I.T.AS. NOS.3027/LB AND 3028/LB OF 1996, DECIDED ON 19TH APRIL, 1999. VS I.T.AS. NOS.3027/LB AND 3028/LB OF 1996, DECIDED ON 19TH APRIL, 1999., 1999 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2949 (1999)

April 19, 1999 INCOME TAX APPELLATE TRIBUNAL PAKISTAN 1999 PTD 2949

1999 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2949

I.T.AS. NOS.3027/LB AND 3028/LB OF 1996, DECIDED ON 19TH APRIL, 1999. VS I.T.AS. NOS.3027/LB AND 3028/LB OF 1996, DECIDED ON 19TH APRIL, 1999.

1999 P T D (Trib.) 2949.

[Income-tax Appellate Tribunal Pakistan]

Present: Muhammad Mujibullah Siddiqui, Chairman, Inam Ellahi Sheikh, Accountant Member and Muhammad Tauqir Afzal Malik, Judicial Member

I.T.As. Nos.3027/LB and 3028/LB of 1996, decided on 19/04/1999.

(a) Interpretation of statutes--

---- Provision of law applicable to a certain situation, a particular treatment or recognition by one official agency could not be a bar against the application of such provision of law.

(b) Estoppel---

----Promissory estoppel ---Neither estoppel against law nor the view-point of one official/agency could be taken as a "promissory estoppel" against all other organs of the State.

(c) Interpretation of statutes-

---- Judicial function---Concept.

(d) Interpretation of statutes---

----"Construction of statutes"---Meaning.

(e) Interpretation of statutes--

Judicial interpretation---Scope---Judicial interpretation was not merely to reiterate but could be creative, of course, within the limits of the most rigorous discipline and in entire harmony with the boundaries of statute law, and previous growth---Statutes were not always rational and it may not be within the province of the Court to import rationality in an enactment under the guise of interpretation. [p. 2975] F

(f) Interpretation of statutes---

---- Ascertainment of legislative intent---Principles.

(g) Interpretation of statutes-

---- Different language in same connection in different parts of statute-- Presumption.

(h) Interpretation of statutes---

---- When two distinct words are used in the same section, rule of construction is that they do not mean identically the same thing.

(i) Interpretation of statutes-

---- Imposition of fiscal burden or charging of tax---Principles.

(j) Interpretation of statutes---

---- Word used in an enactment---Various shades of meaning---Particular meaning to be attached must be arrived at by reference to the scheme of the Act.

(k) Interpretation of statutes---

----Words used in enactment---Words take their shades and colour from the context in which they were used---Law of precedent is to be used with care and caution.

(1) Interpretation of statutes---

---- Words used in enactment---Legislature does not waste any word and when distinct words/expressions/terms are used by the Legislature, they ordinarily connote different and distinct meanings.

(m) Interpretation of statutes---

---- Intent of Legislature---No oblivion could be attributed to the Legislature.

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

----S.2(10)---Banking Companies Ordinance (LVII of 1962), S.5(b)---S.R.O. No.585(1)/87, dated 13-7-1987---Banking Company---Financial institution-- Status---Banking company and financial institution had been referred to separately and distinctly and, thus, they were to be treated accordingly for the purpose of Income Tax Ordinance, 1979---Legislature had made a clear distinction in banking company and investment finance company/finance institution in the Banking Companies Ordinance, 1962 as well---Business of assessee engaged in the business of investment finance business was not "banking company"---[ 1997 PTD (Trib.) 786 overruled].

I.T.A. No.1828/LB of 1995 and I.T.A. No.385(PB) of 1995-96 approved.

1997 PTD (Trib.) 786 overruled

1986 CLC 2197; Overseas Pak Credit and Investment Corporation (Pvt.) Limited v. Governor State Bank of Pakistan 1988 CLC 1438; Farooq Ahmad v. Federation of Pakistan 1988 CLC 1731; MaSialuxmi Bank Limited v. Registrar of Companies AIR 1961 Cal. 666; Salehon and others v. The State PLD 1969 SC 267; PLD 1989 SC 232; 1.T.As. Nos.206, 522, 523(IB) of 1997-98; I.T.As. Nos.99, 100(IB) of 1998-99; 1993 PTD (Trib.) 472; Salmond on Treatise on Jurisprudence; Crawford on Statutory Construction (p. 241);- Ramesh Metal Works v. State AIR 1962 All. 227; Seaford Court Estates Limited v. Asher (1949) 2 KB 481; S. I. Bank v. Pichuthayappan AIR 1954 Mad. 377; AIR 1953 Bom. 170; Taurquand v. Board of Trade (1886) 2 AC 286; Shams Textile Mills Limited v. Federation of Pakistan PLD 1992 Kar. 513 and Chamber's Dictionary, 1993 Edn. ref.

(o) Banking Companies Ordinance (LVII of 1962)---

----S.3-A---Banking Company---Financial institution---Status---Banking company and financial institution enjoyed separate status although a financial institution could be notified as a banking company for the purpose of S.3-A of the Banking Companies Ordinance, 1962.

(p) Income-tax---

----Banking company---Investment finance institution---Every banking company was in essence an investment finance institution as well but every investment finance institution was not a banking company.

(q) Income Tax Rules, 1982---

----R.38---Banking Companies Ordinance (LVII of 1962), Ss.7 & 5---S.R.O. No.585(1)/87, dated 13-7-1987---Banking company---Investment company-- Business---Issuance of cheque book---Investment finance company could carry on investment of finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Banking Companies Ordinance, 1962 and the Insurance Act, 1938 respectively and in this connection they will neither issue cheque books nor accept deposits---Banks and insurance companies were, specifically excluded from the definition of "investment company" by R.38, Income Tax Rules, 1982 and likewise in S.R.O. 585(1)/87, dated 13-7-1987, also the banking business and insurance business had been expressly excluded from the investment finance business---Issuance of cheque books or acceptance of deposits in connection with banking business had been specifically excluded from the "investment finance business".

(r) Banking Companies Ordinance (LVII of 1962)---

----Ss.29 & 5(b)---Banking Companies (Amendment) Ordinance (III of 1994), S.4---Banking company---Financial institution---Word "or financial institution" showed that the Legislature fully knew the definition of Banking company given in S.5(b) of the Banking Companies Ordinance, 1962 which had separately and distinctively inserted the expression "financial institution" in various sections of the Ordinance.

(s) Banking Companies Ordinance (LVII of 1962)---

----Ss.5(b) & 87---S.R.O. No.585(1)/87, dated 13-7-1987, para. 5(xx)-- Banking company---Finance company---Withdrawal of money by cheque, draft, order or otherwise---Expression "withdrawable" used in S.5(b) of the Banking Companies Ordinance, 1962 envisaged, an account current or saving and the right of the account holder to take out or remove the money gradually, though .having the right of withdrawing the amount in one transaction as well---In case of investment finance company neither there was any account of depositor opened with the finance company in the nature of current or saving account nor there was any way for gradual or piecemeal withdrawal of deposit at the option of depositor---Entire deposit was encashed on surrender of certificate of investment/deposit on maturity of certificate or prior to maturity but the repayment was in form of total disinvestments of the entire investment/deposit---In such background words "withdrawal by cheque, draft, order or otherwise" contained in S.87 of the Banking Companies Ordinance, 1962 were not without significance-- Section 87 of the Banking Companies Ordinance, 1962 provides that no person other than a Banking company, State Bank of Pakistan, National Bank of Pakistan or any other Banking institution notified, by the Federal Government in that behalf shall accept from the public deposits money 'withdrawable' by cheque ---Para. 5 (xx) of S. R. O. No. 585(1)/87, dated 13-7-1987 specifically state that the investment finance company was not allowed to do banking business and in that connection they will neither issue cheque books nor accept deposits---So far acceptance of deposits, lending the same for investment and repayment of deposits were concerned, the Banking Companies and investment finance companies both were engaged in the said activities but one of the main point of distinction drawing a broad line of demarcation and not a thin line was of receiving deposits withdrawable by cheques---[1997 PTD (Trib.) 786 overruled].

1997 PTD (Trib.) 786 overruled.

(t) Interpretation of statutes---

----Principles---When language of statute and the intention of Legislature was explicit and clear, it could not be defeated by any interpretative process or by any other doctrine of law---Interpretation of law by recourse to any doctrine or logic against the manifest intention of Legislature which could be inferred by referring the language of statute was against the golden principle of interpretation of statute.

Rana Munir Hussain, Legal Advisor for Appellant (in I.T.As. Nos.3027/LB, 3028/LB, 1228/LB of 1992-93 and 6342 of 1996).

Iqbal Naeem Pasha for Respondent (in I.T.As. NOS.3027/LB and 3028/LB of 1996).

Mehmood A. Hashmi, Advocate and Abdul Hamid Ch., F.C.A. for Respondent (in I. T. As. Nos. 1228/LB of 1992-93 and 6342/LB of 1996).

Date of hearing: 17th February, 1999.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---This Full Bench has been constituted to resolve the difference of opinion between various Benches of this Tribunal on the point of status of the Investment Banks. The point for consideration is if the Investment Banks are merely Financial Institutions distinct from Banking Companies or the Finance Companies are Banking Companies. .

2. Since there are various judgments of this Tribunal delivered by Division Benches, therefore, it would be appropriate to give a resume of the judgments already delivered on the point in issue.

3. The point in issue came for consideration before a Division Bench of this Tribunal at Lahore in I.T.A. No.1828/LB of 1995. The issue was decided vide order, dated 2nd May, 1996. This was the first judgment of this Tribunal on this issue. The relevant discussion and findings is as follows:

"(5) That leaves us with the question whether assessee company was a banking company as determined by the Assessing Officer and thus chargeable at a higher rate of tax or an investment company as claimed by the assessee and chargeable to tax at the rate of a public company. This issue has been discussed in detail in the assessment order as well as in CIT(A) order. The Assessing Officer had assigned the status of a banking company to the assessee after reproducing assessee's objections to such a treatment. The CIT(A) on the other hand, accepted assessee's claim on the basis of the very reasons that had not found favour with the Assessing Officer.

(6) Assessee's explanation for being treated as an investment/finance company instead of a banking company, were reproduced in the assessment order as under:---

(1) Government of Pakistan has granted permission to us as an Investment Finance Company and not as a Bank as defined in Banking Companies Ordinance.

(2) We have been granted licence to commence business by the Government of Pakistan, under S.R.O. 585(1)/87 and Companies Ordinance, 1984 and not by the State Bank of Pakistan as required for establishment of a Bank.

(3) The applicable rules and regulations are embodied in notification published vide S.R.O. 585(1)/87 and Companies Ordinance, 1984 and Banking Companies Ordinance, 1962 is not applicable to us, save to the extent that the Government of Pakistan is imposing its control through the State Bank of Pakistan.

(4) The company is classified as non-banking financial institution by the State Bank of Pakistan. This category includes Modarbas, Leasing Companies and Investment Finance Companies.

The explanation was not considered to be satisfactory on the following grounds:---

(1) The definition of Banking as given in section 5(b) of the Banking Companies Ordinance, refers to accepting and, lending money, which should be repayable on demand or otherwise and withdrawals by cheques, drafts, orders or otherwise. The assessee is admittedly engaged in lending and borrowing of money for which a definite procedure has been prescribed by the assessee itself i.e. issue of deposit slips and repayment on demand or on date of maturity as agreed by both the parties. The issuance of cheque and draft is not the only way for dealing in the lending and borrowing of money.

Encylopedia Britanica Volume-I defines 'banking as an institution that deals in money and its substitutes and provides other financial services. Banks accept deposits and made loans and derive a profit from the difference in the interest rates paid and charged, respectively'.

The perusal of sub-clause (3) of clause (111) of the Memorandum of Association of the companies reveals that it was established to trade in commercial papers issued by its clients, Government securities, promissory notes, banks acceptance and other money market instruments, acting either as a broker or acting on its own account.

The above facts prove that the assessee is engaged in the business of banking.

(2) The assessee is a body corporate, thus, covered in the definition of banking company vide section 2(10) of the income Tax Ordinance, 1979 read with section 5(b) of the Banking Companies Ordinance.

In view of the above facts the assessee's claim is rejected and tax rates are applied as prescribed for a 'Banking Company'.

The Banking companies are chargeable to tax at a higher rate as compared with other public companies. It is a well-established principle that an assessee cannot be subjected to a discriminatory treatment without specific sanction of law. For the purposes of deciding the issue before us, we must find out as to which companies were meant to be charged at higher rate of tax in the category of Banking Companies. The Income Tax Ordinance itself does not define the term banking company. Under section 2(10) of the Income Tax Ordinance 'banking company' has the same meaning as in the Banking Companies Ordinance. The Banking Companies Ordinance defines banking company to mean any company which transacts the business of banking in Pakistan. Section 5(b) of the Ordinance, defines banking business as under:---

'Banking means the accepting, for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.'

The Assessing Officer highlighted the nature of assessee's business to show that it carried on practically the same functions as a bank and, therefore, it was liable to tax as a banking company. On a careful perusal of the definition of banking businesses, it is evident that it involves accepting money for lending or investment but at the same time the money deposited in the bank must be withdrawable through cheque, draft, order or otherwise. Thus, one leg of the definition i.e. accepting money for lending or investment fairly and squarely covers the functions performed by the Development Finance Institutions and Non-banking Finance Institutions. However, the other leg of the definition prescribing the deposits to be withdrawable through cheque, draft, order or otherwise clearly distinguishes the banking institutions from non-banking institutions. Money deposited in bank can be easily withdrawn through the aforementioned instruments while the non-banking institutions are forbidden by law and State Bank Regulations to provide such facility to the depositors. In fact the depositor of money in these institutions are issued Certificates of Investment which are encashable only on maturity. Because of this distinction all the regulatory agencies i.e. Ministry of Finance, State Bank of Pakistan. The Controller of Capital Issue and Registrar of Companies distinguish the investment institutions like the assessee from banking institutions. It was pointed out by Respondent's A.R. that even the C.B.R. recognised this distinction. Copies of C.B.R.'s Letters C. No. IT-JI.1(48)/79, dated 9-8-1987 and C. No. IT-JI.I(48)/79, dated 18-2-1988 were produced to show that C.B.R. in consultation with the Justice Division and all the concerned authorities, decided that B.E.L., P.I.C.I.C. and N.D.F.C. were not banking companies . for the purpose of First Schedule to the Income Tax Ordinance, 1979 wherein a higher rate of tax has been prescribed for banking companies. There is no denying the fact that the assessee company falls exactly in the same category as B.E.L., P.I.C.I.C. and N.D.F.C. except for its being a private sector institution. The law certainly does not make any distinction in private or public institution in this respect.

5. It is obvious that all the abovementioned Government agencies recognise the distinction between banking and non-banking institutions, which revolves on the mode of withdrawal of money. The deposits in banks are withdrawable through cheques, drafts (etc.) which are negotiable instruments while non-banking institutions issue certificates of investment which are not negotiable instruments and these institutions are forbidden from allowing the withdrawals through cheques, etc. It was not the case of the Assessing Officer that the assessee company was indulging in any activity not authorised by its memorandum or otherwise permitted by the law. The status of a banking company had been assigned to the assessee entirely on the basis of definition of banking business which as shown above was misinterpreted. The C.I.T.' s finding that assessee was not a banking company is, therefore, confirmed."

4. The same issue was raised before another Division Bench of this Tribunal at Peshawar in I.T.A. No.385(PB) of 1995-96. The issue was decided vide order, dated 17-9-1996. In this case the Assessing Officer originally charged tax at the rate prescribed for non-banking public limited companies. Subsequently the order was rectified under section 156 after issuance of show-cause notice in this behalf. The assessee submitted following explanation in support of the contention that investment finance company was though allowed to. use the word Bank was not a banking company:---

"Section 5(b) of the Banking Companies Ordinance, 1962 defines 'banking' as follows:---

'Banking' means/the accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft or order or otherwise.

It is, therefore, clear that opening of checking accounts wherefrom the deposits are withdrawable by cheque, draft or order is a preconditions for a banking company.

(2) We would further like to add that right from the beginning we were conceived and called an Investment Finance Company; the Ministry of Finance's permission given to us called us by that name; we were registered as such under the Companies Ordinance, 1979 and our prospectus on the eve of public floatation also stated that we were an Investment Finance Company.

(3) Although we were, as special favour, allowed to use the word 'Bank' in fact, we are specifically not allowed to function as such. We cannot take deposits we can only borrow or issue certificates of investment; cannot discount pronotes/bills; cannot open current or savings accounts or issue cheque books; cannot enter into foreign trade transaction like opening of L/Cs. or negotiations of export documents. We are not admitted to the quality of banks in any of the intra or inter bank activities, including money market operation, nor the State Bank has given us the role of a bankers. These are the basic and most important functions of a bank which are not permitted to be undertaken and only because we are not a bank. If figures of wood wear human clothes, they do not become human beings. If we carry the name of bank we do not become a bank.

(4) It might be of interest to you that upto October 1993 we were not even regulated by the State Bank. It was Ministry of Finance and Corporate Law Authority from where we took our instructions and permissions etc. It was only after 5th October, 1993 that we were brought under the regulatory control of the State Bank and that, too, for the sake of business control over the Financial Markets in the country and due to the fact of scam occurring in cooperative finance company etc.

(5) It is, therefore, abundantly clear that we are an investment bank or bankers equity which are not treated as banks for the purpose of taxes.

(6) Indeed, when an application for setting up an investment bank was being moved by us and intensive feasibility was prepared and, in that, projected profits after tax were calculated on the basis of tax rates applicable to company, our first year assessment was also done on the same basis. If now that basis is totally changed investment banks would be drawn into tremendous disadvantage but not having access to many of the business activity which commercial banks are engaged in, and yet paying income tax at their rate. It will not be a surprise if some of them become non-viable entities.

In our memorandum of association, Article 22 specifically states as follows:---

Carry on any other investment finance business with the exception of the banking business as defined in the Banking Companies Ordinance, 1962 and in this connection the company will neither issue cheque books nor accept deposits.

(8) The State Bank has also defined our role as that of non-banking financial institution by designating as 'N.B.F.I.' and allowing us to deal as such."

5. The explanation was not accepted by the Assessing Officer for the reason that the basic test for treating a company as a banking company was if it was accepting deposits for the purpose of lending and investment. The Assessing Officer further observed the issuance of cheque books or draft or discounting of pronotes or bills was only a secondary issue and if the assessee could not issue cheque book or draft it did not mean that it was not a banking company because other means could be employed for accepting or making payments. The Assessing Officer was further of the view that the investment company like banking companies were subject to the regulations issued by the State Bank of Pakistan for control of their activities. The learned CIT(A) did not approve the order under section 156 and, therefore, the department preferred second appeal. The appeal pertained to the assessment year 1992-93. However, in the assessment year 1993-94 the same treatment was given by the Assessing Officer in the original assessment order under section 62. The assessee preferred first appeal and the learned CIT(A) upheld the view of Assessing Officer for the following reasons:---

(a) The company was carrying on banking business as mentioned in the Banking Companies Ordinance, 1962.

(b) It has been accepting deposits for the purpose of lending or investment and was paying back the deposits on demand or otherwise. The word 'otherwise' as mentioned in the Banking Companies Ordinance was very material. '

(c) The company has been conducting the entire business enumerated under section 7(1)(a) to (o) of the Banking Companies Ordinance, 1962.

6. Thus assessee preferred second appeal for the assessment year 1993-94 assailing the findings. It was contended on behalf of assessee company that it was as investment finance company and was not carrying on the business of banking. Reference was made to the Government of Pakistan, Ministry of Finance letter through which permission was given to the company to establish Islamic Investment Bank: In pursuance of this permission the said assessee got itself incorporated as a public limited company under the Companies Ordinance with the object of doing business as investment finance company. In the Articles and Memorandum of Association, it was specifically stated that it will not do any banking business as defined in the Banking Companies Ordinance, 1962. After making reference to the provisions contained in section 2(10) of the Income Tax Ordinance, 1979 and section 5(b) and (c) of the Banking Companies Ordinance, 1962, it was pleaded that the Banking Companies Ordinance, 1962 was not applicable to the said assessee because it was not transacting the business of banking. Reliance was placed in this behalf on para. 5(xx) of S.R.O. 585(1)187, dated 13-7-1987 under which consent was given for working as investment finance company which reads as follows:--

"(xx) Carrying on any other investment finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and the Insurance Act, 1938 (IV of 1938) respectively, and in this connection they will neither issue cheque books nor accept deposits."

7. It was pleaded that the investment finance company was specifically debarred from carrying on the business of banking as defined in the Banking Companies Ordinance, 1962. It was further pleaded that the assessee was incorporated as a public company to do business as a investment company and was never incorporated or permitted to do any banking business. It was further urged that no company in Pakistan can carrying on banking business without obtaining Licence issued by the State Bank of Pakistan under section 27(1) of the Banking Companies Ordinance, 1962. Further, plea was taken that under provision of Banking Companies Ordinance, 1962 if it appears to be State Bank of Pakistan that a company was transacting business of banking in contravention of subsection (1) of section 27, it was empowered to direct the company to furnish such information as required and was further empowered to declare that the said company doing business of banking in contravention of subsection (1) of section 27 and on such declaration the company cease to function and the said company shall be required to deposits money, movable properties, shares securities and title deeds with the State Bank of Pakistan or any other bank or person authorised by the State Bank of Pakistan. It is further provided in section 43 of the Banking Companies Ordinance, 1962 that on issuance of declaration under section 43-B the High Court shall upon an application made by the State Bank within seven days of publication of declaration in pursuance of subsection (2) of section 43-B or within such further time as the Federal Government may allow, make an order for the winding up of the company. It 'was maintained that State Bank of Pakistan being fully aware of the business transacted by the investment company never took any of the actions for transacting banking business by a company not authorised to do so but on the contrary issued Circular No.l, dated 5-12-1991 which classified the investment company as non-banking financial institution (N.B.F.I.). It was also pleaded that the mere fact that the State Bank of Pakistan had taken control and supervision of investment banks does not in any way mean that the investment bank had assumed status of banking companies. It was further pleaded that the investment company/financial institution/investment bank were not banking companies which was indicated from the fact that they could not perform following functions which clearly fell within the ambit of banking companies:

"(a) It could not have the membership of clearing houses

(b) It is debarred from opening of current and saving bank accounts.

(d) The assessee is unable to issue cheque books.

(e) It is unable to deal in foreign currency except for issuance of certificates of investment in foreign currency for a minimum maturity of three months.

(f) The assessee cannot open foreign currency current and saving accounts.

(g) It cannot candle import and export business."

8. The reference was made to the advertisement by Corporate Law Authority by which public was warned in respect of an investment bank that it was merely investment company and not a banking company. It was argued that the mere fact that deposits were received by investment company which were further invested and that profit was earned on them would not make it a banking company because nothing else can be done by Finance and Investment company if deposits were not received from customers and were not invested elsewhere and profit earned thereon. On consideration of the contentions raised before them the learned Members of the Division Bench at Peshawar held as follows:---

"We have carefully considered the arguments advanced by the learned A.R. and have also heard the learned D.R. in support of the orders passed by the Deputy Commissioner of Income-tax. We have, however, found ourselves unable to agree with the assessment orders passed by the Assessing Officer in this respect. We would on the other hand agree with the learned A.R. that the mere receipt of deposits and an investment thereof for purposes of earning profit would not render the assessee a banking company, nor would be the control by the State Bank of Pakistan, simultaneously of both of banking companies and investment companies lead to the conclusion that both the companies are in fact one and the same and are conducting the business of banking. The mere fact that banking business can be conducted with the specific consent of the State Bank of Pakistan (and in this case no such consent has been given) would prove that banking business is not conducted by the assessee company. We would accordingly direct that status may be assigned to the assessee as a Public Limited Investment and Finance Company and tax may be levied at rates prescribed for such assessees."

9. The same issue again came for consideration before another Division Bench of this Tribunal at Lahore. A contrary view was taken vide judgment reported as 1997 PTD (Trib.) 786. The decision in this case is dated 24-12-1996. It will be seen that in this judgment contrary view was taken in spite of the fact that two Division Benches of this Tribunal one sitting at Lahore and other at Peshawar had taken different view in the months of May, 1996 and September 1996. In this case also similar pleas were taken before the Assessing Officer as in the cases referred to earlier. In this case also the assessee company's contention was rejected in exactly the same word as in the case of assessee in I.T.A. No.1828/LB of 1995. The issue was taken in first appeal and the learned CIT(A) accepted the assessee's plea by placing reliance on the judgment of this Tribunal in I.T.A. No.1828/LB of 1995 re: M/s. Atlas Bot Investment Bank Limited. In the said case reliance was placed on C.B.R. Notification on 9-8-1987 whereby certain financial institutions namely B.E.L., P.I.C.I.C. and N.D.F.C. were described as non-banking institutions for the purpose of tax. The department preferred second appeal and plea was taken that under section 2(10) of the Income Tax Ordinance, 1979 a banking company was defined to have same meaning as Banking Companies Ordinance, 1962. Reference was made to section 5(c) of the Banking Companies Ordinance, 1962 according to which a banking company was described as, "any company which transacts the business of banking in Pakistan." Further reference was made to the definition of banking in sub-clause (b) of section 5 of the Banking Companies Ordinance, 1962 which says that, 'banking means the accepting for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise, and withdrawable by cheque, draft order or otherwise.. It was pleaded on behalf of the department that admittedly the investment company was accepting deposits for the purpose of lending them further or making investments and, therefore, the deposits in fact are borrowing which were returned to investors as per terms as to the period or even before the expiry of such period, therefore, the investment company was engaged in the investment as defined by law though it was not being treated so by various official agencies in Pakistan including State Bank of Pakistan. It was further pleaded that the word 'otherwise' used in sub clause (b) of section 5 of the Banking Companies Ordinance, 1962 shall have the effect of enlarging the scope of the kinds of receipts and discharge which were used by the investment company. It was further pleaded that neither the Income Tax Ordinance, 1979 nor the Banking Companies Ordinance, 1962 indicated that a company trust engage itself in all kinds of other activities commonly known as banking. It was urged that the assessee company was accepting for the purpose of lending or investment of deposits of money from the public and was repaying the said deposits on maturity or demand prior to the maturity and thus the withdrawal was being made on order by the depositor prior to maturity and on maturity which brings the transaction as withdrawal of deposits covered by the word 'otherwise' and, therefore, the revenue was not concerned with the nature of legislation regulating function of the company or the firms used by it. Reliance was placed on three judgments decided by Hon'ble High Courts of Sindh and Lahore. In the judgment re-Haideri International Finance Limited v. State Bank of Pakistan reported as 1986 CLC 2197 the declaration made by State Bank of Pakistan in terms of 43-B of Banking Companies Ordinance was assailed. The State Bank of Pakistan had declared that the company was engaged in transaction of banking business in contravention of section 27(1) of the said Ordinance. It was stated on behalf of company proceeded against that it did not issue any cheque or other documents/instruments mentioned in sub-clause (b) of section 5 of the Banking Companies Ordinance, therefore, no banking was conducted as alleged. The plea was rejected and it was observed as follows:--

"The definition of the term 'banking' given in section 5(b) (ibid) is fairly wide. The acceptance of deposits for the purposes of investing or lending but repayable on demand or otherwise, falls within the mischief of this definition. The repayment may be made through any mode and not necessarily by cheque or draft as usually practised in the recognised banks."

10. The Legal Advisor of the department further placed reliance on the judgment in the case of Overseas Pak Credit and Investment Corporation (Pvt.) Limited v. Governor State Bank of Pakistan 1988 CLC 1438. In this "case a Division Bench of Sindh High Court while upholding the validity of a declaration made by the State Bank of Pakistan under section 43-B of the Banking Companies Ordinance, 1962 treated the word 'otherwise' equivalent to (any manner). In this case it was remarked as follows:---

"The word 'Banking' as defined in section 5(b) contemplates a business where money or deposits are accepted from public for investment or lending them and further that such amount received from public is repayable on demand or by any other mode and can be withdrawn by cheque draft or in any other manner

11. Reference was made to another case, Farooq Ahmad v. Federation of Pakistan 1988 CLC 1731. In this case the petitioner was engaged in banking business in contravention of section 27-A and show-cause notice was issued as to why he should not be prosecuted. It was pleaded that investment was invited through Newspapers but no investment was received in response and, therefore, the penal provisions of Banking Companies Ordinance were not attracted. The prosecution was, however, initiated. On behalf of assessee it' was contended that 'banking' and 'investment business' are totally different as they were regulated by different legislations though at times and for specific purposes, the authorised agency to monitor banking activities, the State Bank of Pakistan also oversees the activities of investment companies and other financial institutions. It was pleaded that it was not possible to do banking without specific permission in this regard from the State Bank of Pakistan. Lot of emphasis was laid on the point that the assessee company does not issue a cheque book in order to collect from other bank for. or on behalf of its customer or depositors and, therefore, it was not doing banking business and cannot be treated as banking company.

12. References were made from the. English jurisdiction to the cases defining. characteristics of banking and reference was made to Halsbury's Laws of England. Reliance was placed on a Division Bench judgment of Calcutta High Court in the case of Mahaluxmi Bank Limited v. Registrar of Companies AIR 1961 (Cal.) 666. It was held while interpreting similar provisions contained in section 5(1)(b) of Indian Banking Companies Ordinance, 1949 as follows:---

"Now this definition makes it clear that receiving money on deposit from customers and honouring their cheques is the essential characteristic of banking. The money deposited by the customers can be utilised by the banker for lending it or for investing it but the bank also undertake the obligation to repay the deposit on demand or otherwise and the mode by which the withdrawal of the deposit can be effected is by the issue of cheques, drafts, orders or otherwise, that is by like method."

13. The learned Members of the Bench did not accept the contentions raised on behalf of the assessee. The earlier judgment of the Division Bench of this Tribunal in the case of Atlas Bot Investment Company was not followed for the reason that the attention of learned Division Bench was not invited to the three cases decided by the Lahore High Court and Sindh High Court and particularly in the case of Haideri International Finance Limited. The learned Division Bench held as follows:---

'The definition of banking as contained in section 5(b) of the Banking Companies Ordinance, 1962 can be better understood if it is divided in the parts in which it has been framed. The first part of the definition "accepting, for the purpose of lending or investment, of deposits of money' gives the substance and real nature of this business. It is accepting moneys from public and then lending it or investing it in the ventures considered suitable. An account-holder or a depositor with a bank is its creditor, which literally means 'the trusts'. It is the trust of the depositor that he will have his money back as and when needed or in accordance with the terms settled as to period which is the raison detre of the whole banking system. The later half of the definition is again divisible in two parts. The first 'repayable on demand or otherwise' indicates that the money deposited is repayable as and when asked by the depositor or 'otherwise'. The use of word 'or' between 'demand' and 'otherwise' points out a different situation if not opposed to it. This different situation is 'when it becomes payable.' It may also be read to mean 'or any other eventuality' besides demand. The re payability can be predetermined by the parties as to the time, mode notice or by other similar stipulations. The 'payability' occasionally may also arise for unseen reasons or those beyond the control of the creditor and the debtor the banker and the customer. In old days when both bankers and customers were individuals, death of any of them made the amount immediately repayable. This remains true as for natural creditors or depositors are concerned. Nowadays where many a times both the bankers and the customers are legal or juridical persons their death can happen by liquidation or by similar other modes of extinction depending upon the nature of their birth, the creation of incorporation. The later part of the definition prescribes how the monies deposited can be withdrawn. Here again the use of word 'or' after the three modes cheque, draft, order amply indicates that the Legislature did not intend to restrict the with draw ability to the three alternates. This intention is further evident from the use of word 'otherwise' at the end. According to Black's Law Dictionary, 5th Edition, page 987 the word 'or' is a disjunctive particle used to express an alternate or to give a choice of one among two or more things. The word 'or' is to be used as a function word to indicate an alternative between different or unlike things. In the same book at page 992 the word 'otherwise' has been stated to mean 'in a different manner; in another way or the other ways'. The Supreme Court in PLD 1969 SC 267 re; Salehon and others v. The State found that though the word 'or' ordinarily is used in disjunctive sense the intention of the Legislature may be to read 'or' and 'and' one for the other. In the definition before us, however the word 'or' both as an alternate or a conjunctive will not support the submission of the assessee on account of the use of word 'otherwise' at the end of the clause. In the first part 'or' indicates something different from demand, and in the last part a mode besides the three stated.

Accepting the interpretation of the assessee that monies are withdrawable only by cheque draft order would mean to ignore completely the two words 'or otherwise' as used in the definition. This is not permitted by any cannon of interpretation of statutes. Redundancy to a letter of law cannot be readily presumed particularly when these do not lead to absurdity or confusion. Slicing away a part of the definition will rather be offensive to the whole clause. The Supreme Court in PLD 1989 SC 232 has settled the principle as for taxing statutes are concerned. It is that words of a statute should neither be stretched in favour of the State nor to be narrowed in favour of the taxpayer.

The definition of 'banking' in the Banking Companies Ordinance, 1962 appears to have been borrowed from the Negotiable Instruments Act, 1881 (XXVI of 1881), section 3(b) which defines a 'banker' in almost similar words. The difficulty in the present case is that the assessee wishes to see the definition interpreted- purely in the perspective of the actual practice being followed by such institutions world over. Its reliance on the cases from the above English and Indian jurisdictions amply expresses this desire. However, these cases are clearly distinguishable. In Paget's Law of Banking (supra) it has been observed that 'banking' has not been defined anywhere. Therefore, the three supposed ingredients have been picked up to define it. These ingredients in fact are the practices or most prominent ways of doing the business of banking. These indicators have emanated from the practice of bankers rather than any law or legislative instrument. The situation in re: Dominions Trust Limited (supra) is exactly the same where their Lordships of Court of appeal repeatedly refer to modern day banking practice rather than any letter of law. These practices or characteristics, as their Lordships would prefer to call them, them self speak of the changes went around since the inception of the institution. In the same judgment Harman, L.J. while delivering the order relied upon another case re: Bank of Chettinad Limited of Colombo (supra) which supports the submission of the Revenue before us that the words of statue in that case were different from those in consideration before us. The definition of banking company before their Lordships in that case as reproduced in para. 19 (ante) appears somewhat similar to the one before us. However, in that definition the last two words 'or otherwise' as used in Banking Companies Ordinance, 1962 are missing, this is the different and as said above, the basis of the contentions of the learned A.R. for the assessee; to look at banking either from pure practical aspect or to accept the definition without the last words used namely, 'or otherwise'. We will refuse to oblige for the simple reason that here we have a delimitation of a business which needs to be seen through the-letters of, law the windows opened to look at banking rather than looking at the-.words of the statute from behind a bank counter. Learned A.R. for the assessee may well be right in explaining the common aspects of modern banking. However, his contentions cannot be granted because our consideration of the scope of banking must remain confined to the words used in the statute. These words can neither be enlarged ignored or squeezed to be pushed into the supposed pattern of practice. His Lordship M: Afzal Lone, J. -in re: Haideri International Finance Limited,(supra) has pointed out the difference as noted above in para. 10 ante. .It is that according- to the definition clause in consideration before us the issuance of cheque is not essential to constitute banking notwithstanding the practice of modern banking. The issuance of cheque though is an important aspect of banking their non-issuance will not take any activity outside the definition of other attributes stated therein are fully answered. To hold otherwise, or to say where no cheque draft or order is used .for withdrawals a company cannot be said to be engaged in banking will make almost half of the Banking Companies Ordinance, 1962 as ineffective and irrelevant. As found by their Lordships of the Karachi and Lahore High Courts in the aforesaid cases while repelling the contentions of companies charged with engagement in banking use of a cheque, draft or order is not invariably necessary to hold a company as a banking company. In fact this was one of the most important submissions for defence in these three cases. The petitioners failed as the learned Judges felt that withdrawal by cheque, draft or order was not necessary to invoke the above regulatory powers of the State Bank of Pakistan.

Learned A.R. for the assessee as an alternate seeks to invoke the `rule of ejusdem generis while interpreting the definition clause, particularly, the last two words. Ejusdem generis, according to Black's Law Dictionary, 5th Edition page 464 literally means, of the same kind, class or nature. "The ejusdem generis rules, in construction of laws, wills or other instruments is that where general words follow an enumeration 'of persons or thing by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but to be held as applying only to persons or things of the same general kind or class as those specifically mentioned. This rule according to the Dictionary does not necessarily require that general provision be limited in its scope to the identical things mentioned. In the facts before us the rule is not attracted as the words or otherwise' are not of general nature as opposed to earlier things mentioned, i.e. cheque, drafts, order. Bearing in mind the earlier stated meaning and explanation in Black's Law Dictionary the word "otherwise" cannot be described as belonging to the genre of the earlier three words or modes of payability. Therefore, we will not allow the argument. All the more so because in at least two cases relied upon by the Revenue namely, 're: Farooq Ahmed (supra) and. M/s. Haideri International Finance Limited (supra) the Karachi and Lahore High Courts have interpreted these two words in different manner. In the first case at page 1735 of -the report the last two words of the definition clause have been treated equivalent to 'any other manner'. The relevant portion reads, 'According to section 5(b) acceptance of deposits of money from public for lending or investment purposes which is made repayable to the creditor on demand or any other manner and can be withdrawn by cheque draft order or in any other manner amounts to transacting banking business'. In the second case, re: Haideri International Finance Limited para. 25 at page 2209 opens with these words. 'The definition of the term 'Banking' given in section 5(b)(ibid) is fairly wide. The acceptance of deposits for the purposes of investing or lending but repayable on demand, or otherwise, falls within the mischief of this definition. The repayment may be made through any mode and not necessarily by cheque or draft as usually practised in the recognized banks.'

The rule, if applied, will still enlarge the scope of modes of reparability to 'like methods' as interpreted by H.K. Bose, J. in re: Mahalukshmy Bank (supra) a case relied upon by the assessee and to other manners as found by the Lahore and Karachi High Courts in the above cases. A like method or other manner in such case keeping in view the first cited three modes would mean any kind of document acceptable to or agreed upon between the parties evidencing deposit and when presented or surrendered will legally discharge the banker of its liability whether or not such discharge is further solemnized by express words or an acknowledgment of the depositors. The result would be that if moneys deposited or entrusted are `also withdrawable, besides the three modes, by an instrument of a kind, which can be treated as an evidence of valid discharge the activity conducted would be banking when co-related with other requirements of the definition. Therefore, in every case of banking business, as pointed out by their Lordships in re: Woods v. Martins Bank (supra) and. re: Bombay v. Bank of Montreal (supra) it would predominantly be a question of fact to be resolved before reaching a conclusion. Whether an assessee is engaged in banking as defined in the Banking Companies Ordinance read with section 2(10) of the Income Tax Ordinance will depend largely upon the facts in every case. An activity cannot be branded or held to be banking unless so determined as a matter of fact. If the facts of a case clearly point out and answer all the conditions given in the above definition clauses, it will hardly be of any difference if the State Bank or another regulatory body treats it otherwise. The thin lines, if there are any, prescribed by the regulatory bodies are not inviolable not are these permanent boundaries which must be respected by every other agency. The treatment extended to an assessee by one official agency may at least be one of the pleas or defences which may be put up. However, if a provision of law is clearly applicable to a certain situation, a particular treatment or' recognition by one official agency cannot be a bar against the application of that provision of law. There is neither an estoppel against law nor the view point of one official agency can be taken as a promissory estoppel against all other organs of the State. It may further be noted that the alleged 'finance investment' business is a recent development and distinction made by the State Bank of Finance Division relates more to its fiscal policies rather than a category recognizable at law. The term 'investment finance business' has not been defined anywhere, not even in the said S.R.O. No.585(1)/87 under which the assessee was granted a licence to operate. The State Bank can conveniently allow a party to do banking without treating it as a bank. However, as long the above definition clause, as it stands, remains a part of the statute, a changed nomenclature will not alter the intention and desire of the Parliament Law, it is perhaps rightly said, sometimes lags behind practice. Yet its certainty, consistency and persistency are vital for any legal system to exit. No fault lies with the words of law used or employed to express a situation which will incurably be the comprehension of drafters and Legislators at the particular time in history. The fault, if any, lies with those who, in spite of felling winds of change are slow in taking alongwith words of law to the changing directions.

In the above case relied upon by the assessee re: D.C.I.T. v. Atlos Bot Investment Company Limited (supra) a Division Bench of this Tribunal rejected the departmental plea against the First Appellate Order whereby the assessee was held to be an investment company and not a banking company as treated by the Assessing Officer. Mr. Iftikhar Ahmad Bajwa, learned Accountant Member while speaking for the Division Bench upheld the First Appellate order for two reasons; firstly that though first part of the requirement namely acceptance of money for lending or investment was present in the case of that assessee and second leg, withdrawability by cheque, draft, order was not available. Secondly, that for such reason similar institutions were not being treated as banking companies by various official agencies.

As noted earlier these reasons are now being advanced at the bar for the assessee. However, the submission based upon these reasons cannot be granted. It appears that the attention of the learned Division Bench was not invited to the aforesaid three cases decided by the Lahore and Karachi High Courts. Particularly the one re: Haideri International Finance Ltd. (supra) At a stage we considered reference of the issue for constitution of a Larger Bench-but refrained on account of the fact that the judgments of the High Courts are binding upon this Tribunal. Even a Larger Bench would not be of any difference as far as ratio settled in the above cases is concerned. We are aware of the general principle that order of a Division Bench is binding upon another Bench of equal strength, Yet, when it is placed with an express ratio of a judgment of High Court, the later has a binding for& even it is a Single Bench judgment against a Larger Bench order of this Tribunal.

The final analysis being that the definition of the banking company as contained in section 2(10) of the Income Tax Ordinance read with clause (b) of section 5 of the Banking Companies Ordinance, is fairly wide. The fact that a company accepts deposits for investment or lending falls within its ambit if other indicators are also present. The second portion of the definition contains the test which in turn refers to the actual practice of a company by prescribing as to how and when these deposits are demanded and paid back. Thus, certain modes of re-payment or withdrawalas are considered as relevant for consideration of banking business. Mere fact that a company is not effecting withdrawals by cheques, drafts, or orders will not by itself take it outside the mischief of the definition clause. However; whether a company is engaged in banking is predominantly a question of fact to be answered .in the light of the parameters given in the definition clause. The burden of such proof will Ordinarily rest upon the Revenue. Treatment extended to company by various official agencies including State Bank of Pakistan does not, per se, mean that for 'income-tax purposes the same treatment must be extended to such a company. If a company actually conducting the business of banking no legal bar exists to hold it so. However, burden of roof to establish this fact will be even heavier on the Revenue in cases where other official agencies treat the assessee as a non-banking company. In the case before us the vital aspect of determination of mode and character of 'documents used for withdrawals having not been considered we will remand the matter to the Assessing. Officer. He will investigate the, exact nature of business of the assessee, the kind of nature of the documents being used while accepting deposits, procedure for demand and repayment or withdrawals made in the light of the observations contained in para. 25 above."

14. Before hearing of the present appeals before us, the issue was raised before a Division Bench of this Tribunal at Islamabad on 26-1-1999, in I.T.As. Nos.206, 522, 523(IB) of 1597-98 and I.T.As. Nos.99 and 100(IB) of 1988-99. The judgment was delivered on 10-3-1999. The learned Members of the Division Bench sitting at Islamabad considered the provisions contained in sections 2(10) and 2(16) of the Income Tax Ordinance, 1979, section 5(b), (e) and (e) of the Banking Companies Ordinance, 1962 and section 2(7), (8), (9, (20), (28) and (30) of the Companies Ordinance, 1984. They further considered the relevant provisions contained in S.R.O. No. 585(1)/87, dated 13-7-1987 issued by the Federal Government in exercise of power under subsection (4) and (4-A) of section 3 of the Capital Issues (Continuance of Control) Act, 1947 relating to investment finance companies for issue of capital for making a public offer or taking any of the action under subsection (2) or subsection (3) of the said section. They particularly referred to clause 5(xx) of the above Banking Companies Ordinance, 1962. After referring to the definition of banking as contained in section 5(b) of the Banking Companies Ordinance, 1962 the Division Bench examined if the investment finance company was indulged in the activity and business of banking as defined in the said law. The Division Bench after narrating the events commencing from incorporation of the Finance Investment Company under the Companies Ordinance, 1984 to the grant of licence by Ministry of Finance Government of Pakistan under S.R.O. No. 585(1)/87 observed that all the related formalities in respect of the assessee company were dealt with in accordance with the provisions contained in Companies Ordinance, 1984 and not a single formality was ever undertaken and was observed under the law of banking companies (The Banking Companies Ordinance, 1962). The A.R. of the assessee took almost all the pleas taken on behalf of assessee before the Division Bench at Lahore in the case reported as 1997 PTD (Trib.) 786. Reference was made to the case of Haideri International Finance Limited (supra) also. It was contended that the State Bank of Pakistan conducted investigation and found that the said company was conducting business of banking without obtaining licence from State Bank of Pakistan and thereafter, the Governor of State Bank of Pakistan ordered the closure of Haideri International Finance Limited. It was submitted that no such action has been taken against the assessee. The finance investment company, and, therefore, the ratio of the said case was not applicable. Reference was made to another decision of this Tribunal in the case of Bank of Punjab reported as 1993 PTD (Trib.) 472 in which the Bank of Punjab was categorised as public company. Reliance was placed on the earlier decision of Division Bench of this Tribunal at Lahore in the case of Atlas Bot Investment Company Limited. It was finally held that the finance investment company was not a banking company. The Division Bench at Islamabad held as follows:---

We have to analyse the situation as to whether the assessee company was fulfilling the criteria of 'banking' as defined in the said definition under the Banking Companies Ordinance, 1962. It was clear that .the assessee company was dealing in investment through deposits from the public. The next stage would be as to whether such investments are repayable on demand. On the deposits in the assessee company certificate of investment are issued to the depositor for maturity of not less than thirty days and on maturity the depositor is issued cheque drawn on the account of the company with a scheduled bank. It covers to some extent the repayability in the context of word used 'repayable on demand' in the definition of bank under the Banking Companies Ordinance, 1962.

Now we have to see the withdrawability by cheque, draft order or otherwise. Everything like that of withdrawability by cheque, draft or order was missing in the case of the assessee company. Here the word 'otherwise' to some extent haunts the situation but that cannot be stretched to the case of the assessee company to attract the concept of withdrawability by cheque, draft or order which was altogether missing in this case. Moreover, the reasons advanced by the learned Member of the Bench in I.T.A. No. 1828/LB of 1995-96 were fully appealing to the mind to suggest that the deposits in the banks were withdrawable through cheques, drafts etc. which were negotiable instruments while non-banking institutions issue certificates of investment which were not negotiable instruments and these institutions were barred since their inception from allowing withdrawing deposits/money through cheques.

Therefore, we are of the view that the activities being carried out by the assessee company were not clearly falling within the activities and definition of 'banking business'. Moreover, the assessee company was neither granted any licence by the State Bank of Pakistan for banking business nor the State Bank of Pakistan took notice of any such activity within the assessee company or initiated any proceedings against the assessee company under sections 43-A and 43-B of the Banking Companies Ordinance, 1962. We may like to add here that the mere use of name or word 'Bank' which was so inserted by the assessee company by the permission of the Federal Government would not tantamount to drag the case of the assessee company within the purview and ambit of a banking company. No plausible arguments have been advanced on behalf of the department to rebut the contentions raised on behalf of the assessee/ company.

So, we are of the considered opinion that the assessee company is not a banking company for income-tax purpose and it being a limited company is liable to be taxed with the tax rate applicable to a limited company in accordance with the relevant provisions of para. A of Part V of the First Schedule to the Income Tax Ordinance, 1979."

15. A resume of the various decisions of this Tribunal on the point in issue shows that there are three judgments of the Division Benches sitting at Lahore, Peshawar and Islamabad wherein it has been held that investment finance companies is not a banking company for the purpose of Income Tax Ordinance, 1979, while contrary view has been taken by one Bench sitting at Lahore. Although the learned Division Bench which delivered judgment reported as 1997 PTD (Trib.) 786 remanded the case back to Assessing Officer for certain factual enquiries but in substance the point of law was decided against the assessee as it has been held that the accepting of deposits for the purpose of investment or lending but repayable on demand or otherwise falls within the mischief of the definition of banking given in section 5(b) of the Banking Companies Ordinance, 1962 which definition has been adopted in section 2(10) of the Income Tax Ordinance, 1979. It was further held that the repayment may be made through any mode and not necessarily by cheque or draft as usually practiced in the recognized bank. In fact this was the finding of Hon'ble Lahore High Court in the case of Haideri International Finance Limited.

16. The learned representatives for the patties have placed reliance on the case law already referred to in the earlier judgments with the addition of few cases which we will be considered presently. Mr. I. N. Pasha and Mr. Mahmood A. Hashmi have raised the points which were agitated in earlier cases also with the difference that the points have been discussed more elaborately more logically, with greater legal acumen, on higher philosophical plane and with the best possible scholarly presentation of the issues.

17. We have given our very careful consideration to the contention raised before us. After a very careful and anxious consideration of very scholarly arguments addressed from both the sides we are of the opinion that in the wake of very high sounding philosophical and academic arguments some very basic principles of the dispensation of justice, jurisdiction of the Courts, authority of the Courts while examining the application of laws and their implications as well as the role and limit of interpretations of statutes have gone in the hind side of the high sounding and to writing arguments. The result is that the learned representatives for the parties as well as learned Division Benches got side tracked and then travelled much wider and of the point which required consideration for deciding the point in issue in the context of Income Tax Ordinance, 1979, the law with reference to which the issue arose for consideration. Before we embark upon considering the issue with reference to provisions contained in the Income Tax Ordinance, 1979 and the Banking Companies Ordinance, 1962, it is imperative to capitulate some fundamental principles which are to be kept in view while construing and applying the provision of law by the Courts. The first and fore most point which should never be lost sight of, is that the legislation and enactment of laws, lies within the exclusive domain of the Legislature and it has been very rightly described by Salmon in his treatise on jurisprudence that interpretation or construction is the process by which the Courts seek to ascertain the meaning of the Legislature through the medium of the authoritative forms in which it is expressed. Another learned author has said in his book on, jurisprudence, 'the function of the Judges, in interpreting statutes is two-fold. In the first place they must decide upon the exact meaning of what the Legislature has actually said, and, in the second place they must consider what the Legislature intended to have said.' Crawford in 'statutory construction' at (page 241) has quoted as follows, from the judgment in the case of Anderson v. City of Hattiesburg:---

"A Court will resort to interpretation when it endeavours to ascertain the meaning of a word found in a statute, which when considered with the other words in the statute may reveal a meaning different from the apparent when this word is considered abstractly or when given its usual meaning."

Thus the judicial function is confines' to applying what Legislature has enacted after ascertaining what it is, that the legislature has enacted. In doing I so it has to be kept in view that law is, however, not an exercise in linguistic discipline. It is emerging as an important therapy in disorder of social metabolism. It is a complex process, and can be fully understood only by an attentive regard to its therapeutic function and its synthesis. There is accordingly growing recognition by Courts that a statute should be construed, rather than interpreted with due regard to its avowed object and to its character. It has been held by Full Bench of Allahabad High Court in the case of Ramesh Metal Works v. State AIR 1962 All. 227 that the art or interpretation is the 'art of proliferating a purpose'. Justice Hegde bf the Supreme Court of India has given a very lucid exposition of the principles of the interpretation of statute which is as follows:---

"The statute is expressed in definite written words. They have been selected not for their symbolic or esoteric value, not even for their logical or aesthetic quality but primarily to let us know the statutory purpose. But if the words are not ends in themselves at all, may they be disregarded as entities? In recent years we have been invited with considerable vehemence to consider the science of semantics. It is still the popular notion that a word is a unit more or less solid, capable of being translated or paraphrased by other words and retaining a constant relation of equivalent to this translation or paraphrase . . . . . .

What both lawyers and moralists declared to be an unmistakable evil was a far-fetched and strained interpretation that made a law harsh in application when it was not designed to be. It was this sort of interpretation that was originally meant by a 'construction'. A 'construction' meant an addition to the statute of things that were not in it at all, a deflection from the right sense. These constructions, said a fifteenth century chronicle, were 'subtle and sinister thing,' by which the true meaning of a statute was impugned and overthrown. Bacon warns Judges to beware of 'hard constructions and strained inference.' When, later, 'construction' came to be practically the equivalent of 'interpretation' it still occasionally suggested something undesirable. Popular feeling definitely regarded both 'construction' and 'interpretation' with hostile eyes. There was always a persistent belief that there is a 'true' and a 'just' meaning to words, and that if anyone speaks of construing or interpreting, he is doing violence to this true and just meaning. It suffers, however, from the fatal defect that there are almost always several meanings equally true and just, so that the problem of choice is presented, after all. Evidently this is not a choice between the 'spirit' and 'the letters'. Generally we take it to be a choice between a 'broad' or a liberal' construction and a 'narrow' or 'restrictive' one

A statute is better described as an instruction to administrators and Courts to accomplish a definite result, usually the securing or maintaining of recognized social, political, or economic values. If figures of speech will help, we may call the statute a ground design, or a plan in which the character and size of a structure are indicated, and in which details are given only so far as they are necessary to assure the election of the desired structure. We may follow the

figure further, in these days of priorities, and say that details of construction may sometimes be provided in order that losses may not be suffered in other social structures of equal or even greater value . . . .

It ought not to seek to justify itself by leaning upon the dictionary or other meaning of this or that word or phrase of the statute's instrumental part ......

The determination both of purpose and means must be effected by reading the words of the statute. To be sure, as even the orthodox canons of interpretation tell us, it should be from a reading of the whole statute and not from an examination of detached words. We cannot lift ourselves out of a consideration of the language of a document merely by lofty reference to spirit, purpose and method.

The law is not static, but is a dynamic process. The task of judicial interpretation is not merely to reiterate. Judicial interpretation can be creative, but, of course, within the limits of the most rigorous discipline and in entire harmony with the boundaries of statute law, and previous growth. Statutes are not always rational and it may not be within the province of the Court to import rationality in an enactment under the guise of interpretation.

The Courts have five principal avenues of approach to the ascertainment of legislative intention.

(1) examination of social background, as specially proved if not within common knowledge, in order to identify the social juristic defect which is the likely subject of remedy:

(2) a conspectus of the entire relevant body of the law for the same purpose;

(3) particular regard to the long title of the statute to be interpreted (and where available, the preamble), in which the general legislative, objectives will be stated;

(4) scrutiny of the actual words to be interpreted in the light of the established canons of interpretation;

(5) examination of the other provisions of the statute in question (or of the other statutes in pari materia) for the light which they throw on the particular words which are the subject of interpretation.

18. Lord Denning remarked in Seaford Court Estates Limited v. Asher (1949) 2 KB 481 as under:

"Whenever a statute comes up for consideration, it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise; and that, even it is were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of the Acts of Parliament have often been unfairly criticised. A Judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the Judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears, a Judge cannot simply fold his hands and blame the draftsmen. He must set to work on the constructive task of finding the intention of Parliament, and he must do this, not only from the language of the statute, but also from a consideration of the social conditions which give rise to it, and of the mischief which it -was passed to remedy, and he must supplement the written word so as to give force and life to the intention of the Legislature. That was clearly laid down by the Resolution of the Judges in Hydon's case which is set out by Lord Coke in the third volume of his reports, and it is the safest guide today. Good practical advice on the subject was given at about the same time by Plowden in the second volume. Put into homely metaphor it is this: A Judge should ask himself the question: If the makers of the Act had themselves come across this ruck in the texture of it, how would they have straightened it out? He must then do as they would have done. A Judge must not alter the material of which it is woven, but he can and should iron out the creases."

19. It is a common practice of legislative bodies to define word used in statute and to place such definition in general interpretation of statute. However, definition in statute must be read subject to qualification variously expressed in the definition clauses which created them such as 'unless the context otherwise requires'. Thus, by now it is an established principle of construction that statutory interpretation clauses or definitions should be read subject to qualification therein expressed. This is so even where the definition is exhaustive. So, where the defined word means or includes a certain thing, it may well be otherwise if the subject or context in any part of the statute so requires. An interpretation clause of comprehensive character is not to be taken as strictly defining what the meaning of a word must be under all circumstances but merely as declaring what things may be comprehended within the term, where the circumstances require that they should S.I. Bank v. Pichuthayappan AIR 1954 Mad. 377.

20. Another important principle to be kept in view is that the Legislature is deemed not to waste its words or to say anything in vain. The presumption is always against superfluity in a statute. Effect should be given to every part of section in an enactment. It should not be consumed that the Legislature used language without any purpose. As far as possible, full meaning must be given to every word of a statute. It is well settled principle of construction that every word in a statute is designedly used, and an interpretation must be avoided which would render the provision either nugatory or part thereof otiose. No part of a provision of a statute can be ignored by saying that the Legislature enacted the same not knowing what it was saying. No oblivion can be attributed to the Legislature. The Legislature is presumed to know the meaning, scope and connotation of every word used by it and, therefore, when any word or term is used which normally comprehends so many things and in spite of the other distinct term is used, it requires a serious consideration as to why a distinct word has been used separately, if without using the said word or term the purpose could be achieved in ordinary course by use of a general term already used by the Legislature. Thus, when a general term is used by the legislature in a particular statute and at the Legislature at the same time has used other distinct a specific term. The meaning of general term may be restrained and limited by specific word which has been knowingly and deliberately used by the legislature. As stated earlier the Court is required to ascertain the real meaning of a legislation. In order to arrive at the real meaning, it is necessary to get an exact conception of the aim, and object of the whole Act. The true meaning of any passage is to be found not merely in the words of the passage but in comparing it with other parts of the law. Construction is to be made of all parts together, and not of one part only by itself, because the true meaning is that which harmonised with every other passage of the statute. In interpreting an enactment all its parts must be construed together as forming one whole and it is not in accordance with sound principles of construction to consider one section, or group of sections alone, divorced from the rest of the statute. The intention of the legislature is to be derived from a consideration of whole enactment and the words may be given a wider or more restricted meaning than they ordinarily bear if the context requires it, It is also well-settled that the language of a statute constitutes the depository or reservoir of the legislative intent, and in order to ascertain or discover that intent, the statute must be construed as a whole just as it is necessary to consider a sentence in its entirety, in order to grasp its true meaning. Meaning of certain words used in a section may be construed by attending to such other provisions of the statute as may tend to throw light upon them. When construing the terms of any provision found in a statute, the Court is bound to consider other parts of the statute, which throw light on the intention of the legislature and serve to show that the particular provision ought not to be construed as it would be alone and apart from the rest of the statute. No pari of a statute should be construed in isolation. For the intention of the law-maker is to be found not in one part of the statute or another but in the entire enactment and that intention can best be gathered by viewing a particular part of the statute not detached from its context in the statute but inconnection with its whole context.

21. Another principle to be kept in view for ascertaining the real intent of legislature is that when the legislature uses different language in the same connection in different parts of the statute, it is presumed that a different meaning and effect was intended, and if different language is used in contiguous provisions, it must be presumed to have done so designedly. When two distinct words are used in the same section, the ordinary rule of construction is that they do not mean identically the same thing. When two words of different import are used in a statute it would be difficult to maintain that they are used in the same sense. It has been held by the Bombay High Court in the judgment reported as 1953 AIR (Bom.) 170, that if the different expressions have been used by the same statute, specially in the same section they must be attributed to different senses. This principle is connected with the principle discussed earlier that the legislature does not waste the words, meaning thereby that if the legislature has used two different words, terms or expressions than normally distinct and different connotation should be attributed to them.

22. There is another important principle of law pertaining to the imposition of fiscal burden or charging of tax, that it should be imposed by unequivocal and unambiguous language. Taxing statutes must state with the utmost clearness what and whom and in what manners they are taxing. Likewise the extent of fiscal burden should also be in clear words and without any ambiguity. In any taxing provision if there are two possible constructions of the words of the statute then effect is to be given to the one that is in favour of the citizen and not the one that in enhances a burden or increased burden on him. Neither any tax nor any higher rate of tax can be imposed by any interpretive process. No provision in fiscal statute can be extended on analogy and, therefore, the Court would never be justified in straining the language in order to hold a subject liable to tax or to a higher rate of tax than by looking at the clear words used by the legislature.

23. In the light of above principles we now proceed to consider the relevant provisions in the Income Tax Ordinance, 1979 as well as the provisions contained in the Banking Companies Ordinance, 1962. It would be appropriate to reproduce the relevant provisions contained in the Income Tax Ordinance, 1979 and Banking Companies Ordinance, 1962 on which the learned representatives for the parties have placed reliance, which reads as follows:---

"Section 2 (10) of the Income Tax Ordinance 1979:

2(1): 'Banking company' has the same meaning as in the Banking Companies Ordinance, 1962 (LVII of 1962), and includes any body corporate formed by, or under any law for the time being in force which transacts the business of banking in Pakistan

Section 5 b and c of the Banking Companies Ordinance 1962:

5(b) Banking' means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque draft, order or otherwise.

5(c) 'Banking company' means any company which transacts the business of banking in Pakistan:

Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause:

Section 3-A of the Banking Companies Ordinance,, 1962

(As inserted by Banking Companies (Amendment) Act (XXX of 1972)

3-ALimited application of Ordinance to certain financial institutions: The provisions of sections (6, 25, 25-A, 29, 32, 33, 40, 41, 42, 83, 84 and 941) of this Ordinance shall, with such modifications as the State Bank may determine from time to time apply, namely:

(i) First Credit and Discount Company Limited; and

(ii) Prudential Discount and Guarantee House Limited:

In relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment Corporation of Pakistan, the National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation and such other companies, corporations or institutions, as the Federal Government may from time to time, by notification in the Official Gazette, specify in this behalf.

Section 3-A of the Banking Companies Ordinance, 1962

(As substituted by Banking Companies (Amendment Act (XIV of 1997)

3-A(l) The provisions of sections 6, 25, 25-A, 25-AA, 29, 31, 32, 33, 40, 41, 41-A, 41-B, 41-C, 41-D, 42, 83, 84 and 94 of this Ordinance shall, with such modifications as the State Bank may determine from time to time in relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment- Corporation of Pakistan, the National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation, the National Development Finance Corporation, the Pakistan Kuwait Investment Company Limited, the Bankers Equity Limited, the Pak-Libya Holding Company Limited, the Saudi-Pak Industrial and Agricultural Investment Company Limited, the Small Business Finance Corporation, the Regional Development Finance Corporation, Investment Finance Companies, venture capital companies, housing finance companies and such other companies, corporations or institutions or class of companies, corporations or institutions which carry on one or more of the business enumerated in section 7 of this Ordinance, save and except for leasing companies and modaraba companies, as the Federal Government may from time to time by notification in the Official Gazette, specify in this behalf.

Section 87 of the Banking Companies Ordinance, 1962

87: Restriction on acceptance of deposits withdrawable by cheque: No person other than a banking company, the State Bank, the National Bank of Pakistan or any other banking institution notified by the Federal Government in this behalf shall accept from the public deposits of money withdrawable by cheque.

Section 27 A of the Banking Companies Ordinance. 1962 .

27-A Prohibition of advertising for deposits and collection. Notwithstanding anything contained in any other law for the time being in force, no company, firm or person, not being a banking company/or a corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues or the Corporate Law Authority or the registrar Cooperative Societies, shall solicit or invite deposits of money from the public through advertisements in the public media or by postal circulars, handbills, displays in public places or by any other means, or collect or receive any deposits of money in pursuance thereof:

Explanation: For the purpose of this section, 'deposits of money' shall be deemed to include money called, invited or collected for the purpose, or declared object, of investment or borrowing in any business carried on, or proposed to be carried on, by the company, firm or person by whom, or on whose behalf, such money is called, invited, collected or received irrespective of the nature of the relationship, arrangement or terms offered or provided by such company, firm or person to the person making the investment, deposits of money or payment or of the basis or understanding on which the money is so called, invited, collected or received.

Section 29 of the Banking Companies Ordinance. 1962:

29. Maintenance of Liquid assets.---(1) Every banking company (and every financial institution specified in section 3A) shall maintain in Pakistan in cash, gold or unencumbered approved securities valued at a price not exceeding (the lower of the cost or) the current market price, an amount which shall not at the close of business on any day be less than (such percentage) of the total to its time and demand liabilities in Pakistan (as may be notified by the State Bank from time to time).

(Provided that the State Bank may separately specify for banking companies or financial institutions the applicable percentage either in general or in relation to any class of banking companies or any class of financial institutions or to any bank or financial institution ` in particular; and

Explanation: For the purposes of this section, 'unencumbered approved securities' of a banking company (or financial institution) shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of ('and the liabilities shall not include the paid up capital or the reserved or any credit balance in the profit and loss account of the Banking Company or, as the case may be, the financial institution or any such liabilities as may be notified by the State Bank for the purposes of this section shall be added).

(2) In computing the amount provided for subsection (1),, any deposit required under the proviso to subsection (3) of section 13 to be made with the State Bank by a banking company incorporated outside Pakistan and any balance maintained in Pakistan by a banking company in current account with (or in profit and loss sharing term deposit account with the State Bank) including in the case of Scheduled, bank the balance required to be so maintained under subsection (1) of section 36 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), shall be deemed to be cash maintained.

(3) Every banking company shall, before the close of the month succeeding the month to which the return relates, furnish to the State Bank monthly return in the prescribed form and manner showing particulars of the company's assets maintained in accordance with this section and its time and demand liabilities in Pakistan at the close of business on each (Thursday) during the month, or if any (Thursday) is a public holiday under the Negotiable Instruments Act, 1881 (XXXVI of 1881), at the close of business on the preceding working day.

24. It will also be appropriate to reproduce the relevant provisions in S.R.O. 585(1)/87 issued by the Government of Pakistan, Finance Division in exercise of the power conferred by subsections (4) and (4A) of section 3 of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947):---

Para. 2(g): 'investment finance company' means a company registered and granted license under this notification to undertake and carry on the business of an investment finance company;

Para. 4: Objects and functions:---The objects and functions of investment finance companies shall be as follows, namely;

(a) Money market activities:

(i) Issuing short-term paper of its own or certificate of deposit or investments of not less than 30 days maturity.

(ii) Trading in commercial paper issued by its clients, Government securities, promissory notes, banker's acceptances and other money market instruments acting either as a broker or acting on its own account.

(iii) Assisting in the issue of commercial paper, including introduction of companies to the money market, preparation of documentation, distribution and market making.

(iv) Acting as broker or on its own account in 'Call Money Market'

(b) Capital market activities:---

(v) Trading in listed securities, both equity and non-equity instruments, acting either as broker or acting on its own account.

(vi) Providing professional analysis of securities of both institutional and individual investors.

(vii) Issuing of long-term certificates of deposit or investment and underwriting of stocks and shares, short and long term Participation Term Certificates and other negotiable term obligations of corporations and financial institutions, acting singly or jointly as manager underwriter and distributor of such issues and taking an active part in all stages of preparation for such issues either public issues or private placement.

(viii) Floating and managing both opened and close end mutual funds and managing portfolios of stocks and shares, pension and provident funds, Participation Term Certificates and other negotiable and debt instruments for both individual and institutional clients, on a discretionary as well as non-discretionary basis.

(ix) Providing margin loans to individual and institutional investors.

(x) Offering of cash management accounts to enable clients to shift at their discretion among various investment alternatives.

(xi) Making investments in project through underwriting of public issue of stocks and shares and securities, short-term and long-term Participation Term Certificates and Term Finance Certificates of varying features.

(xii) Guaranteeing and counter-guaranteeing loans and obligations.

(d) Corporate financial services:

(xiii) Acting adviser and financial agent for companies in obtaining direct bank loans, syndicated loans, export credits, leases and project finance, both domestically and internationally.

(xiv) Assisting companies in private placement of debt and equity, domestically and abroad.

(xv) Acting as adviser to companies in corporate or financial restructuring as well as in the preparation of resource mobilisation plans.

(xvi) Acting as adviser to companies in mergers, acquisition and divestitures.

(xvii) Assisting Companies with cash management systems.

(xviii) Preparing feasibility, market or industry studies for companies, both domestic and foreign.

(xix) Raising equity, such as through venture capital, for new and existing companies, by acting as a financial intermediary.

(e) General:

(xx) Carrying on any other investment finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Bank Companies Ordinance, 1962 (LVII of 1962) and the .Insurance Act, 1938 (IV of 1938) respectively, and in this connection they will neither issue cheque books nor accept deposits.

(xxi) Raising funds through equity, foreign debentures, both short and long term, commercial paper issued abroad, sale of short and long term Participation Term Certificates and Term Finance Certificates, deposit and investment certificates, floating and managing of _ Modarabas and through other methods and instruments:

Provided that the period of term finance certificates and other instruments shall not be less than 30 days.

25. Reliance has been placed on the decisions of Central Board of Revenue and State Bank of Pakistan determining the status of investment finance companies/development finance companies which are also reproduced below for the sake of convenience:---

C. No. IT-JI/ 1(48)/70-pt

Government of Pakistan

Central Board of Revenue

Islamabad, the 9th August, 1987

From:Khaja Habibullah

Chief (Income-tax)

To:Mr. M. A. Majeed,

Regional Commissioner of Income-tax,

Southern Region, '

Karachi.

Subject: LIABILITY OF B.E.L., P.I.C.I.C., N.D.F.C. TO BE TAXED AS BANKING OR NON-BANKING COMPANIES

Kindly refer to the correspondence to the above subject.

2. The matter has been considered in consultation with all the concerned authorities and it has been decided that B.E.L., P.I.C.I.C. and N.D.F.C. will not be treated as banking companies for the purpose of First Schedule to the Income Tax Ordinance, 1979.

(Sd.)

(Khaja Habibullah)

Chief (Income-tax)

STATE BANK OF PAKISTAN

N.B.F.I s. REGULATION & SUPERVISION DEPARTMENT

CENTRAL DIRECTORATE

P.O. BOX N0.4456

KARACHI

N. B. F. Is. Circular No. 15th December, 1991

Chief Executives of

D.F.I s. Investment Banks,

Leasing Companies, Modarabas and

Housing Finance Companies

Dear Sir,

As you are aware, the Government has, through an amendment in the Banking Companies Ordinance, 1962 assigned the responsibility of supervising the business of N.B.F.I s to the State Bank of Pakistan. The State Bank has, accordingly, framed Rules of Business for N.B.F.I s. These appear in paragraph 11 below. These rules will come into force with effect from 1st January, 1992. The rules will govern the business of N.B.F.Is. with they are permitted to undertake under the relevant laws, S.R.O s. Notifications, Government Concept, Charters etc. The rules should not be construed as permission to undertake business which you are not authorised to do. All transactions taking place on or after 1^stJanuary 1992 shall be in conformity with these rules. It should be ensured that undertaking of business on or after Ist January, 1992 does not result in violation of these rules. Business undertaken prior to 1st January, 1992 shall be regularised within reasonable time, Process of regularisation may be taken in hand immediately and completed as early as possible. The State Bank will monitor the progress of regularisation through quarterly progress reports.

II. RULES OF BUSINESS

A. DEFINITIONS ,

For the purposes of these regulations:---

(a) 'N.B.F.I.' means a Non-Bank Financial Institution and includes a D.F.R. Modaraba Leasing Company, House Finance Company and Investment Bank. "

26. Taking guidance from the principle that where a word is used in an enactment which is capable of various shades of meaning, the particular meaning, to be attached must be arrived at by reference to the scheme of the 'Act or of the section in particular taken as a code and particularly from the dictum laid down by Lord Blackburn in Taurquand v. Board of Trade (1886) II AC 286 "in construing this Act' (English bankruptcy Act) of course like every other Act we must take the whole of the Act together, and as this is a very long Act containing, about 60 pages of very closely printed matter, it requires, in order to that we may be certain that we omit nothing that one should look carefully at it all together and consider of the clauses", I have examined the Income Tax Ordinance closely to ascertain if the legislature has referred to financial institution as a separate and distinct entity other than bank or not, so that another principle that legislature does not waste the word and that when different, distinct and specific words/terms/expressions have been used by the legislature, they convey different connotation, and I have found that the legislature has used the terms financial institution in contradistinction to banking company in the following provisions of the Income Tax Ordinance.

Section 12(18) of the Income Tax Ordinance, 1979.

Where any sum claimed, or shown, to have been received as loan or advance or gift by an assessee during any income year commencing on or after the first day of July, 1998, from any person, not being a banking company, or a financial institution notified by the Central Board of Revenue for this purpose, otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding a National Tax Number, the said sum shall be deemed to be the income of the assessee for the said income year chargeable to tax under this Ordinance.

Provided that, where the said loan or advance or gift is claimed or shown by way of the explanation, referred to in subsection (1) of section 13, in a case to which the first proviso to the said subsection applies, the income under this subsection shall relate to the assessment year referred to in the said proviso.

Section 23(l)(vi-a) of the Income Tax Ordinance, 1979

Any sum paid on or, after day of July 1985, to a scheduled bank, a financial institution, or such modaraba or leasing company as is approved by the Central Board of Revenue for the purposes of the Third Schedule, by way of lease money in respect of an asset taken on lease by the assessee and used for the purpose of any business or profession carried on by him.

Section 50(2A) of the Income Tax Ordinance, 1979

Any person responsible for paying any sum by way of interest (or profit) on an account or deposit maintained with any banking company, (or any financial institution) shall deduct, at the time of credit of such interest (or profit) to the account of the recipient, or at the time of payment thereof, whichever is earlier, tax at the rates specified in the First Schedule.

Provided further that nothing contained in this subsection shall apply to any sum paid or credit before the first day of July, 1989)

Clause (79A), Part I of the Second Schedule for the Income Tax Ordinance. 1979

Any income derived by any person, not being a bank, a banking company, financial institution, a development financing institution or a company engaged in the business of insurance, by way of return on bearer bonds issued by the Pakistan Water and Power Development Authority, established under the Pakistan Water and Power Development Authority Act, 1958 (West Pakistan Act No.XXXI of 1958).

(Provided that nothing contained in this clause shall apply in respect of return on bonds issued on or after the first day of July, 1991)

Clause (3), Part IV of the Second Schedule to the Income Tax Ordinance, 1979

The provisions of clause (i) of section 24 shall not apply to any expenditure incurred by a banking company or a financial institution (owned and) controlled by the Federal Government on the provisions of Perquisites, allowances or other benefits to any employee in pursuance of any law.

Rule 1(1) of the Third Schedule to the Income Tax Ordinance, 1979

Where, in any income year, any building, machinery, plant or furniture owned by an assessee is issued for purposes of any business or profession carried on by him, or in any income year commencing on or after the first day of July, 1982, any machinery or plant is given on lease by the assessee, being a scheduled bank, a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for the purposes of this Schedule, on such conditions as may be specified, and allowance for depreciation shall be made in computing the profits and gains of the business or profession of the assessee in the manner hereinafter provided.

Rule 5(1) of the Third Schedule to the Income Tax Ordinance, 1979

Where any building has been newly erected, or any machinery or plant has been installed, in Pakistan at any time between the first day of July, 1976, and the thirtieth day of June 2000 (both dates inclusive), further depreciation allowance in respect of the year of erection or installation or the year in which such building, machinery or plant is used by the assessee for the first time for the purposes of this business or profession or the year in which commercial production is commenced, whichever is the later, shall be allowed at the following rates, namely:---

(aa) in the case of a building given onlease by the assessee, being a scheduled bank, a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for the purposes of this Schedule, on or after the first day of July, 1986, if the said building is used by thelessee for purposes of his business or profession.

Ten per cent of the written down value

(cc) In the case of machinery or plant (other than ships or motor vehicles not plying for hire), given on lease by the assessee, being a scheduled bank a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for purposes of (this Schedule) on or after the first day of July, 1982.

Forty per cent of the written down

value (and in respect of any assessment year commencing on or after the first day of July,1989 twenty-five per cent of the written down value.

2nd Proviso Rule 8(5) of the Third Schedule to the Income Tax Ordinance, 1979

Provided also that in case of an asset leased by a scheduled bank, a financial institution or any modaraba or leasing company which is approved by the Central Board of Revenue the term 'sale proceeds' shall mean the residual value received by such leasing company on maturity of lease agreement with the first lease, subject to the condition that the residual value plus the amount realized during the currency of the agreement towards cost of the asset is not less than the original cost to the lessor.

Explanation:, The expression 'sold' as used in the second proviso, includes a transfer by way of exchange or otherwise or a compulsory acquisition under any law for the time being in force.

27. A perusal of the four earlier judgments by the Division Benches of this Tribunal sitting at Lahore, Islamabad and Peshawar shows that the learned representatives for the parties resorted to the interpretative process for ascertaining if under the Income Tax Ordinance, banking company and financial institution are to be given same status or different and distinct status. Resort was made to the interpretation of expression banking and banking company as defined in section 5(b) and (c) of the Banking Companies Ordinance, 1962 with reference to the provision contained in section 2(10) of the Income Tax Ordinance, 1979 on the linguistic discipline before considering the statute i.e. the Income Tax Ordinance, 1979 itself. In three Division Benches of this Tribunal holding the view that investment finance companies not banking companies, the law was examined on the same linguistic discipline as done in the judgment of another Division Bench of this Tribunal sitting at Lahore reported as 1997 PTD (Trib.) 786, though contrary conclusion was drawn. In all the four judgments by Division Benches of this Tribunal requiring consideration by us in this Full Bench the consideration revolves round the interpretation/terms 'banking' and 'banking company' in isolation, without considering the other provisions in the Income Tax Ordinance itself and likewise the definition of the words 'banking' and 'banking business' contained in section 5(b) and (c) of the Banking Companies Ordinance have been considered without aid from the other provision contained in the Banking Companies Ordinance itself. In the very learned and detailed judgment reported as 1997 PTD (Trib.) 786 the entire attention appears to have been concentrated on the linguistic analysis of definition contained in section 5(b) of the Banking Companies Ordinance, 1962 and support in this behalf has been drawn from the judgments of Hon'ble Sindh High Court and Lahore High Court, particularly in the case of Farooq Ahmad v. Federation of Pakistan 1988 CLC 1731 and Haideri International Finance Limited v. State Bank of Pakistan 1986 CLC 2197, as well as oversees Pak Credit and Investment Corporation Private Limited v. Governor of State Bank of Pakistan. However, it appears that a very important principle of the interpretation of statutes and the law of precedent was lost sight of, that the words take their shares and colour from the context in which they are used and the law of precedent is to be used with care and caution, as the judgments of the superior Courts are given in the context of issues arising in a particular set of fact and in the context on the particular point of law raised and decided. Thus we find that in the case of Haideri International Finance Limited v. State Bank of Pakistan 1986 CLC 2197 on which the learned counsel for the department has heavily relied upon before us and on which reliance was placed by the learned Members of the Division Bench in the judgment reported as 1997 PTD (Trib.) 786, writ petition was filed challenging the declaration made by the State Bank of Pakistan under section 43-B of the Banking Companies Ordinance, 1962, after proceedings under section 43-A of the said ordinance for the reason that the petitioner was transacting banking business in contravention of section 27 of the Banking Companies Ordinance, 1962. In the case of Overseas Pak Credit and Investment Corporation (Pvt.) Limited (supra) also writ petition was filed challenging declaration made by the Governor of State Bank of Pakistan under section 43 of the Banking Companies Ordinance, 1962. In the case of Farooq Ahmad v. Federation of Pakistan (supra) the petition was filed challenging the show-cause notice by the State Bank of Pakistan as to why the petitioner should not be prosecuted for violation of section 27-A of the Banking Companies Ordinance, 1962. It is provided in section 27(1) that no individual or association or body of individuals not being a company shall carry on banking business in Pakistan unless it holds licence issued by the State Bank of Pakistan. Section 27-A prohibits advertising for deposits and collection by any company, firm or person not being a banking company or corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues or the Corporate Law Authority or Registrar Cooperative Societies. In Pro-section 43-A of the Banking Companies ordinance, 1962 the State Bank is empowered to initiate proceeding if business of banking is, transacted in contravention of subsection (1) of section 27 or deposit of money is received in contravention of section 27-A. Under section 43B of the Banking Companies Ordinance, 1962 the State Bank is empowered to hold enquiry under section 43-A to issue declaration in this behalf. The facts in the cited cases are, therefore, distinguishable from the facts of the present case. As already explained, in the case of Farooq Ahmad v. Federation of Pakistan, there was violation of the provisions contained in section 27-A as deposits were solicited through advertisement. While no such question is involved in the cases under consideration and on the contrary under section 27-A, the investment finance institutions are allowed to do so as is permissible to banking companies or corporations or authorities established by the Federal Government. The reason being that the investment finance companies/institutions are duly authorised by the Controller of Capital Issues. In the case of Haideri International Finance Limited and Oversees Pak. Credit and Investment Corporation, the State Bank of Pakistan had initiated action under sections 43-A and 43-B of the Banking Companies Ordinance, 1962 for contravention of the provisions contained in section 27(1) of the Banking Companies Ordinance, 1962 while in the case of Investment Finance Companies, the State Bank of Pakistan in spite of exercising control under section 3-A of the Banking Companies Ordinance, 1962 and conducting audit of the Investment Finance Corporations has not issued any declaration to the effect that Investment Finance Companies are engaged in banking in violation of section 27(1) of the Banking Companies Ordinance. The State Bank of Pakistan being in full knowledge of fact that the Investment finance companies have not been issued licence for banking and that they have been issued licence by the Controller of Capital Issues and that the investment finance companies are accepting deposits, are lending the deposits so received for the purpose of investment and that on maturity of the certificate of investment are returning bank the deposits with interest and prior to the maturity of the certificate of investment without interest, has framed regulations treating the investment finance companies as ' non banking financial institution'. Thus, the facts and circumstances being different in the cases decided by the Hon'ble Lahore High Court and Sindh High Court it would not be proper to treat the judgments as precedent for the purpose of deciding whether for the purpose of Income Tax Ordinance the investment finance companies can be treated as banking companies. Before proceeding to the discussions whereby we will make attempt to discover the intention of legislature, if for the purpose of Income Tax Ordinance, 1979 the legislature has included the investment finance companies in the expression banking companies. We would like to refer another judgment of the Sindh High Court in the case of Shams Textile Mills Limited v. Federation of Pakistan PLD 1992 Kar. 513. In this case vires of the banking companies (Recovery of Loans Ordinance, 1979) (XIX of 1979) was challenged. A contention was raised in this case that Entry 28 of the Fourth Schedule to the Constitution of Pakistan (1973) does not empower the Federal Legislature to enact an Ordinance of the nature in question for providing for the recovery of loans advanced by a financial institution whose business is money lending, as money lending is a provincial subject. On behalf of Federation of Pakistan it was urged that the word 'bank' used in Entry 28 is of wide connotation, susceptible to a meaning, which will include a financial institution. Hon'ble Justice Mr. Ajmal Mian (as his Lordship then was) did not hold that financial institution is a banking company, rather after examination of various provisions contained in the Banking Companies Ordinance, 1962 Banks (Nationalization) Act, 1974, Banking Companies (Recovery of Loans) Ordinance, 1979 held that, "a financial institution can be declared as a banking company for the purpose of Ordinance by a Notification in the official gazette by the Federal Government." The effect of insertion of section 3-A of the Banking Companies Ordinance was also considered by their Lordships. It was held as follows:---

"It cannot be denied that on account of tremendous growth in the National and International commerce and industries new financing institutions have emerged throughout the world specialising in special branch of financial dealings. The Government of Pakistan with the object to develop industry and commerce etc. has caused the establishment of numerous financial institutions like I.D.B.P. and P.I.C.I.C. etc. Strictly speaking it can be urged that respondent No.3 is not carrying on Banking business. In this regard it may be pertinent to observe that the very fact that under section 3-A of the Banking Companies Ordinance, 1962 the provisions of section 25 and 41 of the said Ordinance have been made applicable to financial institutions named therein and the fact that the definition of 'Banking Company' given in section 2(a) of the Ordinance separately mentions a Financial Institution supports Mr. Mumtaz Hussain's contention that a financial institution is not a banking company in strict sense. However, at the same time it cannot be denied that there is nexus between the financial institution like respondent No.3 and a banking company inasmuch as that the former also lends money against security. A banking company ordinarily receives deposits from public, Which it in turn loans out to public and relationship between a banker and its customer is that of a debtor and of a creditor, respectively, whereas respondent No.3 receives loan in the form of foreign exchange with the object to loan out of the same for the developing industries in Pakistan.

(c) It may also be pertinent to refer to section 3-A of the Banking Companies Ordinance, 1962, which reads as follows:---

"3-A. The provisions of sections 25 and 41 of this Ordinance, shall with such modifications as the State Bank may determine from time to time in relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment Corporation of Pakistan, National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation and such other companies or institutions, or class of companies, corporations or institutions as the Federal Government may from time to time, by notification in the official gazette, specify in this behalf."

It may be noticed that under the above quoted section which was enacted by the Banking Companies (Amendment) Act, 1972 (XXX of 1972), the provisions of sections 25 and 41 of the said Ordinance with such modifications as the State Bank may determine from time to time in relation to activities which may have implications of the monetary or credit policies of the State Bank, were made applicable to the financial institutions named in the above quoted section, which include P.I.C.I.C. i.e. respondent No.3. It may be pertinent to observe that section 25 empowers the State Bank to determine the policy in relation to advances to be followed by the Banking Companies generally or by any banking company in particular. It also empowers the State Bank under section 25(2) to impose penalty of Rs.2,000 or in the case of continuing default a penalty of Rs.500 per day for non-observance of the policy framed by the State Bank under section 25(1). Moreover, subsections (2) to (6) of the above section further empowers the State Bank to provide loan ceiling etc. and other measures. The effect of subsections (1) to (6) of section 25 is to give effective financial control to the State Bank of Pakistan over the Banking Companies, whereas section 41 of the said Ordinance empowers the State Bank to give direction from time to time to the banking companies generally or a banking company in particular on the subject-matters mentioned therein. The accumulative effect of sections 25 and 41 of the aforesaid Ordinance is to bring in effective control of State Bank all the banking companies. The application of sections 25 and 41 of the Ordinance to financial institutions mentioned in the above quoted section 3-A, which includes P.I.C.I.C. indicates that the said financial institutions are equated with the banking companies for the purpose of inter alia effective financial and administrative control of the State Bank of Pakistan. In other words, even the above banking companies Ordinance has established nexus between the banking companies and the aforesaid financial institutions as to their working.

In our view the word 'banking' is susceptible to cover financial institutions dealing with or specializing in a special branch of banking. What is to be seen is as to whether in pith and substance the impugned Ordinance is with respect to particular category covered by the above Entry 28. "

28. It is pertinent to note that his Lordship Mr. Justice Ajmal Mian, after making observation that, "strictly speaking it can be urged that respondent No.3 is not carrying on banking business." and that, "in this regard it may be pertinent to observe that very fact that under section 3-A of the Banking Companies Ordinance, 1962 the provisions of sections 25 and 41 of the said Ordinance have been made applicable to financial institutions named therein and the fact that the definition of banking company given in section 2(a) of the Ordinance separately mentions the financial institution supports Mr. Mumtaz Hussain' contentions that a financial institution is not a banking company in strict since," merely held that there was a nexus between the financial institution and a banking company. It was not held that the Federation of Pakistan is empowered to legislate in respect of a financial institution by virtue of Entry 28 in fourth Schedule Part I of the Constitution of Pakistan which refers to the banking, but it was held that the Banking Companies (Recovery of Loans) Ordinance, 1979 (XIX of 1979) was intra vires the powers of Federal Government because of Entry 3 read with Entry 2 of the Concurrent legislative list. The Hon'ble Sindh High Court further held that, "the financial institution has a definite connotation. Under the above section only a financial institution can be declared as banking company for the purpose of Ordinance." Mr. Iqbal Naeem Pasha, learned counsel for the respondent has heavily relied on the above judgment of Hon'ble Sindh High Court. He has contended that although the provisions contained in the Income Tax Ordinance, 1979 were not involved in the above case but the point if financial institution is per se, a banking company came specifically for consideration for the first time and after thorough examination of the various provisions contained in the Banking Companies Ordinance, 1962 and the other laws on banking, it was held that strictly speaking the financial institution was not a banking company and that a financial institution has a definite connotation and that a financial institution can be declared as a banking company for the purpose of Banking Companies (Recovery of Loans) Ordinance, 1979. It is also very pertinent that their Lordships Mr. Justice Ajmal Mian and Mr. Justice Nasir Aslam Zahid, referred to a very basic principle of the interpretation of statute that in the definition of banking company given under section 2(a) of the Banking Companies (Recovery of Loans). Ordinance, 1979 legislative separately mentions a financial institution, which supports the contention of Mr. Mumtaz Hussain, Advocate that a financial institution is not a banking company in strict sence.

29. Now we proceeds to examine whether the legislature has treated a financial institution as a banking company for the purpose of Income Tax Ordinance, 1979. We have already referred to the principles of interpretation of statute to the effect that the legislature does not waste any word and when distinct words/expressions/terms are used by the legislature, they will ordinarily connote different and distinct meanings. After the authoritative pronouncement in the case of Shams Textile Mills Limited (supra) we need not to dilate further on conceptual plan. A perusal of the various provisions in the Income Tax Ordinance referred to in para. 26 of this Order we find that in section 12(18) of the Income Tax Ordinance the legislature has distinctly and separately mentioning 'banking company' or financial institution. Likewise in sections 23(1)(vi-a), 50(2-A), clause (79-A) Part I of the Second Schedule, clause (3) Part IV of the Second Schedule and Rules 1-(1), 5(1)(aa)(ec) and 2nd Proviso to Rule 8(5) of the Third Schedule, the word financial institutions has been separately used alongwith banking company /scheduled bank. The expression scheduled bank has been defined in section 2(m) of the State Bank of Pakistan Act, 1956 to mean a bank for the time being included in the list of banks maintained under subsection (1) of section 37. Section 37, subsection (2) reads as follows:---

"(2) The Bank shall, by notification, in the official Gazette---

(a) declare any bank to be scheduled bank which is carrying on the business of banking in Pakistan and which ---

(i) is a banking company as defined in section 227-F of the Companies Act, 1913, or a Cooperative Bank, or a corporation or a company incorporated by or established under any law in force any place in or outside Pakistan;

(ii) has a paid-up capital and reserves an aggregate value of not less than five lakhs of rupees."

30. We will discuss the implication of above provision while considering the provisions contained in Banking Companies Ordinance, 1962. For the time being it will suffice to observe that in spite of incorporating the definition of banking contained in section 5(b) of the Banking Companies Ordinance, 1962 in the Income Tax Ordinance, 1979 by virtue of definition in section 2(10) of the Income Tax Ordinance, 1979, the Legislature has separately mentioned banking company and the financial institution. If the intention of legislature would have been to include the financial institution in the definition of banking company, then there was no necessity of separately mentioning financial institution in various provisions of the Income Tax Ordinance, 1979. It is also a cardinal principle of the interpretation of statue that no oblivion can be attributed to the legislature and if it is held that the financial institution is a banking company for the purpose of Income Tax Ordinance, 1979 it cannot be done without doing violence to the provisions contained in the Income Tax Ordinance, 1979 referred to above and without violating various principles of interpretation of statute as follows:

(i) it means to attributing of oblivion to the legislature;

(ii) it means to say that legislature has wasted its word;

(iii) it will render the word financial institution used in various provisions as superfluous and redundant; and

(iv) such interpretation would be an attempt to discover the intention of legislature on linguistic discipline only by taking the particular provision in isolation and by ignoring the other provisions contained in the Income Tax Ordinance, 1979. In other words it would amount to make an attempt to discover the intention of legislature by ignoring the entire scheme of the Act and considering of the particular provision in isolation.

31. For the foregoing reasons we are of the considered opinion that in the light of principles of the interpretation of statute referred to above, the intention of legislature is very clear that for the purposes of Income Tax Ordinance, 1979 banking company and the financial institution have been referred to separately and distinctly and, thus, they are to be treated accordingly. It would be appropriate to examine the issue in the light of provisions contained in the Banking Companies Ordinance, 1962 also. We have already referred to the judgment of Hon'ble Sindh High Court in the case of Shams Textile Mills Limited in which their Lordships have already considered the issue with reference to section 3-A of the Banking Companies Ordinance, 1962 and section 5(b) and (c) of the Banking Companies Ordinance, 1962 with reference to the Entry 28 of the Fourth Schedule to the Constitution of Islamic Republic of Pakistan. Their Lordships have clearly held that the banking company and financial institution enjoy separate status although a financial institution can be notified as a banking company for the purpose of section 3-A of the Banking Companies Ordinance, 1962. We will, therefore, not dilate on this aspect and shall merely follow the ratio of above judgment. We will examine another aspect which pertains to the interpretation of expression, 'repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise'. In the Division Bench judgment of this Tribunal expressing view that financial institution is a banking company a lengthy discussion has been made 1997 PTD (Trib.) 786. Iii this case it was contended on behalf of the department that accepting deposits for the purpose of lending them further for making investment means to borrowing and the deposits are returned to the investor as per terms as to the period or even before expiry of such period and, therefore, the financial institutions were engaged in banking business notwithstanding the fact that it was not being treated so by various official agencies in Pakistan including Central Board of Revenue and the State Bank of Pakistan. The main plea on behalf of the assessee was that they were not issuing a cheque book, no current and saving account was opened, not collections were being made from other banks on behalf of customers or depositors and. the investment company are not Members of clearing same and, therefore, they cannot be treated as a banking company. The learned Members of the Division Bench considered the contentions with reference to various judgment, from English Jurisdiction and considered the connotation of the expression 'otherwise' in the light of judgments from Pakistan and Indian jurisdiction. Dictionary meanings of the expression 'otherwise' were also considered and it was held with reference to the judgment in Haideri International Finance Limited, 'the accepting of deposits for the purpose of investing or lending but repayable on demand or otherwise falls within the mischief of this definition. The repayment may be made through any mode and not necessarily by cheque or draft as usual practice in the recognized bank." It was further observed as follows:---

"The treatment extended to an assessee by one official agency may at best one of the pleas or defences which may be put up. However, if the provision of law is clearly applicable to a certain situation, a particular treatment or recognition by one official agency cannot be a bar against the application of that provision of law. There is neither an estoppel against law nor the view point of one official agency can be taken as a promissory estoppel against all other organs of the State. It may further be noted that the alleged 'finance investment' business is a recent development and any distinction made by the State Bank or Finance Division relates more to its fiscal policies rather than a category recognizable at law. The term 'investment finance business' has not been defined anywhere not even in the said S.R.O. No.585 of July, 1987 under which the assessee was granted a licence to operate. The State Bank can conveniently allow a party to do banking without treating it as a bank. However, as long the above definition clause, as it stands, remains a part of the statute, a changed nomenclature will not alter the intention and desire of the Parliament Law, it is perhaps rightly said, sometimes lags behind practice. Yet its certainty, consistency and persistency are vital for any legal system to exit. No fault lies with the words of law used or employed to express a situation which will incurably be the comprehension of drafters and legislators at the particular time in history. The fault, if any, lies with those who, in spite of feeling winds of change are slow in taking alongwith words of law to the changing directions."

32. After considering the expression 'otherwise' on linguistic discipline the learned Members of the Division Bench held that the plea that the banking should be considered on pure practical aspect or the definition contained in section 5(b) of the Banking Companies Ordinance, 1962 may be considered without the words: 'otherwise' was not acceptable. They hold as follows:---

"We will refuse to oblige for the simple reason that here we have a delimitation of a business which needs to be seen through the letters of law the windows opened to look at banking rather than looking at the words of the statute from behind a bank counter. Learned A.R. for the assessee may well be right in explaining the common aspects of modern banking. However, his contentions cannot be granted because our consideration of the scope of banking must remain confined to the words used in the statute. These words can neither be enlarged nor ignored or squeezed to be pushed into the supposed pattern of practice."

33. The Division Bench finally held that the definition of the banking company as contained in section 2(10) of the Income Tax Ordinance, 1979 read with clause (b) of section 5 of the Banking Companies Ordinance, 1962 is fairly wide. The fact that a company accepts deposits for investment or lending falls within its ambit if other indicators are also present. The second portion of definition contains the test, which in turn refers to the actual practice of a company by prescribing as to how and when these deposits are demanded and paid back. Thus, certain modes of repayment or withdrawals are considered as relevant for consideration of banking business. Mere fact that a company is not effecting withdrawals by cheques, drafts or orders will not by itself take it outside the mischief of the definition clause.

34. With all respects and due deference to our learned brother, the Judicial Member who authored the above judgment after taking lot of pains and efforts, it appears that a proper assistance was not provided to the learned Members of the Division Bench. Although it was observed that the law is dynamic but the approach in interpreting the law was not fully sociological, progressive, dynamic and purposive. It was taken note of that the finance investment business is a recent development and we fully agree with these observations but it is not possible to agree that any distinction made by the State Bank of Pakistan or Finance Division relates more to its fiscal policies rather than a category recognizable at law. We will presently further show that the finding that investment finance business has not been defined even in S.R.O. No.585 of July 1987 under which investment finance companies were granted licence to operate, is not correct. Although it is correct that during the modern age the pace of development and progress is too fast and the process of legislation sometimes lags behind but in the present case we are not persuaded to agree with the view that in spite of feeling winds of change the legislature was slow in taking alongwith words of law to the changing directions. We have already shown that in the Income Tax Ordinance itself the legislature has separately and distinctly referred to various institutions including banking company and financial institution. Even prior to the promulgation of Income Tax Ordinance, 1979 the legislature had taken note of the development of institutions in the field of investment other than banking companies. For the sake of brevity we would not like to give elaborate discussion regarding the historical development of the banking companies and the scope of business activities in which the banking companies are engaged. Such details are already given in section 7 of the Banking Companies Ordinance, 1962. We will only give a passing remark that every, banking company is in essence an investment finance institution as well but every investment finance institution is not a banking company. At present we are dealing with the developments in the field of investment and finance of which the legislature has taken notice. Section 15-AA was inserted in the Income-tax Act, 1922 in the year 1953. It was amended from time to time and by Finance Act, 1965 the expression investment companies was included. On promulgation of Income Tax Ordinance, 1979 which repeated the Income-tax Act, 1922, the expression Pakistani investment companies was used in section 41(D). Again in section 43 subsection (2) the expression investment company was used. It was provided in subsection (3) of section 43 that the C.B.R. may make rules regulating procedure for the grant of approval under section V and in pursuance thereof rule 38 was framed. In rule 38 the expression investment company was used and in subsection (2) investment company was defined as follows:---

" 'Investment Company' means a company engaged principle or wholly, in buying and selling securities of other companies and includes a company, not being a holding company, the investment of which in the share capital of other companies at in one time is of an amount equivalent to 80 % of the aggregate of its own paid up capital and free reserve but does not include a bank or an insurance company or a corporation which is a member of Stock Exchange."

35. Prior to the promulgation of Income Tax Ordinance, 1979 section 3A was inserted in the Banking Companies Ordinance, 1962 by Amendment Act (XXX of 1972) which has been substituted by Amendment Act (XIV of 1997). Subsequently S.R.O. 585(1)/87 issued by the Government of Pakistan, Finance Division in exercise of the power conferred by sub-sections (4) and (4A) of section 3 of the Capital Issues (Continuance of Control) Act, 1947. Thus investment finance companies were regularized and brought within the frame work of law by issuance of S.R.O. 585(1)/87. In para. 2(g) investment finance company was defined to 'mean company registered and granted licence under the said notification to under take and carry on the business of an investment finance company. In para. 5 of the above S.R.O. the object and functions of investment company were enumerated in detail which has already been reproduced in earlier part of this order. In para.5(20) it was specifically provided that the investment finance company can carry on other investment finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Banking Companies Ordinance, 1962 and the insurance Act, 1938 respectively and in this connection they will neither issue cheque books nor accept deposits. Thus, we find that in rule 38 of the i income Tax Rules, 1982 the banks and insurance companies were specifically excluded from the definition of investment company and likewise in S.R.O. 585, also the banking business and insurance business has been expressly excluded from the investment finance business. We further find that the issuance of cheque book or acceptance of deposits in connection with banking business has been specifically excluded from the investment finance business.

36. After showing that the legislature has taken notice of the development in the field of investment and finance, we will examine the provisions contained in Banking Companies Ordinance, 1962 other than section 3A. Section 27A has been inserted by Finance Act, 1990 whereby in addition to a barking company a corporation or an authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues has been permitted to solicit or invite deposit of money from public through advertisement. Section 29 of the Banking Companies Ordinance, 1962 has been amended by Ordinance, 3 of 1994 through which the expression, 'and every financial institution specified in section 3A' has been inserted after the words 'banking company'. Prior to that a proviso was added to section 29 by Act, VII of 1.965 which reads as follows:---

"Provided that the State Bank may separately specify for banking companies or financial institutions the applicable percentage either in general or in relation to any clause of banking companies or any clause of financial institution or to any banking or financial institution in particular. "

37. In explanation to section 29 words 'or financial institution' were added by Ordinance 3 of 1994. In this explanation also the expression banking company or financial institution has been used. Thus, we find that the legislature fully knowing the definition of banking company given in ' section 5(b) of the Banking Companies Ordinance, 1962 has separately and distinctly inserted the expression finance institution in various sections of the Ordinance.

38. We have already shown that in the earlier Division Bench judgment of this Tribunal reported as 1997 PTD (Trib.) 786 it has been held that in 2nd part of the definition of banking contained in section 5(b) of the Banking Companies Ordinance, 1962 the words 'withdrawable' by cheque, draft, order or otherwise is not very material and it is sufficient to bring the repayment through any mode, the transaction of deposits and repayment thereof within the perameters of banking, we would again like to observe with respect that the words repayable on demand or otherwise and the modes of withdrawals got more attention and the expression 'withdrawable' was not given due importance. The word 'withdrawable' has not been defined in the Banking Companies Ordinance, 1962 or any other law which has been referred to us. However, the principle that the words acquire the meaning and colour from the context in which they are used in very much attracted here. A perusal of para. 5 of S.R.O. 585 under which the investment finance companies are granted licence to carry on the investment finance business shows that the investment finance companies received deposits by issuance of short-term paper of its own or certificate of deposits or investment of not less than 30 days maturity and issuance of long-term certificate of deposits or investment. The pro forma of certificate of deposits/certificate of investment has been produced before us to show that the amount of investment is payable to the registered holder on surrender of the certificate at the office of issue. It has been further stated before us that if the certificate of deposit/investment is surrendered after maturity the profit thereon is paid. However, if the certificate is surrendered prior to maturity no profit is paid thereon. Be that as it may, the fact which has not been controverted is that the investment/deposits is payable on surrender of certificate and not otherwise. Mr lqbal Naeem Pasha has produced copy of letter from State Bank of Pakistan, dated 30th September, 1993 according to which the State Bank of Pakistan in pursuance of control which it has on the non-banking financial institutions (as nomenclature is given by the State Bank of Pakistan to the financial institutions) are permitted to give premature encashment of the certificate of investment subject to the condition that no profit will be paid on the certificate so encashed. It shows that the repayment of the deposits with the financial institutions/finance investment companies is on surrender and encashment of the certificate, meaning thereby that withdrawal of the part, investment/deposits is not permissible in the case of investment finance, companies. In these circumstances the word 'withdrawable' by cheque, draft, order or otherwise gains importance. According to Chambers Dictionary (1993 Edition) the word 'withdrawal' means; an act of gradual process of withdrawing and the removal of money from a bank account'. Thus when the expression withdrawable has been used in section 5(b) of the Banking Companies Ordinance, 1962 it envisaged, first, an account current or saving and secondly, the right of the account holder to take out or remove the money gradually, though having the right of withdrawing the amount in one transaction as well. In the case of investment finance companies neither there is any account of depositor opened with the finance company in the nature of current or saving account nor there is any way for gradual or piece meal withdrawal of deposit at the option of depositor. The entire deposit is encashed on surrender of certificate of investment/deposit on maturity of certificate or prior to maturity but the repayment is in the form of total disinvestment of the entire investment/deposit. Now in this background when we examine the provisions contained in section 87 of the Banking Companies Ordinance, 1962 we find that the words 'withdrawable' cheque, drafts, order or otherwise' are not without significance. It is provided in section 87 of the Banking Companies Ordinance, 1962 that no person other than a banking company, the State Bank of Pakistan, the National Bank of Pakistan or any other biking institution notified by the Federal Government in this behalf shall accept from the public deposits money 'withdrawable' by cheque. Here we would like to refer even at the cost of reputation and the provision contained in para. 5(xx) of S.R.O. 585(1)/87 specifically stating that the investment finance company is not allowed to do banking business and in this connection they will neither issue cheque books nor accept deposits. So far the acceptance of deposits, lending the same for investment and repayment of deposits are concerned the banking companies and investment finance companies both are engaged in the above activities but one of the main point of distinction drawing a broad line of demarcation and not a thin line as held in the Division Bench Judgment of this Tribunal reported as 1997 PTD (Trib.) 786 is of receiving deposits withdrawable by cheque. It appears that the provisions contained in section 87 of Banking Companies Ordinance, 1962 were not brought to the notice of learned Division Bench which decided the case cited above.

39. For the foregoing reasons it is held that in addition to the Income Tax Ordinance, 1979, the legislature has made a clear distinction in banking company and investment finance company/finance institution in the Banking Companies Ordinance, 1962 as well. At this juncture we would like to observe that the maxim 'expressio' unius exclusio altarisis (the express mention of one thing means the exclusion of the other) is fully applicable in the issue under consideration. After showing that the legislature has expressly manifested its intention by enacting various provisions in the Income Tax Ordinance, 1979 and the Banking Companies Ordinance, 1962 that the banking companies and financial institutions are separate and distinct entities, we have no hesitation in holding that when the language of statute and the intention of legislature is explicit and clear, it cannot be defeated by any interpretative process or by any other doctrine of law. Any interpretation of law by recourse to any doctrine or logic against the manifest intention of legislature which can be inferred by referring the language of statute is against the golden principle of interpretation of statutes.

40. Consequent to the above findings it is held that the investment finance companies are not the banking companies and, therefore, the law has not been correctly exposed and propounded in Division Bench judgment of this Tribunal reported as 1997 PTD (Trib.) 786 which is hereby. Consequently we agree with the view held by three other Division Benches of this Tribunal sitting at Lahore, Peshawar and Islamabad which have been referred to in the earlier part of this order and the view held that investment finance companies/finance institutions are not banking companies is hereby approved.

41. Consequent to the above findings it is held that the First Appellate Authorities in all the above appeals rightly held that the respondents engaged in the business of investment finance business are not banking companies. The appeals at the instance of department on this issue stand dismissed accordingly. The other issues, if any, may be placed before a Division Bench.

(Sd.)

(Muhammad Mujibullah Siddiqui),

Chairman.

42. INAM ELLAHI SHEIKH (ACCOUNTANT MEMBER).---In have perused the above order proposed by the Hon'ble Chairman, on the issue whether the assessees/respondents in these appeals are banking companies or not in the light of the provision of Income Tax -Ordinance, 1979. At the outset, I may mention that I was the signatory to the order reported as 1997 PTD (Trib.) 786 authored by the then Judicial Member, Mr. Nasim Sikandar, who has since been elevated to the High Court. The Hon'ble Chairman has proposed to overrule such order of the Division Bench of the Tribunal and he has passed very elaborate and detailed order after considering the various provisions of not only the Income Tax Ordinance and the Banking Companies Ordinance as well as S.R.O. 585(1)/87 but also various other laws after considering the principles of interpretation as well as various case laws. In the order reported as 1997 PTD (Trib.) 786 I have given the following observations while agreeing with the order passed by the learned Judicial Member:---

33. Inam Ellahi Sheikh (Accountant Member).---I have carefully perused the order proposed by my learned brother, the Judicial Member, in the above four cross-appeals. I have been especially impressed by the well-reasoned and detailed order on the issue of status of the assessee whether this is a banking company or otherwise. My learned brother, the Judicial Member, has set aside the issue with certain directions as given in para 31 of the order. I respectfully agree with the conclusion reached by my learned brother for all the reasons recorded therein: However, while setting aside the assessment on the issue of status, I feel that the Assessing Officer should also look at the status assigned to similar other companies by the tax department. If the Assessing Officer wishes to assign a different status to the present assessee as against that assigned to the other assessees already discussed above who have been recognised to be non-banking institutions although conducting similar business, the Assessing Officer should record his reasons for such discrimination after confronting the assessee. With these brief observations I record my findings that I fully agreed with the order proposed by my learned brother, the Judicial Member and the appeals be decided as proposed by him."

Although the assessment in that case was set aside but in paragraph 31 of the same order (see para. 13, page 30 above) it was held that the definition of the banking company as contained in subsection (10) of section 2 of the Income Tax Ordinance read with Clause (b) of section 5 of the Banking Companies Ordinance, was 'fairly wide'. However, in paragraph 28 of such reported order, it was emphasised that the Revenue should have been on its guard and conducted a factual enquiry in view of the assessee's denial of being a banking company. A special reference was made to the mode of withdrawals involved in that case. Since the matter was being remanded back to the Assessing Officer with certain directions and also I had passed my remarks about the treatment being given to other similar non-banking financial institutions, I did not take long to agree with the decision of setting aside of assessment.

43. At the time of hearing of the present appeals, an enquiry was made from L.A. as to the ultimate fate of such assessment in the reassessment proceedings and the learned L.A. could not provide any answer. Nevertheless, it appears that the above order is taken to have decided the issue finally in favour of the Revenue so far as the Division Bench was concerned. In paragraph 24 of the same order, a reference was made to the discussion of section 5(b) of the Banking Companies Ordinance in the cases of re: Farooq Ahmad (supra) and M/s. Haidery International Finance Limited (supra). In such cases it was observed that term banking given in section 5 of the Banking Companies Ordinance was fairly wide and that the acceptance of the deposits for the purposes of investing or lending but repayable on demand or otherwise which could be withdrawn by cheque, draft order or otherwise would fall within the mischief of this definition. Perhaps these observations of the High courts conveyed the impression that Division Bench had accepted the departmental point of view. However, in such a case there would not have been any need to set aside the assessment if the term 'otherwise' in the mode of repayment could be given such wide meanings.

44. Having given reasons for subscribing to the order reported as 1997 PTD (Trib.) 786, I would now offer my comments on the proposed order of the Hon'ble Chairman in the following manner.

45. As Hon'ble Chairman has rightly pointed out in paragraph 34 above, proper assistance had not been provided to the Division Bench while considering the appeals involved in the order reported as 1997 (Trib.) 786. I dare go a little further and would say that even at the time of the hearing of the present appeals placed before the present Bench of the Tribunal, proper assistance was not available from both the parties. I must appreciate the tremendous efforts made by the Hon'ble Chairman in writing the above order in the absence of such proper assistance from the parties, especially his efforts in digging out the reference to the term financial institutions not only in the Banking Companies Ordinance but also in the Income Tax Ordinance and other laws. I fully agree with the interpretation made by the Hon'ble Chairman that the legislature could not have used the terms financial institution and investment finance companies in various parts of the Income Tax Ordinance as well as Banking Companies Ordinance if it had intended to treat a financial institution as a banking company. Without going into a further detailed reasoning I would express my agreement with the Hon'ble Chairman that the assessees-respondents in present appeals are not banking companies as meant in Banking Companies Ordinance referred in subsection (10) of section 2 of the Income Tax Ordinance.

46. However, subsection (10) of section 2 of the Income Tax Ordinance further goes to include in the definition of a 'banking company' "anybody corporate formed by, or under any law for the time being in force which transacts the business of banking in Pakistan". The assessee in the present case is a company incorporated under the Companies Ordinance, 1984 have a body corporate, and has a licence to conduct business as an investment finance company under the provisions of the S.R.O. 585(1)/87. Such S.R.O. prohibits the company from carrying on banking business and also it prohibits issuance of cheque books or accepting deposits as laid down in clauses (xx) of the objects of such finance company. There is no dispute over the facts that these companies have not issued any cheque book. It is also not the case of the Revenue that any action has been taken by the State Bank of Pakistan against these assessees for violation of such condition or for conducting unauthorised banking business as was in the cases of Haidery and Farooq Ahmad referred to above. Still a question may arise that the assessee may be doing business attracting the penal provisions-and such violation may have escaped the attention of the authorities. If an assessee, being a body corporate, was conducting banking business in contravention of the laws, in my humble view it would still be hit by the definition given in sub section (10) of section 2 of the Income Tax Ordinance. In my humble view some aspects of this issue have still been overlooked. The term 'banking' has been defined in section 5(b) of the Banking Companies Ordinance which has already been reproduced in para. 23 of this order. This definition starts with the term 'accepting, for the purpose of deposits of money from the public'. On the other hand clause (a) of para. 5 of S.R.O. 585 authorises an investment finance company the 'issuance of short term papers' and specifically prohibits the acceptance of the deposits (see para. 24 above). There is no dispute over the fact that the assessees in the present appeals did not open any account, current or term, into which the money could be deposited. The banking companies, in the ordinary sense, open various types of accounts such as Current, Savings, P.L.S., Term Deposit Account, Notice Deposit Account, in addition to issuance of deposit receipts which latter factor is common with the finance companies. Since the law has used different wordings for the term 'banking' in the Banking Companies Ordinance and the functions allowed to an investment finance company, different meanings have to be assigned to such functions.

47. As already mentioned above, the assessment involved in the order reported as 1997 PTD (Trib.) 786 was set aside to conduct of factual enquiry on the mode of withdrawal, although in the earlier para. it had apparently been indicated that the mode of withdrawal did not matter significantly in view of the presence of the word 'otherwise' after cheque, draft, order. Since an impression has been conveyed by the reported order referred to above to have settled the matter in favour of the Revenue, I would like to offer a few comments on this issue as well, especially after going through the detailed order of the Hon'ble Chairman, There is a dispute whether the term 'otherwise' has similar meaning to cheque, draft, or order or does it mean any other mode of withdrawal. Applying the same principle of interpretation that no unnecessary word was used by the legislature. I feel that the presence of the word cheque, draft, order would be rendered unnecessary if we were to give the word 'otherwise' a very wide meaning. The legislature could have easily skipped these words and stopped at 'withdrawalable' or used the words 'in any manner' or other similar term thereafter.

48. Agreed.

(Sd.)(Sd.)

(Muhammad Tauqir Afzal Malik)(Inam Ellahi Sheikh)

Judicial MemberAccountant Member

C.M.A./66-Tax(Trib.)Order accordingly.