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

----Ss. 96 & 99---Refund---Claim for---Procedure---Scope and application of Ss.96 & 99, Income Tax Ordinance, 1979.

Difference between amount of tax paid and total tax liability determined would be amount of refund. In section 99 of the Income Tax Ordinance, 1979 the procedure of claim of refund is mentioned and this section compels the assessee to file an application for claim of refund. In this section it is also mentioned that in case of claim of refund under section 96 of the Income Tax Ordinance, 1979 an application is to be made within one year of the end of the year to which it relates. However an assessing officer has been authorized to condone this period on sufficient cause shown by the assessee with the previous approval in writing of the IA.C. In subsection (3) of this section, the assessing officer may accept the claim or refuse the same. It is also provided in subsection (5), that if no order is made on or before the 30th day of June of the financial year following the date on which the application of refund under subsection (2) was made then amount of refund would be deemed to be due. But it is also mentioned in subsection (6) that the provision of subsection (5) would not apply unless notice stating that no order under subsection (3) has been made, is served on the Commissioner on or before 31st day of May of the said financial year. In short as per section 99, an assessee is required to file an application to claim of refund within the period prescribed and it is binding on the I.T.O. to make an order on or before the 30th day of June of the financial year next following the date on which the application of refund was made otherwise the amount of refund would deem to have become due. But it is also mentioned in this section that this deeming provision would not apply unless a notice is served on the Commissioner on or before 31st day of May of the said financial year.

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

----Ss. 100 [as amended by Finance Act (I of 1985)], 102 & 99---Effect of amendment of S.100, Income Tax Ordinance, 1979 by Finance Act, 1985-- Comparison of unamended S.100 and as amended ---Refund---Procedure-- Assessee is not required to move application for refund now but in any case no refund would become due unless any order of refund is passed---Amendment of S.100, Income Tax Ordinance, 1979 by Finance Act, 1985, being of substantive nature would have prospective operation.

The original provision of section 100, Income Tax Ordinance, 1979 before amendment introduced by Finance Act, 1985 only refer to the orders passed in appeal, revision, reference or other proceedings under this Ordinance, but do not refer to orders passed wider section 59, 59A, 62 or 63. In short before Finance Act, 1985, the I.T.O. spas required to pass order of refund in order to give only appeal effect but after amendment by Finance Act, 1985 there is no need for any application for claim of fund and I.T.O. is required to pass order of refund alongwith order passed under section 59, 59A, 62 or 63 of the Ordinance or on the basis of any order passed in appeal, revision or reference.

Before amendment in section 100 in order to claim additional payment for delayed refunds, it was necessary that there should be an order of refund and a reference to section 99 would show that it was incumbent upon the assessee to make an application for refund and I.T.O. was authorized to pass order of acceptance or refusal of refund under that section and it was also mentioned that under what circumstances refund would be deemed to be due. After amendment the I.T.O. is required to pass an order of refund alongwith the orders passed under sections 59, 59A, 62 and 63. The only change is that the assessee is now not required to move application for refund, but in any case no refund would become due unless an order of refund is passed. This position is manifest from subsection (2) of section 102 and especially from clause (c) of subsection (2).

After the amendment of section 100 by Finance Act, 1985, there is no need for filing of any application for refund and provisions of section 99 have more or less become redundant, but the contention that this amendment was of procedural nature is misconceived in so far as this amendment affected the substantive right of the department available to it by virtue of subsection (2) of section 99. No doubt there was a proviso added to this subsection, which authorized the I.T.O. to condone the period on sufficient cause, but this would not mean that there was no substantive right available to the department. When any law is amended then any change in procedure would take retrospective effect but if any substantive right is affected then the amendment would operate prospectively. Therefore, in the year when assessee had failed to file an application for refund, which was subject to section 99(2) and the same having become time-barred, it created a substantive right in favour of the Department or Revenue. The amendment introduced by Finance Act, 1985 would, therefore, operate prospectively.

The amendment brought in section 100 by Finance Act, 1985, was of substantive nature and would have prospective operation. This amendment would not help the case related to assessment year 1984-85 whereas the amendment was to have effect from the assessment year 1985-86.

Mazharul Hasan for Appellant.

Khalid Siddiqui, D.R. for Respondent.

Date of hearing: 3rd October, 1993.

ORDER

SYED KABIRUL HASAN (JUDICIAL MEMBER): --The appellant is aggrieved by the order of the learned CIT(A), Zone VI, Karachi, dated 18-3-1990 whereby he has disallowed the claim of Rs.29,742 being the additional payment for delayed refund. The assessment year involved is 1984-85.

2. The brief facts, which gave rise to filing of this appeal are that during the assessment year the assessee had paid more tax under section 50(4) of the Ordinance as compared to his tax liability. The amount of tax paid in excess according to the assessee was Rs.79,846. The assessee claimed refund of said amount which was according to him due on 27-1-1985 and after excluding the statutory period of three months prescribed in section 99(5) of the Ordinance the additional payment for delayed refund was due from 22-4-1985 to date of payment i.e. 22-11-1988. The assessment year involved is 1984-85.

3. In support of this appeal the learned counsel for the assessee has submitted that prior to amendment of section 100, the assessee was required to file an application for refund under section 99 and if no application was filed then the assessee was not entitled for any refund and there was no question of any additional payment under section 102. But it is stated by him that by Finance Act, 1985, section 100 was amended and there was no need to file any application and the assessing officer was required to determine the refund due at the time of making order under section 59, 59-A, 62 or 63 of the Ordinance. It is further contended by him that since the amendment was of procedural nature and it had to take effect retrospectively, therefore, the benefit of such amendment could be extended to assessment year 1984-85.

4. In reply the learned D.R. has submitted that the amendment in section 100 brought in by Finance Act, 1985 was of substantive nature and which could not operate retrospectively, as it imposed burden on the revenue under section 102 of the Ordinance. In view of this he has submitted that the amendment was not applicable for the assessment year 1984-85.

5. Before we take up the arguments of the learned counsel for the assessee as well as the learned D.R., it would be pertinent to examine the provisions relating to refunds. In this case the relevant sections are 96 and 99 and the same are reproduced; as under:

"Section 96. Refunds.---(1) Where any person satisfies the I.T.O. that the amount of tax paid by him, or on his behalf, for any year exceeds the amount with which he is properly chargeable under this Ordinance for that year, he shall be entitled to a refund of the amount so paid in excess.

Section 99. Form of application disposal of claim for refund and limitation.--(1) An application for refund under section 86, 97 or 98 shall be made in the prescribed form and verified in the prescribed manner.

(2)An application under subsection (1) shall be made--

(a) in any case to which subsection (2) of section 96 applies within one year or the end of the income year in which the advance or loan is repaid; and

(b) in other cases, within two years of the end of the assessment year to which it relates:

Provided that an Income Tax Officer may after obtaining the previous approval in writing of the I.A.C. admit an application made after the expiration of the aforesaid period, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period.

(3) When an application for refund is made under subsection (1), the ITO shall, subject to the provisions of this Ordinance, determine by an order in writing, the amount of refund on being satisfied that such amount is due to the assessee, and, where he is not so satisfied, he may, by an order in writing, reject the application.

(4) The ITO may, before making an order under subsection (3), call for

such particulars, documents or evidence as he may require.

(5) Where no order is made under subsection (3) on or before the thirtieth day of June of the financial year next following the date on which the application for refund under subsection (2) was made, the amount of refund claimed in the said application shall be deemed to be due to the assessee.

(6) The provisions of subsection (5) shall not apply unless a notice stating that no order under subsection (3) has been made, is served on the Commissioner on or before the thirty-first day of May of the said financial year."

The combined reading of above sections would show that difference between amount of tax paid and total tax liability determined would be the amount of refund. In section 99 the procedure of claim of refund is mentioned and this section compels the assessee to file an application for claim of refund. In this section it is also mentioned that in case of claim of refund under section 96 an application is to be made within one year of the end of the year to which it relates. However an assessing officer has been authorized to condone this period on sufficient cause shown by the assessee with the previous approval in writing of the IA.C. In subsection (3) of this section, the assessing officer may accept the claim or refuse the same. It is also provided in subsection (5), that if no order is made on or before the 30th day of June of the financial year following the date on which the application of refund under subsection (2) was made then amount of refund would be deemed to be due. But it is also mentioned in subsection (6) that the provision of subsection (5) would not apply unless notice stating that no order under subsection (3) has been made, is served on the Commissioner on or before 31st day of May of the said financial year. In short as per section 99, an assessee is required to file an application to claim of refund within the period prescribed and it is binding on the I.T.O. to make an order on or before the 30th day of June of the financial year next following the date on which the application of refund was made otherwise the amount of refund would deem to have become due. But it is also mentioned in this section that this deeming provision would not apply unless a notice-is served on the Commissioner or before 31st day of May of the said, financial year.

6. Now we take up the provision of section 100, which is very material for the resolving of this controversy. This section is being reproduced in the following manner:

"Section 100 before Amendment by Finance Act. 1985:"

"100. Refund on appeal etc.---Where, as a result of any order passed in appeal, revision, reference or other proceedings under this Ordinance, (not being an order setting aside an assessment), refund of any amount becomes due to the assessee, ITO shall except 'otherwise provided in this Ordinance, refund the amount to ^ the assessee irrespective of whether he has or has not made any claim in that behalf."

Section 100 after Amendments by Finance Act. 1985.

"Refund on assessment and appeal. etc.---Where as a result of any order passed under section 59, 59A, 62 or 63 or in appeal, revision reference or other proceedings under the Ordinance (not being an order setting aside an assessment), refund of any amount becomes due to the assessee, the Income Tax Officer shall, except as otherwise provided in this Ordinance, refund the amount to the assessee irrespective of whether he has or has not made any claim in that behalf."

From the comparison of above provisions it would appear that the original provisions before amendment only refer to orders passed in appeal, revision, reference or other proceedings under this Ordinance, but do not refer to orders passed under section 59, 59A, 62 or 63. In short before Finance Act, 1985, the I.T.O. was required to pass order of refund in order to give only appeal effect, but after amendment by Finance Act, 1985 there is no need for any application-for claim of refund and I.T.O. is required to pass order of refund alongwith order passed under section 59, 59A, 62 or 63 of the Ordinance or on the basis of any order passed in appeal, revision or reference.

7. In order to finally resolve this controversy it would be pertinent to reproduce section 102, which relate to additional payment of delayed refunds. This section is as under:---

"102. Additional payment for delayed refunds---(1) Where a refund due, or deemed under subsection (5) of section 99 to be due, to an assessee is not paid within three months of date on which it becomes due, there shall be paid to the assessee, a further sum (by way of compensation at the rate of (fifteen) per cent. per annum) of the amount of refund from the expiration of the said three months up to the date on which the refund order is made.

(2) For the purposes of this section, a refund shall be deemed to have become due,---

(a) in any case where the refund is required to be made in consequence of any order on an appeal or a revision or a reference to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the Income Tax Officer;

(b) in any case to which subsection (5) of section 99 applies, on the thirtieth day of June of the financial year next following the date on which the application for refund was made; and

(c) in other cases, on the date on which the refund order is made.

(3) In computing the period for which the further sum referred to in subsection (1) is payable, the period for which the refund is withheld under section 103 shall be excluded.

(4)Nothing contained in this section shall apply m any refund becomes due as result of an order on appeal, revision or reference setting aside the assessment."

A careful and an critical reading of the above provision would show that before amendment in section 100 in order to claim additional payment for delayed refunds, it was necessary that there should be an order of refund and if we refer to section 99 then it would appear that it was incumbent upon the assessee to make an application for refund and I.T.O. was authorized to pass order of acceptance or refusal of refund under that section and it was also mentioned that under what circumstances refund would be deemed to be due. This point has been elucidated at length in foregoing paras. It is also to be noted that after amendment the I.T.O. is required to pass an order of refund alongwith the orders passed under section 59, 59A, 62 or 63. The only change is that the assessee is now not required to move application for refund, but in any case no refund would become due unless any order of refund is passed. This position is manifest from subsection (2) of section 102 and especially from clause (c) of subsection (2).

8. The final position, therefore, emerges is that after the amendment was by Finance Act, 1985, there is no need for filing of any application for refund and provisions of section 99 have more or less become redundant, but the contention of the learned counsel for the assessee that this amendment was of procedural nature is misconceived in so far as this amendment affected the substantive right of the department available to it by virtue of subsection (2) of section 99. No doubt there was a proviso added to this subsection, which authorized the I.T.O. to condone the period on sufficient cause, but this would not mean that there was no substantive right available to the department. There are copious case-law on this point that when any law is amended then any change in procedure would take retrospective effect but if any substantive right is affected then the amendment would operate prospectively, therefore, this year when, assessee had failed to file an application for refund which was subject to section 99(2) and the same having become time-barred, it created substantive right in favour of the Department or Revenue. In view of this the amendment introduced by Finance Act, 1985 would, therefore, operate prospectively.

9. After having considered the facts and circumstances of the case we are of the view that the amendment brought in section 100 by Finance Act, 198 was of substantive nature and would have prospective operation. The amendment would not help the case of the assessee as it related to assessment year 1984-85 whereas the amendment was to have effect from the assessment year 1985-86.

10. In terms of above the appeal of assessee fails and is hereby dismissed

M.B.A./38/T.T.Appeal dismissed