COMMISSIONER OF INCOME TAX VS CAFÉ STUDENT KARACHI, 2016 PTD-KARACHI-HIGH-COURT-SINDH 1072 (2015)

(a) Income Tax Ordinance (XXXI of 1979)---

---S. 134(5)---Reference to High Court---Enhancement of fee for filing appeal before Appellate Tribunal---Amendment introduced through Finance Act, 1994 in S. 134(5) of Income Tax Ordinance, 1979 and fee for filing an appeal before Appellate Tribunal was enhanced---Income Tax Appellate Tribunal referred question to the High Court to the effect that "whether amendment introduced in S. 134(5) of Income Tax Ordinance, 1979 was applicable only to the appeals pertaining to assessment year 1994-95 onwards"---Contention of department was that since the amendment introduced through Finance Act, 1994 with regard to filing of appeal was a procedural amendment therefore same would apply in the cases of previous years as well which were pending disposal before the Appellate Tribunal at the time of such amendment---Contention of taxpayer was that any amendment in law introduced through Finance Act, 1994 was to be applied prospectively unless retrospective effect was given by the legislature specifically---Validity---Right of appeal against an adverse order was a statutory right---Appellate proceedings would be continuation of the original proceedings---Amendment introduced in law through Finance Act, 1994 were applicable prospectively in the year in which it had been inserted unless such retrospective effect had been given by the legislature---Impugned order passed by the Appellate Tribunal did not suffer from any error or illegality---Question referred by the Appellate Tribunal was answered in affirmative against the department and in favour of taxpayer.

Messrs Kurdistan Trading Company v. Commissioner Income Tax 2014 PTD 9 ref.

Kurdistan Trading Company v. Commissioner Inland Revenue 2014 PTD 339; Commissioner Income Tax Karachi v. BRR Investment (Pvt.) Ltd., Karachi 2011 PTD 2148; Commissioner of Income Tax v. Shahnawaz and others 1993 SCMR 73 and Commissioner of Income Tax v. Humayun Elahi Shaikh 2011 PTD 145 rel.

(b) Appeal---

---Right of appeal against an adverse order was a statutory right---Appellate proceedings would be continuation of the original proceedings.

Nasrullah Awan for Applicant.

Aminuddin Ansari for Respondents.

Date of hearing: 18th May, 2015.

JUDGMENT

AQEEL AHMED ABBASI, J.---Since a common question has been referred by Income Tax Appellate Tribunal in the aforesaid references, therefore, by consent of learned counsel for the parties, the above references are being disposed of through common judgment. Following question of law has been referred by the Appellate Tribunal for opinion of this Court under Section 136(1) of the Income Tax Ordinance, 1979:--

"Whether on the facts and circumstances of the case the learned ITAT was justified to hold that the amendment introduced in subsection (5) of section 134 of the Income Tax Ordinance, 1979 whereby the appeal fee was enhanced, was applicable only to the appeals pertaining to assessment year 1994-95 onwards."

2.Mr. Nasrullah Awan, learned counsel representing the applicants in all the above references, has read out the impugned order passed by the Income Tax Appellate Tribunal, Karachi. However, without referring to facts of each case, has read out the amended provision of sub-section (5) of Section 134 of Income Tax Ordinance, 1979, whereby, appeal fee for filing appeal before the Appellate Tribunal was enhanced through Finance Act, 1994, to Rs.2500/- or ten percent of tax levied, whichever is less, and contended that since the amendment introduced through Finance Act, 1994 relating to filing of appeal was a procedural amendment, therefore, it was to be applied in the cases of previous years as well, which were pending disposal before the Appellate Tribunal at the time of such amendment, therefore, according to learned counsel, the enhanced rate of fee would be applicable to the assessment years 1994-95 as well. However, when the learned counsel for the applicants was directed to assist this Court on the subject controversy by referring to any decision of this Court or of the Hon'ble Supreme Court, the learned counsel for the applicants candidly stated that he could not get hold on any such judgment in support of his submissions as referred to hereinabove.

3.Conversely, learned counsel for the respondents have seriously controverted the submissions made by the learned counsel for the applicants, which according to learned counsel for the respondents are contrary to legal position as already settled through various judgments of this Court as well as the Hon'ble Supreme Court of Pakistan on the subject controversy, whereby, it has been decided that any amendment in law introduced through Finance Act is to be applied prospectively unless the retrospective effect is given by the legislature specifically, whereas, in the instant cases, according to learned counsel for the respondent, the amendment introduced through Finance Act, 1994, by inserting subsection (5) in Section 134 of the Income Tax Ordinance, 1979, enhancing the fee for filing an appeal before the Appellate Tribunal, is a substantial amendment in law, which otherwise is not even beneficial to the taxpayer, hence, cannot be given retrospectively effect. It has been further contended by the learned counsel for the respondent that only such amendment can be given retrospective effect, which is beneficial to a taxpayer, whereas, any amendment through Finance Act, which intends to create further charge or burden of tax or fee upon the taxpayer, can only be given effect prospectively by applying such amendment for the tax year next following the year in which, such amendment has been introduced through Finance Act. Per learned counsel for the respondents, the amendment introduced in subsection (5) of Section 134 of the Income Tax Ordinance, 1979 through Finance Act, 1994 will be applicable to the tax year 1994 onwards and will not apply to the appeals pertaining to the assessment years prior to assessment year 1994-95. Learned counsel for the respondents have read out the impugned order passed by the Income Tax Appellate Tribunal in the aforesaid references and contended that the impugned order does not suffer for any error or illegality, which according to learned counsel for the respondent, is otherwise based on various decision of High Court as well as the Hon'ble Supreme Court on the subject controversy. In support of his contention, learned counsel for the respondent has also relied upon the recent judgment of this Court in the case of Messrs Kurdistan Trading Company v. Commissioner Income Tax reported in 2014 PTD 9. While confronted with the legal position as stated by the learned counsel for the respondents and the decision of this Court as referred to hereinabove on the subject controversy, learned counsel for the applicants could not controvert such legal position and submitted that the question proposed may be decided in view of the ratio of the decision of this Court in the afore-cited case and references may be disposed of accordingly.

4.We have heard the learned counsel for the parties, perused the impugned order(s) passed by the Income Tax Appellate Tribunal in the aforesaid references and the common question of law proposed by the applicant department for opinion of this Court. Since there is no dispute with regard to facts, whereas, the only controversy raised through above references relate to determination of a question, which appears to be a question of law, therefore, we would not record any statement on fact, while deciding the above legal issue and would only dilate upon the legal question, which has been referred by the Income Tax Appellate Tribunal to this Court for opinion in terms of Income Tax Ordinance, 1979. There is no cavil to the legal proposition that right of appeal against an 'adverse order is a statutory right, whereas, the appellate proceedings are continuation of the original proceedings, whereas, such legal position is equally applicable to appeals as provided in terms of Section 134 of the Income Tax Ordinance, 1979. In the above references, certain adverse orders were passed against the assessee/taxpayer, which were assailed by filing appeal before the Commissioner (Appeals) and also before the Income Tax Appellate Tribunal before the amendment introduced in subsection (5) of Section 134 of the Income Tax Ordinance, 1979 through Finance Act, 1994 as well as after the amendment, however, in respect of assessment year(s) prior to assessment year 1994-95. The right of appeal available to an assessee/taxpayer prior to Finance Act, 1994 relating to assessment year for and upto 1993-94 was however qualified and made subject to payment of enhanced fee of Rs.5000/- or 10% of the tax levied, whichever is less, provided further that where no tax levied a fee of Rs.5000/- was to be paid, while filing appeal before the Appellate Tribunal. The above respondent while confronted with such position, agitated the application of the amendment introduced in subsection (5) of Section 134 of the Income Tax Ordinance, 1979, through Finance Act, 1994, in respect of appeals relating to tax years prior to tax year 1994-95 on the ground that such amendment creating additional burden of tax or fee, would apply to the appeals relating to tax years 1994-95 onwards and not to the appeals pertaining to tax years prior to 1994-95, by giving retrospective effect to such amendment introduced through Finance Act, 1994. The Appellate Tribunal, after having examined the effect of such amendment introduced through Finance Act, 1994 and by placing reliance on the various decisions of this Court as well as of Indian jurisdiction has decided the controversy in the following terms:--

"As a result of above discussion we find that on more than one counts and for more than one reasons the amendment introduced in subsection (4) of Section 134 of the Income Tax Ordinance, 1979, wherein the appeal fee has been enhanced shall take effect prospectively. There is nothing to show that the legislature had any intention to give the retrospective effect to the amendment. It is consequently held that the enhanced appeal fee shall be applicable to the appeals pertaining to the assessment year 1994-95 onward. All appeals up to the assessment year 1993-94 shall be governed by the unamended provision contained in subsection (5) of Section 134 of the Income Tax Ordinance, 1979 irrespective of the date of the filing of appeals in this Tribunal. The objection raised by office is, therefore, overruled and the office is directed to admit all the appeals for regular hearing. The office objection stands disposed of as above."

5.The legal issue relating to application of amendment introduced in Fiscal Laws, through Finance Act, 1994, either prospectively or retrospectively, stands settled by various decisions of this Court as well as of the Hon'ble Supreme Court, according to which, an amendment introduced in law through Finance Act shall apply prospectively in the year in which it has been inserted unless such retrospective effect has been given by the legislature. Similarly, it has also been settled through various pronouncements of this Court as well as of the Hon'ble Supreme Court that unless and until any amendment introduced by Finance Act creating any charge or additional burden upon a taxpayer is given retrospective effect by express words by the legislature, it cannot be applied retrospectively to the disadvantage of the taxpayer. In a recent decision in the case of Kurdistan Trading Company v. Commissioner Inland Revenue 2014 PTD 339, this Court while examining the application of an amendment introduced through Finance Act, prospectively or retrospectively, has held as under:--

"8. If we may examine the provision of Clause 3A of Part IV of the Second Schedule to the Income Tax Ordinance, 2001, it can be seen that the said provisions are remedial and beneficial in nature as certain relief has been given to the taxpayers by excluding its benefit derived by way of waiver of profit and debt or the debt itself, from the chargeability to tax. It can be further seen that legislature, while inserting Clause (3A) Part IV of the Second Schedule has extended this benefit retrospectively by referring to Circular No. 29 of 2002 dated 15th October 2002 issued by the State Bank of Pakistan. There is, no cavil to the legal proposition that normally amendments introduced in fiscal statutes through Finance Act apply prospectively in the year in which it has been inserted, unless, some retrospective effect has been given by the legislature. On the other hand, in cases where the amendment introduced is remedial and beneficial in nature, it has to be given retrospective effect and also to apply to all pending cases on the date of amendment/enactment as well, unless some prospective effect is given by the legislature or it is made prospective by its implication. It is trite principle of construction of a fiscal statute that unless and until any amendment introduced by Finance Act, creating any charge or additional burden upon a taxpayer, is given retrospective effect by express words by the legislature, it cannot be applied retrospectively to the disadvantage of the taxpayer. In the instant case, though the accounts of the taxpayer for the tax year 2004 were closed by 30th June 2004, however, the assessment, which includes calculation, computation and application of tax rates and exemption etc., if any, was not finalized, even, a deemed assessment in terms of Section 120(1) of the Income Tax Ordinance, 2001 was not made.

9. The scope and its application of an amendment made in subsection (6) of Section 18-A of the Income Tax Act, 1922 by the Finance Act, 1973, whereby the additional amount of tax under subsection (6)(18-A) could only be charged for a period not exceeding 15 months, was extended also to the cases of assessees who had submitted their returns before the coming into force of the said amendment, but their assessment had not yet been finalized and were still pending, came up for consideration before the Hon'ble Supreme Court in the case of Commissioner of Income Tax v. Shahnawaz Ltd. and others reported as 1993 SCMR 73, wherein the Hon'ble Supreme Court has held as under:-

'As explained in Crawford's Statutory Construction" a statute relating to remedial law may properly, in several instances, be given retrospective operation and we are of the opinion that as the amendment in the instant case was introduced to redress an injury which in the words of Circular No. 6 of 1973 (Income Tax) issued on 7th July, 1973 by the Central Board of Revenue itself was "designed to soften the law in favour of tax-payers who could previously be charged to additional tax up to the date of assessment even though the finalization of assessment was delayed due to no fault of theirs." This was a proper case in which retrospective operation, to the extent the High Court gave to it, could be given to the amending law."

Further reliance in this regard can also be made in the cases of Commissioner Income Tax Karachi v. BRR Investment (Pvt.) Ltd., Karachi 2011 PTD 2148, Commissioner of Income Tax v. Shahnawaz and others 1993 SCMR 73 and Commissioner of Income Tax v. Humayun Elahi Shaikh 2011 PTD 145 ref.

7.Learned counsel for the applicant department while confronted with above legal position with regard to application of an amendment introduced in fiscal laws through Finance Act has candidly conceded that the orders passed by the Appellate Tribunal in the instant case are inconformity with the decisions of this Court as well as of the Hon'ble Supreme Court.

8.In view of hereinabove facts and circumstances of the case and by respectfully following the judgments of this Court and the Hon'ble Supreme Court on the issue of application of amendment introduced in the fiscal laws through Finance Act, we are of the opinion that the impugned orders passed by the Appellate Tribunal in the case of respondents do not suffer from any error or illegality and depict correct legal position. Accordingly, the common question proposed through instant reference application(s) by the Appellate Tribunal is answered in affirmative against the applicant department and in favour of the respondent taxpayer.

9.Let copy of this judgment under the seal of this Court be sent to the Registrar, Appellate Tribunal, Karachi, for information.

ZC/C-13/SindhReference answered.