2010 P T D (Trib.) 1861
[Income Tax Appellate Tribunal of Pakistan]
Before Khawaja Farooq Saeed, Chairperson
S.T.A. No. 1577/LB of 2009, decided on 22/04/2010.
(a) Sales Tax Act (VII of 1990)---
----Ss.3A & 2 (25)---Turnover tax---Club---Fair price shop---Taxation of---Assessee contended that all items which were sold by the Club through its fair price shop were on which tax had been charged at its manufacturing as well as whole-sale stage; and he was not liable to pay sales tax as no value addition had been made by the Club while selling the items through its shop---Validity---Assessee being covered within the thresh-hold should have been charged under S.3A of the Sales Tax Act, 1990 and not under the other. normal provision---Items purchased from a fair price shop of a Club which inter cilia included milk, tooth paste, tooth brush, beverages,_ bakery items and such other items of daily use after purchasing from manufacturer or the whole-seller were without charge of sales tax---If there could be a doubt about the same the charge of tax on turnover had taken due care of the situation for the said period----Matter was remanded back to the Assessing Officer; and in the meantime the assessee may at his option apply for registration being liable to be registered under S.2(25) of the Sales Tax Act, 1990 in order to avail the said facility.
(b) Sales Tax Act (VII of 1990)---
----S.3A---Turnover tax---Application of---Concept of turnover tax introduced through S.3A of the Sales Tax Act, 1990 was to cater for such like situations where the accounts for claiming the input tax could not be readily made available---Concept of turnover tax was to charge the tax on total turnover as against the other concept of charge of sales tax on the value addition.
(c) Sales Tax Act (VII of 1990)---
----Ss.2(28),2(24),2(41),2(35) & 13---Words and phrases---"Goods"---"Taxable goods"-"Supply"-"Taxable supply "---Meaning---Goods means and includes movable property other than money and securities etc. and taxable goods means and includes the movable property other than those which have been exempted under S.13 of the Sales Tax Act, 1990---Supply means and includes sale, transfer and other disposition of goods and Taxable supply means supply of taxable goods other than supply of goods which are exempt under S.13 of the Sales Tax Act, 1990.
(d) Sales Tax----
---"Taxable activity"---Meanings---Taxable activity means an activity which is carried on by any person not necessarily for pecuniary profit and involved in whole or in part the supply of goods to another person irrespective of any consideration and also includes and activity carried on in the form of business, made or manufacture.
Collector of Customs, Sales Tax and Central Excise and others v. M/s. Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 and M/s. Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax Gujranwala and the Central Board Revenue, Islamabad 2008 PTD 60 rel.
(e) Sales Tax---
---"In the course of"---`In furtherance of"---Meanings---In the course of can be taken to mean as connected with, related to and having some nexus with the business/taxable activity and similarly in furtherance of is indicative of the fact that the taxable supply had been made for the enhancement/further development of the business/taxable activity.
(f) Words and Phrases---
---Furtherance---Meaning: act of furthering, helping forward, promotion, advancement, or progress---In furtherance of has been interpreted as in promoting or advancing---Furtherance had been defined as 'fact or State of being furthered or helped forward, the action of helping forward, advancement, aid, assistance.'
Advance Law Lexicon, Third Edition, 2005, p. 1953 and m/s. Super Asia Muhammad Din Sons (Pvt.) v. The Collector of Sales Tax, Gujranwala and The Central Board of Revenue, Islamabad 2008 PTD 60 rel.
(g) Sales Tax Act (VII of 1990) ---
---S.2 (41) ---Taxable supply---Taxable supply has not been confined or limited to the one which is the product or the goods manufactured but also includes those goods which involve in some way with the progress, promotion, advancement of business/activity/taxable activity.
M/s. Super Asia Muhammad Din Sons (Pvt.) v. The Collector of Sales Tax, Gujranwala and The Central Board of Revenue, Islamabad 2008 PTD 60 and Collector of Customs, Sales Tax and Central Excise etc. v. M/s. Sanghar Sugar Mills Ltd. Karachi and others PLD 2007 SC 517 = 2007 PTD 1902 rel.
(h) Sales Tax Act (VII of 1990)---
----S.2 (41) & 3(1)(a)---Companies Ordinance (XL VII of 1984, S.46---Taxable supply -Club---Subscriptions---Taxability---Assessee being a club did not fall in any of the categories like, manufacturer, wholesaler, retailer etc. or distributor, especially in relation to donations, subscriptions.
(i) Sales Tax Act (VII of 1990)---
----S.3---Scope of tax---Club---Fee and subscription---Taxation of---Validity---Sales Tax Act, 1990 applied only on sale and purchase of goods and that also the persons mentioned like manufacturers, whole sellers and traders etc.---Club was not covered in either of the said expression, nor the Federation could charge sales tax on services---Membership fee, monthly subscription and such other subscription were not even against the consideration of the providing of services.
Defence Authority Club, Karachi and 5 others v. Federation of Pakistan through Secretary, Revenue Division and 2 others 2007 PTD 398 rel.
(j) Sales Tax Act (VII of 1990)---
----Ss.2(35), 3 & 3A---Taxable activity---Club---Fee and subscription---Taxation of---Validity---Facility provided like entrance fee, monthly subscription, annual subscription etc. by club were neither sale of goods nor services which even otherwise was a provincial subject--Except for sale at shop and sale of food at club no other item came within the purview of the supply of goods---Except for the heads which were in relation to sale at shop, supply of food to members etc. on other items the charge of sale tax was deleted by the Appellate Tribunal---Assessee was covered within the exceptions provided in definition of taxable activity---Activity carried on by an individual as a private recreational pursuit or hobby: and an activity carried on by a person other than an individual which, if carried on by an individual,. would fall within sub-cl. (b) after the phrase `but it does not include' which meant that the assessee was a person and was involved in private recreationary pursuit and was not covered within the definition of `taxable activity'---Tax could be charged on bakery sale and supply of food in restaurant and on all other receipts its charge was not legally sustainable---Sale of bakery and other food items shall be charged as per S. 3A of the Sales Tax Act, 1990 after due fulfilment of the requirements of law by the Assessing Officer for which case was remanded while no tax was chargeable on other activities of the club.
Cape Brandy Syndicate v. Inland Revenue Commissioner 1921 H.B. 69; Commissioner of Income Tax/Wealth Tax, Zone-C, (Legal), Lahore' v. Messrs Idrees Cloth House 2008 PTD 1420 (H.C.) Lhr. ref.
Defence Authority Club, Karachi and 5 others v. Federation of Pakistan through Secretary, Revenue Division and 2 others 2007 PTD 398 rel.
Khawaja Muhammad Sarwar for Appellant.
Dr. Javed Shehrar, D.R. for Respondent.
ORDER
This appeal filed on behalf of the Punjab Club, 3-Danepare Road, Lahore is in relation to the audit conducted by the department for the tax period July, 2001 to June, 2002. As a result of the audit a contravention report was prepared and consequently an order-in-original was passed by the Deputy Collector, Sales Tax and Excise (Adjudication), Lahore vide No. 37/2005 dated 25-10-2005. In the said order the audit objection regarding non-payment of sales tax on various services was maintained. As a result of appeal before the first appellate authority certain amounts have been deleted by holding that the same are not covered within the taxable supply. However, tax on following services has been maintained.
| Particulars | Sales {July 2001 to June, 2002) |
| Bakery Shop | 4.202,751 |
| Family Dinner | 14,470 |
| Dance and Decoration | 55,082 |
| Particulars | Sales {July 2001 to June, 2002) |
| Entertainment Subscription | 103,760 |
| Monthly subscription | 4,251,990 |
| Annual Subscription | 843,600 |
| Swimming/Sports Subscription | 1,821,400 |
| Min usage charges | 348,280 |
| Interest of outstanding bills | 115,489 |
| Take away charges | 18.910 . |
| Service charges | 85,740 |
The taxpayer is now in appeal before this Tribunal.
The learned counsel appearing on behalf of the Club has challenged the addition by arguing that the contentions of the appellant have been discarded summarily whereas the submissions of the department have been re-produced verbatim. Separate arguments have been made in respect of various items which are hereby taken up in the following manner:-
Bakery shop.
It is claimed before this Tribunal that it is merely a fair price shop and is meant exclusively for the use and the benefits of the members of the Club. Further, it is sued for the contingent requirements of those who are living in residential quarters. Moreover, Club is neither marketing nor manufacturing or selling the items as a whole-seller. It has also been argued that all the items which are sold by the Club through its fair price shop are on which tax has been charged at its manufacturing as well as whole-sale stage. The assessee, therefore, is not liable to pay the sales tax as no value addition has been made by the club while selling the items through its shop.
The learned DR on his turn claimed that the amount of sales tax has been calculated on total sales as the assessee has not been able to produce the accounts with regard to its purchases and the proof of payment of tax by its suppliers. He, however, agreed that charge of tax on the total sales otherwise is not correct application of law. When confronted he agreed that is for such like situations that section 3A for the period under consideration was introduced. He, However, pointed out that the assessee had not been so registered itself; hence at this stage he cannot be given the benefit of the said section.
This Court has gone through the relevant provision of law applicable at the relevant time. Section 3A which was subsequently omitted w.e.f. 30-4-2004 clearly provided for a charge on registered retailer 2% which was subsequently amended from time to time. The concept of turnover tax introduced through said section 3A was to cater for such like situations where the accounts for claiming the input tax could not be readily made available. The concept of turnover tax, therefore, was obviously to charge the tax on total turnover as against the other concept of the charge of sales tax on the value` addition. In the present case the assessee being covered within the thresh hold should have been charged under section 3A and not under the other normal provision. For all practical purpose this 'is beyond the comprehension that the items purchased from a fair price shop of a Club which inter alia includes milk, tooth paste, tooth brush, beverages, bakery items and such other items of daily use after purchasing from manufacturer or the whole-seller were without charge of sales tax. However, even if there can be a doubt about it the charge of the tax on turnover has taken due care of the situation for the said period. It will, therefore, be fair to remand the matter back to the, concerned assessing officer. In the meantime the assessee may at his option apply for registration being liable to be registered under section 2(25) in order to avail the said facility.
Others
This Court shall now deal with the issue regarding family dinner, dance and decoration. It has been informed that the total receipt against these services has been taken as sale and supply. Since the amount includes payment to various sub-contractors the taxpayer should either be allowed to claim the input on the basis thereof or be charged to tax by treating the receipts as his turnover.
Regarding entertainment subscription, monthly subscription, annual subscription and sports, it is claimed that the same are apparently not covered within the definition of "taxable supply".
The Society is incorporated under section 46 of the Companies Ordinance, 1984. It is registered as a Club and by no means its activities can be consideredas covered within the definition of taxable supply. The definition as provided in section2(41) is as follows:-
41. "taxable supply"means a supply of taxable goods made by an importer, manufacturer, wholesaler (including dealer, distributor or retailer) other than a supply of goods which is exempt under section 13 and includes a supply of goods chargeable to tax at the rate of zero per cent under section 4."
From the plain reading of the above definition it appears that it starts with the word `means'. It is settled principle of interpretation that use of world `means' restrict the interpretation to the extent of the meanings mentioned therein. The definition provided above, therefore, has to be applied and used within the said meanings and cannot be extended or applied on the others which are not covered by the said interpretation clause. In this regard famous principle of interpretation which is based upon the verse of Mr. J. Rowlet in "Cape Brandy Syndicate v. Inland Revenue Commissioner: (1921 H.B. 69), is as follows;
"It simply, means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used."
Above principle of interpretation also is a known and settled one. It has been followed in dozens of cases by the superior Courts as well as by this Tribunal. Reliance in this regard can be placed on the judgment of Commissioner of Income Tax/Wealth Tax, Zone-C, (Legal), Lahore v. Messrs Idrees Cloth House reported as 2008 PTD 1420 (H.C.) Lhr.
Keeping the same in view if we look into the provision under discussion it applies on supply of taxable goods made by (i) an importer (ii) wholesaler (iii) dealer, distributor or retailer.
A Club by no means can be covered in any of the categories. Now even if one is convinced that the Commissioner (Appeals) while deciding the appeal of the assessee has correctly considered the status of the taxpayer as supplier one would be constrained to disagree that the Club under discussion by its character is an importer, manufacturer, wholesaler, dealer, distributor or retailer. As already mentioned it is a limited company registered under Companies Ordinance under section 46. It has been constituted to provide facilities for its members of sports and other entertainments. It is correct that to a limited extent by opening a fair price shop it has been selling certain goods though on non-profit basis and to the said extent its action is that of the retail sale activity. However, the purpose of the club is obviously not to enter into any commercial economic activity.
This is where reverting back to the provision creating charge shall be of help. Section 3 which deals with scope of tax reads as follows;
3. Scope of tax.---(1) Subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of sixteen percent of the value of---
(a) taxable supplies made by a registered person in the course or furtherance of any taxable activity carried on by him; and
(b) goods imported into Pakistan."
As mentioned above section 3(1) of the Act is a taxing section. It consists of the following components/constituents,
(i)taxable supply made
(ii)by a registered person
(iii)in the course of furtherance of
(iv)any taxable activity business
(v)carried on by him.
The expressions used in section 3(1)and which are relevant for the purpose of resolving the controversy are
(i)taxable supply
(ii)taxable activity, and
(iii)in the course of furtherance of.
Though for first two, but not the latter one and also not the word `business', have been defined directly under section 2(28) or (41) and section 2(24) or (35) yet for proper appreciation of their meanings one has to revert back to the definition of goods, taxable goods, supply and taxable supply. Goods means and includes movable property other than money and securities etc. And Taxable Goods means and includes the movable property other than those which have been exempted under section 13 of the Act. Similarly, supply means and includes sale, transfer and other disposition of goods and taxable supply means supply of taxable goods other than supply of goods which are exempt under section 13 of the Act. Taxable activity means an activity which is carried on by any person nor necessarily for pecuniary profit and involved in whole or in part the supply of goods to another person irrespective of any consideration and also includes an activity carried on in the form of business, made or manufacture. [Collector of Customs, Sales Tax and Central Excise etc. v. M/s. Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902, M/s. Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax Gujranwala and the Central Board Revenue, Islamabad 2008 PTD 60].
The meaning of "in the course of" can be taken to mean as connected with, related to add having some nexus with the business/taxable activity and similarly "in furtherance of "is indicative of" the fact that the taxable supply had been made for the enhancement/further development of the business/taxable activity. The word furtherance has been defined in the Advance Law Lexicon, Third Edition, 2005, P.1953, as 'act of furthering, helping forward, promotion, advancement, or progress'. In furtherance of has been interpreted as in promoting or advancing in the Oxford English Dictionary, Volume-IV, P.619. Furtherance has been defined as `fact or state of being furthered or helped forward, the action of helping forward, advancement, aid, assistance'. It is abundantly clear that the taxable supply has not been confined or limited to the one which is the product or the goods manufactured but also including those goods which involve in some way with the progress, promotion, advancement of business/ activity/taxable activity. [Collector of Customs, Sales Tax and Central Excise etc. v. M/s. Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902, M/s. Super Asia Muhammad Din Sons (Pvt.) Ltd. v. The Collector of Sales Tax Gujranwala and the Central Board Revenue, Islamabad 2008 PTD 60.
The above discussion makes one thing clear that the present assessee does not fall in any of the categories like, manufacturer, wholesaler, retailer etc. or distributor; especially in relation to the donations, subscriptions.
In this regard reference of a judgment of the Sindh High Court shall also be of help. The judgment is reported as 2007 PTD 389 re: Defence Authority Club, Karachi and 5 others v. Federation of Pakistan through Secretary, Revenue Division and 2 others. In the said judgment it has been concluded that the concurrent list and Federal legislative list do not provide for the charge of Federal Excise and Sales Tax by the Federation on services. The Central Excise Act 1944 was applied on the services. Thus provincial legislature had no power to legislate on the subject as Sales Tax on services rendered by clubs could not be demanded in respect of entrance fee, annual subscription, monthly subscription, gratuity, staff bonus etc. The Court concluded that the federation had exclusive authority under Entry No. 49 of Federal List to legislate law in respect of taxes on sale and purchase of goods. Legislation with reference to sales tax on services was not enumerated either in Federal List or Concurrent List and Article 142 (c) of the Constitution, conferred exclusive powers to Provincial Assembly to make law with respect to any matter not enumerated in Federal List or Concurrent List. Further, expression "goods used in Entry No. 49 of Fourth Schedule of the Constitution could not be extended to include services" which one could render while offering goods for sale. It was therefore, held that only service provided or rendered by clubs was made liable to sales tax under Sindh Sales Tax Ordinance, 2000, which did not define the term services. Even the term services provided used in Schedule could not in any manner include membership fee or monthly subscription as the same has no nexus with the services provided which club provided to its members like boarding, lodging, arranging parties, supply of foods and other stuff etc.
This obviously means that the Sales Tax Act 1990 applies only on sale and purchase of goods and that also the persons mentioned like manufacturers, whole sellers and traders etc. The club is not covered in either of the above expression or it is providing, nor the Federation can charge sales tax on services. Even otherwise the judgment referred above had categorically held that membership fee, monthly subscription and such other subscription are not even against the consideration of the providing of service. An accumulative reading of the provisions of the Sales Tax Act, 1990 and the judgment now referred gives following picture of the issues in hand.
That the facilities provided like entrance fee, monthly subscription, annual subscription etc. by club are neither sale of goods nor services which even otherwise is a provincial subject.
That except for sale at shop and sale of food at club no other item comes within the purview of the supply of goods.
Thus, except for the heads which are in relation to sale at shop, supply of food to the members etc. on other items the charge of sale tax is hereby deleted. In this regard this Court is further convinced that the assessee is covered within the exceptions provided in the definition of taxable activity. In the relevant defining clause (b) an activity carried on by an individual as a private recreational pursuit or hobby; and (c) an activity carried on by a person other than an individual which, if carried on by an individual, would fall within sub-clauses (b) after the phrase `but it does not include'. This means that the assessee is a person and is involved in private recreationary pursuit; hence is not covered within the definition of taxable activity.
It is, therefore, held that the tax can be charged on bakery sale and supply of food in restaurant. On all other receipts its charge is not legally sustainable. However, sale of bakery and other food items shall be charged as per section 3(A) after due fulfilment of the requirements of law by the assessing officer for which case has been remanded while no tax is chargeable on other activities of the club.
The appeal is, therefore, decided in the manner and to the extent as mentioned above.
C. M. A/89/Tax(Trib.)Order accordingly.