WARTSILA PAKISTAN (PVT.) LTD. vs COMMISSIONER INLAND REVENUE, LTO, LAHORE Ss

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WARTSILA PAKISTAN (PVT.) LTD. VS COMMISSIONER INLAND REVENUE, LTO, LAHORE Ss.4C(2)(i) & 4C(2)(ii)---Commission income---Super tax---Precedent---Binding nature---Appellant (taxpayer / company), while placing reliance on a decision given by the Appellate Tribunal Inland Revenue (Tribunal) in ITA No.3867/LB/2023 in a case titled as M/s Atlas Copco Pakistan v. CIR, LTO Lahore dated 01.03.2024 ('the M/s Atlas Copco Pakistan case'), contended the OIR incorrectly classified the commission earned by the appellant as "Brokerage and Commission" under section 4C(2)(i) of the Income Tax Ordinance , 2001 ('the Ordinance 2001') instead of foreign indent commission, and the correct total income under S.4C is below the threshold of 150 million rupees, hence, the appellant is not liable to payment of super tax---Validity ---The decision of the Tribunal on the issue given in M/s Atlas Copco Pakistan case had not even touched upon the exclusion given in S. 4C(2)(ii) of the Ordinance, 2001---Since there is no discussion about said primary aspect of the scheme of law, therefore, it cannot be said to be a binding precedent---If the relied judgment is found to be either per incuriam or sub-silentio it has no binding effect---Vital questions escaped adjudication by the earlier bench in M/s Atlas Copco Pakistan case and had become a case of either sub-silentio or per incuriam or a blend of both ---In any of the two events, the binding effect of the said judgment is defeated and diluted as the ratio in consideration of the scheme of law pertaining to super tax is not settled in the earlier said referred judgment---The principles of per incuriam and sub-silentio are exceptions to the doctrine of precedent and permit the court to overrule the ratio decidendi of the incorrect decision or to ignore the same---Thus, on analysis of S. 4C of the Ordinance, 2001 and other related provisions, the judgment referred in the M/s Atlas Copco Pakistan case, surfaced as a blend of both per incuriam and sub-silentio---The most appropriate interpretation of S. 4C of the Ordinance, 2001 is that commission income shall not be included as imputable though may be subject to Final Tax Regime and is required to be included under clause (i) of S.4C(2) of the Ordinance, 2001 as a sum in the taxpayer's income for the purpose of charging super tax---Appellate Tribunal Inland Revenue upheld the impugned order---Appeal, filed by Taxpayer/Company, being merit-less was dismissed. Ss. 2(28a), 4C(2)(i), 4C(2)(iii), 154a & 233---Income against Foreign Indent Commission ---Commission---Super tax , chargeability of ---Final Tax Regime ---Scope ---appellant (taxpayer/company), accruing Foreign indent commission, filed income tax return for tax year 2023 which, upon scrutiny, revealed that the taxpayer failed to discharge the liability of payment of super tax under S. 4C of the Income Tax Ordinance, 2001 ('the Ordinance, 2001')---Stance of the appellant / taxpayer was that the word "commission" used in clause (1) of S.4C(2) refers to the commission given in S. 233 of the Ordinance, 2001---Whether income against foreign indent commission (being subject to final taxation under S. 154a of the Ordinance, 2001) is liable to be included as imputable income or the same is separately Included under S. 4C(2)(i) of the Ordinance, 2001?---Held: Section 4C(2)(iii) of the Ordinance, 2001 stipulates that imputable income as defined in clause (28a) of S. 2 excluding amounts specified in clause (1) ibid would be summed up in calculating taxpayer's income ; there is clearly an exclusion given in said clause which states that only imputable income not falling any of the heads specified in sub-clause (1) shall be included under sub-clause (iii) and any income falling in any of the heads specified in sub-clause (i) shall not be included as imputable income---as per definition given imputable income in relation to an amount subject to Final Tax means the income which would have resulted in the same tax, had this amount not been subject to final tax which clearly means that imputable income is always in relation to amount subject to final tax, whereas undisputedly payment of tax on commission under S. 233 is not subject to Final Tax ---If the taxpayer's stance (that the word 'commission' used in clause (1) of S.4C(2) refers to the commission given in S. 233) is accepted then question arises that any Income, which cannot be imputed how can the same be excluded? and which commission income would be excluded as imputable income as stated in Clause (iii) ---Section 4C(2)(ii) clearly allows those imputable incomes to be included under this provision which do not fall under heads specified in clause (1) which covers the word commission---While interpreting clauses (1) and (iii) of S. 4C(2) of the Ordinance, 2001, on their own language, both clauses when read in juxtaposition, would mean that commission income shall not be included as imputable though may be subject to Final Tax Regime and is required to be included under clause (1) of S.4C(2) as a sum in the taxpayer's income for the purpose of charging super tax ---Thus, contentions of the appellant was not in line with the scheme of law and was misconceived---The most appropriate interpretation of S. 4C of the Ordinance, 2001 is that commission income shall not be included as imputable though may be subject to Final Tax Regime and is required to be included under clause (i) of S.4C(2) of the Ordinance, 2001 as a sum in the taxpayer's income for the purpose of charging super tax---appellate Tribunal Inland Revenue upheld the impugned order---appeal, filed by Taxpayer/Company, being merit-less was dismissed. Non-binding---Doctrine of per incuriam---Scope---The doctrine of per incuriam refers to a judgment of a court which has been decided without reference to or in ignorance of a statute or an earlier judgment/precedence and/or overall dress up of the scheme of law which could have been relevant and ,therefore, such ignorance has affected the result of the case---Some of the factors to be considered while contending that a decision is not a binding precedent and should not be followed or be ignored are:- (i) A decision where the point in issue is not argued or considered by the court, or a decision rendered without an answer to the argument, without reference to the crucial words of the rules/provisions ; (ii) If a judgment is delivered in ignorance of scheme of law to demonstrate the real intent of legislature will also be recited per incuriam ; (iii) Legislature's real intent should never be left behind or overshadowed by a judgment rendered per incuriam. Ss. 4C, 4C(2), clause (i), 154 & 233---"Commission" income---Super tax, chargeability of---Scope---Appellant( taxpayer/company), accruing foreign indent commission, filed income tax return for tax year 2023 which, upon scrutiny, revealed that the taxpayer failed to discharge the liability of payment of super tax under S. 4C of the Income Tax Ordinance, 2001 ('the Ordinance, 2001')---Contention of the appellant was that the word 'Commission' used in clause (i) of S.4C(2) refers to Commission envisaged in S. 233 and not of S.154 of the Ordinance, 2001; and that its income does not exceed the threshold of Rs.150,000,000/- therefore is not liable to chargeability under S.4C of the Ordinance, 2001---Whether appellant's income for the tax year 2023 exceeds the threshold of 150 million or not for the purpose of chargeability of tax under S. 4C as per income defined in the provision of S. 4C of the Ordinance 2001 ?---Held: Section 4C of the Ordinance provides for determination of tax liability under said provision which indicates that super tax shall be charged on high earning persons at the rates specified in Division IIB of Part I of First Schedule---Subsections (4) & (5) of S. 4C also empowers the Commissioner to determine the super tax liability and to recover the same from the taxpayer---Super tax, by its very nature, related to an additional duty of income tax and such charge had been recognized to exist independent of income tax---From perusal of S. 4C subsection (2), it can be safely gathered that for the purpose of computing income for levy of super tax, income shall be the sum of (i) profit on debt, dividends, capital gains, brokerage and commission (ii) taxable income (iii) imputable income and (iv) income computed other than brought forward depreciation, amortization and business losses ---Examination of S. 4C(2)(i) reflects that word "commission" has been given independent of any classification---Contention of the appellant was misconceived as the word 'Commission' used in clause (i) of S. 4C(2) refers to Commission envisaged in S. 233 and not S. 154 because the Legislature has not made any bi-furcation or such classification ; nor did the Officer Inland Revenue (OIR) make any such observation in said regard rather he just added the commission income for the purpose of charging super tax---Without any explicit reference to any particular provision, giving the word "commission "a restrictive meaning in terms of S.233 of the Ordinance, 2001 is uncalled for ---The most appropriate interpretation of S. 4C of the Ordinance, 2001 is that commission income shall not be included as imputable though may be subject to Final Tax Regime and is required to be included under cls. (i) of S. 4C(2) of the Ordinance, 2001 as a sum in the taxpayer's income for the purpose of charging super tax---Appellate Tribunal Inland Revenue upheld the impugned order---Appeal, filed by taxpayer/company, being merit-less was dismissed.

WARTSILA PAKISTAN (PVT.) LTD. vs COMMISSIONER INLAND REVENUE, LTO, LAHORE Ss — 2025 PTD 1707 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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