement would automatically fall outside the scope of 'turnover' provided by S.113 of the Income Tax Ordinance, 2001

If such income falling under the Presumptive Tax Regimes of both the Ordinances was to be excluded from the ambit of 'turnover' as provided in S.80D of the Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001 the Legislature would have explicitly mentioned it.

S. 113 [as it existed prior to its omission by the Finance Act (I of 2008]-Income Tax Ordinance (XXXI of 1979) [since repealed], S.80D-Minimum tax liability-Turnover, calculation of

Exclusion of amounts treated as deemed income and assessed as or covered by final discharge of tax liability for which tax was separately paid/payable from the term 'turnover' could not be implied in the provisions of S.80D if the income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001, as the same had not been so expressed.

Phrase `turnover from all sources' used in S.113(1) of the Income Tax Ordinance, 2001 [as it existed prior to its omission by the Finance Act, 20128] was to be read in conjunction with the meaning of 'turnover' provided in S.113(3), which was exhaustive in nature and nothing further could be added thereto

Phrase 'turnover', thus, did not cover all sources under various heads of income.

Said phrases were to be necessarily read in conjunction with the explanation to S. 80D(2) of the Income Tax Ordinance of 1979 for the purposes of determination of minimum tax liability-Word 'turnover' specifically defined in S. 80D of the Income Tax Ordinance 1979 could not be interpreted in a way so as to widen or enlarge the scope of the said section by interpreting `turnover' to include income from 'all sources'.

Mere filing of a statement under S.143B of the Income Tax Ordinance, 1979 (as opposed to a return under S.55 which was for the Normal Tax Regime) for income falling under the Presumptive Tax Regime (i.e. Ss. 80C, 80CC etc.) was not a reason to bring it out of the definition of `turnover' when the law, i.e. the explanation to S. 80D(2), expressly provided otherwise

Same applied to the corresponding provisions of the Income Tax Ordinance, 2001, in that mere filing of a statement under S.115(4) of the Income Tax Ordinance, 2001, which (section) was pari materia to S.143B of the Income Tax Ordinance, 1979, did not mean that the income contained in such statement would automatically fall outside the scope of 'turnover' provided by S.113 of the Income Tax Ordinance, 2001

If such income falling under the Presumptive Tax Regimes of both the Ordinances was to be excluded from the ambit of 'turnover' as provided in S.80D of the Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001 the Legislature would have explicitly mentioned it.

Nothing in the wording of S.80D of Income Tax Ordinance, 1979 and S.113 of the Income Tax Ordinance, 2001 suggested that for the purposes of calculating the turnover for the said sections receipts of income subject to the Presumptive Tax Regime were excluded

Minimum tax payable under S.80D of the Income Tax Ordinance, 2001 was leviable on the aggregate of declared turnover from all sources including receipts covered by Ss. 80C & 80CC of the Income Tax Ordinance, 1979

­Minimum tax payable under S. 113 of the Income Tax Ordinance, 2001 was leviable on the aggregate turnover from all sources including receipts and tax under the Presumptive Tax Regime of the Income Tax Ordinance, 2001

Legislature did not intend that tax already paid/payable in respect of deemed income which was assessed as final discharge of the tax liability under S.169 of the Income Tax Ordinance, 2001 or under any other provision of the said Ordinance would be excluded from the purview of 'tax payable or paid', because the Legislature did not expressly provide so.

Entire S.153 of the Income Tax Ordinance, 2001 was redrafted under Finance Act, 2011 and as such the service sector, comprising both corporate and non corporate service providers, were brought into a minimum tax regime.

Taxpayer contented that Taxation Officer erred in applying the third proviso to Cl.(iii) of subsection (6) of S.153 of the Income Tax Ordinance, 2001 in case of corporate sector; and that actual tax was deducted considering the tax deductible under S.153(1) of the Income Tax Ordinance, 2001 to be minimum tax

Validity

Through insertion of Cl.79 in Part-IV of the Second Schedule to the Income Tax Ordinance, 2001, corporate service providers were taken out of minimum tax regime reinstating the position that was generally understood to be applicable prior to the same

Understanding expressed in Circular No.6 of 2009 was not contrary to the provisions of law

If the understanding expressed in Circular No.6 of 2009 was so patently contrary to law that could have been withdrawn soon after

Clarifications issued both prior to and subsequent to issuance of Circular No.6 of 2009 did not unequivocally clarified to the contrary

Amendment in both the clarifications was made to such service providers which were previously covered by the final tax regime

Corporate service providers being previously covered by the normal tax regime, the text of said clarifications could be construed to suggest that the amendment only altered the tax regime in cases where previously final tax regime was applicable

Position, even after the amendment introduced vide Finance Act, 2011, had not changed since the insertion of Cl.79 in Part-IV of the Second Schedule of the Income Tax Ordinance, 2001 had reinstated the position for corporate service providers in a manner that in such cases tax liability would be governed by the normal tax regime without any cap, or ceiling

Order of the two authorities below were found to be suffering from legal as well as factual infirmities

Appeal filed by the tax payer was accepted by the Appellate Tribunal.