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Petitioner: NATIONAL POWER PARKS MANAGEMENT COMPANY (PVT.) Ltd. VS Respondent: FEDERAL JUDGMENT
Court Name: Lahore High Court Judge(s): Asim Hafeez Title:NATIONAL POWER PARKS MANAGEMENT COMPANY (PVT.) Ltd. vs FEDERAL
JUDGMENT
Reported As: PLJ 2020 Lahore 292, 2020 PTD 1001, 2020 LHC 834 Result: Petition dismissed Judgment JUDGMENT ASIM HAFEEZ, J. The petitioner , through this constitutional petition, seeks declaration of invalidity against orders dated 30.01.2020 and 06.02.2020, whereby the estimate(s) furnished by the petitioner regarding computation of advance income tax payments, for the 1st and 2nd quarters of Tax year 2020 ('tax year'), in terms of section 147 of the Income Tax Ordinance, 2001 ("Ordinance, 2001"), were rejected and notices under section 137 of Ordinance, 2001 for recovery of payable advance tax issued. The respondents are duly represented and with concurrence, this case is treated as PAKKA CASE and decided accordingly . 2. The elephant in the room is the jurisdictional challenge thrown to the existence and assumption of jurisdiction by the respondent No.3, who allegedly proceeded to reject the estimate(s) furnished with regard to computation of advance tax payments. Conversely , the petition is resisted, on behalf of the respondents, on the point of availability of an alternate remedy under section 127 of Ordinance, besides submissions on merits. 3. Briefly the facts, necessary for adjudication of the lis at hand, are that the petitioner , whose income was chargeable to tax, furnished estimate of advance tax amounts, computed for the 1st quarter of tax year, wherein alleged tax credit(s) amounting to Rs.561,565,000/-, allegedly accrued under section 65D of Ordinance, 2001 - was deducted from the amounts computed. The estimate furnished was rejected and notices under section 137 of Ordinance, 2001 for recovery of the amounts, tabulated in accordance with sub-section (4) of section 147 of Ordinance, 2001 were issued. Aggrieved, the petitioner invoked constitutional jurisdiction bearing W.P No. 64399/2019, which was disposed of with direction to decide the matter afresh. The estimate furnished, for 1st quarter , was again rejected vide order dated 30.01.2020. During the interregnu m period, deemed assessment order regarding return of income for the Tax year 2018 was amended vide order dated 25.10.2019, in terms of
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section 122(5A) of Ordinance, 2001, whereby claim of tax credit(s) was dismisse d. The petitioner unsuccessfully impugned order dated 25.10.2019 before the Commissioner Inland Revenue (Appeals). Thereafter , second appeal was filed before learned Appellate Tribunal, which is claimed to be pending adjudication. In the meanwhile, the obligation to pay advance tax payment for 2nd quarter accrued. The petitioner again furnished estimate, computing advance tax payments, wherein amounts of Rs.1,047,271,000/- was deducted on account of claimable tax credit(s) under section 65D, ibid. The estimate for 2nd quarter was rejected on 06.02.2020 and recovery notices were issued under section 137 of Ordinance, 2001. The rejection of estimate(s) regard ing advance tax payments was primarily on account of alleged deductibility / adjustments of tax credit(s), allowance and admissibility whereof is vehemently disputed by the department. Hence, this petition. It is noted that deemed assessment order for the Tax year 2019 was amended vide order dated 06.03.2020, in exercise of powers under section 122 (5A) of Ordinance, 2001, whereby claim of tax credit under section 65D was again rejected. 4. Learned counsel for the petitioner submits that respondent No.3 (Officer Inland Revenue) lacked jurisdiction to question the computation and authenticity of estimate(s) furnished, regarding computation of advance tax payments, which estimate(s) cannot be questioned by the department. Alternately submits that in terms of first and second provisos to sub-section (6) of section 147 of Ordinance, 2001, the Commissioner has limited power to reject the estimate(s) furnished, which power can only be exercised subject to the existence of conditions prescribed, none of which was available when authority was purportedly exercised. Adds that no claim with respect to advance tax payments, allegedly overdue, can be raised till conclusive determination of income tax liability for the relevant tax year. Per learned counsel, alleged payable advance tax, subject to any tax is found payable upon carrying assessments, can be recovered along with penalty , as default surcharge, under section 205 of Ordinance, 2001. To support these submissions, he referred to the judgments reported as "Commissioner of Income Tax V. M/s Habib Sugar Mills Ltd." (1993 PTD 343), "Call Tell and another V. Federation of Pakistan and others" (2005 PTD 833), "Lone Cold Storage, Lahore V. Revenue Officers, Lahore Electric Power Co. and others" (2010 PTD 2502 ), "Karachi Port Trust, Karachi V. Commissioner Inland Revenue, Karachi" (2011 PTD 1996 ), Messrs Lahore Polypropylene Industri es (Pvt.) Ltd. and others V. Federation of Pakistan and others (2012 PTD 1003 ), "Sui Northern Gas Pipelines Limited (SNGPL) V. Federation of Pakistan and others" (2017 PTD 1774 ), "Fauji Fertilizer Company Ltd. V. Federation of Pakistan through Secretary , Ministry of Finance, Islamabad and 3 others" (2018 PTD 719). With respect to the objection regarding maintainability of instant petition, learned counsel emphasized that remedy of appeal is not available to the petitioner under section 127 of Ordinance, 2001, against orders impugned through this petition. Reference, in this behalf, is made to the case reported as Chairman, Central Board of Revenue, Islamabad and 3 others V. Messrs PAK-SAUDI Fertilizer Ltd. (2000 PTD 3748 ). Learned counsel emphasized petitioner 's entitlement to deduct / adjust claimed tax credit(s), which became admissible once return of income for the preceding tax year was furnished, to be construed as deemed assessment; and unless reversed or altered, the declarations made therein are valid and intact. Learned counsel referred to sectio n 53 of the erstwhile Income Tax Ordinance 1979 (Repealed Ordinance), which was analogous to section 147 of Ordinance 2001, to emphasize point of absence of jurisdiction to question estimate(s) furnished regarding advance tax payments. Adds that claims regarding tax credit(s) are still pending adjudication before learned Appellate Tribunal, hence disallowance at this stage constitutes an illegality . Per learned counsel, estimate(s) under reference were rejected in the garb of principle of res-judicata, without appreciating that said principle has no application till the decisions referred attain finality in law. Referred to judgments reported as "Commissioner of Income Tax, North Zone (West Pakistan), Lahore V. Crescent Textile Mills Ltd., Lahore" (1974 (2) Tax 212), "Commissioner of Income Tax, Central Zone 'B' V. Messrs Farrokh Chemical Industries" (1992 PTD 523), "Central Board of Revenue and others V. Chanda Motors" (1993 SCMR 39), "Messrs MICROP AK (PVT .) LTD., LAAHORE v. INCOME TAX APPELLA TE TRIBUNAL, LAHORE and 2 others" (2001 PTD 1180), "INSPECTING ADDITIONAL COMMIS SIONER OF INCOME TAX and others v. Messrs MICRO PAK (PVT .) LIMITED and others" (2002 PTD 877), "Messrs Engineering Consortium (Pvt.) Limited, Karachi V. I.T.O. Co., Circle Central Zone-C, Karachi" (2006 PTD 333), "Messrs Riaz Bottlers (Pvt.) Limited, Lahore V. Commissioner of Income Tax, Companies Zone-I, Lahore" (2008 PTD 877) "BP
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Pakistan Exploration and Production Inc., Karachi V. Additional Commissioner , Inland Revenue-B Enforcement and Collection Division-I , Karachi and another" (2011 PTD 647) and "H.M. Extraction Ghee & Oil Industries (Pvt.) Ltd. V. Federal Board of Revenue" (2019 PTCL 533). Lastly argued that sub-section (4) and (6) of section 147 of Ordinance, 2001 are independent provisions for the purposes of computation and estimation of advance tax liability . 5. Learned counsel appearing for respondent department seeks dismissal of instant petition in wake of availability of remedy of appeal under section 127 of Ordinance, 2001, and reference, in this behalf, is made to the cases reported as "WEAL TH TAX OFFICER and another v. SHAUKA T AFZAL and 4 others" (1993 SCMR 1810 ) and "COMMMISSSIONER OF INCOME TAX, COMP ANIES-II and another v. HAMDARD DAWAKHANA (WAQF), KARACHI" (PLD 1992 SC 847). Per learned counsel, assumption and exercise of jurisdiction by respondent No.3 - who is duly authorized and competent - was in accordance with the first and second provisos to sub-section (6) of section 147 of Ordinance, 2001, added through Finance Act 2018 (XXX of 2018) dated 22.05.2018 ("Act, 2018). Learned counsel emphasized, that claim of tax credit(s) under section 65D of Ordinance, 2001, was inadmissible and only such tax credit(s) are adjustable against computed advance tax, as allowed under section 168 of Ordinance, 2001, reference is made to item (D) of computation formula prescribed for tabulation of advance tax under sub-section (4) of section 147 of Ordinance, 2001. Submits that claim of tax credit(s) was otherwise rejected, while amending deemed assessments for the Tax years 2018 and 2019, vide orders dated 25.10.2019 and 06.03.2020. Learned counsel referred to the case of "H.M. EXTRACTION GHEE AND OIL INDUSTRIES (PVT .) LTD. and another v. FEDERAL BOAR D OF REVENUE and another" (2019 SCMR 108) to highlight the adjustment mechanism with respect to claim of exemption(s) and tax credit(s). Further submits, that judgments referred are distinguishable in view of amendments introduced through Act, 2018. 6. Arguments heard. Available record perused. 7. The objection regarding maintainability has been confronted on two grounds, firstly on jurisdictional plane; averring that respondent No.3 lacked jurisdiction to review and reject estimate(s) furnished, regarding computation of advance tax payments and to proceed to recover allegedly payable advance tax before conclusive determination of income tax liability for the respective tax year. And secondly that no remedy of appeal is available under section 127 of Ordinance 2001, in view of the nature of the orders impugned here. 8. The question of alternate remedy would pale into insignificance if jurisdictional challenge succeeds, in which eventuality the very act of assumption of jurisdiction would be of no legal effect. It is therefore appropriate to decide the jurisdictional objection first. It is significant to note that petitioner has not questioned the vires, constitutionality or legality of the first and second provisos to sub-section (6) of section 147 of Ordinance, 2001 - added through the Act, 2018. 9. There is no dispute regarding the statutory obligation to pay advance tax for requisite tax year in accordance with section 147 of the Ordinance, 2001, which obligation was allegedly discharged upon furnishing computed advance tax liability for the 1st quarter vide document dated 27.09.2019 - followed by explanatory letters dated 11.10.2019 and 20.01.2020. The contents of the document dated 27.09.2019 manifest that advance tax liability was worked out under sub-section (4) sectio n 147 of Ordinance, 2001. The petitioner , while computing the liability proceeded to effect deduction of Rs.561,565,000/- for 1st quarter on the basis of alleged claim of tax credit(s), claimed under section 65D of Ordinance, 2001. It was alleged through document dated 11.10.2019 that advance tax liability of Rs.483,282,000/-, computed under sub-section (4) of section 147, ibid, was not payable in lieu of deduction of claim of tax credit(s), and in fact excess tax of Rs.82,283,641 was paid. Likewise, excess advance tax payment was claimed by the petitioner while computing advance tax liability for 2nd quarter of the tax year, wherein deduction of Rs.1,047,271,000/- was made on the basis of alleged tax credit(s), claimed to have accrued in terms of section 65D, ibid. The estimate for 2nd quarter was furnished through document dated 31.12.2019. Respondent No.3 rejected the estimate(s) furnished on the premise that estimate(s) were invalid, being contrary to computation formula provided under sub-section (4) of section 147 of Ordinance, 2001 and otherwise no deductions could be effected on the basis of alleged tax credit( s), against computed liability of advance tax, as claimed tax credit(s) was never allowed in terms of section 168 of Ordinance, 2001; hence, not available for any alleged adjustments against
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advance tax liability . Manifestly , respondent No.3, claimed to be duly authorized under section 210 of the Ordinance, 2001, rejected the estimate(s) upon assumption of jurisdiction in terms of first and second proviso to sub-section (6) of section 147 of Ordinance, 2001, added through Act, 2018, which provisos hold critical position in the context of subject matter controversy . It is expedient to reproduce sub-section (6) of section 147, ibid, and provisos thereto, for ease of reference, which read as; "(6) If any taxpayer who is required to make payment of advance tax under sub-s ection (1) estimates at any time before the last instalment is due, that the tax payable by him for the relevant tax year is likely to be less than the amount he is required to pay under sub-section (1), the taxpayer may furnish to the Commissioner an estimate of the amount of the tax payable by him, and thereafter pay such estimated amount, as reduced by the amount, if any, already paid under sub-section (1), in equal instalments on such dates as have not expired; *Provided that an estimate of the amount of tax payable shall contain turnover for the completed quarters of the relevant tax year, estimated turnover of the remaining quarters along with reasons for any decline in estimated turnover , documentary evidence of estimated expenses or deductions which may result in lower payment of advance tax and the computation of the estimated taxable income of the relevant tax year: *Provided further that where the Commis sioner is not satisfied with the documentary evidence provided or where an estimate of the amount of tax payable is not accompanied by details mentioned in the first proviso, the Commissioner may reject the estimate after providing an opportunity of being heard to the taxpayer and the taxpayer shall pay advance tax according to the formula contained in sub-section (4). [*added through Act, 2018] [Emphasis supplied] 10. While comparing sub-section (6) of section 147, with and without the provisos, fundamental departure has been made, when contextualized in the context of jurisdictional objection. Out with the old, in with the new. It is evident that, subject to the conditions prescribed, jurisdiction to reject the documentary evidence furnished has been extended, which was lacking before the introduction of provisos, ibid. Even no such authority was extended under section 53 of the Repealed Ordinance , largely referred by learned counsel for the petitioner to emphasize jurisdictional objection. In terms of first proviso, certain parameters were laid down, to be adhered to while furnishing estimate(s) thereunder , which inter-alia included provisioning of documentary evidence relating to alleged deductions, resulted in reduced payment of advance tax. Documentary evidence by way of estimation was accordingly provided by the petitioner , tabulating the advance tax liability and effecting deduction(s) on the basis of tax credit(s) - claimed under section 65D of Ordinance, 2001. The expression 'documentary evidence' calls for no explanation for understanding its meaning, scope and extent. Officer Inland Reve nue, acting in terms of second proviso to sub-section (6) of section 147, ibid, proceeded to review the documentary evidence furnished and rejected the same, upon being unsatisfied. Upon rejection of the estimate(s) adva nce tax payable in terms of the computation formula was claimed. The assumption of jurisdiction is in accordance with the mandate of the provisos to sub-section (6) of section 147 of Ordinance, 2001. The significance of the provisos, while interpreting sub- section (6) of section 147, ibid, cannot be undermined or ignored, which provisos in fact, control and regulate the procedure provided under sub-section (6) of section 147, ibid, for furnishing estimate(s) thereunder . Their Lordships, while dilating upon the cano ns of statutory interpretation in the context of 'proviso', in the case of MESSRS EAST AND WEST STEAMSHIP COMP ANY v. PAKIST AN, through the Secretary to the Government of Pakistan, Ministry of Commerce, Karachi (PLD 1958 Supreme Court 41 , at page 72), observed that "Moreover , one of the plainest rules of statutory interpretation is that a proviso is to be regarded as something which excepts a particular case from a general principle. The effect of a proviso is to except something out of a preceding portion of the enactment or to qualify something enacted therein which but for proviso would be within it. As is said in Caries on Statute Law;- "The natural presupposition is that, but for the proviso, the enacting part of the section would have included in it the subject-matter of the proviso" 11. In nutshell, submissions made by learned counsel to object to assumption of jurisdiction are misconceived, which if adverted to, would have the effect of making section 147 in general and provisos in particular redundant
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and ineffective. Their Lordships while interpreting the effect of section 15-B of Income Tax Act 1922, in the case of MUHAMMADI STEAMSHIP Co. LTD v. The COMMISSIONER OF INCOME-T AX (CENTRAL) KARACHI (1966 PTD 664), held that "it is a well-established rule of interpretation of statutes that no words in a statute are to be treated as surplusage or redundant". Likewise, no redundancy or surplusage can be attributed to the provisos to sub-section (6) of section 147 of Ordinance, 2001. The provisos have to be given full effect, without an exception. Apex court in the case of Messrs HIRJINA & Co. (PAKIST AN) LTD, KARACHI v. COMMISSIONER OF SALES TAX CENTRAL, KARACHI (1971 SCMR 128), reiterated time-tested principle of interpreting taxing enactments, relevant portion is reproduced hereunder as; "while interpreting the taxing statute the Courts must look to the words of the statu te and interpret it in the light of what is clearly expressed and not imply anything which is not expressed and provisions to support assumed deficiencies." [Emphasis supplied] 12. Without getting into nitty-gritty of factual details, bordering the domain of exercise of jurisdiction conferred, it is evident that jurisdiction is available, but exercisable subject to the conditions prescribed. The matter of exercise of jurisdiction is another specie. There is conspicuous distinction between the existen ce of jurisdiction and exercise of jurisdiction, as former implies grant or conferment of authority to adjudicate and later manifest the manner of application / execution thereof. Their Lordships, in the case of STATE v. ZIA-UR REHMAN and others (PLD 1973 Supreme Court 49) while classifying the expressions 'jurisdiction' and 'judicial power ' observed as follows; "It expresses the concept of the particular res or subject-matter over which judicial power is to be exercised and the manner of its exercise. Jurisdiction, there fore, a right to adjudicate concerning particular subject-matter in a given case, as also the authority to exercise in a particular manner the judicial power vested in the Court". 13. The argument that sub-section (4) and sub-section (6) of section 147, ibid, are independent in its operations is misconceived, which, if adverted to would render sub-section (4), ibid, redundant. The liability to pay advance tax has to be computed in accordance with sub-section (4) of section 147, for each quarter of the respective tax year, which quarterly computed liability for the tax year would conjointly constitute an obligation to pay advance tax for the tax year in terms of sub-section (1) of section 147, ibid. There is no escape or avoidance from the computation formula prescribed under sub-section (4) of section 147, ibid. For the purposes of clarity , it is expedient to reproduce sub-section (4) of section 147, which reads as: (4)"Where the taxpayer is an association of persons or a company , the amount of advance tax due for a quarter shall be computed according to the following formula:- A. is the taxpayer 's turnover for the quarter provided that where the taxpayer fails to provide turnover or the turnover for the quarter is not known, it shall be taken to be one-fourth of one hundred and ten percent of the turnover of the latest tax year for which a return has been filed; B. is the tax assessed to the taxpayer for the latest tax year . [Explanation.--For removal of doubt it is clarified that tax assessed includes tax under sections 1 13 and 1 13C.] C. is the taxpayer 's turnover for the latest tax year; and D. is the tax paid in the quarter for which a tax credit is allowed under section 168. [Emphasis supplied] 14. The significance of item (D) cannot be undermined, while allowing deductions, as evident from sub-section (4) of section 147, ibid. It is not the case of the petitioner that tax credit(s) alleg edly deducted from the liability computed were allowed in terms of section 168 of Ordinance, 2001. Since, this court is not touching the issues regarding legality or admissibility of said tax credit(s), therefore exercises restraint to make any comment in this behalf. Coming back to the scope of sub-section (6) of section 147, ibid, it is eviden t that it provides an option to the taxpayer to furnish estimate(s) of the amount of the tax payable, if upon estimation at any time before the last installment is due, that tax payable for the relevant tax year is likely to be less than the amount taxpayer is required to pay under sub-section (1) of section 147, ibid, the taxpayer shall pay the estima ted amounts, as reduced by the amounts, if any, already paid under sub-section (1) of section 147, ibid. In essence, the petitioner while submitting estimate(s) claimed - without prejudice to the computation formula - that amounts payable under sub-section (1) of
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section 147, ibid, stood reduced allegedly in wake of claimed tax credit(s), by effecting deductions from the computed liability of advance tax payments. The applicability of sub-section (4) of section 147, while making estimate(s) is significant, which is evident from the perusal of second proviso thereto, whereby the Commissioner is empowered to make directions for payment of tax in accordance with the formula prescribed. Until computation of advance tax liability has taken place in accordance with the statutory mandate, there is no question of alleged estimation of tax payable for the relevant year and consequent adjustments therefrom, for the purposes of sub- section (6) of section 147, ibid. The computation appears to be condition precedent for undertaking estimation under sub-section (6) of section 147, ibid. The argument is inherently flawed, which, for instance, implies that petitioner or a taxpayer , as the case may be, may proceed to claim and deducts alleged tax credit(s) from computed advance tax liability - notwithstanding same are not allowed under section 168 of Ordinance, 2001, in terms of item D of sub-section (4) of section 147 of Ordinance, 2001. Such a construction, if accepted, would implies that every eligible taxpayer , required to pay the advance tax, may unilaterally claim tax credit(s), proceed to effect adjustments and pay reduced advance tax payments. The submissions are contrary to the estimates submitted by the petitioner . 15. In light of aforesaid, the argument regarding absence or want of jurisdiction, to examine and reject the estimate(s) furnished is without any force and same is repelled. The judgments referred by learned counsel for the petitioner and reasonings adopted therein, wherein, commonly , it was held that Taxation officer / authorities have no jurisdiction to question the estimate(s) furnished with regard to the computation of advance tax payments, are distinguishable and do not apply to the controversy at hand. In fact, no such authority or jurisdiction was available or conferred to review and reject estimate(s), either under section 53 of the Repealed Ordinance or section 147 of Ordinance, 2001, as it existed before the amendments introduced. None of the judgments referred have interpreted section 147 of the Ordinance, 2001, after the amendments are introduced through the Act, 2018. 16. Learned counsel has also argued that act of issuance of impugned recovery notices, section 137 of Ordinance, 2001 is devoid of jurisdiction and no recovery could be effected with respect to alleged due advance tax liability , till conclusive determination of liability of income tax for the relevant tax year, which determination has to be…
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