COMMISSIONER INLAND REVENUE, LEGAL ZONE, CORPORATE TAX OFFICE, LAHORE vs LF LOGISTICS PAKISTAN (PVT

Fields are extracted from the reported citation and judgment text. Where a detail is not stated in the record, it is not shown.

COMMISSIONER INLAND REVENUE, LEGAL ZONE, CORPORATE TAX OFFICE, LAHORE VS LF LOGISTICS PAKISTAN (PVT.) LTD., LAHORE Ss.113(3)(b), 153(7)(v)(b) & 133---Minimum tax on the turnover of service-provider---"Gross turnover"---Freight charges, terminal charges, shipment handling charges, payment of duties and other taxes under the term gross turnover, inclusion of---Taxpayer (company/service-provider) was engaged in the business of freight forwarding by air and sea to and from Pakistan and also customs house brokerage, road freight etc.---Assessment order (return) filed by taxpayer (company/service-provider), was amended by levying turnover tax @ 1.25%, which was endorsed by Commissioner Inland Revenue (Appeals), however, Appellate Tribunal Inland Revenue ('the Tribunal') vacated both the said orders---Department filed reference against the said judgment passed by the Tribunal---Contention of the Applicant/Department was that freight charges, terminal charges, shipment handling charges, duties and taxes ('other amounts') were part of invoiced amount(s), hence construable as gross receipts, and said amounts could not be excluded from the ambit of turnover as defined in clause (a) subsection (3) of S. 113 of the Income Tax Ordinance ('the Ordinance, 2001') 2001, thus, the Tribunal incorrectly held that only the fee, claimable as service charges could be recognized as taxable for the purposes of minimum tax liability---Plea of the respondent / taxpayer was that case of the taxpayer falls within clause (b) of subsection (3) of S. 113 of Ordinance, 2001 as taxpayer was a service provider and charges fees for rendering services, and all other amounts, erroneously treated as part of the turnover, were otherwise reimbursable expense, incurred at the behest of the recipient of service---Validity---Turnover, in terms of clause (b) of subsection (3) of S.113 of the Ordinance, 2001 means the gross fees paid for rendering of services other than those covered by final discharge of tax liability, for which tax is separately paid or payable---Fundamental question is whether the said other amounts, otherwise distinguishable from the fees paid in lieu of rendering of services in terms of clause (b) of subsection (3) of S. 113 of the Ordinance of 2001, could be treated as gross receipts---Factually, the claim of reimbursement of other amounts is not disputed; if construction proposed by the department is acknowledged (to treat other amounts and the service fees as part of gross receipts), it would not only render clause (b) of subsection (3) of S. 113 ibid, redundant but conspicuously distort the meaning effect of sub-clause (b) of clause (v) of subsection (7) of S. 153 of the Ordinance 2001---Term "gross fee", in the context of rendering of or providing of services, would exclude reimbursable expenses for the purposes of ascertaining the volume of the "turnover"---Accordingly, it is the gross fee and not the gross receipts, which shall be treated as part of turnover for the purposes of commuting the minimum tax liability in terms of clause (b) of subsection (3) of S.113, of the Ordinance, 2001, and the other amounts have to be excluded for the purposes of turnover in terms of clause (b) of subsection (3) of S. 113 of the Ordinance, 2001---It was not the case of the department that the other amounts were treated as part of gross receipts for the purposes of deduction of withholding tax in terms of subsection (1) of S. 153 of the Ordinance, 2001---Tribunal rightly differed with the determinations by the Commissioner (Appeals) and Commissioner, which had erroneously treated the amounts, comprising of freight charges, terminal charges, shipment handling charges payment of duties and other taxes, in addition to the gross fee for rendering services, as part of gross receipts---Applicant /Department had failed to point out any illegality or legal infirmity in the order passed by the Appellate Tribunal Inland Revenue, which needed no interference---Answer of the High Court to the proposed questions was in negative, i.e., against applicant-department and in favour of respondent-taxpayer---Reference Application filed by the Department was dismissed.

COMMISSIONER INLAND REVENUE, LEGAL ZONE, CORPORATE TAX OFFICE, LAHORE vs LF LOGISTICS PAKISTAN (PVT — 2024 PTD 728 LAHORE-HIGH-COURT-LAHORE

Case information

Judgment text as reported

Other judgments reported in 2024 PTD