I.T.A. NO. 250/IB OF 1989-90, DECIDED ON 14TH SEPTEMBER, 1992. VS I.T.A. NO. 250/IB OF 1989-90, DECIDED ON 14TH SEPTEMBER, 1992., 1993 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1100 (1992)

(a) Precedent--

--- Two decisions of the same Court irreconcilably inconsistent ---Effect-- Where the Court seized of the matter is of co-ordinate jurisdiction the inconsistent precedents are taken note of and the matter is decided on the basis of independent scrutiny of the relevant provisions of law.

One view is that if is there are two inconsistent precedents of equal authority the one that is later in time must be followed. The other view is that if the Court giving the later decision did not consider the earlier decision and the Court giving the later decision was not competent to depart from the earlier decision, the earlier decision shall hold the field and that must be followed. The above two views are attracted only when the Court deciding the question is bound by the authority of precedent. Where the Court seized of the matter is of co-ordinate jurisdiction the inconsistent precedents are taken note of and the matter is decided on the' basis of independent scrutiny of the relevant provisions of law.

(b) Income Tax Ordinance (XXXI of 1979)---

----First Sched., Part IV, para. B(2)---Public Company --- Definition Public company as defined in First Sched., Part IV, Para. B(2) of the Ordinance does not include a company in which a Government owned company but not the Government as such owns more than fifty per cent shares.

A company is a public company if 50% or more of its shares are held by the Government. In the present case the shares of the assessee-company were not held by the Government as such but by, another company which, admittedly was cent per cent owned by the Government.

The broad contention that a company owned by the Government shall be deemed to be the Government in all purposes including the definition of the company could not be accepted. The assessee was not a public company within the meanings of its definition given in the Income Tax Ordinance, 1979.

Central Board of Revenue v. SITE PLD 1985 SC 97; West Pakistan Transport Board v. Commissioner of Income Tax 1973 PTD 499 and 1989 PTD 1185 ref.

Khalid Majid, FCA for Appellant

Mrs. Zareen Saleem Ansari, DR for Respondent.

Date of hearing: 9th September, 1992.

ORDER

CH. IRSHAD AHMAD (JUDICIAL MEMBER).---For an assessee, being a company it is beneficial to be a public company rather than to be a private company for the purposes of Income Tax Ordinance, 1979. A public company is entitled to certain rebate in super-tax. The only question we are required to decide in this appeal filed by the assessee is whether the assessee, a company, is private company or a public company. The assessee contends that it is a public company whereas the tax authorities have held that it is not a public company. The relevant facts forming the foundation of the respective contentions of the assessee and the Department are that the assessee is a company of which 51.57 per cent. shares are held by another company which is cent per cent owned by the Federal Government. For the purposes of the Income Tax Ordinance, 1979, the expression `public company' is defined in Paragraph B(2) of Part IV of the First Schedule to the Income Tax Ordinance, 1979, and so far as relevant for this appeal it reads as under

"Public Company" means:---

(a) a company in which not less than fifty per cent of the shares are held by the Government;

(b) xxx xxxx xxxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx

(c) xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxxxxx xxx xx

(In this order the above definition has been referred to as the "definition")

According to the assessee since more than 50 out of 100 shares of the assessee are held by another company which is cent per cent owned by the Federal Government it qualifies to be a public company for the purposes of the Ordinance as provided in the definition. On the other hand the Department is of the view that with the addition of Article 165A in the Constitution of Pakistan the concept of a Government owned legal entity being an instrument of the Government has ceased to exist.

We have heard Mr. Khalid Majeed, FCA for the appellant and Mrs. Zareen Saleem Ansari, D.R. for the Department.

It is an accepted position that the Government itself does not hold any share in the assessee-company. It is only another company owned by the Government that holds shares in the assessee-company. It is also an accepted position that the income of the assessee-company is not the income of the Government and as such exempt from the payment of income tax. At the most a part of the assessee-company's income will go to a Government-owned company. The question is that if a cent per cent Government-owned company owns not less than 50% of the shares of an assessee-company does the assessee-company become a public company as provided for in the definition? Putting it in other words the question is whether the expression `Government' used in the definition will include a company owned by the Government. The learned Authorised Representative of the assessee asks us to read the expression `Government' to include a company cent per cent owned by the Government. In support of the above contention a reference is made to the judgment of the Supreme Court in case Central Board of Revenue v. SITE cited PLD 1985 Supreme Court 97 and the judgment of the Lahore High Court in case West Pakistan Transport Board v. Commissioner of Income Tax cited 1973 PTD 499 and this Tribunal's decision dated 17-4-1989 by which some appeals filed by Pakarab Fertilizers Limited, were disposed of. On the other hand the Department relying on this Tribunal's decision dated 30-1-1989 cited (1989 PTD 1185) and referring to Article 165A of the Constitution contends that the jurisprudential concept that a Corporation owned by the Government shall be deemed to be the Government Department has been departed from in Pakistan and the decisions of the Supreme Court and of the Lahore High Court have been nullified by the Constitutional amendment by which Article 165A was added to the Constitution in 1985.

This Tribunal in its decision dated 17-4-1989 (unreported) has held that the decision of the Supreme Court that a legal entity wholly owned by the Government shall be deemed to be a Government Department has not been affected by the addition of Article 165A to the Constitution. According to the Tribunal a Corporation owned by the Government still remains to be a Government Department for other purposes except that now in view of the provisions of Article 165A of the Constitution the income of such a Corporation is taxable and exemption of Government properties and income from taxation provided for in Article 165A of the Constitution has been denied. On the other hand this Tribunal by its decision dated 30-1-1989 reported (1989 TD 1185) has held that Supreme Court's decision has been nullified by the amendment in the Constitution whereby Article 165A was added to the Constitution. The learned A.R. of the assessee asks us to follow the decision of this Tribunal's decision dated 17-4-1989 in preference to this Tribunal's decision dated 30-1-1989 because the first was later in time.

The first question that aises for determination is whether we should follow this Tribunal's decision dated 30-1-1989 (reported) which is earlier in time or the decision dated 17-4-1989 (unreported) which is later in time.

It is an accepted position that this Tribunal's holdings in the above noted cases are irreconcilably inconsistent. One view is that if there are two inconsistent precedents of equal authority the one that is later in time must be followed. The other view is that if the Court giving the later decision did not consider the earlier decision and the Court giving the later decision was not competent to depart from the earlier decision, the earlier decision shall hold the field and that must be followed. The above two views are attracted only when the Court deciding the question is bound by the authority of precedent. Where the Court seized of the matter is of coordinate jurisdiction the inconsistent precedents are taken note of and the matter is decided on the basis of independent scrutiny of the relevant provisions of law. Both the earlier decisions of this Tribunal are, so far as we are concerned, decisions by a forum of coordinate jurisdiction and in such cases the subsequent forum is at liberty to decide the issue independently. The reasons for the above holding are that if we are bound by this Tribunal's decision dated 17-4-1989, as contended by the learned A.R. of the assessee, the Bench giving that decision was bound by this Tribunal's earlier decision dated 3o-1-1989. In view of the above precedential principles we proceed to examine the point in controversy independently.

As stated earlier a company is a public company if 50% or more of its shares are held by the Government. There is no dispute that the shares of the assessee-company not held by the Government gas such but by another company which admittedly is cent per cent owned by the Government. The question is whether the expression `Government' used in the definition of the company includes a company owned by the Government. As stated earlier the assessee asks us to read the expression "Government" in the definition as a company owned by the Government and in that context reference is invited to the judgment of the Supreme Court and of the Lahore High Court already noted. Neither the Supreme Court nor the High Court has held that a company owned by the Government shall for all purposes mean a Department of the Government owning such company. The holdings of the Supreme Court and of the Lahore High Court proceed on the basis of immunity granted under the Constitution to the Federation to be taxed by or under a provincial law and to the provinces to be taxed by or under a Federal Law. The basis of that holding is that since under the Constitution the income of the Provinces is exempt to be taxed by or under a Federal Law the income of the Province shall remain exempt whether the Province earns that income through its executive limb or through an instrumentality incorporated in the form of a company car a Corporation. The holding of the Supreme Court and for that purpose any jurisprudential rule does not lay down that a company owned by a Government shall for all purposes be deemed to be a Government Department. The Supreme Court explained that "in a controversy like the present one the final decision would rest on the facts and circumstances of the case." On facts the Supreme Court found that the company in that case was carrying on the functions of industrial development on behalf of the Provincial Government and the income of that company in fact was destined to be the income of the Province. In the case before us it is no one's case that the assessee-company's income is the income of the Federation. If one accepts the preposition that a company cent per cent owned by the Federal Government is a Government Department as contended by the assessee, then one has to accept that all the employees of such company are the Government servants, all the properties owned by that company are owned by the Government and all contracts made by that company will be made only by the President as required by Article 1.73 of the Constitution of Pakistan. No one will be ready to contend or accept the above preposition. After going through the judgments of the Supreme Court and of Lahore High Court and perusing the jurisprudential principles we are of the view that the holding of the Supreme Court that a company or a Corporation owned by the Government shall be deemed the be a Department of the Government was confined for the purposes of its immunity to tax granted by Article 165 of the Constitution. The broad contention that a company owned by the Government shall be deemed to be the Government for all purposes including the definition of the company cannot be accepted. We would, therefore, hold that the assessee is not a public company within the meanings of its definition given in the Income Tax Ordinance, 1979. The appeal is devoid of force and is hereby rejected.

M.BA./2311/T Appeal dismissed.