COMMISSIONER OF INCOME-TAX COMPANY'S II, KARACHIV VS MESSRS NATIONAL FOOD LABORATORIES, 1992 PTD-SUPREME-COURT 570 (1991)

(On appeal from the judgment and order of the High Court of Sindh. in ITR No. 34 of 1983 dated 22-4-1991)

(a) Income-tax Act (XI of 1922)---

----S. 66---Income Tax Ordinance (XXXI of 1979), S.136---Reference to High Court-- -High Court has to answer the question as referred to it by the Income -tax Appellate Tribunal and in order to decide the real issues between the parties the Court is competent to reframe or resettle the question referred by the Tribunal without raising any new or different question.

(b) Income-tax Act (XI of 1922)---

----S. 35---Exercise of power to rectify any mistake apparent from the record-- Essential conditions---When an officer exercising power under S.35 enters into the controversy, investigates into the matter, reassess the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to "rectification" of the order---Any mistake which was not patent and obvious on the record, could not be termed to be an order which could be corrected by exercising powers under S. 35.

Section 35 of the repealed Income-tax Act, 1922 confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised suo motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassess the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to "rectification" of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under S. 35.

Shaikh Muhammad Iftikharul Haq v. Income-tax Officer, Bhawalpur PLD 1966 SC 524 and Pakistan River Steamer Ltd. v. Commissioner of Income-tax 1971 PTD 204 ref.

(c) Words and phrases--

----- Vegetable"---Meaning.

Vegetable generally means plants whose leaves, flower, roots, barks are edible and are used for consumption and form part of the food by cooking or seasoning.

Harver's World Encyclopaedia, Vol. 20 ref.

(d) Words and phrases---

----"Food"---Meaning.

The word "food" includes all items and substances which are consumed by human beings to maintain their life, body, vitality and strength.

Harver's World Encyclopaedia, Vol. 20 ref.

(e) Words and phrases---

---- Word "spices"---Meaning---Word "spices" means any vegetable,, substance with distinctive aroma and flavour used for seasoning food.

Harver's World Encyclopaedia, Vol. 20 ref.

(f) Finance Act (XL of 1974)---

----First Sched., Part II, cl. 4(iv)---Processing of spices (Masalah Jat) was processing of foods, vegetables as contemplated in First Schedule, Part II, cl. 4(iv) of the Ordinance.

Spices are substance obtained from vegetables and food and are ordinarily used in the composition or preparation of food. Vegetables which are edible plants or fruits are also used for human consumption as food. "Food"' according to its dictionary meaning, is a substance to be taken into the body to maintain life and growth. The said term, according to its different meaning also includes substances used in its preparation. Spices cannot be separated from "vegetable" or "food". In fact spices, like many other spices of food or vegetable take their origin from the same genus.

(g) Income-tax Act (XI of 1922)---

----Ss. 35 & 23---Rectification of mistake apparent from record---Notice under S. 35---Income-tax Officer who originally dealt with the case arrived at his conclusion by a different interpretation by application of the process of reasoning and argument which interpretation was not accepted by the successor Income-tax Officer---Held, the Income-tax Officer who later dealt with the case could not invoke the provisions of S. 35 of the Act and recall the order earlier passed by his predecessor in circumstances.

Shaikh Haider, Advocate Supreme Court and S.M. Abbas, Advocate -on-Record for Petitioner.

Nemo for Respondent.

Date of hearing: 31st October, 1991.

JUDGMENT

SALEEM AKHTAR, J.---The petitioner seeks leave to appeal against the judgment of the High Court of Sindh passed in ITR No.34 of 1983.

2. The facts as stated by the Tribunal are that the respondent in respect of its income from processing, packing and sale of spices claimed a rebate of 10% in super tax as provided by clause 4(iv) of Part II of the First Schedule of the Finance Act, 1974, which is reproduced as follows:-

"A rebate of 10% to such company in respect of it income, profits and gains to which subsection (9) of section 10 of the Income-tax Act, 1922 (XXI of 1922) applies or which are derived by it in Pakistan from processing, freezing, preserving and canning of food, vegetable, fruits, grains, meat, fish and poultry."

A rebate of 10% of the super-tax as provided by the aforestated clause was allowed to the respondent during assessment years 1974-75 and 1975-76. The Income-tax Officer who succeeded the officer who had allowed the rebate took the view that `masalah jat' (spices) could not be termed as food as contemplated by the aforesaid clause. He, therefore, issued notice under section 35 of the Income-tax Act, 1922, for rectifying the original assessment orders. He finally ordered that the rebate granted earlier be withdrawn. The respondent filed an appeal before the Appellate Assistant Commissioner challenging the validity of the order passed under section 35 of the Act but it was dismissed. The respondent then filed appeal before the Income-tax Appellate Tribunal which confirmed the order passed by the Appellate Assistant Commissioner holding that as the error was apparent from the record the Income-tax Officer had properly rectified the order in exercise of powers under section 35 of the Income-tax Act. The respondent had also challenged the order on the ground that processing of spices could be considered as processing of food and, therefore, it was entitled to rebate. This plea was also rejected by the Tribunal with the following observations:--

"In the background of the above principles, spices processed by the appellant cannot be considered processing of vegetables because in most popular sense vegetables are used as food; whereas the spices although they have a vegetable origin, cannot be considered as vegetable consumed as food. Spices can only be used as condiment and never as food itself. In this view of the matter, the learned counsel of the appellant fails on this ground as well. We accordingly sustain, the orders of the departmental officers below in respect of assessment years 1974-75 and 1975-76."

The respondent then filed application under section 136(1) of the Income-tax Ordinance and the following questions were referred for the opinion of the High Court:--

"(1) Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Income-tax Officer passed under section 23(3)/35 of the repealed Income-tax Act as valid in law?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the processing of spices (Masalah Jat) could be considered as processing of foods, vegetable as contemplated in clause 4(iv) of Part II of the First Schedule of the Finance Act, 1974"

3. At the outset it may be mentioned that Question No.2 has been wrongly framed by the Tribunal. From the order of the Tribunal it is clear that the petitioner's plea that the proceeding of spices could be considered as processing of food and vegetables was rejected and it was held not entitled to claim rebate on that basis. However, from the question framed it seems that the Tribunal had accepted petitioner's plea. Without noticing this discrepency the High Court answered the question as referred in the affirmative. Under section 66 of the repealed Income-tax Act, 1922 which is equivalent to section 136 of the Income-tax Ordinance the High Court has to answer the question as referred to it by the Tribunal. However, in order to decide the real issues A between the parties the High Court is competent to reframe or resettle the question referred by the Tribunal without raising any new or different question. Keeping in view the facts on record the question should be refrained as follows:--

"Whether on the facts and in the circumstances of the. case, the Tribunal was justified in holding that the processing of spices (`Masalah Jat) could not be considered as processing of foods, vegetable as contemplated in clause 4(iv) of Part II of the First Schedule of the Finance Act, 1974?"

4. The High. Court by the impugned judgment answered the first question in the negative while Question No.2 as referred was answered in the affirmative. In effect the High Court did not accept the decision of the Tribunal and held that processing of spices amounted to processing of food and vegetable. Consequently respondent's claim for rebate was upheld.

5. As regards the first question the learned Judges after referring to several authorities of our Supreme Court as well as from the Indian Jurisdiction concluded as follows:-

"Reference to these cases clearly indicates that the order subsequently passed by the ITO and upheld by the learned Assistant Commissioner of Income-tax and then by the learned Income-tax Appellate Tribunal could not validly be passed as rebate had been clearly granted by the ITO who originally dealt with the case on the ground that processing of spices fell within the purview of the said provision introduced in the Finance Act, 1974, allowing 10% rebate on income derived from processing of spices was held to be the game as processing of food or vegetables etc. This interpretation was not accepted by the successor of the ITO who was clearly of the view that spices could not be bracketed with `Food' or `Vegetable'. This in our opinion, amounted to clear revision of the earlier order because the ITO who subsequently dealt with the case arrived at his conclusion by a different interpretation by application of the process of reasoning and argument. The original order passed by the ITO cannot be the result of an apparent mistake but the same was based on the opinion of the said ITO who found that spices were the same as `Food' or `Vegetable'. Consequently, we are unable to hold that the ITO who later dealt with the case could invoke the provisions of section 35 of the repealed Act and recall the order earlier passed by his predecessor. We are, consequently, of the view that the learned Appellate Tribunal was not justified in upholding the order of the Income-tax Officer passed under section 23(3)/35 of the repealed Income-tax Act and, therefore. the first question referred to by the learned Tribunal is answered in the negative and in favour of the applicant."

Section 35 of - the repealed Income-tax Act, 1922, hereinafter referred to as`The Act' confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised Suo Motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to `rectification' of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35. In this regard reference can be made to Shaikh Muhammad Iftikharul Haq v. Income -tax Officer, Bahawalpur, PLD 1966 SC 524 and Pakistan River Steamer Limited v. Commissioner of Income-tax, 1971 PTD 204. In the present case the mistake pointed out by the petitioner was not of a nature to attract section 35 and, therefore, the High Court has correctly answered the first question in the negative.

6. The learned Judges of the High Court while dealing with Question No.2 have extensively considered the meaning of `spices' by referring to Harver's World Encyclopaedia, Volume-20, where spices has been defined as `any vegetable substance with distinctive aroma and flavour used for seasoning food ...Spices are obtained from various parts of a number of plants, mostly tropical. For example, ginger is a root, cinnamon is bark and popper a fruit. Spices played an important part in the early history of trade. They were highly valued as additives to make poor quality of food edible.' Reference has also been made to various dictionaries for the purpose of ascertaining the meaning of words spices, vegetable and food. Vegetable generally means plants whose leaves, flower, roots, barks are' edible and are used for consumption and form part of the food by cooking or seasoning. The word "food" includes all items and substances which are consumed by human beings to maintain their life, body, vitality and strength. In the impugned judgment after referring to the meaning of the aforestated words the following observation was made:--

"It would thus be seen that spices are substances obtained from vegetables and food and are ordinarily used in the composition or preparation of food. Vegetables which are edible plants or fruits are also used for human consumption as food. "Food" according to its dictionary meaning is a substances to be taken into the body to maintain life and growth. The said term, according to its different meaning reproduced earlier also includes substances used in its preparation. Consequently, we are unable to see how spices can be separated from "vegetables" or "food". In fact spices, like may other spices of food or vegetables take their origin from the same genus."

Mr. Shaikh Haider, the learned counsel for the petitioners, contended that the food. and spices have to be distinguished; we do not consider this argument tenable. The opinion of the learned Judge is based on cogent reasons and correct analysis of the meaning of the words `vegetable, food and spices.'

7. We, therefore, refuse to grant leave and dismiss the petition.

M.B.A./C-96/SLeave refused.