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Petitioner: COMMISSIONER OF INCOME TAX VS Respondent: Messrs KAMRAN MODEL FACTORY
Court Name: Sindh High Court Judge(s): Zahid Kurban Alavi, Sayed Saeed Ashhad Title: COMMISSIONER OF INCOME TAX vs Messrs KAMRAN MODEL FACTORY Case No.:I.T.As. Nos. 59, 1 2, 13, 93, 10, 110 to 115, 1 20 to 1 23, 1 25 to 138, 136, 137, 191, 197 to
JUDGMENT
Reported As: K.L.R. 2002 tax & Corporate Cases 161 Result: Appeals disposed of Judgment JUDGMENT SAIYED SAEED ASHHAD, C.J.- The aforesaid Income-tax Appeals arid Income-tax Case have been find by the Department against the order of the Income-tax Appellate Tribunal passed by rt in a large number of appeals, In all the aforesaid Income Tax Reference, Income Tax Cases and Income Tax Appeals any one or all the following questions of law arise for determination by this Court:-- (1) Whether Workers' Welfare Fund would be leviable on income exempted. Under the 2nd Schedule to the Income Tax Ordinance? (2) Whether while levying Workers' Welfare Fund the assessee would be entitled to claim set of the losses of earlier years? (3) Whether Workers' Welfare Fund would be leviable on the income subjected to tax under the presumptive tax regime covered by sections 80C and 80CC of the Income Tax Ordinance? And (4) What would be the reasonable period for levying Workers Welfare Fund after the finalisation of
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assessm ent of income-tax and omission to charge/levy Workers' Welfare Fund? The facts giving rise to the aforesaid Income-tax Reference/income-tax Cases/income-tax Appeals are that the Assessing Officers in exercise of the powers conferred on them by section 4 of the Workers' Welfare Funds Ordinance, 1971 (hereinafter referred to as the Workers' Welfare Fund Ordinance) charged/levied Workers' Welfare Fund at the rate provided in the aforesaid section 4 while finalizing the assessm ent, In some of the cases the assessee had claimed set of of the losses of the. Earlier years from the income in the ensuing years but the Assessing Officers did not allow the benefit and refused to set of the losses of the earlier years from the income of the assessment years in question. In some of the cases the question involved was whether Workers' Welfare Fund would be chargeable/leviable on the income declared under the presumptive tax regime covered by sections 80C and 80CC of the Income Tax. Ordinance (hereinafter referred to as the Income Tax Ordinance) and the Assessing Officers rejected the contention of the assessee that Workers' Welfare Fund could not be charged/levied on the income/turnover declared under sections 80C and 80CC and held that the income/turnover liable to tax under the presumptive tax regime under the aforesaid two sections was also liable to be charged or to the levy of Workers' Welfare Fund in accordance with section 4(1) of the Workers' Welfare Fund Ordinance. In some of the cases the grievance of the department was the finding of the Tribunal that no Workers' Welfare Fund could be levied on income of the assessee which have been exempted from charge to tax in accordance with various clauses of the 2nd Schedule to the Income Tax Ordinance. In some of the cases of the Assessing Officers wile finalizing the assessment had failed or omitted to subject the income to the charge/levy of Workers' Welfare Fund and when this omission was brought to their notice they determined the account 'by an order subsequently. The delay between the making of the assessm ent order and the order determining the payment of Workers' Welfare Fund levied from 5 months and 1 7 days to 5 years, 6 months and 15 days. The order of levying Workers' Welfare Fund was cancelled by the First Appellate Authority. The department preferred an appeal before the Income-tax Appellate Tribunal and it observed and concluded that the Assessing Officer could, in case he omits to make an order for levy of Workers' Welfare Fund in the assessm ent framed by him, then he could make an order for levy within 90 days of the assessment order. Mr. Muhammad . Fareed appearing on behalf of the department/appellant raised the following objection with regard to the maintainability: "That the assessee have no right of appeal under sections 129 and 134 of the Income Tax Ordinance to challenge the levy of Workers' Welfare Fund and the aforesaid cases would have not arisen inasmuch as majority of the aforesaid cases have been find by the department against the orders of the Income-tax Appellate Tribunal passed in appeals find by the Assessee." We have heard the arguments of Messrs Shaikh Haider, Nasrullah Awan, Muhammad Fareed, Jawaid Farooqui, Arif Motan and Aqeel Ahmed Abbasi on behalf of the department/appellant, Messrs Rohan Hasan Naqvi, Sirajul Haq Memon, Arshad Siraj, Salman Pasha, Zamarrud Jafferi, Hanif Khan, Irfan Sadat Khan, Z.H. Jafri and Rehan Jafferi, Advocates on behalf of the
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assessee/respondents. All the aforesaid learned counsel were put on notice that the aforesaid I.T.As. And I.T.O, would be heard/disposed of finally on merits at katcha peshi stage, if need by after admitting them to regular hearing. Mr. Muhammad Fareed, the learned Advocate for the department vehemently contended that the assessee did not have the right to have recourse to sections 129 and 134 of the Income Tax Ordinance and could not have challenged the order of the Assessing Officers by filling an appeal before the Commissioner of Income-tax. He further submitted that as the assessee/respondents did not have the right to challenge the order of the Assessing Officers by filing an appeal under section 129 of the Income Tax Ordinance the question of filing an appeal under section 134 before the Income-tax Appellate Tribunal to challenge the order of the First Appellate Authority did not arise. Elaborating his arguments he submitted that sections 129 and 134 of the Income Tax Ordinance provide a right of appeal to an assessee who is aggrieved by an order of the Assessing Officer and the Appellate Authority relating to the determination of the income and charge/levy of the income-tax. He further submitted that all the assessee/respondents were not aggrieved by the assessm ent-orders passed by the Assessing Officers in respect of any question relating to the determination/assessm ent of the income chargeable to tax and subsequent levy/charge of income- tax thereon but their grievance was with regard to the order levying/charging Workers' Welfare Fund which was made by the Assessing Officers in pursuance of the powers conferred by section 4 of the Workers' Welfare Fund Ordinance and that an issue or a finding in the assessment order which was not made or passed in exercise of any provisions of the Income Tax Ordinance could not be challenged by way of an appeal under section 129 of the Income Tax Ordinance. He further submitted that such an issue/finding would be deemed to have been made in exercise of the powers under the Workers' Welfare Fund Ordinance and in case of any illegality or irregularity therein it could be challenged in accordance with the provisions of the Workers' Welfare Fund Ordinance. He further submitted that though the Assessing Officers had finalized/made the assessm ent order under Sections 59, 59A, 59B, 59C and 62 of the Income Tax Ordinance and in doing so they had also decided the issue of levy/charge of Workers Welfare Fund on the taxable income in exercise of the powers conferred by Section 4 of the Workers' Welfare Fund Ordinance and, therefore, it could not be said that the Assessing Officers in levying/charging Workers' Welfare Fund had exercised powers under the Income Tax Ordinance so as to render the order relating to the levy/charge of Workers' Welfare Fund liable to be challenged by way of an appeal under the provisions of Income Tax Ordinance. Messrs Rehan Hasan Naqvi, Sirajul Haq Memon, Arshad Siraj, Salman Pasha and others appearing on behalf of the assessee/respondents vehemently refuted the arguments of Mr. Muhammad Fareed and submitted that they were without any substance and did not merit any consideration. They contention was, no doubt, that the order/finding with regard to the levy/charge of Workers' Welfare Fund was made by the Assessing Officers in exercise of the powers conferred on them by section 4 of the Workers' Welfare Fund Ordinance but the Assessing Officers in doing so were proceeding in accordance with the powers conferred on them by the Income Tax Ordinance for making the assessment and during the course of finalizing the assessm ent they in exercise of the powers conferred by section 4 of the Workers' Welfare Fund Ordinance had to decide the issue relating to the charge/levy of Workers' Welfare Fund, In order to decide this question it will be appropriate to reproduce the provisions of Section 4 of the Workers' Welfare Fund Ordinance, which are as under:- "4. Mode of payment by, and recovery from industrial establishment.- (1) Every industrial establishment, the total income of which in any year of account commencing on or after the date specified by the (Federal Government) in the official Gazette in this behalf is not less than on6 lakh
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of rupees shall pay to the Fund in respect of that year a sum equal to two per cent. Of so much of its total income as is assessable under the (Ordinance) or would have been so assessable but for the exemption made by section [48] thereof. (2) Every industrial establishment which is liable under subsection (1) shall pay the amount due from it to the Income-tax Officer having jurisdiction over the industrial establishment for purposes of the [Ordinance]. (3) The industrial establishment shall, on or before the date on-which it is required to furnish a return of income under [section 55 of the Ordinance], pay the amount due from it under sub- section (1) calculated with reference to the total income reported in the said return. (4) At the time of making a assessm ent under the Ordinance, or as soon thereafter as may be, the Income- tax Officer shall, by order in writing, determine the amount due from industrial establishment under subsection (1), if any, on the basis of the income so assessed after taking into account the amount paid by the industrial establishment under subsection (3) in respect of the-.Year and the industrial establishment shall pay the amount so determined on or before the date specified in the order. (5) Any change by way of enhancement or reduction in the assessed income subsequent to the assessm ent made under the the Ordinance shall be given effect to by adjustment of the amount due under sub-section (1). (6) ................................................. (7) ................................................. (8).................................................. (9) The provisions of the [the' Ordinance], relating to the mode and time of recovery of the income- tax leviable under the Act shall, so far as may be, apply to the recovery of the amount due under sub-section (1)." From perusal of the aforesaid sub-sections of section 4 of the Workers' Welfare Fund Ordinance it is absolutely clear that the Assessing Officer has been authorized to deal with the question/issue of charge/levy of Workers' Welfare Fund' while finalizing the assessment proceedings of an assessee, who had furnished a return of income under section 55 of the Income Tax Ordinance. Thus the aforesaid section 4 has empowered or conferred the powers on the Assessing Officers in their capacity as Income-tax Assessing Officers exercising powers under the Income Tax Ordinance. From perusal of sub-section (4) of section 4 of the Workers' Welfare Fund Ordinance it is also clear that the Income-tax Officer after finalizing the assessment and determining the income liable to tax has to determine the amount due from the assessee under sub-section (1) of section 4 of the Workers' Welfare Fund Ordinance and the same would be payable by the assessee on or before the date specified in the order. Sub-section (5) of Section 4 requires adjustment of the amount paid by an assessee under sub-sections (2) and (3) of section 4 on account of any change by way of enhancement or reduction in the income declared and the income assessed by the Assessing Officer. Provision of sub-section (9) of section 4 also unequivocally lend support to the contention that while determining the question of charge/levy of Workers' Welfare Fund the provision of Income Tax Ordinance relating to the mode and time of recovery of income tax shall apply to the recovery of the amount of Workers' Welfare Fund due under section 4(1) of the Workers' Welfare
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Fund Ordinance, In this connection special reference may be made to sub-section (4) of section 4 of the Workers' Welfare Fund Ordinance which specifically provides that the Income-tax Officer at the time of making an assessm ent under the Income Tax Ordinance shall be an order in writing determine the amount due from industrial establishment under sub-section (1) of section 4 of the Workers' Welfare Fund Ordinance. From the aforesaid provisions, it is absolutely clear that the Assessing Officer while finalizing the assessment has to make on order would be part of the assessm ent order. The order relating to charge/levy of Workers' Welfare Fund being part of the assessm ent order made by the Assessing Officer could be challenged by an aggrieved party only in accordance with the provisions of the Income Tax Ordinance as the same would be incapable of being separated from rest of the assessment order, It is also pertinent to note that there is no provision In the Workers' Welfare Fund Ordinance providing a forum for challenging the order relating to the charge/levy of Workers' Welfare fund by the Assessing Officer and this fact also leads to a strong inference that a grievance of an assessee with regard to an order/finding relating to the charge/levy of Workers' Welfare Fund under section 4(1) of the Workers' Welfare Fund Ordinance can be challenged by filing an appeal against the assessment order containing the finding/order relating to the charge/levy of Workers' Welfare Fund, else the aggrieved party would have no alternate forum or authority for redress of his grievances relating to any illegality or irregularity in charging/levying Workers Welfare Fund by the Assessing Officer. In the circumstances, we are unable to uphold the objection raised by Mr. Muhammad Fareed regarding maintainability of an appeal under section 129 of the Income Tax Ordinance against the order of the Assessing Officer making on order/finding relating to the charge/levy of Workers' Welfare Fund, In view of our above observation it follows that an appeal under Section 129 of the Income Tax Ordinance would be maintainable then an appeal under section 134 of the Income Tax Ordinance by a party aggrieved by the order passed by the Appellate Authority under section 129 of the Income Tax Ordinance would be further appealable before the Income-tax Appellate Tribunal under section 134 of the Income Tax Ordinance, In the circumstances, the objection raised by Mr. Muhammad Fareed is overruled. We will now proceed to examine the four questions which have arisen out, of the aforesaid Income- tax Appeals and Income- tax Case which require a decision from this Court. We have heard the arguments of the learned counsel named above on behalf of the department/appellant and the assessee/respondents on the aforesaid questions of law and we will now proceed to discuss the same. QUESTION NO. 1: With regard to this question the contention of the learned counsel for the assessee was that Workers' Welfare Fund could not be charged/levied under section 4(1) of the Ordinance on the assessee whose income has been exempted from charged to tax in accordance with any of the clauses of the 2nd Schedule to the Income Tax Ordinance. They further submitted that this question has been decided by the judgment dated 28.3.2000 of the Supreme Court in Civil Petitions Nos. 38, 156 to 180, 199 to 276, 278 to 283, 285 to 320, 323 to 421 and 518 to 524 to 2000, where the Supreme Court had pronounced that Workers' Welfare Fund would not be charged/levied on income of an assessee whose income was exempt from charge to income-tax under any of the clauses of the 2nd Schedule to the Income Tax Ordinance. Mr. Muhammad Fareed does not controvert the
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arguments advanced by the learned counsel for the assessee/respondents and conceded that in view of the pronouncement made by the Supreme Court in the afore-cited petitions the question had to decide and that Workers' Welfare Fund would not be charged/levied on income of an assessee which was exempt from charge to tax under any of the clauses of the 2nd Schedule to the Income Tax Ordinance, Accordingly, this question stands decided/answered in the negative and no Workers' Welfare Fund would be charged/levied on income exempted under any of the clauses of the 2nd Schedule to the Income Tax Ordinance. Question No. 2: With regard to this question the contention of Mr. Muhammad Fareed and other teamed counsel appearing on behalf of the department/appellant was that the assessee would not be entitled to the benefit of set of in respect of the losses of the earlier years by referring or claiming the same in the subsequent assessm ent years wherein the assessee had earned profits. The learned counsel for the assessee/respondents submitted that the assessee would be entitled to set of of the losses of the earlier years provided that they had been determined as such by the Assessing Officers in the earlier assessm ent years, in accordance with section 34 of Income Tax Ordinance, during which the assessee had declared losses. Their further contention was that any loss or losses claimed by the assessee without such determination/computation could not be allowed and the Assessing Officers would not be authorized to determine/compute the losses in the assessment year in which the assessee had shown profits. The learned counsel appearing on behalf of the assessee/respondents submitted that their very contention was that the assessee would be entitled to set of of losses only in accordance, with section 35 of the Income Tax Ordinance which they had declared in the earlier years when they had suffered losses and which had been determined/computed by the Assessing Officers in accordance with section 34 of Income Tax Ordinance. They further submitted that they were not claiming benefit of set of in respect of the losses which had not been determined or computed as losses in the earlier years and they had no intention of claiming set of in respect of the losses which the assessee claimed in the assessment year in which profits were earned without their determination or computation as losses in the earlier year, In view of the contentions advanced by the learned counsel for the parties, we are of the view that there is no dispute with regard to the contention advanced on behalf of the assessee/respondents as the learned counsel appearing on behalf of the department/appellant had conceded that the assessee would be entitled to the benefit or claim of set of in respect of the losses, which they had declared in the earlier years and which had been determined/settled/computed as losses by the Assessing Officers in accordance with section 34 and carried forward in accordance with section 35 of Income Tax Ordinance. Accordingly, this question stands decided/answered in the a. Tirmative. QUESTION NO. 3- The next question which arises for determination is as to how the words "as is assessable" used in section 4 of the Workers' Welfare Fund Ordinance are to be interpreted and what would be connotation of the words "total as, is assessable" under the Workers' Welfare Fund Ordinance. The aspect which requires consideration in determining his question is as to whether Workers' Welfare Fund would be charged/levied on the tot^l income which is assessed by an Assessing Officer after commutation of the income/expenditure, allowing exemption and taking into consideration all other relevant factors necessary for determining the taxable income or whether
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the same would be charged/levied on the total income as declared by the assessee which should also be taken as the total income for the purpose of computation of tax without any exercise being undertaken by the Assessing Officer for arriving at the total income, In other words it is to be decided as to whether the provisions of section 4 of the Workers' Welfare Fund Ordinance will apply to the total income/proceeds declared by an assessee under the presumptive tax regime embodied in sections 80C and 80CC of the Income Tax Ordinance. Mr. Muhammad Fareed, one of the learned Advocates appearing on behalf of the department/appellant advanced arguments, which were adopted by all the learned counsel appearing on behalf of the department/appellant. The arguments advanced by Mr. Muhammad Fareed were to the effect that the words "total income as is assessable" would mean the total income on which the income-tax was charged or levied irrespective of the fact whether it had been determined by the Assessing Officer after taking into consideration the gross income, expenditure, exemption and other factors relevant for the purpose of determining the taxable income. According to him the words "as is assessable" appearing in section 4 did not lead to an inference that only such total income as was determined by an Assessing Officer while finalizing the assessment of an assessee would be subjected to charge/levy of Workers' Welfare Fund and further submitted that whatever income/proceeds were declared by an assessee at the time of filing of his return and which, according to the provisions of the Income Tax Ordinance were to be taken as the total income liable to tax without computation and determination thereof any an Assessing Officer, would, also be subjected to charge/levy of Workers' Welfare Fund. He further submitted that the return of total income as envisaged in section 55 of the Income Tax Ordinance would include statements find under sections 143 and 143B of the Income Tax Ordinance as they also declared the total income of the assessee and as such would be liable to charge/levy of Workers' Welfare Fund under section 4(1) of the Workers' Welfare Fund Ordinance, In support of his above arguments he placed reliance on sub-section (3) of section 4 of the Workers' Welfare Fund Ordinance. Sub-section (3) of section 4 of the Workers' Welfare Fund Ordinance has already been produced hereinabove but for the sake of read reference it is reproduced herein as under:-- "4. Mode of payment by, and recovery from industrial establishmen-- (1) ................................................................................................. (2) ................................................................................................. (3) The industrial establishment shall on or before the date on which it is required to furnish a return of income under section 55 of the Ordinance, pay the amount due from it under sub-section (1) calculated with reference to the total income reported in the said return." Mr. Muhammad Fareed relied heavily on the words: "pay the amount due from it under sub-section (1) calculated with reference to the total income reported in the said return" and submitted that from perusal of the above it was absolutely clear and without any doubt that every industrial establishment was required to pay the amount due from it by way of Workers' Welfare Fund under subsection (1) of section 4 of the Workers' Welfare Fund Ordinance and further that the same was to be calculated with reference to the total income shown or reported in the said return which meant that payment of Workers' Welfare Fund was not subject to the finalisation of any assessm ent by the Income-tax Officer and the words "total income" used in sub-section (1) of section 4 of the Workers' Welfare Fund Ordinance would in the circumstances mean the income declared by an assessee in the return. He further submitted that statements under sections 143 and 143B of the Income Tax Ordinance would be equated with the return of income as envisaged
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under section 55 of the Income Tax Ordinance for the purpose of charge/levy of Workers' Welfare Fund inasmuch as they also contain the total income of the assessee in respect of the transaction/business for which the assessee have been exempted from filing detailed returns of total income and are required to file only statements declaring their total income/turnover/proceeds during a particular financial year which is to be taken as their income and would be deemed to be "the total income reported in the said return" as provided in sub- section (3) of section 4 of the Workers' Welfare Fund Ordinance. On the other hand Mr. Rehan Hasan Naqvi vehemently refuted the arguments advanced by Mr. Muhammad Fareed and submitted that the arguments advanced by Mr. Muhammad…
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