Taxable income

2019 SCMR 439 SUPREME-COURT Judicial Precedent

Ss. 20, 23 & Second Sched., Pt. I, Cl. 62(1)Taxable incomeExemptionContributions made by employers to Khyber Pakhtunkhwa Employees Social Security Institution ("the Institution")

Whether income received by the Institution in the form of contributions was exempt from tax in terms of Cl. 62 of Part I of Second Schedule to the Income Tax Ordinance, 1979 ("the Ordinance")

Clause 62 applied in case of "voluntary" contributions

Contributions to be made by employers under S. 20 of the Ordinance were "mandatory"

Failure to make timely payment exposed the delinquent employer to the consequences laid down in S. 23, which provided that if there was non-payment of any amount due under S. 20, then what was payable stood increased by such percentage or amount as may be prescribed

Section 23 further provided that any unpaid amount could be recovered as arrears of land revenue

Contributions under S. 20 were, thus, not voluntary and therefore did not come within the scope of Cl. 62 of Part I of Second Schedule to the Ordinance.

2019 SCMR 439 SUPREME-COURT Judicial Precedent

Second Sched., Pt. I, Cl. 142Income Tax Ordinance (XXXI of 1979) [since repealed], S. 20 & Second Sched., Pt. I, Cl. 62(1)Taxable incomeExemptionRetrospective effectScopeContributions made by employers to Khyber Pakhtunkhwa Employees Social Security InstitutionTax assessment years falling under the Income Tax Ordinance, 1979 ("the 1979 Ordinance")

Plea that benefit of exemption from tax provided under Cl. 142 of Part I of Second Schedule to the Income Tax Ordinance 2001 ("the 2001 Ordinance') should be given retrospective effect to apply to assessment years falling under the 1979 Ordinance

Held, that to give retrospective effect to Cl. 142 of the 2001 Ordinance would be not merely to extend its reach over a huge period of time but also to cut across two different statutes

Clause 142 found place in the 2001 Ordinance whereas the issue, in the present case, arose under the 1979 Ordinance, which was repealed by the former

Clause 142 had no retrospective effect as contended for

Appeal was allowed accordingly.

2019 PTD 928 SUPREME-COURT Judicial Precedent

Ss. 20, 23 & Second Sched., Pt. I, Cl. 62(1)Taxable incomeExemptionContributions made by employers to Khyber Pakhtunkhwa Employees Social Security Institution ("the Institution")

Whether income received by the Institution in the form of contributions was exempt from tax in terms of Cl. 62 of Part I of Second Schedule to the Income Tax Ordinance, 1979 ("the Ordinance")

Clause 62 applied in case of "voluntary" contributions

Contributions to be made by employers under S. 20 of the Ordinance were "mandatory"

Failure to make timely payment exposed the delinquent employer to the consequences laid down in S. 23, which provided that if there was non-payment of any amount due under S. 20, then what was payable stood increased by such percentage or amount as may be prescribed

Section 23 further provided that any unpaid amount could be recovered as arrears of land revenue

Contributions under S. 20 were, thus, not voluntary and therefore did not come within the scope of Cl. 62 of Part I of Second Schedule to the Ordinance.

2019 PTD 928 SUPREME-COURT Judicial Precedent

Second Sched., Pt. I, Cl. 142Income Tax Ordinance (XXXI of 1979) [since repealed], S. 20 & Second Sched., Pt. I, Cl. 62(1)Taxable incomeExemptionRetrospective effectScopeContributions made by employers to Khyber Pakhtunkhwa Employees Social Security InstitutionTax assessment years falling under the Income Tax Ordinance, 1979 ("the 1979 Ordinance")

Plea that benefit of exemption from tax provided under Cl. 142 of Part I of Second Schedule to the Income Tax Ordinance 2001 ("the 2001 Ordinance') should be given retrospective effect to apply to assessment years falling under the 1979 Ordinance

Held, that to give retrospective effect to Cl. 142 of the 2001 Ordinance would be not merely to extend its reach over a huge period of time but also to cut across two different statutes

Clause 142 found place in the 2001 Ordinance whereas the issue, in the present case, arose under the 1979 Ordinance, which was repealed by the former

Clause 142 had no retrospective effect as contended for

Appeal was allowed accordingly.

2019 PTD 1256 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 2(64), 4(5), 9(5), 11 & 122(5A)Taxable incomeInternally Displaced Persons Tax (IDPT), imposition ofApplicability

Taxpayer was aggrieved of calculation of taxable income by assessing officer and charging Internally Displaced Persons Tax (IDPT) at 5% on tax payable

Commissioner Inland Revenue (Appeals) issued order in favor of taxpayer disallowing imposition of IDPT by authorities

Validity

IDPT was introduced as 'income tax' on taxpayers on their 'taxable income' of one million rupees or more

Term 'taxable income' was specifically defined in Ss. 2(64) & 9 of Income Tax Ordinance, 2001

Provisions of S. 9(5) of Income Tax Ordinance, 2001 provided exclusion of certain amounts from computation of 'taxable income' in accordance with Ss.8 & 169 of Income Tax Ordinance, 2001

Such exclusions restricted levy of IDPT to income tax chargeable on normal income or incomes other than those covered under FTR/PTR

IDPT was liable on income tax chargeable on taxable income of more than one million rupees

Taxpayer declared normal taxable income of only Rs. 320,800/- which was less than one million rupees

Balance amount treated by assessing officer as taxable income was PTR income which was erroneously included in taxable income

Appellate Tribunal Inland Revenue declined to interfere in order passed by Commissioner Inland Revenue (Appeals) and maintained the same

Appeal was dismissed in accordingly.

2018 PTD 996 ISLAMABAD Judicial Precedent

Ss. 11(1)(c)(d), 53, 54, 122 & 133Regulation of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), Ss.2 & 3-BReferenceWorking Interest, sale ofTaxable incomeScope

Applicant was a foreign company engaged in petroleum exploration in Pakistan, who sold its entire share of Working Interest to another company

Authorities issued notice of recovery tax on consideration amount received by applicant in such transaction

Plea raised by applicant was that it sold its interest in an immovable property which was leased out to it

Validity

Gain accrued to applicant company from consideration received for sale or assignment of its share of Working Interest was definitely taxable income

Such was not sale of an asset or leasehold rights in respect of an immovable property

Nature of transaction did not attract provisions of Income Tax Ordinance, 2001, relating to immovable property; it was an income which fell under S.11(c) and (d) of Income Tax Ordinance, 2001

Income derived from sale, dispossession or assignment of a Working Interest and falling under the heads of 'income from business' or 'income from other sources' was not exempted under Ss.53 & 54 of Income Tax Ordinance, 2001

Language of S.54 of Income Tax Ordinance, 2001, was unambiguous and free from any doubt

Income arising from sale or assignment of share in Working Interest attracted levy and charge of income tax and the sale consideration had to be offered for tax in the relevant tax year

Reference was dismissed accordingly.

2012 PTD 1535 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.4Constitution of Pakistan, Art. 70Mode of payment by, and recovery from, industrial establishmentTaxable incomeAccounting profit for the yearDeletion of levy of Workers Welfare Fund

Revenue contended that First Appellate Authority had deleted the levy without any justification and without considering the fact that the position of law had been substantially changed after the decision of High Court and after amendment in the Workers' Welfare Fund Ordinance, 1971 vide Finance Act, 2006 and Finance Act, 2008

Workers' Welfare Fund was to be charged on higher side of taxable income or the accounting profit for the year

Taxpayer contended that amendments in the Workers' Welfare Fund Ordinance, 1971, had been made through Finance Act, 2006 and Finance Act, 2008, but the case of the assessee was for the tax year 2006 and the amendments were not applicable

Validity

First Appellate Authority deleted the charge in this respect for the reason that admittedly the taxpayers' amended income had been determined after setting off the brought forward losses and the Workers' Welfare Fund charged on amended income could not be endorsed

Amendment in Workers' Welfare Fund Ordinance, 1971 were brought through Finance Act, 2006 and Finance Act, 2008 while the case of the taxpayer was of tax year 2006, and these amendment will not be applicable in the case of taxpayer

Even otherwise Workers' Welfare Fund being a fee could not be amended, altered or modified through a money bill but required regular legislative procedure under Art. 70 of the Constitution.

2012 PTD 507 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S. 4Mode of payment by, and recovery from, industrial establishmentPower companyTotal incomeTaxable income

Charge of Workers Welfare Fund on the total income of the Power company by extending the application of provisions of Workers Welfare Fund Ordinance, 1971

Validity

Workers Welfare Fund was chargeable on the "total income" of an industrial establishment and not on "taxable income"

Workers Welfare Fund was chargeable not only from one but all I.P.Ps, as well

Any other I.P.P. was an industrial establishment within the meaning of Workers Welfare Fund Ordinance, 1971

Contention that electricity generated by assessee or any other I.P.P. was not an "article" within the meaning of Workers Welfare Fund Ordinance, 1971 was without substance

Criteria for an industrial establishment were the use of electricity for its operation

Claim that assessee company was not an industrial establishment was baseless.

1981 SCMR 659 SUPREME-COURT Judicial Precedent

S. 4-Taxable incomeIncome earned whether legally or illegally Liable to taxation

Contention that respondent Insurance Company having commenced business before obtaining required certificate from Controller of Insurance, business carried on before obtaining such certificate rendered illegal and fatal to claim for expenses, held, not tenable.

1973 PTD 227 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 10(2)(x)-Taxable income-Business-Profits and gains upon which assessee has to pay tax Amount allowable as deduction under S. 10(2)(x)-Bonus paid by assessee who is running to loss would not be "bonus" within meaning of S. 10(2)(x)-Word "employee" -Managing Director of a Company-Not an "employee" of company so as to entitle company to allowance under S. 10(2)(x) in respect of bonus paid to Managing Director.

1973 PLD 367 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

S. 10(2)(x)-Taxable income Business-Profits and gains upon which assessee has to pay tax Amount allowable as deduction under S. 10(2)(x)-Bonus paid by assessee who is running Pi loss would not be "bonus" within meaning of S. 10(2)(x)-Worst "employee" - Managing Director of a Company

Not an "employee" of company so as to entitle company to allowance under S. 10(2)(x) to respect of bonus paid to Managing Director.