Payment for goods and services

Citation Name : 2019 PTD 1912 SUPREME-COURT
Side Appellant : SUPER ENGINEERING
Side Opponent : COMMISSIONER INLAND REVENUE, KARACHI
S. 153(6A) [as amended by the Finance Act (I of 2008)]---Payment for goods and services---Association of Persons (AOPs)---Declaration of income under the normal or presumptive TAX regime---In terms of S.153 of the Income TAX Ordinance, 2001, as it existed prior to the amendments made by the Finance Act, 2008, the appellant-companies were "prescribed person" registered as AOPs with the revenue authorities, engaged in the manufacturing of auto parts, and their income generated from the supply made thereof would bring their cases within the scope of subsection (6A) and thus entitle them to submit their returns under the normal TAX regime, and not the presumptive TAX regime provided under sub­section (6) of S. 153 of the Ordinance---Amendments made in S. 153(6A) by the Finance Act 2008 had substituted the words "any person" with that of "a company", and thereby restricted the scope of "prescribed person", who could be excluded from declaring their return under the presumptive TAX regime mandated in subsection (6A) of S. 153 of the Ordinance---With the said amendment, only a company that was manufacturing the goods generating the income would be excluded from the purview of the presumptive TAX regime---In the circumstances, even if we regard the said amendment to be procedural in nature, it would not have retrospective effect, as valuable rights had already accrued and matured in favour of the appellants at the culmination of the TAX year 2008 i.e. on 30-06-2008---Income of the appellants for the TAX year 2008 was to be assessed under the normal TAX regime and not the presumptive TAX regime---Appeals were allowed accordingly.

Citation Name : 2019 PTD 1479 SUPREME-COURT
Side Appellant : H.M. EXTRACTION GHEE AND OIL INDUSTRIES (PVT.) LTD.
Side Opponent : FEDERAL BOARD OF REVENUE
S. 159(1)(a) [after amendment by the Finance Act, 2012 and before the changes made by the Finance Act, 2016]---Exemption certificate, issuance of---TAX credit---Clause (a) of subsection (1) of S. 159 of the Income TAX Ordinance, 2001 did not apply to a TAX credit, therefore, no exemption certificate could be issued under S. 159 in respect of the same.

Citation Name : 2019 PTD 1479 SUPREME-COURT
Side Appellant : H.M. EXTRACTION GHEE AND OIL INDUSTRIES (PVT.) LTD.
Side Opponent : FEDERAL BOARD OF REVENUE
'TAX credit' and 'exemption'---Conceptual distinction---Three stages in the imposition of a TAX were; first, leviable (declaration of liability); second, payable (assessment); and third, recoverable---Exemption inserted itself between the first two stages, i.e., between what was leviable and what was payable---TAX credit inserted itself between the second and the third stages, i.e., between what was payable and what was recoverable---Conceptual difference existed between TAX credit and an exemption---If there was an exemption in the field then the second stage may not be reached at all (i.e., the TAX may not be payable) if the exemption was whole---Of course, it may be reached partially if that be the nature of the exemption---On the other hand, in the case of a TAX credit the second stage must necessarily always be reached, and that too in full; it was only then that the credit manifested itself by interposing between what was payable (i.e., the assessment) and what was recoverable---Such interposition may be complete (if the TAX credit was 100%) or partial---In a fiscal statute there must always be the first stage, that could be affected by neither an exemption nor a TAX credit---Exemption operated on, and in relation to, the second stage: that stage may not be reached at all, or only partially---TAX credit did not bear on the second stage---Once that stage was reached, and crossed, then the TAX credit was manifested, thereby blocking (as the case may be, either in whole or in part) the third stage---Exemption may eliminate the need for an assessment altogether (if it was whole) or reduce it by the relevant amount if it was partial---TAX credit on the other hand had no bearing on the assessment; it came into operation after assessment and when the question of recovery arose.

Citation Name : 2019 PTD 1438 SUPREME-COURT
Side Appellant : INDEPENDENT MEDIA CORPORATION (PVT.) LIMITED
Side Opponent : PROVINCE OF SINDH
Ss. 2(92), 45, 66 & 83---Sindh Sales TAX Ordinance (VIII of 2000) [since repealed], Ss. 3 & Sched. Item II---Sindh Revenue Board Act (XI of 2010), S. 3---Sales TAX ---Accrued penalties and default surcharge, payment of---Amnesty scheme issued by Provincial Government [Notification No. SRB-3-416/2014 dated 17-04-2014 ('the Amnesty notification')] with respect to payment of accrued penalties and default surcharge---Vires of---Whether Sindh Revenue Board could grant an amnesty for penalties and default surcharge accumulated under the repealed Sindh Sales TAX Ordinance, 2000---Held, that the Amnesty notification provided that the Sindh Revenue Board would exempt the whole of the amount of penalty and 95 per cent of the amount of default surcharge, payable on the principal amount of arrears of the [sales] TAX as were outstanding on the date of present notification, if the said principal amount of TAX and the 5 per cent of the amount of default surcharge were paid in the prescribed manner---With the promulgation of the Sindh Sales TAX on Services Act, 2011, the Sindh Revenue Board Act, 2010 and the establishment of the Sindh Revenue Board the province's dependency on the Federation and on the Federal Board of Revenue (FBR) to administer and collect on its behalf sales TAX on services, including penalty and default surcharge thereon, came to an end---Sindh Sales TAX on Services Act, 2011, had repealed the Sindh Sales TAX Ordinance, 2000 but S. 83 of the Act of 2011 had saved certain matters accrued thereunder which henceforth had to be administered by the Sindh Revenue Board, including the power to issue notifications exempting the collection of sales TAX on service, accrued penalties and default charges---Provincial Government had not withdrawn, supplanted or varied the Amnesty notification---Nor was the said notification assailed before a competent court of law---Amnesty notification encouraged those who had not paid the penalty and default surcharge to get exemption from payment, provided they came forward and paid five per cent of the default surcharge amount---Once the requisite amount was paid pursuant to the said notification, the Provincial Government, which had itself approved the issuance of the said notification, could not seek to restrict the scope of the said notification and contend that under the Sindh Sales TAX on Services Act, 2011 the said exemptions could not be given---Joint reading of Ss. 2(92), 45, 66 & 83 of the Sindh Sales TAX on Services Act, 2011 left no doubt that the Sindh Revenue Board, with the prior approval of the Provincial Government, could issue the Amnesty notification---Petitions for leave to appeal were converted into appeals and allowed accordingly.

Citation Name : 2019 PTD 1438 SUPREME-COURT
Side Appellant : INDEPENDENT MEDIA CORPORATION (PVT.) LIMITED
Side Opponent : PROVINCE OF SINDH
Exemption---TAX ing instruments and exemptions issued thereunder must contain clarity and certainty.

Citation Name : 2019 PTD 1377 SUPREME-COURT
Side Appellant : DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE C-4, KARACHI
Side Opponent : NATIONAL BANK OF PAKISTAN, KARACHI
Ss. 17 & 32(1)---Interest earned by financial institutions on Government securities---Whether the same was liable to be TAX ed on accrual or on receipt basis---'Hybrid' system of accounting---Scope---Bank/assessee in the present case maintained its accounts on the accrual system but accounted for interest on Government securities on receipt basis, also known as the "hybrid" system---As a matter of law, an assessee was not limited to using either the accrual or the receipt basis of accounting---In law it was permissible to use the "hybrid" system of accounting by mixing and merging elements from the two systems, which was a question of law, and must be regarded as having been answered and settled accordingly---Secondly, if such question arose, then it had to be shown as a matter of fact in respect of the income year corresponding to the given assessment year that the assessee had, in fact, regularly employed the "hybrid" system of accounting (requirement under S. 32 of the Income TAX Ordinance, 1979), which was a question of fact, and therefore had to be dealt with and answered accordingly---Department was wrong in refusing to accept interest income offered on receipt basis in respect of the assessment years at hand, and the Appellate Tribunal erred materially in dismissing the bank's appeals in such regard---High Court reached the correct conclusion in law by finding that the interest earned by the Bank on Government securities was liable to be TAX ed on receipt basis---Appeals were dismissed accordingly.