The Appellate Tribunal Inland Revenue, Karachi, has held that the registered yarn dealers are liable to pay minimum tax at the rate of 0.1 percent of their turnover instead of standard rate of minimum tax of one percent. It is learnt that a registered yarn dealer had filed return of total income wherein, on declared turnover, minimum tax liability was worked out and discharged at the rate of 0.1 percent provided under Proviso to Clause (45A)(a) of Part IV of Second Schedule of the Income Tax Ordinance instead of standard rate of 1 percent provided in the aforesaid Clause for taxpayers falling in the five export sectors including textile.
The Additional Commissioner Inland Revenue amended the assessment by holding that the rate of 0.1 percent given in the proviso is only for the purpose of withholding under section 153 and the said withheld amount of tax is adjustable towards the minimum tax liability to be calculated wherein the standard rate of tax was 1 percent provided in clause (45A). The amendment made by the Additional Commissioner was upheld by the Commissioner (Appeals) and in second appeal the decision of both the authorities below was reversed.
The authorised representative (AR) of the appellant taxpayer from Taimoor Law Associates pleaded before the Tribunal and explained that the exemption or reduced rate provisions is provided in the taxing statutes to give relief and/or lessen the rigor of tax liability. He explained that part IV of the Second Schedule is about reduction in tax liability wherein through clause (45A) the rate of withholding tax under section 153(1)(a) and (b) was reduced to 1 percent for the five export-oriented sectors. However, an exception was made through Proviso in respect of Yarn Dealers which provided that withholding tax under section 153(1) shall not be deducted from sales, supplies and services made by the traders of yarn to the taxpayers of textile sector and such traders of yarn shall pay minimum tax at the rate of 0.1 percent on their annual turnover on monthly basis. The AR pleaded that there was a definite purpose and intent to exclude the yarn dealers even from the regime of reduced rate of withholding tax at the rate of 1 percent under clause (45A) read with section 153. Since, turnover in case of yarn dealer runs into billions of rupees and their margin of net profit is nominal; therefore the federal government felt that even withholding at the rate of 1 percent would be excessive and unjust in the case of yarn dealers so they were excluded from the operation of the reduced rate through SRO 333(I)/2011. Instead they were required to pay turnover tax at the rate of 0.1 percent on their monthly turnover. He further explained that when clause (45A) was introduced section 153 was also substituted whereby payments made to traders of yarn by the textile export sector taxpayers were excluded from the operation of section 153(1). It was argued that 0.1 percent tax on turnover of yarn dealers is a totally different tax liability and the turnover tax under section 113 is also not applicable.
The Appellate Tribunal accepted the arguments and operative part of the order is as under: "We have given anxious consideration to the arguments of the rival parties and have perused the impugned orders, the relevant provisions of law, the case law referred and the available record of the case. We found ourselves in agreement with the submission of the learned AR inasmuch as the facility provided to the yarn dealers through Proviso to Clause 45A of Part IV of the Second schedule has got nothing to do with section 153(1) of the Ordinance. We are of the view that facility provided purposely to the yarn dealers via proviso to clause (45A) ibid, keeping in view the peculiar facts and circumstances of their business and the margin of profit is also independent of section 113 which has altogether different dynamic and sphere of operation."
Comments
Comments are closed.