I. T. A. NO. 3776/LB/1981-82, HEARD ON 22ND SEPTEMBER, 1982. Versus I. T. A. NO. 3776/LB/1981-82, HEARD ON 22ND SEPTEMBER, 1982.

ORDER

GHULAM MUSTAFA KHAN (ACCOUNTANT MEMBER) .-The appellant is a registered firm engaged in the business of manufacture of steel. Appeal has been filed against the order of the learned A. A. C. of Income-tax Range., Zone-A, L. . . . passed under section 66-A of the Income-tax Ordinance, 1979 relating to the assessment year 1978-79. The Appellant's objection in against the withdrawal of credit for refund which was adjusted, against the income-tax and super-tax demand of the appellant.

The facts under which the question of giving credit to the assessee for an amount of Rs. 1,33,131 as disclosed by the assessee, are that originally there was a firm known as Messrs A...R ..A...D...R...M... Subsequently in the year 1971 this firm was trifurcated into three firms namely, Messrs S...A...R... A...D...Messrs S...M...L.. Messrs A...D...A...R... (present assessee). This fact was subsequently recognized by the Assistant Director Industries and Mineral Development, Punjab vide their letter, dated 3-6-1978. The licence for import of steel furnace was issued to Messrs S...A...R A...D... the parent firm. Consequently, the licence for import of raw material i.e. iron scarp for use in the furnace was also issued in the name of the parent firm. Since a trifurcation had taken place, therefor the impart licence, though in the name of the parent firm, was used and utilized by the present assessee. While making the imports of iron scarp, the income-tax was deducted at source by the Collector of Customs under section 18 (3-cc) which amounted to Re. 1,33,131. It is this amount for which the assessee claimed a credit for adjustment against the demand created against him. The assessee's case is that though the import licence was in the name of the parent firm put to fact it was utilized by the assessee anti raw material was imported by him. The tax amounting to Rs. 1,33,131 was paid by the assessee though it was in the name of the parent firm because the import licence was in his name. Consequently the payment of tax having been mane by the assessee it was be who was entitled to the adjustment and not the name lender i.e. the firm of S .. A...R... A.."D... who is concerned with this amount only to this extent that import licence was in his name.

The departments's case on the other hand is that since the import licence was in the name of another term namely Messrs A...R...A...D... and. the tax was deducted in that name by the Collector of Customs. therefore, irrespective of the fact as to who utilized the imported raw material the adjustment of the tax has to be made in case of the firm in whose name the import licences was issued.

The issue for determination is whether credit for tax deducted could be allowed to Weirs A...D ..A...R.. who allegedly utilized the imported scrap, although another sister firm, Messrs S ..A...R... actually imported the same and from whom tax was deducted at import stage under section 18 (3-cc) of the repealed Income-tax Act.

The facts are that the parent firm, through an agreement between the relative owners. was trifurcated sometime in 1971 and Messrs A-,D...A...R... the appellant was one of them. It was expected that the three independent units should have got their names registered as independent units with the Department of Industries, Chief Controller, Imports and Exports and other relevant authorities. Somehow, it was not done till as late as June, 1978, when the Industries Department recognized the trifurcation of the units.

As already stated earlier the admitted position is that Messrs S...A...R... A...D...was the importer and tax of Rs. 1,33,131 was deducted at the Custom stage under section I F(3-cc) of the repealed Income-tax Act. The provisions of section S (3-cc) lay down that in the case of a person who imported goods and from who tax was deducted "the tax so collected shall be given credit for in the assessment for the year next the following the year in which it is paid.' There is no other provision in the Act authorising refund or adjustment of the tax so deducted to any one else. Section 48 of the repealed Act also does not contemplate refund of tax to a person other than the one who pal the tax.

In the instance case, even if for the sake of agreement it is conceded that the appellant tray have utilized the imported scrap in its mill even then the refund, if any, could be paid only to the person who imported the goods and from whom tax was deducted. Also, in my opinion even if it is verified from the books that the payment was made by the appellant but refund/adjustment could not be allowed to it if the deduction was made under the name of another person who imported the goods. Thus, even if the payment is shown to have been made by the appellant in its books of accounts, the fact would remain that the Collector of Customs showed deduction of tax in the name of Messrs A...R...A...D... who alone can be eligible for getting the amount adjusted in their assessment or obtain a refund.

Similarly, it will not help the appellant even if it is proved that Messrs A... R...A...D... had been allowed any refund or adjustment of this deduction of tax made from them. The factual position will continue to remain that only Messrs A...R...A...D... will be eligible for refund or adjustment of the tax paid.

I am firmly of the view that this was purely in administrative matter and could only be dealt with by the departmental authorities at their level. Since the learned I. A. C. decided to rectify the error under section 66-A the whole matter seems to have assumed a judicial character leading to an appeal before the Tribunal. It may also be incidentally mentioned that an assessee may import an item, say man-made yarn on an industrial import licence, and for some reason he may not censure it and instead decides to sell the imported yarn to another person who may actually consume the yarn. In such a case, even if it is provided that the imported yarn was utilised by the other assessee under some agreement or arrangement that other person cannot get the tat adjusted against the demand raised in his assessment although the origins: importer did not get any refund or adjustment of that amount in hi; assessment. While dealing with such matters one will have to keep' in minx the well-recognised principle interpretation, specially those relating to the taxing statutes. In the words of Rowlatt, J. "one has to look merely at what is clearly said. There is no room for any intendment. There is no exluit3 about a tax .... nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. "As a matter of fact if the statute not clearly provide a benefit to a tax-payer, the letter of the law has to be followed notwithstanding the hardship that the tax-payer may have to suffer.

In view of these circumstances the order of the learned I. A. C. upheld with the result that the appeal fails.

ABRAR HUSSAIN NAQVI (JUDICIAL MEEMBER). -After going through the proposed order of my learned brother, the Accountant Member, I could not persuade myself to agree with him and, therefore, and writing the dissenting order. I need not re-state the.-facts which are already given in the proposed order of my learned brother but some of the facts err necessary to be stated in order to appreciate the proposition under consideration.

The licence for import of steel furnace was issued to Messrs S...A...R... A...D.., the parent firm. Consequently, the licence for import of raw material i.e. iron scrap, for use in the furnace was also issued in the name of the parent firm. Since a bifurcation of business had taken place, therefore, the import licence, though in the name of the parent firm. was used and utilized by the present assessee. While making the imports of iron Scam the income-tax was deducted at source by the Collector .of Customs under section 18 (3-cc) which amounted to Rs.,1,33,131. It is this amount for which the assessee claimed a credit for adjustment against the demand created against him. The assessee's case is that though the import licence was in the name of the parent firm but in fact it was utilized by the assessee and raw material was imported by him. The tax amounting Rs. 1,33,131 was paid by the assessee though it was in the name of patent firm because the import licence was in that name. Consequently the payment of lair having been made by the assessee it was he who was entitled to the adjustment and not the name leader i.e. the firm of S... A... R... A ... D... who had no concern with this amount except that import licence was in its name.

2. The department's case on the other hand is that since the import licence was in the name of another firm namely Messrs A...A...A ... D... and the tax was deducted in -teat name by the Collector of Customs, therefore, irrespective of the fact as to who paid the tax, adjustment of the tax has to be made in the case of t a firm in whose name the import licence was issued.

3. Section 18 c5) provides for an adjustment of the tax deducted at source including the pore under section 18 (3-cc). It says that any deduction made in accordance with the provisions of this section." . . . . shall be treated as payment of income-tax or super-tax on behalf of the person from whose Income the deduction was made .." It a not the Cause of that department that the payment had not been made by the assessee or the raw material had not been used by the assessor. It, therefore, follows that if the assessee had utilized the import licence of another person and tax was paid him to the Collector of Customs under section 18 (3-cc). the raw material was also used by him and the income therefrom has also been taxed base department at his hands, the tax deduction made under section 18 (3-cc) had to be adjusted against the tax demand of the assessee. Under section 18(5) of the Repealed Income-tat Act talks about the person from whose income the deduction was made. Therefore, the only question for examination would be as from whose income the deduction was trade. If it clan be proved that the tax was paid by the present assessors and the goods imported by him were utilized by him in his furnace and the income which is being subjected to tax is that of the assessor, be will certainly bet entitled to adjustment under section 18 (5). Since the deduction was made out of the assessee, adjustment has to be made against tax demand created against him irrespective of the fad that the import licence was in the name of another person, if at all, the following facts could be further get verified if necessary:-

(1) whether the payment under section 18 (3-cc) was made by the assessee or by Messrs A ..R .A ..D. .

(2) Whether Messrs A... R...A...D... claimed any adjustment of this deduction or any adjustment had been made in his assessment or not.

Since the difference of opinion bas arisen the case is referred to the Chairman for placing the following issue before their Member for his opinion:

Question:

"Whether the assessee is entitled to adjustment of tax amounting to Rs. 1,33,131.".

SIKANDAR HAYAT KHAN (ACCOUNTANT MBMBHR). -,Messrs A...R A...D... Rerolling Mills was trifurcated in 1971 to form the following firms :-

(1) S...A...R...A...D...

(2) S...M...L..and

(3) Messrs A...D...A...R...

2. There is no dispute with regard to this fact as it was accepted by Assistant Director Industries and Mineral Department, Punjab vide letter, dated 3-6-1978. However, import licence for the import of steel furnace was in the names of Messrs S...A...R...A...D... and consequently licence for the import of raw material was also issued in the name of this firm. Since trifurcation the import licence, though in the name of Messrs S ..A...R... A . D..., was used and utilized by A...D...A...R... While making the imports of iron scrap, Income Tax at the rate of 3 % war deducted at source by Collector of Customs to the extent of Rs. 1,33,131 under section 18 (3-cc) of the Income-tax Act. This amount was claimed as a credit against its tax liability by Messrs A...D...A...R... although the import licence stood in the name Messrs A...R...A...D....

3. The department's cage on the other hand is that since the import licence was in the name of Messrs A...R...A...D... and the tax was deducted at source by the Collector of Customs in respect of that name, therefore, irrespective of the fact as to which assesses utilized the imported raw material and ever paid tax thereon the adjustment of the tax could only be allowed in the case of that assesses, in whose name the import licence stood, at the relevant time.

4. The contention of Messrs A...D...A...R... and that of the department was considered by my learned brother, the Accountant Member, who held that a sum of Rs. 1,33,131 could only be allowed in the case of the assesses in whose name the import licence was. In this connection the relevant portion of his holding is given below for facility of reference

"As already stated earlier the admitted position is that Messrs S...A...R... A...D... was the importer and tax of Rs. 1,33,131 .was deducted at the Customs stage under section 18 (3-cc) of the repeated, Income-tax Act. The provisions of section 18 (3-cc) lay down that in the case of a person who imported goods and from whom tax was deducted, 'the tax so collected shall be given credit for in the assessment for the year next following the year in which it is paid." There is no other provision in the Act authorising refund or adjustment of the tax so deducted to any one else. Section 48 of the repealed Ad also does not contemplate refund 0f tux to a person other than the one who paid the tax,"

5. My learned brother the Judicial Member concluded to the contrary and his holding is as under ,-

"Section 18 (5) provides for an adjustment of the tax deducted at source including the one under section 18 (3-cc). It says drat any deduction made in accordance with the provisions of this section" ... . shall be treated as a payment of Income-tax or. super-tax on behalf of the person from whose income the deduction was- made .." It is not the case of the department that the payment had not been made by the assesses or the raw material had not been used by the assesses. It, therefore, follows that if the assessee bad utilized the import licence of another person and tax was paid by him to the Col lector of Customs under section 18 (3-cc), the raw material was also used by him any the income therefrom has also been taxed by the department at his hands, the tax deduction made under section 18 (3-cc) had to be adjusted against the tax demand of the assesses. Subsec tion 18 (5) of the Repealed Income-tax Act talks about the person from whose income the deduction was made. Therefore, the only question for examination would be as from whose income the deduction was made. . If it can be proved that the tax was paid by the present assesses and the goods imported by him were utilized by him in his furnace and the income which is being subjected to tax is that of the assessee, he will certainly be entitled to adjustment under section 18 (5): Since the deduction was made out of the income of the assesses, adjustment has to be made against the tax demand created against him irrespective of the fact that the import licence was in the name of another person. If at all, the following facts could be further got verified if necessary:-

(1) Whether the payment under section 18 (3-cc) was made by the assessee or by Messrs A... R... A... D...

(2) Whether Messrs A...R...A...D... claimed any adjustment of this deduc tion or any adjustment, and had been made in his assessment or not."

5-A. The only point for consideration before me is whether Messrs A... D...A... R... was entitled to adjust a sum of Rs. 1,33,131 against its tax liability or not.

6. As the admitted facts on record are licences for the import of raw material stood in the name of Messrs A R...A...D... Rerolling Mills. On such imports Income-tax at the rate 3 % was deducted at source by the Collector of Customs. The said section reads as under :-

"18(3-cc). The Collector of the Customs shall in the case of every person who has imported goods into Pakistan, against an import licence of the face value of one hundred thousand rupees or more, collect income-tax at the rate of three per cent of the value- of goods as increased by customs duty and sales tax, if any payable thereon; and the tax so collected shall be given credit for in the assessment for the year next following the year in which it is paid

Provided that nothing in this subsection shall apply to any class of persons as may be specified in this behalf by the Central Board of Revenue by notification in the official Gazette."

7. From a plain reading to section 18 (3-cc) it is evident that credit for) tax deducted at source could only be given in the assessment for the year nee following the year in which it is paid to that assess in the whose name it was deducted and paid. This is also the intention of section 18 (5) of the Income tax Act which reads as under :--

"Any deduction made and paid to the account of Central Government in accordance with provisions of this section and any sum by which a dividend has been increased under subsection (2) of section 16 shall be treated as a payment of income-tax (or super-tax) on behalf of the person from whose income the deduction was made, or of the owner of the security (or of the share-holder) (or any holder of Bearer Certificates of the National Investment (Unit) (Trust) as the case may be, and credit shall be given to him, therefore, on the production of the certificate furnished under subsection (9) of section 20, as the case may be, in the assessment, if any, made for the following year under this Act." .

8. Even from a plain reading of section 18 (5) it is crystal clear that any, deduction that has been made and paid to the Central Government shall be-1 given credit while making the assessment only in respect of that assessee respect of whom it was made. In this view of the matter I respectfully disagree with my learned brother, the Judicial Member and concur with the view expressed by my learned brother, the Accountant Member.

9. In view of the finding contained in paragraphs 1 to 8 the question posed to me is answered in the negative: The end result of it is that the majority opinion shall prevail in this case i.e. that the assessee is not enticed to the adjustment of tax amounting to Rs. 1,33,131.

Appeal dismissed.