WWF at two percent be levied only after adjustment of B/F losses: ATIR Lahore ruling...

Workers Welfare Fund (WWF) @ 2 percent under WWF Ordinance could only be levied on balance income of the taxpayer after adjustment of brought forward (B/F) losses, says a recent judgement of Appellate Tribunal Inland Revenue (ATIR), Lahore.
A prominent Lahore-based tax lawyer Waheed Shahzad Butt of Tax Resolution Services Company, Lahore on Saturday told this correspondent about the legal implications of the WWF appeal recently decided by the ATIR. The issue mainly related to the chargeability of 2 percent WWF on industrial undertakings in cases where there is brought forward losses available to the taxpayers for adjustment against present or future income/gains. The WWF is collected by the tax officials at the time of making assessments under the Income Tax Ordinance 2001 in case taxpayer falls under the category of industrial undertaking.
The WWF is leviable on the total income as is assessable under the WWF Ordinance meaning thereby that the taxpayer would be entitled to set off the losses determined for the earlier years by charging WWF if leviable, after setting off such losses for earlier years, Waheed added.
In ITA No 564/LB/2011 on legal issue of chargeability of WWF, it was decided by ATIR with the observation that the WWF is leviable on the total income as is assessable under the Ordinance. The ATIR further observed that issue before us for adjudication already stands decided in favour of the taxpayer not only by the Karachi High Court, wherein it has been held in an unequivocal manner that while levying WWF the taxpayer would be entitled to claim setting of the BF losses of earlier arrears. The issue under consideration also stands resolved in favour of the taxpayer by Lahore High Court on the basis of Supreme Court of Pakistan decision vide its judgement reported as 2002 PTD 2714.
The facts of the case are that it was observed by the taxation officer that being an industrial establishment, the taxpayer company was under legal obligation to pay WWF on total business income at Rs 67,909,475/-. Therefore, the taxpayer was confronted with regard to the non-payment of WWF and reply tendered by the taxpayer was treated unsatisfactory. Resultantly, WWF was charged on total declared income. Feeling aggrieved, the taxpayer went into appeal before Commissioner Inland Revenue "CIR" (Appeals), who relying on the judgement of Karachi High Court ordered cancellation of order passed as per finding given below:
"It is held that WWF was wrongly charged in this case on the total income from business for the year. WWF is leviable on the total income as is assessable under the ordinance meaning thereby that the appellant would be entitled to set off of the losses determined for the earlier years and WWF would be charged, if leviable, after set off of such losses for earlier years. In view of the foregoing facts the impugned order is cancelled."
Aggrieved, by the treatment meted out by the CIR (Appeals), the department has come up in appeal before ATIR challenged the order of CIR (Appeals) cancelling the order of taxation officer for charging WWF illegally.
The ATIR announced: "The departmental representative (DR) has termed the action of first appellate authority to be arbitrary and contrary to facts of the case. The sole contention of DR is that WWF was rightly charged by the taxation officer on total income of the taxpayer as the BF losses are adjustable only for the purpose of charge of the Income Tax and not for the purpose of WWF. She, therefore, prays for vacation of the impugned order and restoration of the treatment meted out by the taxation officer.
On the other hand, while rebutting the assertions made by DR, the counsel of the taxpayer has adopted the same line of arguments as was adopted by him before CIR (Appeals) and also quoted in detail in the body of appellate order.
The tribunal held that the rival arguments heard and relevant record available on file carefully perused. The tribunal don't find in agreement with the assertions made by DR, which are weightless being not supported by plausible reasons or any dictum of law. The issue before us for adjudication already stands decided in favour of the taxpayer not only by the Karachi High Court as relied by learned CIR (Appeals) in support of his action, wherein it has been held in an unequivocal manner that while levying WWF the taxpayer would be entitled to claim setting of the BF losses of earlier arrears. The issue under consideration also stands resolved in favour of the taxpayer by the Lahore High Court on the basis of Supreme Court of Pakistan decision wherein the following question raised by the department was refused:
"Whether the facts and circumstances of the case justify the deletion of WWF when subsection (1) of section 4 of the Workers' Welfare Fund Ordinance, 1971, clearly says that WWF is payable by Industrial undertakings on the total assessable income in a year and not taxable income?"
Since, in the case in hand, the B.F losses amounting to Rs 67,909,475 were carried forward from earlier years, therefore, in the light of the ratio settled by the above mention High Courts, WWF could only be levied on balance income of the taxpayer after adjustment of B/F losses, which has not been done by the taxation officer. In such like situation, the cancellation of the order passed under WWF Ordinance ordered by learned CIR (A) is quite justified. The DR has not been able to make out a case for our interference. Hence, we are left with no other option but to uphold the impugned order on the issue under consideration. We order accordingly." Waheed referred to the ruling of the ATIR.