2015 PTD 1591
ORDER
FIZA MUZAFFAR, ACCOUNTANT MEMBER.--- These are cross appeals pertaining to Tax Year 2011, have been filed by the taxpayer and Revenue, arise out of order dated 26-6-2013, passed by the learned CIR(A), Zone-11, Lahore.
2. The relevant facts in brief are that the taxpayer in this case is a private limited company, deriving income form execution of contracts with the Government Organizations, The taxpayer-company being a prescribed person in terms of various withholding tax provisions of Income Tax Ordinance, 2001, (hereinafter called the 'Ordinance') was under legal obligation to deduct tax on certain payments made under different heads of accounts and deposit the same into national exchequer. The assessing authority on perusal of e-filed statements under section 165, have detected certain discrepancies regarding non-deduction of tax from the parties to whom the company had made certain payments under certain heads. Accordingly, the assessing authority issued statutory notices to the taxpayer-company asking certain information, documentation, explanation etc. The notices issued to the taxpayer-company, as alleged in the impugned assessment order, were partly complied with by the taxpayer-company, however, the same did not find favour of the assessing authority. Accordingly, the assessing officer treated the company as "taxpayer-in-default" and passed order under sections 161/205 of the income Tax Ordinance, 2001, pertaining to tax year 2011 In the impugned order, the assessing officer charged tax under section 181 at Rs.43,325,280 while default surcharge under section 205 was calculated at Rs.9,935,140. Being aggrieved, the taxpayer-company went in appeal before the learned CIR(A) and assailed the treatment meted out at assessment stage. The learned CIR(A) vide impugned appellate order had decided appeal of the taxpayer and deleted the tax charged under section 161 under the following heads.
(i) Staff Salary (BTL),
(ii) Messing of field staff.
(iii) Carriage charges for materials.
(iv) Cost of earthwork/materials,
(vi) Earth transportation "hiring charges".
(vii) Tender cost and enlistment fee.
With regard to tax charged under section 161 under the following heads, the learned CIR(A) remanded the matter back to the assessing authority for de novo decision:--
(1) Purchase of raw material Bitumen.
(2) Purchase of POL, Diesel, Lubricants and LPG Gas.
(3) Purchases from parties having exemption certificates
(4) Labour charges.
(5) Staff Salary (BTL).
(6) Cost of crush, sandstone, stone dust etc,
(7) Laboratory charges,
As regards charges of default surcharge under section 205, the learned CIR(A) directed the same to be deleted on the ground that the same was charged in the presence of available refunds of the taxpayer. Both the parties being not satisfied with the order of the learned CIR(A) have preferred second appeal before this Tribunal.
3. It is submitted by the learned AR for the appellant that the orders of both the authorities below are contrary to law and facts of the case, it is submitted by the learned AR that the taxpayer-company, wherever applicable, has properly and diligently deducted tax and deposited the same into government treasury under different heads of expenditure. It is submitted that as per law the monthly as well as annual Statements along with proof of payments were duly filed during the period under consideration. It is contended by the learned AR that the taxpayer duly responded to the notices issued to the taxpayer and has filed the requisite information documentation payments proofs etc., before the assessing authority and later on also before learned CIR(A) but the same was unjustifiably and illegally brushed aside by the authorities below and the taxpayer was wrongly and illegally held taxpayer-in-default. It is further contended by the learned AR that the learned CIR(A) being convinced with the submissions made by the learned AR before him which were duly supported with the necessary documentation and he was principally agreed with the taxpayer that the company has not defaulted any withholding tax provisions but the learned CIR(A) remanded the matter, under different heads, back to the assessing authority which is against the law and also norms of justice.
On the contrary, the learned DR supported the order passed by the assessing authority and submitted that learned CIR(A) was not justified to remand back the case by ignoring the fact that it was the obligation of the taxpayer to provide party-wise details of tax deduction and reasons for non-deduction of tax from a particular party as held by the Hon'ble Supreme Court of Pakistan in the case reported as 2002 PTD 1. It is further contended by the learned DR that the CIR(A) was not legally empowered to remand back the assessment order to the assessing (officer) as per section 129 of the Income Tax Ordinance. 2001 and also in terms of a full bench decision of the learned ATM recorded in ETA Nos. 1078 and 1079IL82010 in re: Messrs New Defence Estate.
5. We have heard the arguments made by the learned representatives of both the sides and have carefully gone through the available record. After due consideration, the appeals are disposed of in the following manner:--,
Purchase of raw material Bitumen,
6. The Assessing Officer charged tax under section 161 on the purchases on the ground that these purchases were not made from the National Refinery Limited and Attock Oil Limited, The learned CIR(A) remanded the matter back to the assessing officer for de nove decision. In this behalf, it is asserted by the learned AR that the purchases were duly made from National Refinery Limited and Attock Petroleum Limited and these are exempt from withholding of tax under clause (48) of Part IV of the Second Schedule. It is also submitted by the learned AR that the payments made were duly made through banks and the evidences, including purchases invoices, were submitted before the assessing officer which were checked and found in order but the assessing officer charged tax only on the ground that the refineries had not declared the purchases in their respective sales tax return. In this behalf, it is apprised by the learned AR that the taxpayer is not a sales tax registered person, therefore, the supplier company did not show its name in their sales tax returns. It was also submitted by the AR that some of the payments were made to distributors and these were not subjected to withholding tax in terms of section 156A of the Ordinance.
7. We have looked into the matter and after due consideration, we find that the learned CIR(A) was not justified to remand the matter to the assessing officer when the payments made by the taxpayer were not subjected to withholding tax in terms of clause (46) of Part IV of the Second Schedule. Perusal of record and order of the assessing officer is also clear in this regard that the taxpayer has duly provided purchases invoices and evidence of payments through crossed cheques but the assessing officer has charged tax on the plea that the oil refineries had not declared the purchases in their sales tax returns. The objection is not maintainable as the taxpayer is not a registered sales tax person. Similarly, some payments were made by the taxpayer to distributors which were also not liable to withholding tax in terms of section 156A of the Income Tax Ordinance, 2001. Under such circumstances, we find' no reason to maintain the order of the learned CIR(A) which is hereby vacated and the tax charged under section 161 by the assessing officer under this head is hereby deleted being not maintainable in the eye of law. Order accordingly.
Purchase of POL Diesel Lubricants and LPG Gas
8. The assessing officer charged tax at Rs.9,083,401 on purchase of POL, Diesel, Lubricants and LPG Gas. The learned CIR(A) remanded the matter back to the assessing officer to revisit the case-law quoted and allow it accordingly, if law so permits. It is contended by the learned AR that CIR(A) was not justified in remanding back the issue of non-deduction of tax under the said head as section 156A clearly provides exemption of these purchases.
We have considered the matter carefully and find that the law as provided in section 156A of the Income Tax Ordinance, 2001, is crystal clear that the tax deduction is not liable in case of purchase of POL Diesel, Lubricants and LPG Gas, in the light of clear-cut statutory stipulation and the fact that the CIR(A) was also convinced with the submissions made before him, therefore, we are of the view that no fruitful purpose will be served by remand order of the learned CIR(A). Therefore, we find no reason to maintain the order of the learned CIR(A) in this behalf and tax charged by the Assessing Officer in this regard is hereby deleted being not tenable in the eye of taw. Order accordingly.
Purchases made from parties having exemption certificates,
9. The assessing officer charged tax under section 161 at Rs.11,150,113 on the ground that the purchases were not made from the following parties which were claimed by the taxpayer being not liable to withholding provisions:--
(i) Ittefaq Sons (Pvt.) Ltd. Lahore
(ii) Maple Lease Cement Factory Limited.
(iii) Best Way Cement Limited,
(iv) Wire Manufacturing Industries Limited
(v) Burger Paints Pakistan Limited, Karachi.
It is submitted by the learned AR that the assessing officer was not charged tax under section 161 on the purchases made from the above referred parties. It is explained by the learned AR that all the purchases were made from the said parties without deduction of tax as these parties have exemption certificates in this regard. It is contended by the learned AR that the requisite exemption certificates were duly produced before the Assessing Officer and even before the learned CIR(A) but the same was not accepted on the plea that the above mentioned parties did not declare the purchases in their sales tax returns. It is contended by the learned AR that the payments were duly made through banks and evidence in this regard was duly produced before the authorities below but the assessing officer has illegally charged tax under section 161 and the learned CIR(A) without any justification remanded the matter back to the Assessing Officer.
I have looked into the matter and after due consideration, we find that the learned CIR(A) was not justified to remand the matter back to the assessing officer in the case of Parties mentioned at Serial Nos. ii to v, when all these parties were not liable to withholding tax being declared exempt by the department. Perusal of the record reveals that the requisite exemption certificates were duly produced before the authorities below and even before this forum. Under such circumstances, we find no reason to maintain the order of the learned CIR(A) who has remanded the matter to the Assessing Officer. Therefore, the order of the learned CIR(A) is accordingly vacated and the tax charges from the said parties is hereby deleted. As regard party mentioned at Serial No. i, i.e. Messrs Ittefaq Sons (Pvt.) Limited, we find also here that the taxpayer duly produced the relevant purchase invoices and payments proof from bank, therefore, there was no justification to charge tax in this behalf on the ground that the purchases were not declared by the supplier company in their sales tax returns. Perusal of the record also reveals that the taxpayer also submitted copy of income tax return of the supplier-company who had discharged its tax liability. Under such circumstances, we find no reason to charge tax under section 161 from the said party which amounts to double taxation which is not permissible. Therefore, the tax charged under section 161 in this behalf is hereby deleted and order of the learned CIR(A) in this behalf is vacated.
Labour Wages
10. The Assessing Officer charged tax amounting to Rs.5,971,880 on payments made by the taxpayer-company at Rs.236,875,210 towards payment made to daily wages workers. The learned CIR(A) remanded the issue back to the Assessing Officer for de novo decision. It is contended by the learned AR that the CIR(A) was not justified to remand the matter when he was convinced that the amounts were BTL and do not fall within the ambit of withholding tax. It is submitted by the learned AR that the payments were made to daily wages workers in respect of 32 projects carried out by the taxpayer in the northern areas of Pakistan.
11. We are in agreement with the submissions made by the learned AR that when the learned CIR(A) was convinced that the payments made were below the threshold limit of taxation, he should have deleted the same. The AR duly produced the relevant documentary evidences that the payments relate to wages of daily wages workers regarding 32-projects carried out by the taxpayer-company in the northern areas, especially the flood affected areas of the Khyber Pakhtunkhwa, Therefore, we find no reason to maintain the order of the learned CIR(A) which is hereby vacated and tax charged under this head is hereby deleted. Order accordingly.
Cost of crush, sandstone, stone dust etc.
12. The Assessing Officer charged tax under section 161 under this head amounting to Rs.344,377 which action was remanded back by the learned CIR(A). It was the contention of the learned AR that when the assessing officer was convinced that the purchases made from each individual do not exceed the threshold limit of taxation, he should have deleted the same. Since, the taxpayer duly provided the relevant detail to support their claim that the payments made were below the threshold as prescribed under the provisions of section 153 of the Ordinance, there is no justification for taxing the same. Accordingly, the tax charged under this head is deleted and order of the learned CIR(A) in this regard is vacated.
Laboratory charges
13. The Assessing Officer charged tax at Rs.20,000 under this head which action was not approved by the CIR (A) and he accordingly remanded the matter back to the assessing officer for de novo decision. Perusal of the record itself speaks that the payments made under this, head were petty in nature and furthermore the same were made to government institutions. Under such circumstances, there was no justification of the remand of the matter, therefore the order of the learned CIR (A) in this regards is also vacated an tax charged under this head is deleted. Order accordingly.
In view of the above, both the appeals filed by the department and taxpayer are disposed of in the above manner.
HBT/135/Tax(Trib.) Order accordingly.