Law: Income Tax Ordinance, 2001

Section: 161,236(1)(b)(3)

Law: Income Tax Ordinance, 2001

Section: 161,236(1)(b)(3)

Income Tax Ordinance, 2001 (XLIX of 2001)......Sections 161 & 236(1)(b)(3)......Sale and proclamation of sales......Business of public call office......Non deduction of tax from telephone users......Show Cause notice......Respondent/Taxpayer held personally liable to pay tax......Appeal dismissed by CIR(A)......Taxpayer succeeded before Tribunal......Reference application to High Court......Whether section 236 of Ordinance clearly spells out that liability of advance tax shall be collected on amount of prepaid cards for telephones -Held yes......Whether in year 2004-2005, liability to deduct advance tax was restricted to pay phone companies dealing in sale of prepaid cards only......Held yes......Whether in year 2004-2005, section 236(1) was not applicable to case of payphones dealing with sale of units, therefore, tax reference is decided against department......Held yes. The above section clearly spells out that the liability of the advance tax shall be collected on the amount of Prepaid Cards for telephones. Admittedly the respondent taxpayer does not sell any prepaid cards, but in fact sells units, which are consumed by the consumers. The difference between the business of payphone company dealing with prepaid cards and the company dealing with units becomes clear when an amendment was introduced in the year 2010 in Section 236 (1) (c) and (3A), which read as under: "236. Telephone users.- (1) (c) sale of units through any electronic medium or whatever form. * [The word "mobile" was omitted by Finance Ordinance 2002] (3A) The person issuing or selling units through any electronic medium or whatever form shall collect advance tax under sub-section (1) from the purchaser at the time of issuance or sale of units. From the above, it is clear that in the year 2004-2005 the liability to deduct the advance tax was restricted to pay phone companies dealing in sale of prepaid cards only. Business of selling prepaid cards is different from selling of units as has been highlighted by the legislature through the amendment brought about in Section 236 (1) (c) and (3A). We, therefore, hold that in the year 2004-2005 dealing Section 236 (1) was not applicable to the…

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