MInimum Tax and Turnover - M. M. Akram Reported Judgements - THE COMMISSIONER-IR, ZONE-1, LTU, KARACHI Vs M - S. KASB BANK LIMITED, KARACHI

3/3/22, 12:32 PM M. M. Akram Reported Judgements : THE COMMISSIONER-IR, ZONE-1, LTU, KARACHI Vs M/S.
KASB BANK LIMITED, KARA…
M. M. Akram Reported
Judgements
Reported judgements of Learned Judicial Member Mr. M.M. Akram, Appellate Tribunal Inland Revenue, Pakistan.
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M/S. KASB BANK LIMITED,
KARACHI……………………………………………………………….Respondent
Appellant by : Mr. Abdul Salam, DR
Respondent by :Mr. Safdar Imam, (ACMA)
Date of Hearing :28.01.2022

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3/3/22, 12:32 PM M. M. Akram Reported Judgements : THE COMMISSIONER-IR, ZONE-1, LTU, KARACHI Vs M/S. KASB BANK LIMITED, KARA…
Date of Order :07.02.2022
ORDER
M.M. AKRAM, JUDICIAL MEMBER: By this combined order, we intend
to dispose of the above-titled appeals filed by the Appellant/ Department
challenging the validity of the Order No.126 & 127/A-I dated 27.03.2015,
passed by the learned Commissioner Inland Revenue (Appeals-I), Karachi,
for the tax years 2011 and 2013, on the grounds as set forth in the
memos of appeals.
2. Brief facts culled out from the record are that the returns of income
for the tax years 2011 and 2013 were e-filed on 21.12.2011 and
31.12.2013 respectively showing a taxable loss at Rs. (2,685,571,965)

and Rs. (1,810,510,000) respectively. As per returns of income, the
taxpayer has worked out Nil tax liability and has claimed a refund of Rs.
(2,583,872) and Rs.(3,250,947) on account of taxes deducted/paid

during the tax years 2011 and 2013 respectively. Returns of income were
treated as statutory assessment orders under section 120(1)(b) of the
Income Tax Ordinance, 2001(“the Ordinance”). However, the said

assessments were considered to be erroneous in so far as prejudicial to
the interest of revenue which required amendments under section
122(5A) of the Ordinance. Notices under section 122(9)/(5A) of the

Ordinance were accordingly issued on 28.09.2014 and 10.09.2014 on
various issues. In compliance, the counsel of the taxpayer M/s Anjum
Shahid Rehman (C.A) vides their letter Nos. T-2138/2014& T-21080/2014

dated 26.09.2021 and 19.09.2014 filed explanation. After issuing show-
cause notices and obtaining necessary details and documents,
proceedings were culminated in passing amended orders under section

122(5A) of the Ordinance by determining revised amended income for
both the tax years under consideration. Felt aggrieved, the
respondent/taxpayer preferred appeal before the learned Commissioner-

IR (Appeals), Karachi who vide order No. 126 & 127/A-I dated
27.03.2015partially accepted the appeals of the respondent taxpayer. As
a consequence, the Appellant Department has preferred the present

appeal before this Tribunal against the order passed by the learned CIR
(Appeals) Karachi and assailed the impugned order on a number of
grounds.
3. This case came up for hearing on 28.01.2022. Mr. Abdul Salam,
Departmental Representative [DR] appeared on behalf of the appellant
department while Mr. Safdar Imam, ACMA appeared on behalf of the
respondent/taxpayer. As per grounds of appeal, the appellant department

contended that the order passed by the learned CIR (Appeals) Karachi is
bad in law and against the facts of the case. It has been further stated in
the grounds that the learned CIR (A) has failed to appreciate that Rule 6
of the Seventh Schedule to the Ordinance itself provided separate tax
treatment for income from dividend and capital gains, and this provision,
being special provision would override the general provision of section

113. Further added that learned CIR(A) failed to appreciate that since the
first part of Rule 6 of the Seventh Schedule itself referred to the First
Schedule to the Income Tax Ordinance, 2001; therefore, the

interpretation placed upon it by the taxpayer would render the second
part of the Rule, prescribing separate tax rates for these two heads
redundant, and redundancy cannot be attributed to the legislature.

Further stated that the learned CIR(A) was not justified to delete the tax
levied on Dividend income and Capital gain with the observations that the
officer has also taken the turnover of Rs. 5,468,163,000/- which is

inclusive of dividend income and income from capital gain for levy of
minimum tax when income under these heads was not included in the
turnover of levy of minimum tax under section 113 of the Ordinance,
2001.
4. On the other hand, the learned counsel for the respondent taxpayer
strongly opposed the contentions submitted by the department in the

grounds of appeal and supported the order passed by the learned CIR
(Appeals). The learned counsel argued that the order passed by the
learned CIR(A) is based on the various judgments of this Tribunal and

therefore, the impugned order is well within the framework of law and
carries no illegality, irregularity, and infirmity in it.
5. We have heard the arguments of both sides and have perused the
orders passed by the authorities below. The submissions made on behalf
of the respondent taxpayer have substance. The only issue raised by the
department in the present appeals is that both normal tax and minimum
tax are leviable under the law. We have noted that at present the
aforesaid issue is, however, quite irrelevant for the reason that the
learned CIR(A) has agreed to the Appellant’s stance that tax losses are to
be adjusted against dividend income and capital gain after which no
taxable income remains to be taxed and the appellant department has
apparently not raised any objection in respect of adjustment of loss
against dividend income and capital gain in the grounds of appeal.
Notwithstanding the aforesaid, the learned assessing officer has erred in

understanding the basic concept of levy of minimum tax. To resolve the
controversy it would be expedient to first reproduce below the relevant
provisions of section 113 of the Ordinance as stood at the relevant time

i.e tax years 2011 and 2013:-
“Section 113.(1) This section shall apply to a resident

company, an individual (having turnover of fifty million rupees or
above in the tax year 2009 or in any subsequent tax year) and
an association of persons (having turnover of fifty million rupees
or above in the tax year 2009 or in any subsequent tax year)
where, for any reason whatsoever allowed under this Ordinance,
including any other law for the time being in force—
(a) loss for the year;

(b) the setting off of a loss of an earlier year;
(c) exemption from tax;
(d) the application of credits or rebates; or
(e) the claiming of allowances or deductions (including
depreciation and amortization deductions) no tax is
payable or paid by the person for a tax year or the
tax payable or paid by the person for a tax year is
less than one percent of the amount representing
the person’s turnover from all sources for that year:
Explanation: For the purpose of this sub-section, the expression
“tax payable or paid” does not include tax already paid or
payable in respect of deemed income which is assessed as the
final discharge of the tax liability under section 169 or under any
other provision of this Ordinance.
(2) Where this section applies:
a) the aggregate of the person’s turnover as defined in

sub-section (3) for the tax year shall be treated as
the income of the person for the year chargeable to
tax;
b) the person shall pay as income tax for the tax year
(instead of the actual tax payable under this
Ordinance),an amount equal to one percent of the
person’s turnover for the year”
The above provision was also applicable to the tax year 2013 as well
except that the rate of minimum tax was reduced from one percent to
half percent of the turnover. It is clear from a plain reading of the

above provisions of law that where normal tax liability under the
Ordinance is less than one percent or half percent of the aggregate
turnover from all sources, then one percent or half percent of the
aggregative turnover from all sources would be payable instead of normal
tax liability under the Ordinance and in case normal tax liability under the
Ordinance is higher than one percent or half percent of aggregate
turnover from all sources, then only the normal tax liability under the
Ordinance would be payable. The meanings of the words “instead of” or

“in lieu of” are explained by the Hon’ble Supreme Court in the case titled
M/s Elahi Cotton Mills Vs Federation of Pakistan and 6 others,

(1997 PTD 1555) wherein it observed that:
Black's Law Dictionary, page 787:
"In lieu of" Instead of; in place of; in substitution of. It does
not mean "in addition to".
Ballentine's Law Dictionary, page 628:
"in lieu of": In substitution for or in place of. Ordinarily

implying the existence of something to be replaced.
Legal Thesaurus, page 266:
"In lieu of": Proposition as a substitute for, as an alternative,

by proxy, or, in place of, instead of, on behalf of, rather than,
representing.
35. A perusal of the above-quoted meanings of the

above expression "in lieu of" indicates that the same
connote, instead of, in place of, in substitution of, but
it does not mean, in addition to.” (Emphasis supplied)
It clearly establishes that the expression “instead of” used in section

113(2)(b) of the Ordinance clearly suggest that “alternative to” or “as a
substitute” or “in place of” and, therefore, by no stretch of imagination it
could mean that both one percent of the aggregate turnover from all
sources as well as normal tax liability payable under the Ordinance would
be payable in any situation. Reliance may be placed on the judgment of
the Hon’ble High Court titled Commissioner of Income Tax/Wealth

Tax Companies Zone, Faisalabad Vs M/s Masood Textile Mills Ltd,
(2017 PTD 1707) wherein it was observed that minimum tax cannot be
applied on every source of income individually but total turnover basis.

The relevant part of the judgment is reproduced below:
“25. An accumulative reading of section 80D gives an

impression that the said charge has been created in respect of
person including a company, a registered firm an individual, etc.
on his `turnover from all sources'. The provision does not end
there. The charge is on the aggregate of declared
turnover. The legislature has intendedly and advisedly
used the word àggregate' as it can only be of more than
one source. The legislature would have never used this
connotation if the intention was to charge it separately
in respect of each source of the individual or company
etc. The Word àggregate' has been defined as follows: -
"Concise Oxford English Dictionary"
(1) "a whole formed by the combining several disparate

elements;(2) a total score of a player or team in a picture
comprising more than one game or round;
"Law Terms and Phrases"
`Meaning of Aggregate' means a collection of things in order to

form a whole, Mushtaq Textile Mills Limited v. Karachi
Metropolitan Corporation 1994 CLC 1516.
26. The use of language àmount representing its

turnover from all sources' and then followed by the
words `the aggregate of the declared turnover shall be
deemed to be income' leaves no doubt that the sources
like import, export, local supply, and local sale, etc. all
are to be aggregated and 1/2 percent minimum tax is to
be calculated on its total turnover declared by him from
all his sources. Thus, if after said calculation the tax
deducted or paid in any of the sources falls higher than
1/2 percent of the aggregate turnover from all sources
no more tax is required to be paid.
27. Obviously there was no restriction on the

legislature to use the language in the manner to provide
this 1/2 percent charge on each source separately.
28. The above discussion leaves no doubt that section

80D cannot be applied on each and every source of
income of a taxpayer separately and it has to be on the
aggregate of the turnover of the taxpayer from all
sources. The direction of the Income Tax Appellate Tribunal to
charge it on the aggregate of section 80C or 80CC after inclusion
of the turnover from other sources like local sale etc., which is
not subject to withholding tax, needs no exception.” (Emphasis
supplied)
6. The above judgment of the Hon’ble Lahore High Court was

subsequently followed in certain other judgments of this tribunal like ITA
No. 231/LB/2012, 2011 PTD 168, ITA No. 212/LB/2013, and
2011 PTD 845. Reference is also made of the decision of this Tribunal
reported as 2016 SLD 1104 wherein taxation officer levied both taxes on
dividend income as well as a minimum tax on business turnover and this
Tribunal affirmed the deletion of levy of minimum tax as the normal tax
was higher than minimum tax. The relevant part of the decision is
reproduced below:
“Department in this appeal contended that the CIR(A) was not

justified in deleting the minimum tax u/s 113 amounting to Rs.
8,254,250/- on the basis of comparison of minimum tax u/s 113
on business turnover, with tax charged on income from other
sources i.e. u/s 39 of the Income Tax Ordinance, 2001. It has

been observed that the DCIR has charged a minimum tax u/s
113 at Rs. 8,254,220/- and then added it to normal tax @35%
amounting to Rs. 27,897,339/- against income falling in NTR.
The CIR(A) considered the action of the Assessing Officer
against the provision of law with the following observations:-
“I have examined the tax computed by the learned

DCIR which is as follows:-
Tax u/s 113. 8,254,250 A

Tax on Dividend. 106,400 B
NTR Tax. 27,897,339 C
Total Tax. (A + B + C)
Obviously, the above treatment is not according

to law. The learned DCIR can either charge
minimum tax u/s 113 or normal tax law @ 35%
but not both and it has then to be added to tax
on dividends. In the above scenario the tax of
Rs. 8,254,250 reflected as “A” has to be deleted
because tax under NTR far exceeds minimum
tax u/s 113.”
The findings recorded by the CIR(A) on the issue of charging

minimum tax and normal tax simultaneously was in accordance
with the provisions of law and calls for no interference.”
It is thus clear from the above discussion and case laws that either normal
tax or minimum tax on turnover is payable and there is no concept of

applying minimum tax under section 113 of the Ordinance for each source
of income separately.
7. Reference is also made of the judgment of the Hon’ble Supreme

Court in the case titled Commissioner of Income Tax Legal Division,
Lahore and others Vs Khurshid Ahmed and others, (2016 PTD

1393) wherein the revenue department has challenged various
judgments of Hon’ble Lahore High Court on the issue of minimum tax
decided against the department and the Apex Court has dismissed the
appeals of the department and affirmed the position discussed in above

paras. The relevant part of the judgment is as under:
“7. In light of the above discussion, the aggregate of the

declared turnover as defined in Section 80D of the
Ordinance of 1979 from the sale of goods, rendering,
giving or supplying of services or benefits or execution
of contracts has to be taken into account for determining
the minimum tax liability of 0.5% of the turnover. If no
tax, for whatever reason, is payable/paid, then the
amount worked out at the rate of 0.5% of the turnover
will be the minimum tax payable. If the tax payable/paid
is less than 0.5% of the turnover, then the minimum tax
payable will be the difference/balance between the tax
payable/paid and 0.5% of the turnover. A similar analysis

will apply to Section 113 of the Ordinance of 2001, where the
aggregate of the taxpayer’s turnover from the sale of goods,
rendering of services, or giving of benefits including
commissions and the execution of contracts has to be taken into
account in order to determine the minimum liability of 0.5% of
the turnover for each tax year (or 1% of the turnover for each
tax year, depending on the tax year involved; as Section 113 was
subsequently amended vide Finance Act, 2013 and the
percentage of minimum liability prescribed therein was increased
to 1%).” (Emphasis is ours)
It is established that the Hon’ble Supreme Court has, therefore, laid at
rest the question under both the repealed Ordinance as well as the
Ordinance as to whether minimum tax is leviable on each and every
source of income or the aggregate of turnover from all sources.
8. Notwithstanding the aforesaid, it is clarified that the dividend

income and capital gain of the Appellant being a banking company taxable
under the Seventh Schedule to the Ordinance is “Income from business”
and are not “Income from other sources” under Rule 6 of the Seventh
Schedule to the Ordinance which states that income computed under the
Seventh Schedule to the Ordinance are Income from the business. Rule 6
of the Seventh Schedule to the Ordinance is reproduced below for ready

reference:
“Income computed under this Schedule shall be chargeable to

tax under the head “Income from Business.”
The aforesaid legal position i.e. that all incomes of banking companies are
in the nature of business income has been reiterated by this Tribunal in a

number of cases including 2012 PTD 1055, 2013 PTD 246, and 2013
PTD 1429. There is thus no dispute that all incomes of Appellant fall
under the head Income from the business. It is further noted that the
term “turnover” has been defined under section 113 of the Ordinance to
mean gross sales or gross receipts for the sale of goods, gross fee for the
rendering of services including commission, gross receipts from the
execution of the contract. As such, by no stretch of imagination dividend
income and capital gain falls under the category of “turnover” which has
been defined exhaustively. Reference is again made of the judgment of
Hon’ble Supreme Court in the case of CIT v Khurshid Ahmed & others,
cited supra, wherein it was affirmed that the definition of “turnover” under
section 113 of the Ordinance is restrictive/exhaustive and does not include
each and every source of income as argued by the department but
includes what has been specified under the definition. The relevant part of
the judgment is quoted below:
“When a word has been defined to mean such and

such, the definition is prima facie restrictive and
exhaustive. Upon a plain reading of the definition of
‘turnover’ provided in Section 113(3) of the Ordinance of 2001
it is manifest that it (turnover) means: (i) gross receipts
derived from the sale of goods; (ii) gross fees for the
rendering of services or giving benefits, including
commissions; (iii) gross receipts from the execution of
contracts; and (iv) the company’s share of the amounts stated
above of any association of persons of which the company is a
member. The meaning in the said subsection has been
assigned to the word ‘turnover’ used in Section 113
and therefore the phrase ‘turnover from all sources’ in
subsection (1) is to be read in conjunction with such
definition which is exhaustive in nature and nothing
further can be added thereto, thus the argument of
the appellants/petitioners’ that ‘turnover’ covers all
sources under various heads of income is not tenable
in law.”(Emphasis is ours)
There is thus no ambiguity that dividend income and capital gain are
“income from business” in the case of Appellant, however, these still do

not fall under the category of “turnover” for minimum tax.
9. In view of the above facts and legal position, the judgment of

Honourable Sindh High Court reported as 92 TAX 235 relied on by
learned ACIR is not relevant as in that case dividend income of the
taxpayer has been held as liable to normal tax in addition to minimum tax
because dividend income was not like business income of the said
taxpayer. The judgment of Honourable Sindh High Court is discussed in
detail by Honourable Lahore High Court in the case titled CIR Vs
Masood Textile Mills, cite supra. It is pertinent to mention here that the
learned assessing officer had included both dividend income and capital
gain in computing turnover for minimum tax purposes in the instant case
in appeal effect orders.
Be that as it may, the judgment of Hon’ble Supreme Court discussed

supra has settled the issue at hand.
10. From what has been discussed above, it is quite clear from the
above-detailed discussion and case-laws referred that minimum tax and

normal tax cannot be levied simultaneously. Therefore, the impugned
order passed by the learned CIR(A) is maintained and the appeal of the
department is dismissed.
11. This order consists of (11) pages and each page bears my
signature.
Sd/-
(M. M. AKRAM)
Sd/- JUDICIAL MEMBER
(DR. TAUQEER IRTIZA)
ACCOUNTANT MEMBER
at February 07, 2022
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3/3/22, 12:32 PM M. M. Akram Reported Judgements : THE COMMISSIONER-IR, ZONE-1, LTU, KARACHI Vs M/S.

KASB BANK LIMITED, KARA…

Home About Us Contact Us

Monday, February 7, 2022 Search This Blog

(PAKISTAN) M/s D-Watson Chemist. Vs

SPEICIAL BENCH, KARACHI M/s National Highway Authority Vs

ITA No.764/KB/2015 Followers

ZONE-1, LTU, Privacy Policy

M/S. KASB BANK LIMITED,

Appellant by : Mr. Abdul Salam, DR

Respondent by :Mr. Safdar Imam, (ACMA)

Date of Hearing :28.01.2022

Date of Order :07.02.2022

M.M. AKRAM, JUDICIAL MEMBER: By this combined order, we intend

to dispose of the above-titled appeals filed by the Appellant/ Department

31.12.2013 respectively showing a taxable loss at Rs. (2,685,571,965)

(2,583,872) and Rs.(3,250,947) on account of taxes deducted/paid

treated as statutory assessment orders under section 120(1)(b) of the

Income Tax Ordinance, 2001(“the Ordinance”). However, the said

the interest of revenue which required amendments under section

122(5A) of the Ordinance. Notices under section 122(9)/(5A) of the

various issues. In compliance, the counsel of the taxpayer M/s Anjum

Shahid Rehman (C.A) vides their letter Nos. T-2138/2014& T-21080/2014

cause notices and obtaining necessary details and documents,

proceedings were culminated in passing amended orders under section

both the tax years under consideration. Felt aggrieved, the

respondent/taxpayer preferred appeal before the learned Commissioner-

27.03.2015partially accepted the appeals of the respondent taxpayer. As

a consequence, the Appellant Department has preferred the present

(Appeals) Karachi and assailed the impugned order on a number of

3. This case came up for hearing on 28.01.2022. Mr. Abdul Salam,

Departmental Representative [DR] appeared on behalf of the appellant

department while Mr. Safdar Imam, ACMA appeared on behalf of the

respondent/taxpayer. As per grounds of appeal, the appellant department

being special provision would override the general provision of section

Schedule to the Income Tax Ordinance, 2001; therefore, the

redundant, and redundancy cannot be attributed to the legislature.

officer has also taken the turnover of Rs. 5,468,163,000/- which is

strongly opposed the contentions submitted by the department in the

learned CIR(A) is based on the various judgments of this Tribunal and

carries no illegality, irregularity, and infirmity in it.

taxable income remains to be taxed and the appellant department has

apparently not raised any objection in respect of adjustment of loss

against dividend income and capital gain in the grounds of appeal.

Notwithstanding the aforesaid, the learned assessing officer has erred in

controversy it would be expedient to first reproduce below the relevant

provisions of section 113 of the Ordinance as stood at the relevant time

“Section 113.(1) This section shall apply to a resident

(a) loss for the year;

(2) Where this section applies:

a) the aggregate of the person’s turnover as defined in

half percent of the turnover. It is clear from a plain reading of the

Ordinance is less than one percent or half percent of the aggregate

Ordinance is higher than one percent or half percent of aggregate

Ordinance would be payable. The meanings of the words “instead of” or

M/s Elahi Cotton Mills Vs Federation of Pakistan and 6 others,

Black's Law Dictionary, page 787:

Ballentine's Law Dictionary, page 628:

"in lieu of": In substitution for or in place of. Ordinarily

Legal Thesaurus, page 266:

"In lieu of": Proposition as a substitute for, as an alternative,

35. A perusal of the above-quoted meanings of the