1. These appeals, by leave of the Court, and petitions involve similar question(s) of law, hence are being disposed of together. The key questions involved herein are:
(i) whether the minimum tax payable under Section 80D of the Income Tax Ordinance, 1979 (Ordinance of 1979) is leviable on the aggregate of declared turnover from all sources including receipts covered by Sections 80C and 80CC of the Ordinance of 1979;
(ii) whether the minimum tax payable under Section 113 of the Income Tax Ordinance, 2001 (Ordinance of 2001), as it existed prior to its omission by the Finance Act, 2008, is leviable on the aggregate turnover from all sources including receipts covered by the Presumptive Tax Regime or upon which the tax payable/paid is a final discharge of tax liability (note:- the subsequent Section 113 reinserted vide Finance Act, 2009 has no bearing on the present matters as no tax year after re-insertion of the said section is involved thus all references to the ‘Ordinance of 2001’ are to as it existed prior to the amendments brought by the Finance Act, 2008, unless stated otherwise);
(iii) whether ‘services rendered’ pursuant to execution of a contract would fall within the Presumptive Tax Regime by virtue of Section 80C(2)(a)(i) of the Ordinance of 1979, whereas Section 50(4)(a) deals with ‘services rendered’ and ‘execution of contracts’ as separate categories alongwith ‘supply of goods’; and
(iv) whether cash purchase and/or purchase of raw material falls within the purview of ‘supply of goods’ as envisaged by Section 50(4)(a) of the Ordinance of 1979?
Out of the total of 105 cases (103 civil appeals and 2 civil petitions), 53 cases (Civil Appeals No.1481 to 1529/2009, 254 and 255/2011 and Civil Petitions No.2595 and 2596/2009) pertain to question No.(i); 36 cases (Civil Appeals No.1235 to 1270/2015) relate to question No.(ii); 5 cases (Civil Appeals No.1084/L to 1088/L/2008) pertain to question No.(iii); and 10 cases (Civil Appeals No.1089 to 1098/2008) pertain to question No.(iv). During the analysis portion of this opinion, questions No.(i) and (ii) shall be dealt with together as they are interlinked.
2. For the sake of convenience and brevity, one case for each of the categories shall be taken to be the lead case for the purposes of explaining the factual background. With respect to question No.(i), the brief facts of Civil Appeal No.1482/2009 are that the Deputy Commissioner of Income Tax assessed the total income and determined the tax payable by the respondent-company under Section 80D without taking into consideration Section 80C. The assessment order was challenged by the respondent which (appeal) was accepted by the Commissioner of Income/Wealth Tax (Appeal) holding that income even though liable to tax under Section 80C should be taken into consideration by the Income Tax Officer while calculating the turnover for the purposes of Section 80D. Aggrieved, the appellants approached the Income Tax Appellate Tribunal which vide order dated 18.11.1999 dismissed the appeal. Thereafter the appellants challenged such order before the learned High Court in an Income Tax Appeal which was dismissed vide order dated 27.5.2009 for the same reasons as enunciated in the judgment reported as Commissioner of Income Tax/Wealth Tax Companies Zone, Faisalabad Vs. Messrs Masood Textile Mills Ltd., Faisalabad (2009 PTD 1707) after which they approached this Court.
For the purposes of question No.(ii) the facts of Civil Appeal No.1235/2015, are that the respondent-company filed its Income Tax Return for the Tax Year 2006 which was treated to be an assessment in terms of Section 120 of the Ordinance of 2001. The amended assessment order passed under Section 122 of the said Ordinance and the subsequent order dated 23.10.2012 passed by the Commissioner of Inland Revenue, Appeals were successfully challenged by the respondent before the Appellate Tribunal Inland Revenue which vide order dated 15.9.2014 held that the minimum tax under Section 113 of the Ordinance of 2001 was to be calculated and charged on the basis of the aggregate turnover from all sources, including export receipts. Aggrieved, the appellants filed a reference petition under Section 133 of the said Ordinance before the Lahore High Court which upheld the decision of the Appellate Tribunal Inland Revenue vide order dated 24.12.2014 and decided it in the same terms as the judgment reported as Commissioner Inland Revenue Vs. Imperial Electric Company (Pvt.) Ltd. (2015 PTD 884). The order dated 24.12.2014 has been impugned before this Court.
In respect of question No.(iii), the concise facts of Civil Appeal No.1084/L/2008 are that the respondent was a sanitation contractor of the Capital Development Authority, Islamabad (CDA) who filed a return under Section 55 of the Ordinance of 1979 which though initially assessed under Section 59A, was subsequently revised and an order was passed by the Additional Commissioner under Section 66A to the effect that the payments received by the respondent from CDA were to be governed by the Presumptive Tax Regime of Section 80C which would be full and final discharge of tax liability. The order was successfully challenged by the respondent before the Income Tax Appellate Tribunal, subsequently the appellant filed applications under Section 136(1) of the said Ordinance before the Income Tax Appellate Tribunal which (applications) were dismissed. Thereafter, the appellant’s tax reference before the learned High Court was also dismissed while holding, inter alia, that income derived from ‘services rendered’ was not subject to the Presumptive Tax Regime of Section 80C which stands specifically excluded from such section, hence the instant appeal.
Finally with regard to question No.(iv), the facts of Civil Appeal No.1089/2008 are that the respondent was deriving income from the manufacturing and sale of vegetable oil and ghee items. The Assessing Officer found the respondent to be in default under Section 52 of the Ordinance of 1979 on the basis that the respondent failed to deduct tax under Section 50(4) on account of certain purchases. The respondent’s appeal before the Commissioner Income Tax (Appeals) was accepted after which the appellant’s appeal before the Income Tax Appellate Tribunal and their reference before the learned High Court were both dismissed primarily on the ground that on-the-spot cash purchases did not fall within the term ‘supply of goods’ as used in Section 50(4)(a) of the said Ordinance, thus the respondent was not in default in terms of Section 52, thus the appellants approached this Court.
3. Dr. Ishtiaq Ahmed, Commissioner Inland Revenue, appearing on behalf of the appellants/petitioners argued against the impugned judgments. With respect to questions No.(i) and (ii), he submitted that the phrases ‘turnover from all sources’ and ‘aggregate of declared turnover’ provided in Section 80D encompass income from all sources. He bifurcated the tax law regimes into the Presumptive Tax Regime and the Normal Tax Regime.
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