Interest earned by financial institutions on Government securities

Citation Name : 2019 SCMR 282 SUPREME-COURT
Side Appellant : PAKISTAN TELEVISION CORPORATION LIMITED
Side Opponent : COMMISSIONER INLAND REVENUE (LEGAL) LTU, ISLAMABAD
Ss. 2(23), 3 & First Sched., Table II---Customs Act (IV of 1969), First Sched. [Pakistan Customs Tariff (PCT), Heading 98.12]---Wireless Telegraphy Act (XVII of 1933), S. 3---Television Receiving Apparatus (Possession and Licensing) Rules, 1970, Rr. 2(e) & 3(3)---TV license fee recovered by Pakistan Television Corporation Ltd. (PTV)---Federal excise duty, payment of---Exemption---Telecasts, TV sets and TV license fee were not covered by the definition of "services" in S. 2(23) of the Federal Excise Act, 2005 and Item 6 of Table II of the First Schedule to the said Act read with Chapter 98 of the Pakistan Customs Tariff (PCT)---TV license fee, telecasts and TV sets not being covered by any of the subheadings of PCT Heading 98.12 were not subject to Federal Excise Duty on a reasonable interpretation of the LAW ---Pakistan Television Corporation Ltd. (PTV) was exempt from payment of Federal Excise Duty on TV license fee---Moreover the Wireless Telegraphy Act, 1933 and the Television Receiving Apparatus (Possession and Licensing) Rules, 1970, made the Parliamentary intention clear, i.e. the license fee was paid not for any service provided by PTV but by the holder of the TV set for its possession---TAX able event was not the provision of any service by PTV; it was the possession of a television set by the holder---TV license fee not being the product of any service provided by PTV, Federal Excise Duty could not be levied on it---Appeal was allowed accordingly.

Citation Name : 2019 SCMR 158 SUPREME-COURT
Side Appellant : DEWAN KHALID TEXTILE MILLS LTD.
Side Opponent : COMMISSIONER OF INCOME TAX (LEGAL DIVISION), LARGE TAXPAYERS UNIT, KARACHI
Ss. 65(2) & 80B---Additional assessment---"Definite information"---Scope---Judgment of the Supreme Court as 'definite information'---Appellant-company filed its return for the relevant assessment year but thereafter (before the assessment was framed) filed a revised return---Reason for the revised return was that the appellant claimed that in respect of "interest or profit on which the TAX deductible under subsection (2-A) of S. 50" of the Income TAX Ordinanxe, 1979 ("Ordinance"), it was liable to be TAX ed in terms of S. 80B of the said Ordinance---Income TAX Officer accepted said claim of appellant, and the said amounts were TAX ed accordingly---However, subsequently, by a notice issued under S. 65 of the Ordinance, Income TAX Officer sought to reopen the assessment on the ground that the appellant was not so entitled--- Revised assessment order, adverse to the appellant, was made---Appellant contended that action under S. 65 of the Ordinance could only be taken if there existed any "definite information" for reopening the assessment, and that no such information existed in the facts and circumstances of the case---Appellate Tribunal accepted such contention of the appellant, however, the High Court found that the "definite information" was available with the Income TAX Officer in the form of a judgment of the Supreme Court and hence found against the appellant---Legality---High Court erroneously relied on a judgment of the Supreme Court, without appreciating that the said judgment was rendered many years after the initiation of action under S. 65 of the Ordinance against the appellant---Since the judgment did not exist at the relevant time it could not ipso facto constitute "definite information" within the meaning of LAW that would have made it permissible for the Income TAX Officer to reopen the assessment---Judgment of the High Court was set aside in circumstances and that of the Appellate Tribunal was restored---Appeal was allowed accordingly.

Citation Name : 2019 PTD 1961 SUPREME-COURT
Side Appellant : MUJAHID SOAP AND CHEMICAL INDUSTRIES (PVT.) LTD.
Side Opponent : CUSTOMS APPELLATE TRIBUNAL, BENCH-I, ISLAMABAD
S. 179(3)---Adjudication---Period of 120 days for rendition of judgment after issuance of show cause notice---Scope---Judgment reserved---Order-in-original was issued by the Collector (Adjudication) after a lapse of 157 days from the date of show cause notice, however, customs authorities contended that the judgment was reserved on the 116th day after the date of the show cause notice, thus, it was within the time period of 120 days---Question as to whether the customs authorities were justified in treating the date of conclusion of hearing and for judgment to be reserved as the date of disposal of the show cause notice---Held, that on the 116th day after issuance of show-cause notice no decision was verbally announced by the adjudicating officer nor was any decision communicated to the parties prior to the subsequent issuance of the order-in-original---Adjudicatory decision could not be said to have been recorded/taken without announcement or communication thereof to the parties---LAW was quite accommodating for the TAX ing authority as an extension was available beyond the originally prescribed period of 120 days for rendition of a decision---Even though no decision was communicated within the said period, such an extension could be sought and granted subsequently but in such an event it was mandatory that the decision came within 180 days after the date of show cause notice---In the present case, however, the Collector did not even apply for an extension but consumed 157 days to record the reasons for his judgment and to communicate the same to the parties---Resultantly the impugned decision was beyond time prescribed in S. 179(3) of the Customs Act, 1969, and was therefore, held to be invalid---Appeal was allowed accordingly.

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 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.

Citation Name : 2019 PTD 1299 SUPREME-COURT
Side Appellant : PAKISTAN MATCH INDUSTRIES (PVT.) LTD.
Side Opponent : ASSISTANT COLLECTOR, SALES TAX AND CENTRAL EXCISE MARDAN
Fiscal statute---Exemption from TAX ---Where a TAX payer fairly came within the scope of an exemption, then the same could not be denied on the basis of some supposed intention of the LAW -maker.

Citation Name : 2019 PTD 1299 SUPREME-COURT
Side Appellant : PAKISTAN MATCH INDUSTRIES (PVT.) LTD.
Side Opponent : ASSISTANT COLLECTOR, SALES TAX AND CENTRAL EXCISE MARDAN
S. 47---Reference to High Court---Scope---'Questions of LAW '---In case of a TAX reference before the High Court, all factual aspects of the case were closed by, and at the level of, the Appellate Tribunal; and it was only questions of LAW that could travel to the High Court---Factual points could not be allowed to be opened or (re-)agitated, unless there had been a material misreading or non-reading of the evidence, which was itself a question of LAW that could be taken to the High Court.

Citation Name : 2019 PTD 718 SUPREME-COURT
Side Appellant : SAMI PHARMACEUTICALS (PVT.) LTD.
Side Opponent : FEDERATION OF PAKISTAN
Ss. 19 & 31A---Sales TAX Act (VII of 1990) S. 13(2)(a)---Exemption from customs duty and sales TAX under SRO No.575(I)/2006 dated 5.6.2006---Import of "Air Handling Units"---Certification by Engineering Development Board of Pakistan (EDB)---Procedure---Petitioner-company imported 'Air Handling Units' and sought concession on customs duty and exemption from sales TAX under SRO No.575(I) 2006 dated 05.06.2006 on the ground that the 'Air Handling Units' imported were of such specification that were not manufactured locally---[Per Faisal Arab, J (Majority view): Exemption from customs duty and sales TAX could not be claimed under SRO No.575(I)/2006 in case the item was either listed in the locally manufactured items notified through a Customs General Order (CGO) issued by the Federal Board of Revenue or certified by the Engineering Development Board of Pakistan (EDB) that the item in question was locally manufactured---In order to confirm whether exemption granted under SRO No.575(I)/2006 on an item was available or not one could take recourse to CGOs issued from time to time or seek certification from the EDB---Apart from seeking recourse to CGO, the need to seek certification from EDB seemed to have arisen as there was a strong possibility that a name of local manufacturer of a particular item may not have been updated in the CGO hence not reflecting the latest position of the local industry---Under SRO No.575(I)/2006, EDB had been entrusted with the function to certify whether an item was also locally manufactured which was done by gathering information from the local industry---Any person including the Customs Authorities could seek such certification---EDB's certification only confirmed a pre-existing position i.e. an item was or was not locally manufactured---In case EDB certified that imported item was also locally manufactured, exemption under SRO No.575(I)/2006 would be denied---After such certification the fact that a particular item may not have been listed in the CGO as a locally manufactured item would be of no legal consequence---Date on which certificate was issued by the EDB could not be taken as the date on which an item had become a locally manufactured item---Where a letter of credit was opened for import of an item which was already being locally manufactured and such pre-existing factual position was later certified by the EDB, it was good enough to disentitle an importer to claim exemption under SRO No.575(I)/2006---Timing of seeking certification from EDB would be immaterial in such circumstances---Only exception to this could be that the local manufacture of an item was so recent that it could not have been ordered from the local market when the letter of credit for its import was established---In such exceptional situation benefit granted under SRO No.575(I)/2006 could be availed---In absence of such an exception, the effect of certification in the affirmative by EDB would be that it confirmed that at the time when the importer opened the letter of credit in favour of a foreign supplier it was already one of the locally manufactured items and thus not entitling an importer to claim concession under SRO No.575(I)/2006---Where an item was required to be custom-built e.g. an item with the same technical specifications was required to be supplied with different dimensions not readily available in the local market even then exemption on such item could not be claimed where a local manufacturer was fully capable to supply it had an order been placed with him---In the present case, the Engineering Development Board of Pakistan (EDB) certified that the 'Air Handling Units' imported by the petitioner were also being manufactured by four local manufacturers with the same technical specifications---Moreover the petitioner sought certification from EDB on 14.3.2011 i.e. at the time when the consignment was in the process of being shipped to Pakistan, much after the letter of credit dated 9.9.2009 was opened---Petitioner was rightly denied the exemption from customs duty and sales TAX under SRO No.575(I)/2006]---[Per Munib Akhtar, J (Minority view): Language used in the SRO No.575(I)/2006 in specific context of "Air Handling Units" provided that the exemption was available only to units of "specifications which were not manufactured locally"---Such condition clearly recognized that Air Handling Units came in more than one type of specifications, of which some sorts only were being locally manufactured, thus, it required that the CGO to be issued by Federal Board of Revenue, or the certificate that could be issued by the EDB, had to list (or at any rate clearly relate to) the specifications of the "Air Handling Units" that were to be regarded as being locally manufactured---Only listing without more, "Air Handling Units" (with or without their PCT heading) in the CGO or the EDB certificate would be insufficient---For purposes of exemption/ concessionary notifications, the Customs General Order 11 of 2007 dated 28.8.2007 ('CGO 11') was the relevant CGO for the present case---Entry No. 504 of the CGO 11 listed two companies that locally manufactured Air Handling Units---For CGO 11 to apply the question was not whether either of the two companies manufactured "Air Handling Units" with the same specifications as those imported by the petitioner, rather, the true and correct question was whether the petitioner's "Air Handling Units" were of the specifications as listed in CGO 11, and manufactured by the two companies---Record showed that this was not the case---Furthermore the Al-Samrez' principle enunciated by the Supreme Court in the case of Al-Samrez Corporation v. Federation of Pakistan (1986 SCMR 1917) would apply to the present case---Certificate, issued by EDB on 1.4.2011, could not, as a matter of LAW and for purposes of SRO No.575(I)/2006 have any retrospective effect---As a certification that "Air Handling Units" of the sort imported by the petitioner were being locally manufactured, it could only apply prospectively from the date of its issuance---In considering whether the issuance of the EDB Certificate amounted to a "withdrawal" of the exemption under SRO No.575(I)/2006 within the meaning of S. 31A of the Customs Act, 1969, a restrictive view would have to be taken---When so considered there was no withdrawal of the exemption---Exemption ceased to apply in relation to the petitioner's goods when the certificate was issued by EDB on 1.4.2011, however, that was not, in the context of S. 31A, a withdrawal of the exemption; that could take place only as a result of an act of the authority issuing the same, which would have to be the Federal Government---Petitioner was entitled to the benefit of SRO No.575(I)/2006 in respect of the "Air Handling Units" for which the goods declaration was filed on 22.7.2011; this was so by an application of the Al-Samrez principle, which was not ousted or negated by reason of S. 31A of the Customs Act, 1969]---Petition for leave to appeal was dismissed in circumstances.