APPELLATE TRIBUNAL INLAND REVENUE.HEADQUARTERS BENCH, ISLAMABAD ITA No. 38/1B/2012 (Tax year 2009) ITANo. 136/IB/2012 (Tax year-2009) ITANo. 137/IB/2012 (Tax year 2010) The Commissioner Inland Revenue, LTU, Islamabad.... Appellant Versus M / S A i r b l u e Limited, Islamabad.... Respondent Appellant by : Respondent by: Mr. Tahir Khan, DR Mr. Tahir Razzaque Khan, RCA/AR Date of Hearing: 07-05-2012 Date of Order: 21-05-2012 ORDER The titled appeals have been filed both by the Revenue and the Taxpayer. In Tax Year 2009 the taxpayer appellant has assailed the Order of CIR (Appeals-I), Karachi dated 31-08-2011 whereby he remanded the issued of levy of Workers Welfare Fund (WWF) to the Taxation. Officer for de novo consideration. In the same year the department is also in appeal but against another Order of CIR (Appeals-I), Islamabad dated 28-12-2011 whereby the learned first appellate authority directed the deletion of disallowance of Rs. 1.394 million claimed under the head "customs duty" as an expense and also WWF. In the Tax Year 2010, the department feels aggrieved against the Orders of CIR (Appeals-I), Islamabad, whereby he deleted the levy of 1 Pak Law Publication
WWF by the Taxation Officer through recourse to the provisions of section 221 of the Income Tax Ordinance, 2001. 2. We heard the learned representatives of both the sides and also gone through the record available on file. All the appeals involve two substantive issues, i.e., levy of WWF and disallowance of Customs Duty which are disposed of through this consolidated order. 3. Background of levy of WWF as gleaned from the Orders passed by the first appellate authority that certain amendments were made in the WWF Ordinance, 1971 through Finance Acts, 2006 and 2008 whereby Workers Welfare Fund was made payable on the accounting profits of the company rather than taxable income. In pursuance of these amendments the Taxation Officer initiated proceedings under section 221 of the Income Tax Ordinance, 2001 and confronted the Taxpayer company with the levy of WWF on the lines of amendments made in the Workers Welfare Fund Act, 1971. Reply submitted by the Taxpayer company failed to impress the Taxation Officers who proceeded to charge the tax on the lines of respective show cause notices. The Taxpayer company filed appeals for both the years before the CIR(Appeals-l). Karachi (Tax Year 2009) and CIR (Appeals-I), Islamabad (Tax Year 2010). In the Tax Year 2009 the learned CIR (Appeals) remanded the case to the Taxation Office for denovo consideration whereas in the Tax Year 2010 the CIR(Appeals), deleted the levy. The Taxpayer feeling aggrieved by the Order of CIR(Appeals) for Tax Year 2009 and the Revenue feeling dissatisfied with the Order for the Tax Year 2010 has come up in further appeal before us. 4. Initiating the arguments on appeal, the learned AR of the Taxpayer Company contended that vires of amendments made in WWF Act, 1971 through Finance Acts 2006 and 2008 was challenged before the Lahore High Court, Lahore and the honourable Court struck down the amendments holding them to be ultra vires of the constitution. Since the very basis of the levy has been knocked off, there was no justification on part of the first appellate authority for Tax Year 2009 to the 2 Pak Law Publication
Taxation Officer for de-novo consideration. He pleaded that in view of settled legal position he should have deleted the levy of WWF as was done by the CIR (A-l), Islamabad. The learned DR in his turn could not dislodge the arguments the learned AR of the company. 5. On the basis of facts discussed,supra we feel inclined to accept the appeal of the Taxpayer regarding the levy of WWF in Tax Year 2009 and reject the departmental appeal in Tax Years 2009 and 2010. We may further observe that in Tax Year 2009, the first appellate authority should not have set aside the assessment on the point of levy of WWF because an assessment can be set-aside only if circumstances of the case necessitates further inquiry or probe. The issue of levy of WWF on the basis of amendments made in the WWF Act, 1971 gained finality after the judgment of Lahore High Court, Lahore replied upon by the learned AR of the company and there was nothing which the assessing officer was supposed to look into. For the sake of reference, operative part of the judgment in Writ Petftion No. 8763 of 2011 in the case East Pakistan Chrome Tannery v. Federation of Pakistan reported as (2012) 105 TAX 81. Relevant part of the judgment is reproduced hereunder. Quote 29. As to the ouster clause in Article 73 (5) of the Constitution which provides that every Money Bill shall bear a certificate under the hand of the Speaker of the National Assembly and the said certificate shall be conclusive for all purposes and shall not be called in question. The said ouster clause does not give protecti on to an unconstitutional act or an act that is without jurisdiction, corum non-judice and based on malafide. This question stands well settled in Chief Justice of Pakistan Iftikhar Muhammad Chaudhrv v. President of Pakistan through Secretary and others. (PlD 2010 S.C.61), The State v. Zia-ur-Rahman and others, (PLD 1973 S.C. 49), Miss Asma Jilani v. The Government of Punjab and other, (PLD 1972 S.C. 139), The Federation of Pakistan through the Secretary, Establishment Division, 3 Pak Law Publication
Government of Pakistan Rawalpindi v. Saeed Ahmad Khan and others, (PLD 1974 S.C. 151), Pir Sabir Shah v. Federation of Pakistan and others, (PLD 1994 S.C. 738) and Mian Jamal Shah v. The Member Election Commission, Government of Pakistan, Lahore and others (PLD 1966 S.C.1). Hence the ouster clause is not attracted in the present case and this court has the power to judicially review the legislative amendments brought about through Finance Act, 2006 & 2008 in the WWF Ordinance. 30. For the above reason, the impugned amendments introduced in WWF Ordinance through Finance Acts, 2006 and 2008 are declared UNCONSTITUTIONAL and therefore STRUCK DOWN. As a consequence, impugned Notice dated 14.6.2011 is set aside, being unlawful and unconstitutional. The petitioner is, however, liable to pay Workers' liable to pay Workers' Welfare Fund under WWF Ordinance as it stood prior to the impugned amendments. Unquote Emphasis Supplied 6. In view of the categorical ruling of the Lahore High Court, Lahore we modify the remand order of CIR (Appeals), Karachi dated 31-08-2011 (for Tax Year 2009) and direct deletion of the levy of WWF. Order of the CIR(A), Islamabad dated 28-12-2011 (for Tax Year 2010) whereby levy of WWF was deleted is confirmed. Departmental ppeat against the deletion of WWF by CIR(A) vide his Order dated 28-12-2011 (for Tax Year 2009) also stand adjudicated and disposed in the above terms. 7. In the Tax Year 2009, the department disallowed expense of Rs. 1.394 million claimed under the head Customs Duty with the observation that the expense was of capital nature. The learned CIR (Appeals), however, deleted the disallowance with the observation that payment of customs duty was an expense of revenue nature with the following observation ".the disallowance of customs duty of Rs. 1.394 million which was paid by the appellant in connection with the import of various consumable stores, technical charts, books and magazines. The learned AR contended that all imports made by the appellant were incidental to the business and as such payment of customs 4 Pak Law Publication
duty was an expense inextricably linked to the business of the company. There is no rebuttal to the argument of the learned AR as far as nexus of the customs duty with the business of the company is concerned. The expense being incidental to the business is directed to be allowed as a deduction." The learned DR could not find any fault with the observation of the learned CIR (A) who had deleted the disallowance after adequate discussion at page 3 of his Order. Under the circumstances we do not find any fault with the finding of the learned CIR (Appeals) which is maintained. 8. The upshot of above discussion is that appeal of the taxpayer for the Tax Year 2009 is accepted whereas the departmental appeals for the Tax Year 2009 and 2010 are dismissed on all the grounds. 9. Ordered accordingly. (SOHAIL AFZAL) (ACCOUNTANT MEMBER) (SYED NADEEM SAQLAIN) (CHAIRPERSON) 5 Pak Law Publication