2017 P T D 1372

[Supreme Court of
Pakistan]

Present: Mian Saqib

Nisar, C.J., Maqbool Baqar and Ijaz ul Ahsan, JJ

Messrs PAKISTAN
TELEVISION CORPORATION LIMITED

Versus

COMMISSIONER INLAND
REVENUE (LEGAL), LTU, ISLAMABAD and
others

Civil Petitions Nos. 3551

to 3555 of 2015, decided on 24th April, 2017.

(On appeal from the

judgment of the Islamabad High Court Islamabad
dated 23.09.2015 passed in
I.T.Rs. Nos. 224-228 of 2015)

(a) Income Tax

Ordinance (XLIX of 2001)---

----S. 133---Reference
before the High Court---Maintainability---'Question
of law'---Scope---Reference
before High Court under S. 133 of the Income
Tax Ordinance, 2001 ("the
Ordinance") would lie on a question of law
only---When a reference filed
before the High Court required an
interpretation of various provisions of the
Ordinance, it would
essentially be a "question of law".

(b) Income Tax

Ordinance (XLIX of 2001)---

----Ss. 20, 21(c),

153(1)(b), 158(b), 161, 162 & 233(2), [as existed for the tax
years 2009 to
2013]---Deductions not allowed in computing income---
Scope---'Television
licence fee' was collected from consumers through
their electricity bills by
Electricity Distribution and Supply Companies
("the Distribution
companies") on behalf of Pakistan Television
Corporation Ltd.
(PTV)---Distribution companies would remit the balance
licence fee to PTV after
retaining a portion of it as their fee for this
collection service---Pakistan
Television Corporation Ltd. (PTV) claimed
the collection service charges
retained by Distribution companies as
expenditure in terms of S. 20 of the
Ordinance in the income tax returns
it filed for the tax years 2009 to 2013,
which stood finalized---
Subsequently show cause notice was issued to PTV for
further
amendment of the assessments on the ground that the television licence
fee collection expense was a commission earned by Distribution
companies and
PTV was required to deduct tax under S. 153(1)(b), or
alternatively under S.
233(2) of the Ordinance, and since this was not
done, therefore this expense
was liable to be disallowed under S. 21(c) of
the
Ordinance---Legality---Section 158(b) of the Ordinance stipulated that
a person
who was required to deduct tax from an amount paid by the
person shall do so at
the time the amount was actually 'paid'---Effect of
the combined reading of
Ss.153(1)(b) & 158(b) of the Ordinance made it
clear that deduction was to
be made by a person "making the payment"
"at the time the amount
was actually paid", however in the present case,
no payment was made by PTV
to Distribution companies, instead the
Distribution companies retained a
portion of the licence fee and remitted
the balance to PTV---Section 153(1)(b)
of the Ordinance only required
prescribed persons to deduct, and not collect,
tax from the payment
being made to a resident person for the rendering of or
providing of
services at the time of making the payment, thus, PTV could not
have
possibly deducted such tax as it did not make any actual payments to the
Distribution companies---Advance tax in terms of S. 233(b) of the
Ordinance
could only be collected if there was a relationship of principal
and agent
between the parties---Agreement between PTV and
Distribution companies for
collection of licence fee did not indicate a
relationship of principal-agent,
rather the wording employed therein
suggested that it was a contract for the
provision of services for which
the latter was entitled to a 'service fee'---As
no relationship of principal
and agent existed between PTV and Distribution
companies, therefore
PTV was not required to collect tax from the Distribution
companies in
terms of S. 233 of the Ordinance---Since PTV was not liable to
deduct tax
under S. 153(1)(b) of the Ordinance or collect advance tax under S.
233(2)
of the Ordinance, thus it did not fall within the garb of the exception
of S.
21(c) of the Ordinance, and was entitled to claim deduction of service
fee
from its income as expenditure---Further Ss. 161 & 162 of the Ordinance
did not apply to the present case as both sections reflected a presumption
that
a person was required to deduct and/or collect tax, and PTV could
neither have
deducted tax nor was it liable to collect tax from
Distribution
companies---Appeal was allowed accordingly.

The Ramkola Sugar Mills Co., Ltd. v. The Commissioner of

Income-Tax,
Punjab and North-West Frontier Province Lahore PLD 1955 Federal
Court
418 ref.

(c) Interpretation of
statutes---

----'Fiscal
statute'---Fiscal statute, particularly the provisions creating a
tax
liability, must be interpreted strictly and any doubt arising therefrom
must be
resolved in favour of the taxpayer.

Chairman, Federal Board of Revenue, Islamabad v. Messrs

Al-Technique
Corporation of Pakistan Ltd. and others PLD 2017 SC 99;
Commissioner of
Income Tax Legal Division, Lahore and others v. Khurshid Ahmad
and
others PLD 2016 SC 545; Zila Council Jhelum through District
Coordination
Officer v. Messrs Pakistan Tobacco Company Ltd. and
others PLD 2016 SC 398;
Government of Sindh through Secretary and
Director General, Excise and Taxation
and another v. Muhammad Shafi
and others PLD 2015 SC 380; Commissioner of
Income Tax v. Messrs Eli
Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 and The
State v. Zia-ur-Rehman
and others PLD 1973 SC 49 ref.

(d) Interpretation of
statutes---

----Statute was the edict

of the legislature and the language employed in
the statute was determinative
of the legislative intent.

(e) Interpretation of
statutes---

----Redundancy could not

be attributed to statutory provisions or any
part thereof.

Collector of Sales Tax and Central Excise (Enforcement)

and another v.
Messrs Mega Tech (Pvt.) Ltd 2005 SCMR 1166; Aftab Shahban Mirani
and
others v. Muhammad Ibrahim and others PLD 2008 SC 779 and Messrs
Master
Foam (Pvt.) Ltd. and 7 others v. Government of Pakistan through
Secretary,
Ministry of Finance and others 2005 PTD 1537 ref.

M. Makhdoom Ali Khan, Senior Advocate Supreme Court,

Hafiz
Muhammad Idris, Advocate Supreme Court, Faisal Hussain Naqvi,
Advocate
Supreme Court and Syed Rifaqat Hussain Shah,
Advocate-on-Record for Petitioner
(in all cases).

Muhammad Bilal, Senior Advocate Supreme Court, Babar

Bilal,
Advocate Supreme Court and Ehsan Ullah Khan, Dy. Commissioner
Inland
Revenue for Respondents (in all cases).

Dates of hearing: 7th, 14th and 15th March, 2017.

JUDGMENT

MIAN SAQIB NISAR, C.J.---The facts of the instant

cases are that the
petitioner, Pakistan Television Corporation Ltd. (PTV)
collects 'television
license fee' from consumers. This fee was previously
collected by the
Water and Power Development Authority (WAPDA), and now by the
successor Electricity Distribution and Supply Companies (DISCOS) for
PTV in
pursuance of an agreement dated 01.07.2004, through monthly
electricity bills.
WAPDA (this expression shall include DISCOs) would
remit the balance license
fee to PTV after retaining a portion of it as their
fee for this collection
service. PTV claimed the service charges retained
by WAPDA as expenditure in
terms of section 21 of the Income Tax
Ordinance, 2001 (the Ordinance) in the
income tax returns it filed for the
tax years 2009 to 2013, which stood
finalized under section 120(1) of the
Ordinance. Show cause notices was issued
to PTV for further amendment
of the assessments in terms of sections 122(5A)
and 122(4) of the
Ordinance on the ground that the original assessments were
erroneous
as they were prejudicial to the interest of revenue for the reason
that the
'television license fee collection expense' is a commission earned by
WAPDA and PTV was required to deduct tax under section 233 of the
Ordinance,
and since this was not done, therefore this expense was liable
to be disallowed
under section 21(c) of the Ordinance (note:- the
assessment was once amended
under section 122(5A) of the Ordinance
for some other reason but this is not
relevant for the purposes of the
instant issue). Thus the said expense was
disallowed and the assessment
orders were accordingly further amended. This
amendment was upheld
throughout: before the Commissioner Income Tax (Appeals),
the Income
Tax Appellate Tribunal (the Tribunal) and the learned High Court,
hence
these petitions.

2. For the sake of brevity, the arguments of the learned

counsel are not
being recorded separately, rather would reflect in the course
of this
opinion. The key question involved in this matter is whether PTV was
not
entitled to deduct as expenditure, the service fee retained by WAPDA, as
per the provisions of section 21(c) of the Ordinance. In this regard, the
relevant provisions of the Ordinance (as they existed at the relevant
time,
i.e. for the tax years 2009 to 2013) read as under:-

21. Deductions not allowed.- Except as

otherwise provided in this
Ordinance, no deduction shall be allowed in
computing the income
of a person under the head "Income from
Business" for-

(a)

(b)

(c) any
salary, rent, brokerage or commission, profit on debt,
payment to non-resident,
payment for services or fee paid by the
person from which the person is
required to deduct tax under
Division III of Part V of Chapter X or section 233
of Chapter XII,
unless the person has paid or deducted and paid the tax as
required by Division IV of Part V of Chapter X;

153. Payments for goods and services.---(1)

Every prescribed
person making a payment in full or part including payment by
way
of advance to a resident person or permanent establishment in
Pakistan of a
non-resident person-

(a)
(b) for the rendering of or providing of services;

(c)

shall, at the time of making the payment, deduct tax

from the gross
amount payable at the rate specified in Division III of Part III
of the
First Schedule.

(6) The tax deducted under this section shall be a

final tax on the
income of a resident person arising from transactions referred
to
in subsections (1) and (1A):

(9) In this section,-

"prescribed person" means-

(b) a company

153. Payments for goods, services and contracts.---(1)

Every
prescribed person making a payment in full or part including a
payment by
way of advance to a resident person or [* * *]-

(a)

(b) for the rendering of or providing of services;

(c)

shall, at the time of making the payment, deduct tax

from the gross
amount payable (including sales tax, if any) at the rate
specified in
Division III of Part III of the First Schedule.

(2)

(3) The tax [deductible] under clauses (a) and (c) of

subsection (1)
and under subsection (2) of this section, on the income of a
resident person or [* * *], shall be final tax.

Provided that,-

(a)

(b) tax
[deductible] shall be a minimum tax on transactions
referred to in clause (b)
of subsection (1); and

161. Failure to pay tax collected or deducted.-(1)

Where a person-
(a) fails
to collect tax as required under Division II of this Part or
Chapter XII or
deduct tax from a payment as required under
Division III of this Part or
Chapter XII or as required under section
50 of the repealed Ordinance; or

(b) having
collected tax under Division II of this Part or Chapter XII
or deducted tax
under Division III of this Part or Chapter XII fails
to pay the tax to the
Commissioner as required under section 160,
or having collected tax under
section 50 of the repealed Ordinance
pay to the credit of the Federal
Government as required under
subsection (8) of section 50 of the repealed
Ordinance,

the person shall be personally liable to pay the

amount of tax to
the Commissioner who may pass an order to that effect and
proceed to recover the same.

(1B) Where at the time of recovery of tax under

subsection (1) it is
established that the tax that was to be deducted from the
payment
made to a person or collected from a person has meanwhile been
paid by
that person, no recovery shall be made from the person
who had failed to
collect or deduct the tax but the said person shall
be liable to pay [default
surcharge] at the rate of eighteen per cent
per annum from the date he failed
to collect or deduct the tax to
the date the tax was paid.

(2) A person personally liable for an amount of tax

under
subsection (1) as a result of failing to collect or deduct the tax shall
be entitled to recover the tax from the person from whom the tax
should have
been collected or deducted.

162. Recovery of tax from the person from whom tax

was not
collected or deducted.---(1) Where a person fails to collect tax as
required under Division II of this Part or Chapter XII or deduct tax
from a
payment as required under Division III of this Part or
Chapter XII, the
Commissioner may pass an order to that effect and
recover the amount not
collected or deducted from the person
from whom the tax should have been
collected or to whom the
payment was made.

(2) The recovery of tax under subsection (1) does not

absolve the
person who failed to deduct tax as required under Division III of
this Part or Chapter XII from any other legal action in relation to
the
failure, or from a charge of [default surcharge] or the
disallowance of a
deduction for the expense to which the failure
relates, as provided for under
this Ordinance.
 233. Brokerage and commission.---(1) Where any
payment on
account of brokerage or commission is made by the Federal
Government, a Provincial Government, a Local Government, a
company or an
association of persons constituted by, or under any
law (hereinafter called the
"principal") to a person (hereinafter
called the "agent"),
the principal shall deduct advance tax at the
rate specified in [Division II
of] Part IV of the First Schedule from
such payment.

(2) If the agent retains Commission or brokerage from

any amount
remitted by him to the principal, he shall be deemed to have been
paid the commission or brokerage by the principal and the
principal shall
collect advance tax from the agent.

(3) Where any tax is [required to be] collected from

a person under
subsection (1), [such tax] shall be the final tax on the income
of
such persons.

3. We find it appropriate to first deal with the objection

raised by the
learned counsel for the respondent that no question of law emerged
from the order of the Tribunal and, since a reference before the High
Court can
only be filed on a question of law and not on a question of fact,
therefore the
tax references were not maintainable. Responding to this,
the learned counsel
for the petitioner submitted that the jurisdiction of
the High Court, in a tax
reference, can be invoked where:- (a) the
Tribunal has decided a question of
law incorrectly; (b) the Tribunal has
decided a question of law not before it,
whether correctly or incorrectly;
or (c) the Tribunal has not decided a
question of law before it. He stated
that it cannot be said that the High Court
shall have no jurisdiction
where the Tribunal has failed to decide a question
of law before it. An
interpretation which restricts the scope of the reference
in the High
Court to categories (a) and (b) would mean that the Tribunal could
deny
the High Court's jurisdiction simply by failing to decide questions of law
before it. Undoubtedly, a reference under section 133 of the Ordinance
would lie
before the High Court on a question of law only, however, in
the instant cases,
the issues (and in the statement of case) before the High
Court required an
interpretation of various provisions of the Ordinance
including sections 21,
153 and 233 which were essentially questions of
law. We have examined the order
of the Tribunal and find that the above
questions of law do arise therefrom,
resultantly the tax references before
the learned High Court were maintainable.

4. Section 18 of the Ordinance provides the various incomes of

a person
which would be chargeable to tax under the head 'income from business'
and the television license fee earned by PTV constitutes the profits and
gains
of its business carried on throughout the year. Section 20 of the
Ordinance allows,
subject to the Ordinance, deductions for any
expenditure incurred by a person
during the year in computing their
income chargeable to tax under the head
'income from business'. PTV
claimed deductions by declaring the service fee
paid to WAPDA as
expenditure. It is the department's stance that since Section
20 ibid was
subject to the Ordinance, therefore PTV was required to deduct tax
under
section 153(1)(b) of the Ordinance, or alternatively under section 233
thereof, and it did not pay or deduct and pay such advance tax, thus PTV
could
not be allowed deduction of expenditure under section 21(c) of the
Ordinance.
The general rule is that deduction of expenditure incurred by
a person, in a
year, for the purposes of business is allowed under section
20 of the
Ordinance. Section 21 of the Ordinance creates an exception
thereto where no
deduction is to be allowed in computing the income of
a person under the head
'income from business' for various items,
including "payment for services
or fee paid by the person from which the
person is required to deduct tax under
Division III of Part V of Chapter X
or section 233 of Chapter XII " The
department has taken two alternate
pleas:- (i) PTV was bound to deduct tax from
the gross amount payable to
WAPDA for the rendering/ providing of services
under section 153(1)(b)
of Division III of Part V of Chapter X of the
Ordinance; and/or (ii) PTV, the
principal, was bound to deduct/collect advance
tax from WAPDA, the
agent, under section 233 of the Ordinance. Therefore PTV
could not claim
the service fee as expenditure and deduct the same from its
income.

5. With regard to the first plea, PTV's stance is that as no

payment was
made by the petitioner to WAPDA, therefore, the provisions of
Section
153 supra are not applicable. The said section provides that every
prescribed person making a payment in full or part, including a payment
by way
of advance, to a resident person etc. for the rendering of or
providing of
services, shall, at the time of making the payment, deduct
tax from the gross
amount payable at the rate specified in Division III of
Part III of the First
Schedule. The term 'prescribed person' is defined in
section 153(7)(i) of the
Ordinance, part (b) whereof includes 'a company'
thus PTV was a prescribed
person for the purposes of section 153 supra.
WAPDA admittedly is a 'resident
person' as per the definition provided in
section 2(52) of the Ordinance. When
we confronted learned counsel for
the petitioner with the hypothesis that since
PTV was making payments
in the form of a service fee to WAPDA for the
collection of television
license fee from the consumers, the former was liable
to deduct tax in
terms of section 153(1)(b) supra, he candidly conceded that
had the
amount of television license fee come to PTV in full and then been made
over as payment of service fee to WAPDA, the former would have been
bound to
deduct tax. However, in the instant case, no payment was ever
made by PTV to
WAPDA, rather WAPDA collected the television license
fee from the consumers through
electricity bills, deducted its fee for this
collection service and remitted
the balance amount to PTV. Therefore,
PTV was unable to deduct tax. At this
juncture, it would be useful to
examine section 158 of the Ordinance which
stipulates the time of
deduction of tax. Sub-part (b) thereof is relevant which
provides that a
person required to deduct tax from an amount paid by the person
shall
do so (in cases other than that of deduction under section 151 of the
Ordinance) at the time the amount is actually paid. The effect of the
combined
reading of sections 153(1)(b) and 158(b) of the Ordinance
makes it clear that
deduction is to be made by a person "making the
payment" "at the
time the amount is actually paid", and as stated earlier,
in the instant
case, the payment was not channeled from PTV to WAPDA,
thus the former could
not possibly deduct tax.

6. Another aspect of this matter is that the only way PTV could
have been
required to pay tax in this situation was if an obligation was
imposed on
it to collect the amount of tax from WAPDA, which section 153 supra
did
not provide for. In circumstances such as those in the instant matters,
where the Ordinance requires a person to deposit tax in the treasury it
either
uses the term 'deduct' or 'collect'. There is a distinction between
the two
which needs to be appreciated. In this context we find it
appropriate to
ascertain the true import of both words which have been
defined as follows:--

Deduct:

To take away (a number, amount, etc.)

To take away money, points, etc. from a total amount

Abate, attenuate, bate, cheapen, cut, cut down,

decrease, deflate,
deplete, depreciate, devaluate, dilute, diminish, discount,
downgrade, dwindle, lessen, lower, make less, make smaller, mark
down, remove,
render few, shrink, slash, strike off, strip, subduct,
subtract, take away,
take off, trim, truncate, withdraw

Collect:

To bring or be brought together; to gather; to get

something from
people, e.g. money owed or voluntary contributions etc.

To bring things together from different people or

places; to ask
people to give you money for a particular purpose.

Accept, acquire, appropriate, arrogate, assume, be

given, be paid,
collect payment, demand and obtain payment, exact payment,
execute, gain, get back, get money, get possession of, levy, obtain
 payment,
profit, raise, raise contributions, raise funds, reacquire,
realize, receive
money, receive payment, reclaim, recompense,
recoup, recover, redeem, regain,
retrieve, secure, secure payment,
sequester, settle accounts with, take back
again, take possession.

From the above, it is

clear that the words 'deduct' and 'collect' cater to
two different situations.
A perusal of the various provisions of the
Ordinance in which the words
'deduct' or 'collect' (or both) are used
indicates that the former is used
where payment is being made by a
person and he is required to take away or
subtract a percentage of such
payment as advance tax to be deposited with the
treasury, whereas the
latter is employed where the person receiving the payment
is to deposit
advance tax on behalf of the person making the payment. The key
is how
the money changes hands. This reasoning is supported by section 233
supra itself. The legislature used the word 'deduct' in section 233(1) of the
Ordinance to cover situations where the brokerage or commission
payment is made
by the principal to the agent and the former would be
liable to deduct tax from
such payment. However it used the word
'collect' in section 233(2) of the
Ordinance and introduced a legal fiction
therein to cater to situations where
payment of the entire amount was
received by the broker or the commission agent
who, after retaining his
commission, remitted the rest of the amount to the
principal, thus the
former would be deemed to have been paid by the latter, who
would
collect the amount of tax from the former. Had it been the legislature's
intention that 'deduct' appearing in section 153 supra be construed the
same
way as in section 233 supra, it would have introduced a similar
legal fiction
in the former provision and also used the word 'collect'. The
absence of the
same points to the legislature's intention that 'deduct' in
section 153 supra
is to be read restrictively and cannot be interpreted
liberally so as to extend
its scope to include collection. It is trite law that
fiscal statutes,
particularly the provision creating a tax liability, must be
interpreted
strictly and any doubt arising therefrom must be resolved in
favour of the
taxpayer. In this respect, reference may be made to the
judgments reported as
Chairman, Federal Board of Revenue, Islamabad
v. Messrs Al-Technique
Corporation of Pakistan Ltd. and others (PLD 2017
SC 99), Commissioner of
Income Tax Legal Division, Lahore and others v.
Khurshid Ahmad and others (PLD
2016 SC 545), Zila Council Jhelum
through District Coordination Officer v.
Messrs Pakistan Tobacco
Company Ltd. and others (PLD 2016 SC 398), Government
of Sindh
through Secretary and Director General, Excise and Taxation and
another v. Muhammad Shafi and others (PLD 2015 SC 380) and
Commissioner of
Income Tax v. Messrs Eli Lilly Pakistan (Pvt.) Ltd. (2009
SCMR 1279). Further,
in the judgment reported as The State v. Zia-ur-
Rehman and others (PLD 1973 SC
49), while interpreting Article 281 of
the Constitution of the Islamic Republic
of Pakistan, 1973, a five member
bench of this Court held:-

"It is a well-established rule that we have to

gather the intention of
the law-maker from the words used by it; and if it has
in two
clauses of the same Article used different words, then it follows
that
its intention is not the same, particularly, where such a
conclusion also
appears to be in consonance with reason and
justice."

The legislature,
therefore, being aware of the distinct meanings of these
words, consciously
used them asymmetrically, and not interchangeably,
in various provisions of the
Ordinance, be it either word or both. The use
of only the word 'deduct' in
section 153(1)(b) supra is to our mind
intentional. If the legislature had the
intention to cover any other
situation, it could have conveniently used the
word 'collect' in the said
section (or introduced a legal fiction), as it has
done in many other
provisions of the Ordinance. This reasoning is augmented by
the fact that
the legislature has, by virtue of the Finance Act, 2016 (XXIX of
2016)
substituted section 21(c) supra which now contains the phrase
"deduct or
collect". Therefore, as section 153(1)(b) supra only
requires prescribed
persons to deduct, and not collect, tax from the payment
being made to a
resident person for the rendering of or providing of services
at the time
of making the payment, PTV could not have possibly deducted such
tax
as it did not make any actual payments to WAPDA. It is settled law that
the
statute is the edict of the legislature and the language employed in
the
statute is determinative of the legislative intent. From the reading of
section
153(1)(b) supra, on the principle of literal interpretation, the
legislative
intent is evident: that the prescribed person at the time of
making payment to
a resident person etc. shall deduct the amount so
envisaged by Division III of
Part III of the First Schedule. However when
payment is not being actually,
physically or practically made by the
prescribed person the possibility of
deduction does not arise at all. It is
absolutely impracticable and impossible
to deduct a certain amount from
an amount which is not being paid. Therefore,
from the above, we are
not persuaded to hold that the interpretation of such
section can be
extended to require something to be done which is not possible.

7. We now advert to the applicability of section 233 of the

Ordinance.
According to subsection (2) thereof, if an agent retains the
commission
from any amount he remits to the principal, the former shall be
deemed
to have been paid the commission by the latter, who shall collect
advance
tax from the former. The relationship of principal and agent is a sine
qua
non for the purposes of section 233(2) of the Ordinance. Controverting
the
department's plea in this regard, learned counsel for the petitioner
submitted
that as per the agreement between PTV and WAPDA, no
relationship of principal
and agent existed between them as the latter
was only providing services to the
petitioner. Suffice it to say that the
agreement does not indicate a
relationship of agency between PTV and
WAPDA, rather the wording employed
therein suggests that it was a
contract for the provision of services for which
the latter was entitled to
a 'service fee'. As such, no relationship of
principal and agent existed
between PTV and WAPDA requiring the former to
collect tax from the
latter in terms of section 233 supra. In this context, the
judgment
reported as The Ramkola Sugar Mills Co., Ltd v. The Commissioner of
Income-Tax, Punjab and North-West Frontier Province Lahore (PLD 1955
Federal
Court 418) referred to by the learned counsel for the respondent
examined
whether dividend income could be said to have been received
by the assessee in
British India within the meaning of section 4(1) read
with section 14(2)(c) of
the Income Tax Act, 1922 and is therefore
distinguishable.

8. Learned counsel for the respondents argued that by showing

WAPDA's
service fee for collection of television license as an inter-account
adjustment as opposed to an actual payment, PTV avoided withholding of
advance
tax, and according to the Income Tax Circular No.01 of 2009
dated 20.02.2009,
it was clarified that such adjustments would be
tantamount to actual payments
thereby attracting section 158(b) of the
Ordinance. Apart from the fact that
circulars issued by the department
are not binding on this Court, the
clarification which sought to curb the
alleged menace mentioned in the said
circular is against the clear
mandate of section 153(1)(b) read with section
158 of the Ordinance as
mentioned above in paragraph No.5 of this opinion, and
therefore, does
not provide any support to the case of the respondent.

9. The conclusion of the above discussion is that since PTV was

not liable
to deduct tax under section 153(1)(b) of the Ordinance as it did not
make
any payments to WAPDA nor was the former required to collect advance
tax
under section 233(2) thereof due to the absence of the relationship of
agency
with the latter, thus PTV did not fall within the garb of the
exception of
section 21(c) supra and was entitled to claim deduction of
service fee from its
income as expenditure. The findings of all the forums
below in this respect are
liable to be set aside.

10. Further, there is an exception to the exception in section

21(c) supra,
that "unless the person has paid or deducted and paid the
tax " such that
the payment for services or fee paid is not to be treated
as expenditure
unless the person has (i) paid; or (ii) deducted and paid the
tax. Learned
counsel for the respondent submitted that since PTV did not pay or
deduct and pay the tax, thus it did not fall within the exception to the
exception resultantly payment for services could not be treated as
expenditure.
He argued that the word 'person' in section 21(c) supra only
refers to
withholding agents and since PTV did not pay the tax, thus
WAPDA's service fee
could not be treated as expenditure. To fortify his
argument, he referred to
section 161 of the Ordinance according to
which where a person fails to deduct
tax from a payment, he shall be
personally liable to pay the amount of tax to
the Commissioner who may
pass an order to that effect and proceed to recover
the same. Further,
that PTV was also liable to pay default surcharge under
section 161(1B) of
the Ordinance, which provides that where at the time of
recovery of tax
under subsection (1) it is established that the tax that was to
be deducted
from the payment made to a person or collected from a person has
meanwhile been paid by that person, no recovery shall be made from the
person
who had failed to collect or deduct the tax but the said person
shall be liable
to pay default surcharge at the rate of eighteen per cent
per annum from the
date he failed to collect or deduct the tax to the date
the tax was paid. He
also argued that even if the amount of tax could be
recovered from WAPDA under
section 162(1) of the Ordinance,
subsection (2) thereof does not absolve the
person who failed to deduct
tax (in this case PTV) from any other legal action
in relation to the
failure, or from a charge of default surcharge or the
disallowance of a
deduction for the expense to which the failure relates, as
provided for
under the Ordinance. Conversely, learned counsel for the
petitioner
submitted that if the tax is deducted and paid by PTV (which did not
happen in this case) or WAPDA paid tax on the service fee, in either of
the two
situations, the former was entitled to deduct the said fee as its
expenditure.
According to him, the service fee retained by WAPDA was
shown as its income and
tax due has been paid thereupon. Since WAPDA
cleared its tax liability, no loss
has occurred to the revenue, hence
invoking section 21(c) supra was unjustified
and at the most the
provisions of section 161(1B) supra could be applied and
default
surcharge imposed upon PTV due to delay in payment of tax, during the
period when it was due and when WAPDA actually paid such amount.
Learned
counsel stated that any other interpretation would result in
double taxation
which (interpretation) should be avoided unless the law
very clearly so
mandates. In this regard he relied upon the judgments
reported as Pakistan
Industrial Development Corporation v. Pakistan
through the Secretary, Ministry
of Finance (1992 SCMR 891) and
Federation of Pakistan through Secretary M/o
Petroleum and Natural
Resources and another v. Durrani Ceramics and others
(2014 SCMR 1630).
He also referred to numerous judgments of this Court to argue
that any
uncertainty in the meaning of a taxing provision must be resolved in
favour of the assessee. According to him, the claim of the department is
not
that since WAPDA did not pay tax, PTV should pay the same, rather
that the
latter failed to deduct tax that it was obliged to do and thus the
service fee
could not be treated as expenditure. He also stated that in
identical
circumstances, when the Gas Distribution Companies failed to
deduct tax on the
service charges retained by banks etc. for the collection
of gas bills, the
Tribunal allowed deduction of such expenditure from
income under section 21(c)
supra in ITAs Nos.871/LB to 874/LB of 2008
[2010 PTD (Trib.) 930] and Sui
Northern Gas Pipelines Ltd., Lahore v.
Commissioner Income Tax, L.T.U., Lahore
[2012 PTD (Trib.) 801].

11. As discussed earlier, since no actual payment was made from

PTV to
WAPDA, therefore no deduction could have been made, resultantly
category
(ii) of 'deducted and paid' does not apply. Thus the question is
whether the
phrase "unless the person has paid the tax " in category (i)
refers
only to PTV or includes WAPDA as well. It is pertinent to note that
till 2003,
only category (ii) existed. Thus "person deducted and paid"
clearly
refers to withholding agents as it is only they who 'deduct' tax.
Category (i)
came into being by virtue of the Finance Act, 2003 (I of 2003)
which inserted
the words "paid or" in section 21(c) supra. Prior to this
amendment,
the provision read "until the person has deducted and paid
the tax "
The amendment cannot be regarded as inconsequential, rather
it has to be given
meaning. By inserting the phrase 'paid or' the
legislature has essentially
widened the scope of the word 'person' to
cover not only withholding agents but
the person liable to pay the tax
(the person on whose behalf advance tax is
being paid). If it is presumed
that both the expressions 'paid' and 'deducted
and paid' relate only to
one person (withholding agents), the amendment would
have no
implication whatsoever on the scope of the statutory provision and
render the phrase 'paid or' completely redundant. It is settled law that
redundancy cannot be attributed to statutory provisions (or any part
thereof).
In this respect, the following judgments are relevant:- Collector
of Sales Tax
and Central Excise (Enforcement) and another v. Messrs
Mega Tech (Pvt.) Ltd.
(2005 SCMR 1166), Aftab Shahban Mirani and
others v. Muhammad Ibrahim and
others (PLD 2008 SC 779) and Messrs
Master Foam (Pvt.) Ltd. and 7 others v.
Government of Pakistan through
Secretary, Ministry of Finance and others (2005
PTD 1537). Thus, WAPDA
is covered by category (i) and if it discharged its tax
liability regarding
the service fee, PTV is entitled to deduct the amount of
such fee as
expenditure under section 21(c) supra.

12. As regards sections 161 and 162 of the Ordinance, as pointed

out by
the learned counsel for the respondent, we find that the wording of both
sections reflects a presumption that a person was required to deduct
and/or
collect tax. As we have discussed in the earlier portion of this
opinion, PTV
could neither have deducted tax nor was it liable to collect
tax from WAPDA
under the law, thus sections 161 and 162 supra, in the
facts and circumstances,
do not apply to the instant case. Thus, as we
have held above, the exception
itself does not apply to PTV therefore the
question of the exception to the
exception applying to it does not arise.

13. During course of the arguments, learned counsel for the

respondent
submitted that PTV did not produce any documentary evidence to
establish
that WAPDA paid tax on the service fee retained by it. We
directed learned
counsel for the respondent to obtain a certificate from
the Chairman, Federal
Board of Revenue (FBR) in this respect. On one of
the hearings, the learned
counsel for the petitioner filed a certificate
issued by one of the DISCOs
namely, IESCO certifying that "from tax year
2009 to 2013, the commission
deducted by IESCO from TV license fee paid
to Pakistan Television Corporation
was treated as one of the component
of other income in IESCOS's Revenue".
Learned counsel for the
respondent also produced a certificate issued by the
Chairman, FBR
showing various charts relating to service fee deducted by the
DISCOs
viz. withholding tax collected and the net profit/loss shown by DISCOS
viz. tax paid on that amount, in the tax years 2009 to 2013. It was also
certified by the Chairman, FBR that "although withholding tax under
section 153(1)(b) was not deducted/collected except Gujranwala Electric
Supply
Company (GEPCO). However, the DISCOS have discharged their
normal tax liability
on the basis of Return filed. Further examination of
record reveals that the
DISCOS were declaring losses whereas, had there
been any tax withheld under
section 153(1)(b) on service charges, the tax
withheld would have been minimum
Tax liability of the DISCOS.
Therefore, the tax liability in cases of DISCOS
showing losses has not
been discharged."

14. It is not clear from the above certificates, except for GEPCO
(which
has paid tax), how much tax has been paid by the DISCOs on the service
fee retained by them. However, it is clear that they have mentioned the
said
amount as one of the components of their income and have
discharged their
ultimate tax liability on their total income, i.e. whenever
there was a profit,
they paid the tax due and in case of loss, they were
obviously not required to
pay tax. In either of the two eventualities, they
have mentioned the service
fee as part of their income. Therefore, PTV
was entitled to treat WAPDA's
service fee as expenditure and reduce its
(PTV's) income accordingly.

15. Learned counsel for the respondent also submitted that the tax
on
WAPDA's service fee deductible by PTV in terms of section 153(1)(b)
supra,
would be treated as minimum tax as per proviso (b) of Section
153(3) of the
Ordinance. Again, the said proviso uses the phrase 'tax
deductible' and not
'tax collectable'. As we have already held above, PTV
was not liable to deduct
tax from WAPDA's service fee as no actual
payment was made by the former to the
latter, thus proviso (b) of section
153(3) ibid is irrelevant.

16. In the light of the above, these petitions are converted into
appeals
and allowed and the impugned judgment(s) are set aside.

MWA/P-4/SC Appeals allowed.

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