Keeping animals in cattle market: Lahore High Court rejects plea to allow exemption of WHT

KARACHI: The Lahore High Court (LHC) has rejected the petition of taxpayers seeking relief from the court to declare that the withholding tax is exempted on fees paid against keeping animal in the cattle market, a circular issued on Monday by the Federal Board of Revenue (FBR).
The court declared that Impugned notices had been sent without lawful authority, jurisdiction and of no legal effect due to this petition failed and dismissed.
It also declared, “The Thekka/Tax farmer bestowed upon the petitioner does not fall within the four corners of Section 236A of the ordinance rendering the Thekka/Tax farmer of the petitioner exempt from the operation.”
According to petition number 2151/2010, the petitioners have assailed a notice issued on 6-10-2009 for payments of five percent tax on auctioned amount.
The FBR said, “The petitioner was declared successful bidders for collection of cattle market fee, the auction was confirmed in the favour on 28-4-2009, the petitioner deposited the auction money. On receipt of notices, petitioners submitted an application to the respondent stating therein that deduction of advance income tax based on notification No.47 dated 23-7-2009 is applicable on the sale of any property or goods confiscated or attached either belonging to governmental, local government and any authority.” It further added that collection rights of cattle market is not a property or goods as per the said notification and as such advance tax is not payable but instead of withdrawing the said notice, respondents are issuing notices for payment of said amount.
A circular said that notices issued to respondents who failed report and parawise comments and stated that provisions of Section 236-A of Income Tax Ordinance, 2001 are applicable against petitioners. It informed, “The right to collect fee from cattle market and any other levy as to octroi toll i.e. falls under Section 236-A of Income Tax Ordinance. They have relied on a letter dated 26-9-2010 issued by the Taxation Officer Federal Board of Revenue, Secretary Local Government, Civil Secretariat Lahore.”
Under Section 236-A of Income Tax Ordinance, learned counsel for petitioner submitted the sale by public auction of any property or goods confiscated or gathered either belonging to government, local government and any authority is subject matter of said provision of law whereas petitioner is auction purchaser for collection of fee of cattle market.
Petition said, “Learned counsel further submits that collection of fee of cattle market is not a property or goods. Further submits that words used confiscated or attached in Sub Section (1) of Section 236-A of Income Tax Ordinance, are not equal to the auction purchase.” It further said that words to statutes of the legislature have to be attributed their plain and simple meaning and each word of the statute has to be given due weight. The insertion of words confiscated or attached with words property or goods mean that only those goods or properties could be subjected to the levy of advance tax visualized by Section236-A which either have been confiscated or are attached.
“The right to collect different tolls leased out to petitioner through a public auction did not in any manner fall within the definition of confiscated or attached.” The notification said, “According to Finance Bill 2010 provides that under clause 66 the word confiscated/attached/property/goods” mean to charge the property or goods confiscated/attached only learned counsel for petitioner has relied on Messrs Mehran Association, The Commissioner of the Income Tax, Karachi (1993 SCMR 274) and submits that it is in an established principle of interpretation of a fiscal statute is that all charges upon the subject are to be imposed by clear and unambiguous words.”
The FBR said that there is no room for any intendment nor there any equity or presumption of tax. A fiscal provision of a statute is to be constructed normally in favour of the citizen.
The issue has already been settled by the Supreme Court of Pakistan in (2005) 91 Tax 425 (S.C Pak). The issue between the parties is about t he interpretation of Section 236-A of Income Tax Ordinance, 2001 for better appreciation of said provision of law, “S. 236A-Advance tax at the time of sale through auction. Following is an extract from FBR’s circular No.03 of 2009 dated July 17, 2009,” and “In the past under section 50(7A) of the repealed Income Tax Ordinance, 1979, any person making sale by public auction of any property belonging to the government a local authority was required to collect at three percent of the sale price of such property.
No such provision was however, available in the Income Tax Ordinance 2001. Considering the revenue importance, a new Sub-Section 236A has been inserted to provide that any person making sale through public auction of any property or goods confiscated or attached belonging to or not belonging to the government, local government, any authority and a company, Circular added.
As per petition, “The credit for the tax collected under sub-section (1) in that tax year shall subject to the provision of Section 147, be given in computing tax year or in the case of taxpayer to whom section 98-B or section 145 applies the tax year, in which the said date as referred to in that section, falls or whichever is later.” As per explanation, For the purposes of this section, sale of any property includes the awarding of any lease to any person, including a lease of the right to collect tolls, fees or other levies, by whatever name called.
The FBR notified that the petitioner entered into an agreement for collection of fee from cattle market. The right to collect fee of cattle market was auctioned on 28-4-2009 and operation of said agreement was to commerce from 1-7-2009 to 30-6-2010, meaning thereby the effective date of the said agreement is 1-7-2009. Admittedly the finance bill is to be implemented from 1-7-2009.
“It is an admitted fact that effective date is the material date which will decide the fate of issue. The argument of learned counsel for petitioner is that section 236-A of Income Tax Ordinance, specifically find mentioned the words property/goods/confiscated/attached of fee of cattle market is not a property/goods/confiscated or attached.”
Meanwhile, Perusal of Section 236-A of Income Tax Ordinance shows that word property is an independent meaning, goods confiscated are independent and attached is a separate one meaning thereby in three situation tax is payable. Now the question arose whether collection of lease money or collection of fee from the cattle market is a property or not.
Moreover, explanation of Section 236-A of Income Tax Ordinance provides that sale of property includes the awarding of any lease to any person including the lease of right to collect tolls, fees or other levies. “The perusal of said explanations now that right to collect the tolls fee and other levies falls within the mischief of section 236-A of Income Tax Ordinance perusal of agreement for collection of castle market fee shows that it is a lease contract for collecting the fee from the owners of animals who bring their animals in market.
The FBR said that the land is provided by the TMA and the TMA is providing every facility or managing the market, the contractor has to recover the fee from the animal owners and as such the payment by the animal owners falls within the definition of lease and also a fee. In these circumstances, the petitioners are liable to pay the advance tax in terms of Section 236-A Income Tax Ordinance, 2001.
All above petitions failed and dismissed, According to circular of FBR.

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