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

----S.66-A [before amendment]---C.B.R. Circular No.8 of 1991, dated 30th June, 1991---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessment Years 1987-88 to 1990-91-- Inspecting Additional Commissioner revised the assessment orders which were already a subject-matter of appeal before the higher forum---Validity-- Before amendment in S.66-A of the Income Tax Ordinance, 1979, mere filing of appeal before a higher forum, irrespective of the issue involved, was sufficient to restrain an Inspecting Additional Commissioner from exercising its revisional jurisdiction in respect of an order appealed against---Order of Inspecting Additional Commissioner was declared to be of no legal effect.

In re: PICIC 1988 PTD 626; Anjuman Shaheen v. I.A.C. 1993 PTD 1232; Anjuman Shaheen v. I.A.C. 1993 PTD 1013; 1998 PTD (Trib.) 775; Glaxo Laboratories Limited v. I.A.C. 1992 PTD 932; Additional Commissioner of Incorne tax v. Vijayalakashmi Lorry Service 157 ITR 327; 1992 PTD 1610 and Russell Properties Private Limited v. A. Chaudhry, Additional C.I.T. 109 ITR 229 ref.

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

----S.2.(7)---Assessment-.-definition---Doctrine of merger ---Application-- Provision of S.2(7) of the Ordinance does not control, in any manner, the doctrine of merger.

(c) Managed Cement L5tablishments (Payment to Corporation) Rules, 1987-

----R.3---Cement Development Fund---Taxability---Principles---If the assessee/corporation used the amount of Fund towards its business, then it could be treated as its receipts or an interest-flee advance and to be treated in accordance with the relevant provision of the Income Tax Ordinance, 1979-- If the amount of Fund was not spent in its business or allied purpose, then its treatment as income or table receipts was not justified.

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

----S.62---Assessment on production of accounts, evidence etc.---Cement Development Fund---Taxability---Agreement between assessee and revenue- Assessee/Corporation received amounts from its constituent units as contribution in the head "Cement Development Fund" and offered for taxation under the agreement after payments of freight subsidy to its units -- Assessing Officer made addition in the head Cement Development Fund and disallowed the freight subsidy on the ground that neither it was allowable expense under S.23 of the Income Tax Ordinance, 1979 nor such payment was contemplated by the charter of the assessee---First Appellate Authority maintained the addition and taxability of Fund---Validity---Appellate Tribunal reconsidered the agreement between the assessee/corporation and the revenue and set aside the assessments with the observations that the assessee/corporation may re-cast its accounts and revise the return in the light thereof if so advised.

Abrar Hussain Naqvi and Jamil Akhtar Baig, A.C.A. for Appellant (in I.T.As. Nos. 576/LB to 579/LB of 1995, 4092/LB of 1994, 3113/LB of 1992-93, 2756/LB to 2758/LB of 1996.

Ratra Munir Hussain. L.A. for Respondent (in I.T.As. Nos. 576/LB to 579/LB of 1995 , 4092/LB of 1994, 3113/LB of 1992-93, 2756/LB to 2758/LB of 1996).

Rana Munir Hussain, L.A. for Appellant (in I.T.A. No.6606/LB of 1992-93). Abrar Hussain Naqvi and Jamil Akhtar Baig, A.C.A. for Respondent (in I.T.A. No.6606/LB of 1992-93).

Date of hearing: 9th May, 1998.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER). ---The assessee before us is a Public Limited Company established to manage cement industrial units in Pakistan. In the assessment year 1987-88 an income of Rs.21,15,70.000 was disclosed from various sources including receipts of Cement Development Fund, dividend, interest on investments, service charges and managing agency fee etc. In case of Cement Development Fund the Assessing Officer was explained that this amount was contributed by the units being run by the assessee corporation as required under Ordinance No.II of 1979 read with the Managed Cement Establishments (Payment to Corporation Rules, 1987). The Assessing Officer confronted the assessee with a notice expressing his intention to treat the amount of Cement Development Fund disclosed at Rs.56,63,70.000 as taxable income. In reply the assessee stated as under:--

(a) Cement Development Fund is liability of the Corporation rather than income and it is attached with attended obligations.

(b) The Corporation has received the amount of Cement Development Fund under obligation to utilize it under provisions of section 5 of Managed Cement Establishment (Payment to Corporation) Ordinance, 1979.

(c) The proceeds of the amount paid by the units and credited to the Cement Development Fund account in the books of Corporation constitute advances for issuance of shares by the Corporation to the Federal Government.

2. The assessing officer however, was of a different view. By referring to some cases from English as well as from Indian jurisdiction he rejected the contention that the assessee was acting only as a trustee or an administrator of the Fund which was received on behalf of the Government and therefore, the receipts constituted a liability on the Corporation. He held the view that the fund be available at call and discretion of the Corporation it could not be treated as a receipt on behalf of the Federal Government and that the Corporation had real as well as usufructory rights over the fund. He referred certain statements in the books of accounts of the assessee to sat that issuance of shares to the Federal Government in lieu of the receipts from Cement Development Fund was hardly of any significant and was rather a mere formality as the Corporation and its assets were wholly owned by the Government of Pakistan. Finally he noted that a reference on the subject was made to the Ministry of Law and Justice which by way of its decision communicated through C.B.R. found that receipts of Cement Development Fund were an income within the meaning of section 9 of the Income Tax Ordinance. For these reasons the assessing officer rejected all the submissions made in this regard and treated the aforesaid sum received as Cement Development Fund as taxable receipts. Also the difference between the amount received and spent under the head Cement Research and Development Institute was found liable to tax. The assessee had received these sums from the component units under the aforesaid head and the Assessing Officer found that proposed institute was still under formation process and did not have any independent legal statuts or a separate entity from the Corporation. Finally proportionate expenditure was allocated to dividend income by adopting a formula explained in the body of the assessment order, dated 20-9-1998 to reach total income for the year at Rs.77,92,15,000.

3. In the year 1988-89 as against disclosed income of Rs.90,24,64,000 an assessment was framed at total income for the year at Rs.90,86,63,444. It appears that total Cement Development Fund received at Rs.59,89,38,000 was offered for taxation "subject to terms and conditions of agreement, dated 5-12-1988 between the department and the assessee". It appears that after framing of the assessment in the year 1986-87 the senior officers of the Ministry of Production, the Central Board of Revenue the Income Tax Department and the Corporation reached an arrangement. Para of that agreement dated 5-12-1988 provides: --

"After detailed discussions, it was decided that (a) The Corporation should be considered taxable on the issue under reference i.e. Cement Development Fund, with effect from the assessment year 1987-88 onwards and the assessments for the year 1976-77 to 1986-87 shall be cancelled under section 138 of the Ordinance. (b) Other statutory liabilities like additional tax etc. will be charged from 1987-88 onwards. However, the recovery of such tax would be stayed till the matter is decided by the higher authorities before whom the corporation will take their case for necessary waiver. (c) The demand for 1987-88 will be paid in four instalments before 30th June, 1989. (d) The return for 1988-89 due to be filed by 15-1-1989 is likely to reflect the liability around Rs.22 crores. (e) Pending appeals on the issue under reference will be withdrawn by the State Cement Corporation of Pakistan and there will be no further litigation in the Courts on this issue in respect of the succeeding years. (f) Reference to the Ministry of Finance for cancellation of assessments will be made after the return has been filed or the admitted liability thereon, paid."

4. As in the earlier year differential between the receipts and expenditure under the head Cement Research and Development Institute were brought to tax while proportionate administrative expenditure were allocated to dividend income. Some other disallowances were also made including those under section 24(1) of the Income Tax Ordinance to reach total income for the year as aforesaid.

5. These assessments alongwith the one framed under section 87/132 of the Income Tax Ordinance for the assessment year 1985-86 came up for disposal before the CIT(A)-I, Lahore on 7-6-1990. With regard to assessment year 1987-88 the assessee did not press its grievance against the treatment of Cement Development Fund or its taxability. It was only the charging of tax on surplus of Cement Research and Development Institute and allocation of administrative as well as financial expenses to dividend income which were pressed. In case of Cement Research and Development Institute learned first appellate authority maintained the 'treatment meted out to the assessee while the allocation of proportionate expenditure to income was set aside for re examination. In the year 1988-89 again only the aforesaid two issues were pressed and the learned first appellate authority by referring to the findings recorded in the year 1987-88 proceeded to maintain the taxability of surplus under the head Cement Research and Development Institute. The issue of allocation of expenses to dividend income was however remanded. After remand the assessing officer framed two separate orders on 29-12-1990 for the assessment years 1987-88 and 1988-89 under section 62/132 of the

Ordinance, It was noted that learned first appellate authority had remanded:

(a) proportionate allocation of administrative expenses to dividend income; and

(b) proportionate allocation of financial expenses to dividend income.

After notice to the assessee and on usual proceedings the DCIT repeated the same treatment. Therefore, as far the assessee is concerned nothing changed for the better as on remand not only 5 % of administrative expenses were again allocated to dividend income but also the formula earlier adopted to allocate financial expenses was repeated.

6. In the year 1989-90 the assessee disclosed an income of Rs.49,06,00,000. The Cement Development Fund received at Rs.16,02,84,000 was offered for taxation. This amount was apparently reached after taking cost of subsidy at Rs.15,63,08,490 out of total fund received at Rs.31,65,91,613. The Assessing Officer found that receipts under the head Cement Development Fund in this year declined considerably. Accordingly he required the assessee to explain the basis of chargeability of rates per Metric Ton. In reply the assessee relied upon Circular No. S.R.O. 1218(1)/89, dated 19-12-1989 wherein the Federal Government had determined the rates per M.T. for the purpose of charging the said fund from the constituent units. The attention of the assessing officer was also drawn in section 3 of the aforesaid Ordinance II of 1979 read with Rules 3 and 6 of Managed Cement Establishments (Payment to Corporation) Rules, 1987 to say that it was for the Federal Government to fix the rate of chargeability of Cement Development Fund at the end of each financial year. However, the assessing officer being of the view that the Notification issued by the Ministry of Production and relied upon by the assessee was issued after 10 months of the closing of the financial year held the same to be applicable to the next year and not to the years under discussion. It appears that the assessing officer suspected that after having reached the aforesaid agreement with the Revenue the assessee Corporation had deliberately disclosed less receipts under this head. Also that for reducing the tax liability the assessee tried to take the benefit of the Notification issued long after close of the income year. Holding further that no basis having been produced for the rates applied for the current year he proceeded to adopt the rates and earlier notified on 16-2-1988 as against the Notification relied upon by the assessee which was issued on 19-12-1989. In this manner a sum of Rs.24,62,91,001 was added towards the fund and therefore, treated as income of the assessee. As in earlier years administrativ6 expenses were proportionately allocated to dividend income while part of provisions were disallowed to frame and assessment on 28-9-1991 at total income of Rs.85,37,11,001. In the year 1990-91 the picture almost remains the same. The assessee returned an income of Rs.30,78,01,000. A sum of Rs.11,97,87,000 was declared as Cement Development Fund after deducting the cost of subsidy. The assessing officer laboring under the suspicion of under statement of total receipts under this head proceeded to make similar kind of exercise to hold that the assessee could not take advantage by reducing the rate of Cement Development Fund on the strength of the Notification issued at a much latter time of closing period. Accordingly a sum of Rs.11,54,92,989 was added towards income of the assessee after allowing cost subsidy. The dividend income was again reduced by allocating proportionate administrative expenses while disallowances of paltry sums under two heads of profit and loss account were made to reach total income for the year at Rs.31,88,25,489.

7. The assessments so framed alongwith the assessment order recorded under sections 62/135 and 62/132 with regard to assessment years 1986-87 and 1987-88 were again challenged before the CIT(A) Zone 1, Lahore. Two orders recorded on applications under section 156 of the Ordinance also appear to have been challenged. Learned first appellate authority summarised the grievance of the assessee in all the aforesaid years in the following manner: --

(a) Taxability of the surplus of receipts over expenditure from the Cement Research and Development Institute (assessment years 1986-87, 1987-88 and 1988-89, Rs.83,71,000, Rs.12,75,000 and Rs.11,50,000 respectively).

(b) Proportionate allocation of Administrative expenses attributable to Dividend Income (assessment years 1986-87 to 1990-91 Rs.8,35,200, Rs.10,21,000, Rs.11,00,000, Rs.13,78,900 and Rs.15,35,500 respectively, in each year in appeal).

(c) Proportionate allocation of Financial Expenses attributable to Dividend Income (assessment years 1986-87 to 1988-89 Rs.42,42,384, Rs.28,30,000 and Rs.11,86,170 respectively).

(d) Taxability of the yearly amount credited to the Cement Development Fund assessment years 1989-90 and 1990-91 Rs.24,62,91,001 and Rs.11,34,92,989 respectively.

(e) Taxability of the amount received by the Corporation and shown as a provision in the balance sheet as at 30-6-1989 (assessment year 1989-90 Rs.11,74,14,000).

(f) Taxability of perquisites under section 24(i) (assessment year 1988-89).

(g) Rectification under section 156 of the Ordinance of the assessment order for 1989-90 assessment year re-determining total income at Rs.84,83,61,575."

8. While recording its findings the appellate authority rejected the contentions against taxability of surplus under the head Cement Research and Development Institute. The estimation of quantum of Cement Development Fund as adopted by the assessing officer for the years 1989-90 and 1990-91 was also maintained for a number of reasons. In a way learned first appellate authority shared the suspicion of the assessing officer that after the aforesaid agreement with the Revenue the assessee attempted to reduce the rates disclosed under the head Cement Development Fund. Learned first appellate authority observed that Managed Cement Establishment Rules were framed in July, 1987 while the Managing Cement Establishment Ordinance had come into force in January, 1979. It was also of the opinion which was based upon some material on record that these rules were framed only after the department had started interrogating the appellant on the nature of Cement Development Fund. The allocation of proportionate administrative expenses to financial expenses were also upheld. The corporation filed further appeals in the years 1976-77 to 1990-91 which were heard and disposed of by a Division Bench of this Tribunal on 20-10-1991. By way of that order the allocation of administrative expenses to dividend income was disapproved on the authority of a reported judgment of the Karachi High Court cited as 1988 PTD 626 re: PICIC. The allocation of financial charges to dividend income was also found unjustified for similar reasons. In case of surplus under the head Cement Research and Development Institute the assessee failed in toto.

9. Subsequently, two Miscellaneous Applications Nos. l47 and 147 A/LB/1991-92 relevant to the assessment years 1989-90 and 1990-91 were made. By way of these applications with regard to Cement Development Fund the assessee alleged that the issue raised in the assessment years 1989-90 and 1990-91 was inadvertantly not adjudicated. The applications succeeded partly. In the concluding part of the order recorded on these applications on 14-3-1992 the learned Division Bench held: --

"Therefore, relying on clause (xii) of subsection (1) of section 23 of the Ordinance, we adjudge that it would be correct to restrict allowances and deductions in respect of any expenditure laid out and expended and to treat the surplus of receipts over expenditure as income. On this threshold the dispensation by the officers below is unexceptionable -except that the rates for final payment by the management units though determined by the Government on a subsequent date is to be applied in such a manner as to adopt the same figure in respect of each unit as represents the final amount fixed by the Federal Government. The appeal succeeds to this extent."

10.. In the year 1991-92 the corporation returned an income ' of Rs.37,32,20,000. Total Cement Development Fund was shown at Rs.26,71,64,477. Out of this amount an amount of Rs.8,53,26,000 was deducted as cost subsidy to offer balance for tax at Rs.18,18,38,477. In this year again the assessing officer required the assessee to explain the basis on which the Fund was charged and paid by the constituent units. After making an exercise of similar nature as made in the earlier two years he made an addition of Rs.3,75,02,795 under this head. In this year the assessee absorbed deficit of Rs.2,08,81,760 on account of loss on freight subsidy. This subsidy payment was made to various cement units. The assessing officer held the view that freight subsidy could not be paid by the assessee inasmuch as it was neither allowable expense under section 23 of the Ordinance nor such payment was contemplated by the charter of the assessee. The total claim under this head at Rs.10,95,50,487 was accordingly disallowed. After making a disallowance in profit and loss account an assessment was framed on 19-3-1992 at total income of Rs.52,22,50,514.

11. This order was challenged before the first appellate authority which by way of its order, dated 20-10-1992 allowed partial relief. On the basis of the order recorded by this Tribunal in aforesaid M. A. No. 147 -147-A/LB/1991-92, dated 14-3-1992 the addition made under the head Cement Development Fund at Rs.3,75,02;795 was deleted. The addition under the head freight subsidy was however set aside for de novo decision after re-examining the issue and confronting the assessee.

12. On 3-8-1994 the I.A.C. Range-III, Companies Zone 1, Lahore issued a notice under section 66-A of the Ordinance expressing his intention to revise the assessments framed in the years 1987-88 to 1990-91. According to the order framed under that section on 27-12-1994 the revising authority found that the assessments framed under section 62 of the Ordinance in the aforesaid years were erroneous as well as prejudicial to the interest of the revenue for the reason that in the returns the assessee computed net income by reducing amount of subsidy paid to various units of the Corporation and in the assessment order the assessing officer allowed the subsidy as deduction/expenditure. It appears that after issuance of this notice the assessee approached the Lahore High Court which disposed of its Writ Petition No.6584 of 1994 on 29-6-1994. In para 3 of that order the Honourable Judge recorded the assurance of the counsel for the Revenue that the pleas raised by the petitioner in its reply or at the time of arguments before the Commissioner shall be duly adverted to passing a speaking order. The revising authority with reference to the aforesaid observations of the learned Judge briefly touched the issue whether receipts on account of Cement Development Fund were income under the Income Tax Ordinance, 1979? Also if payments on account of subsidy were an administrative deduction/expenditure under the Ordinance. After examining the issue in the light of various authorities and judicial pronouncements from foreign jurisdictions the revising authority concluded that subsidy could not be termed as an expenditure. Earlier with regard to receipts on account of Cement Development Fund it was noted that the assessee having already agreed that receipts under this head were taxable income it could not be allowed to resile. Further that consequent upon the agreement the assessee having itself been declaring the receipts on this account and in fact paying tax on it regularly there could hardly be said to be any dispute existing between the revenue and the assessee in this regard. Accordingly the revising authority by, way of an order, dated 27-12-1994 proceeded to add the amounts of subsidy of Rs.4,59,84,284, Rs.3,43,37,751, Rs.15,63,08,490 and Rs.12,67,96,145 respectively in the years 1987-88 to 1990-91 towards income already assessed on 24-6-1993 while framing assessments under section 135 of the Income Tax Ordinance.

13. In the year 1991-92 the Commissioner of Income Tax Companies-I, Lahore by way of an order under section 66-A dated 7-8-1994 for similar reasons and after having made the similar findings proceeded to add a sum of Rs.8,53,26,000 towards income. The exercise of revisional jurisdiction by the Commissioner in this year appears to have been for the reason that the assessment order under section 62 was recorded on 19-3-1992 by an IAC. The exercise of revisional jurisdiction by way of the aforesaid two orders has aggrieved the assessee in the years 1987-88 to 1991-92. The assessee is also in appeal in the year 1991-92 against the assessment framed under section 62 of the Ordinance with regard to addition of Cement Development Fund as well as addition of Rs.10,95,50,487 on account of freight subsidy.

14. The Revenue is in cross-appeal in the year 1991-92 against deletion of addition of Rs.3,75,02,795 under the head Cement Development Fund as well as of setting aside of assessment on the point of freight subsidy.

15. In the years 1992-93 to 1994-95 same pattern of events appears to flow. The assessee returned incomes in the three years respectively at Rs.55,73,07,000, Rs.31,56,45,000 and Rs.37,38,21,000. Instead the assessment were framed at Rs.74,88,30,995 Rs.47,888,30,995 and Rs.29,01,67,519. In the process the claim of subsidy cost was rejected with reference to orders passed by the revisional authority under section 66-A in the years 1987-88 to 1990-91 dated 27-12-1994 and for the assessment year 1991-92 dated 7-8-1994. Also the claim of freight subsidy was rejected holding the same to be an application of income and not an expenditure allowable under section 23(1)(xvii) or for that matter any other sub-clause. Some disallowances with reference to the provisions as contained in section 24(i) of the Ordinance were also made to reach the aforesaid incomes by way of three separate assessment orders framed on 24-6-1995.

16. Learned first Appellate Authority CIT(A) Zone I, Lahore on 16-5-1996 recorded a consolidated order for the three years 1992-93 to 1994-95. After considering the matter at length the treatment meted out to the assessee was maintained for various reasons including the fact that the aforesaid agreement between the parties clearly provided for treatment of Cement Development Fund as taxable income. Also it was found that the decision given by this Tribunal on 14-3-1992 was distinguishable. Accordingly the disallowance of freight subsidy was maintained. The other profit and loss account disallowances and the addition under section 24(i) were also not interfered.

17, As stated earlier the assessee has agitated exercise of revisional jurisdiction in the years 1987-88 to 1991-92 as done by way of two separate orders while the department is in cross-appeal in the year 1991-92 against deletion of addition under the head Cement Development Fund and setting aside of the assessment on account of freight subsidy. The assessee is also in appeal for the year 1991-92 against part maintenance of assessment order framed under section 62 of the Ordinance as well as setting aside of the issue of freight subsidy. In the years 1992-93 to 1994-95 the assessee feels aggrieved of the addition under the head cost subsidy, freight subsidy and treatment of whole of the amount of Cement Development Fund as taxable income. Besides these grounds in the year 1994-95 the addition under section 24(i) of the Ordinance is also described as illegal and unjustified. In the original grounds of appeal for the years 1987-88 to 1991-92 the assessee has taken exception to exercise of revisional jurisdiction on various legal as well as factual issues. It has also been stressed that whole of the amount of Cement Development was legally not taxable and that returns of income in the past were procured under threat of levying an amount of Rs.1,08,34,06,900 through an agreement dated 5-12-1988 which is void ab initio having no legal competence.

It is also stated that a Constitutional Petition on the subject is pending before the High Court. In the grounds of appeal the assessee has also attempted to explain the nature of Cement Development Fund which is statedly administered under the compulsion of law laid down in Managed Cement Establishments (Payment to Corporation,) Ordinance, 1979. It is further alleged that in spite of a direction passed by the learned Judge of the High Court on 29-6-1994 the revising authority failed to record a speaking order on the issue of taxability of Cement Development Fund. Surprisingly in the end of the grounds of appeal in the years 1987-88 to 1991-92 the assessee has requested for keeping these appeals pending till the decision of the Honourable Lahore High Court in a Writ Petition No.12443 of 1994 statedly filed as a consequence of the option allegedly granted by the Court by earlier order on 29-6-1994. Neither in the grounds of appeal nor at the bar any information with respect to the fate of the aforesaid writ petition has however, been brought home.

18. In the assessment years 1987-88 to 1991-92 the assessee filed additional grounds of appeal contending that the revising authority was not justified in invoking section 66-A of the Income Tax Ordinance inasmuch as the order of the assessing officer was neither erroneous nor prejudicial to the interest of the revenue; that the revising authority could not lay its hands upon the assessment orders as these were already a subject-matter of appeal before the Higher forum; that the exercise of revisional jurisdiction after a lapse of four years was patently time-barred when seen in the perspective of the limitation provided in subsection (2) of section 66-A of the Ordinance and that the cost subsidy was a legal expense paid under the enactment and therefore, the revising authority was not justified in disallowing the same which was actually paid to the constituent units out of the Cement Development Fund.

19. Parties have been heard. Mr. Abrar Hussain Naqvi learned counsel for the assessee contends that exercise of revisional jurisdiction under section 66-A of the Ordinance for the assessment years 1987-88 to 1990-91 was against law as it existed at the relevant time. Explaining the proposition he submits that at the time of the enforcement of the Income Tax Ordinance, 1979 no provision with regard to revision of assessment was provided. These provisions earlier existed in the late Income Tax Act of 1922 as section 34-A of the Ordinance. However, after the enforcement of the Income Tax Ordinance, 1979 a need was felt to provide for exercise of revisional jurisdiction by the I.A.C's where the situation as contemplated in late section 34-A of the repealed Act prevailed. Therefore, section 66-A was inserted by Finance Act, 1980. The provision so introduced however, did not provide for exercise of revisional jurisdiction where an appeal had been taken against the assessment order either to the first appellate authority or the Tribunal. In this manner the exercise of revisional jurisdiction are many a time rendered ineffective when appeal was taken to any appellate forum on any issue involved. In order to remedy the situation the law was amended by Finance Act, 1991 and the added subsection (1-A) provided for exercise of revisional jurisdiction will not be effected merely for the reason that an appeal had been taken to the appellate forum. In other words exercise of revisional jurisdiction remained uneffected on the issues which were not the subject-matter of appeal. According to the learned counsel the revenue itself explained this situation by CBR Circular No.8 of 1991 dated 30-6-1991 after introduction of the aforesaid subsection. Through this Circular the CBR admitted that where an appeal had been taken to an appellate forum the IAC could not revise an assessment. The proposition as explained in the said CBR Circular, learned counsel continues also finds support from reported judgment cited as 1993 PTD 1232 re: Anjuman Shaheen v. IAC, 1993 PTD 1013 Anjuman Shaheen v. IAC and 1998 PTD (Trib.) 775. In the first two cases the Lahore High Court found that when an appeal was filed against the order of the ITO the original order ceased to exist and stood merged in the appellate order which alone remained in the field. Therefore, section 66-A as originally enacted could not be invoked. These decisions were followed by a Full Bench of this Tribunal in the third mentioned case. Learned counsel also refers to the ratio settled by the Supreme Court of Pakistan in Glaxo Laboratories Limited v. IAC reported as 1992 PTD 932. This judgment explains doctrine of merger and lays down that after an order in appeal it is only the appellate order which remains in the field and the original order merges therein. Learned counsel has also cited at the bar the finding recorded by his Lordships of Mr. Ahmad Saeed Awan in the case cited as Sheikh Abdul Sattar v. CIT reported as 1995 PTD 882. In this case his Lordship after examining the history of the provision .proceeded to elaborate the legal situation after introduction of subsection (1-A) to section 66-A by way of the Finance Act, 1991. Lastly, learned counsel refers to 157 ITR 327 re: Additional Commissioner of Income-tax v. Vijayalakashmi Lorry Service wherein it was found that entire original order merges into an appellate order.

20. On facts learned counsel states that original assessment in the year 1987-88 was framed on 20-9-1988 and in the year 1988-89 on 21-8-1989. Appeals were filed and after a decision thereupon the assessing officer again framed assessment under section 62 read with section 132 of the Ordinance on 28-2-1991 for the assessment year 1989-90 and on 31-3-1991 for the assessment year 1990-91. The appeals though on different issues were further taken to this Tribunal which were heard and decided by way of an order dated 20-10-1991. The assessment for the year 1991-92 was framed on 19-3-1992 while the IAC exercise his revisional jurisdiction through a consolidated order pertaining to the assessment years 1988-89 to 1990-91 on 27-12-1994 while in the year 1991-92 the CIT recorded an order under section 66-A on 7-8-1994. From the chain of above events learned counsel for the assessee submits that the assessments framed for the years 1987-88 to 1990-91 having travelled all these appeal stages up to the Tribunal, the assessment order recorded in these years merges into the order of the Tribunal, dated 20-10-1991. Since, according to the learned counsel before introduction of subsection (1-A) exercise of revisional jurisdiction was admittedly not provided for where an appeal had been taken against an assessment order the exercise of revisional jurisdiction by the IAC for these years by way of an order, dated 27-12-1994 is totally illegal. To hammer the point learned counsel again refers to the aforesaid reported judgments. A specific mention is made to the findings recorded by his Lordships of Mr. Ahmad Saeed Awan in re: Sheikh Abdul Sattar v. CIT (supra). In order to forestall an argument from the Revenue learned counsel also refers to the findings recorded by Malik Muhammad Qayyum learned Judge of the Lahore Court at page 1235 of the said reported judgment re: Anjuman Shaheen v. IAC. While holding for the assessee learned Judge remarked that sub section (1-A) of section 66-A added with effect from 1-7-1991 had no retrospective effect and therefore, could not apply to any earlier assessment order. As an alternate plea Mr. Abrar Hussain Naqvi submits that original assessment in the first two years -viz. 1987-88 and 1988-89 having been framed on 20-9-1988 and 21-8-1989 were beyond the scope of revisional jurisdiction as prescribed time limit of four years in sub section (2) of section 66-A of the Ordinance had long gone. Further that assessments framed in the years 1987-88 to 1990-91 having already merged into the appellate order the exercise of revisional jurisdiction in respect of these years was legally not sustainable. A reference is also made to a reported judgment from Indian jurisdiction reported as 1992 PTD 1610 wherein it was found that only an original order could be revised. Reliance in. this regard is also placed upon the findings of 109 ITR 229 re: Russel Properties Private Limited v. A. Chaudhry, Additional CIT wherein it was held that order giving effect to appellate order was not an assessment order and, therefore, could not be revised. According to the learned counsel the total effect of the aforesaid reported judgments of exercise of revisional jurisdiction before and after amendment in section 66-A being that the assessments framed in this case from the years 1987-88 to 1990-91 merged into the appellate order and therefore were not susceptible to revisional jurisdiction. Also that doctrine of merger clearly disapproves such an action on the part of the revising authority.

21. With respect to the remaining years namely 1991-92 to 1994-95 learned counsel has another set of defence. The exercise of revisional jurisdiction of CIT in the year 1991-92 by way of an order, dated 7-8-1994 is contested on the ground that it was clearly violative of the order of the Lahore High Court dated 29-6-1994. In that order the Honourable Judge in para. 3 recorded an assurance of the learned counsel for the respondent that the pleas raised by the petitioner in its reply or at the time of arguments before the Commissioner shall be duly adverted to by passing a speaking order. Mr. Abrar Hussain Naqvi, states that the revisional order, dated 7-8-1994 bears a witness to the fact that the Commissioner exercising his revisional powers did not comply with the order of the High Court inasmuch as the objection of the assessee against the taxability of Cement Development Fund was not treated at any length as he rejected the same by making of a passing remarks that the assessee had itself offered this amount for tax after the aforesaid agreement with the Revenue. It is claimed at the Bar that had the learned Commissioner allowed an adequate opportunity of hearing the assessee could explain that whole of the amount of Cement Development Fund received from constituents units was treated in accordance with law as laid down in Managed Cement Establishment (Payment to Corporation) Rules, 1987. Further claims that whole of the amount under this head received by the Corporation as an agent of the Federal Government. Also that not a single penny of this amount is at the disposal of the Corporation which is kept in a separate current account operated under the strict provisions of the Federal Government. It is stated at the Bar that whole of the amount received in this regard is in the nature of an advance and therefore, a liability as the Corporation is obliged to issue shares to the Federal Government as and when it is so required by them. Alternately, learned counsel continues the receipts in this fund are of capital nature received under the dictates of law, maintained and spent strictly as required by law. Learned counsel takes strong exception to the remarks as made by the assessing officer while treating the Cement Development Fund as taxable income lie states that the assessing officer totally ignored the fact on ground when it held that the Corporation could exercise any domain on the fund or it could exercise usufructory right on it. On the nature of the fund learned counsel cites (1983) 141 ITR 685 re: CIT, Aghra v. Setaram Sri Krishin Das and 97 ITR 334 re: CIT Bombay v. Amalgamant Electric Company Limited. In the first case market fee received by a commission agent which was meant to be paid to the constituents from whom it was realized was found not to form part of the trading receipts or income of the assessee. Also it was found that the assessee held the market fee for and on behalf of the Government as a trustee. Iii-the second case statutory reserves created under the Electricity Act were found to be a compulsory transfer required under the law. Also that these amounts were either not available to the assessee at all or were available for very limited purposes. Further the receipts in reserves were held not to form part of the assessee's real profit.

22. With reference to the aforesaid agreement between the revenue and the assessee with regard to treatment of Cement Development Fund learned counsel relies upon 91 ITR 173 re: CIT v. Behar Rajya Pul Nirman Nigm Limited. This case is cited to support the contention that even a declaration or an agreement on the part of the assessee will not change the legal situation. In the reported judgment tolls were collected by the Government company. The Government issued a letter that it would be the income of the company. Their Lordships however, held otherwise. It was noted that notwithstanding the issuance of letter by the Government the Corporation while managing and collecting toll merely acted as an agent. Learned counsel further contends that statutory provisions always override covenants between parties which are contrary to statutory provisions. Also refers to (1969) 74 ITR 1 wherein it was held that no provision in law could enforce the undertaken given by an assessee to file a return. Also relies upon (1984) 49 ITR 131 re: CIT Kerala-II A.P. Parukutti Moopilamma and others wherein it was held that an assessment was not be made solely on the admission of the assessee and the view of law which he takes.

23. In the year 1991-92 learned counsel supports the grounds of appeal against the first appellate order recorded by the CIT (A)-II, Lahore on 20-11-1992. It is stated that the CIT (A) erred in law as well as in fact by setting aside the addition of Rs.10,95,50,487 on account of freight subsidy. In this regard it is submitted that the learned first appellate authority having agreed with the submissions made before it could not push the assessee to another round of proceedings. In the years 1992-93 to 1994-95 the addition on account of cost and freight subsidy are described as contrary to the provisions of law and the rules as contained in Managed Cement Establishment (Payment to Corporation Rules, 1987. In terms of grounds of appeal it is vehemently contended at the Bar that whole of the Cement Development Fund was made taxable on the basis of the said agreement, which was otherwise void, and not in accordance with law. In the year 1994-95 the addition under section 24(1) of the Ordinance is described as illegal. Learned counsel while defending the departmental appeal in the year 1991-92 claims that the first appellate authority was justified in deleting the addition of Rs.3,70,02,795 under the head Cement Development Fund. In this regard he states that the first appellate authority having followed the aforesaid order of the Tribunal passed in Miscellaneous Applications M.As. Nos.147 - 147-A on 14-3-1992 the Department had no case at ail. The setting aside of the addition of Rs.10,95,50,487 on account of freight subsidy is also contested with the added argument that the first appellate authority ought to have deleted the addition instead of setting aside the same.

24. Rana Munir Hussain, learned Legal Advisor on his turn however claims that the assessee has no case at all as far the taxability of Cement Development Fund is concerned. It is stated that use of words "any proceedings" include an order under section 62/132 and therefore, the revising authority was competent to exercise revisional jurisdiction even on orders giving appeal effect. By referring to definition of "assessment" as contained in section 2(7) of the Ordinance he maintains that since it includes reassessment and additional assessment revising authority could always lay its hands upon them. Therefore, denies that only an original assessment order could be revised. 1t is further submitted that since the Assessing Officer failed to take note of the fact that subsidy was not an expense nor the assessee could dole out freight expenses the revising authority had all the justification in the world to exercise its jurisdiction inasmuch as the assessment orders recorded in these years were not only errnoneous but also prejudicial to the interest of the revenue. Explaining the doctrine of mergers he claims that an appeal order merges in an original order only to the extent of the issues decided by it. In the view of the learned Legal Advisor since the issue of subsidy was never before the appellate authorities the original assessment order even if merged in the appellate order still remains erroneous and prejudicial to the interest of the Revenue. It is further opined that the issue of subsidy in the years 1987-88 to 1991-92 being not a part of the merged order an exercise of revisional jurisdiction in that regard could not be challenged. It is further stated that principle of change of opinion did not apply to revisional jurisdiction. Also relies upon 1989 PTD (Trib.) 562 re: A&B Food Industries Limited to say that the revising authority had wide power to exercise jurisdiction. Also refers to the findings recorded by a Division Bench of this Tribunal in 1986 PTD (Trib.) 839 with regard to the powers of the revising authority.

25. On merits he claims that the assessee Corporation having accepted the factum of taxability of the Fund after duly considering the opinion expressed by the Ministry of Law, it cannot be allowed to turn about and to resile from the agreement. According to the learned Legal Advisor the admission on the part of the assessee with regard to taxability of the fund was consciously repeated over the years inasmuch as this fund was offered for taxation. Therefore, the allegation of any coercion and undue influence as stated in the grounds of appeal of the assessee and repeated at the Bar is denied. He points out that even the Chartered Accountant of the assessee firm was present at the occasion and was also a signatory to the said agreement. Therefore, in the opinion of the learned legal advisor, the assessee having best legal advice available to it even at the time of agreement nothing could be more unjust to say that the agreement was engineered or it was forced upon the assessee. Further states that the assessee itself having offered the fund for taxation the revising authority rightly foiled any attempt on its part to reopen, the issue by making resort to far-fetched technicalities. Further claims that no kind of subsidy could be allowed as an expense inasmuch as the amount of fund offered to tax as income from other source and section 31 of the Ordinance providing for deductions in such cases cannot be stretched in any manner to justify doling out of any of the two kinds of subsidies. It is stated that as per provision of section 7 of the Managed Cement Establishment (Payment of Corporation) Ordinance, 1979 the profits on Cement Development Fund could only be used in development schemes and any expense of the kind claimed by the assessee was not warranted by law. Therefore, according to the learned legal advisor the subsidies could not be claimed as an expense either under the provisions of Income Tax Ordinance, 1979 or the said Managed Cement Establishment (Payment to Corporation) Ordinance, 1979. The departmental appeal in the year 1991-92 is supported by contending that the CIT (A) wrongly deleted the addition and that the order of the ITAT dated 20-10-1991 was misinterpreted in order to allow the impugned relief. The setting aside of the issue of freight subsidy is also contested on the ground that the first appellate authority ought to have maintained the addition inasmuch as the claim was not supported by any law or authoritative precedent.

25-A. Learned Legal Advisor further relies upon 1995 PTD 375 re: Mst. Inayat Begum v. CIT, Zone B, Lahore wherein it was held that assessment once made did not come to an end only proceedings with regard to that assessment were finally concluded. This case is relied upon to say that the assessments in question in the years 1987-88 to 1991-92 still being sub-judice before the appellate forum did not loose their basic character of being assessments. The next case relies upon is Mersey Docks and Harbour Board v. Lucas reported as 2 TC 25. In that case the law Lords addressed themselves to a question if the amounts carried to sinking fund and surplus carried to the following year's accounts were "profits" within the meaning of the Income Tax Acts and that if they were "profits" whether there was anything in the local Act and the Harbour Board to relieve the Corporation from payment of the tax. The Harbour Board was empowered by Act of Parliament to levy dock dues etc, to, be applied in maintaining the concern, and in paying interest on money's borrowed. Also the surplus income remaining after meeting these charges was directed to be applied informing a sinking fund to extinguish the debt incurred in the construction of the docks. The House of Lords found that the surplus was profit assessable to Income tax. In 16 TC-451 re: The Alloa Town Council v. The Commissioners of Inland Revenue the Town Council carried on, under a statutory authority, a gas undertaking and an electricity undertaking. Since from the year 1918 the electricity undertaking was not financially successful and therefore, in order to reduce the accumulated deficit the Town Council under the statutory powers increased the price of gas within its area and in each of the subsequent accounting year transferred out of the revenues of the gas undertaking to the credit of the Electricity Department. The revenue treated these sums- transferred from gas department to Electricity Department a taxable receipts on account of their being part of the profits of the gas undertaking. The Court of Session, Scotland (First Division) found for the revenue holding that the sums transferred to the Electricity Department were not admissible deductions in computing the profits of gas undertaking for income-tax purpose. In cross-appeal Young (H.M.) Inspector of taxes v. Racecourse Betting Control Board cited as 38 Tax Cases 426 the assessee a Recourse Betting Control Board was established by the Recourse Betting Act, 1928 to operate totalisators at approved recourses. A percentage of moneys marked with the totalisators was required to be deducted from the distributions among winners of bets and paid into a fund known as the totalisator fund. After payment of usual taxed this fund was to be applied in accordance with scheme to be approved by the Secretary of State for the improvement of breeds of horses or the sport of horse racing or the advancement of veterinary science. In the approved scheme for the year the Board made payments to recourses owners for improving the amenities of recourses and augmenting prize money to owners and trainers to reduce the cost of bringing horses to meetings to the organizers of meetings at which totalisators were operated to meet the salaries of racing officials. The runner allowance was also paid to owners and was charged as a working expense in arriving at the amount subject to the approved scheme. These payments of rebate were made with the object of increasing the receipts of the totalisator by attracting the public to race meetings, increasing the number of runners. The Board claimed that the payments in question should be deducted in computing its profits. The Commissioner allowed the appeal except as regards expenditure on the provision of certain physical installations at recourses which they held to be of a capital nature. Both sides demanded cases and consequently reached the House of Lords. While finding for the Revenue it was found that the treatment of aforesaid payment made for the purpose of the Board's trade was inconsistent with the Act of 1928 and that runner allowance unless approved by the Secretary of States was paid ultra vires. In 5 ITC p.371 re: Dewan Bahadur Balabhdas and Son v. CIT, Berar the assessee a member of East India Cotton Association forward or hedge contracts received payments every fortnightly according to the bye-laws of the Association in respect of contracts known as forward or hedge contracts. On an assessment of the excess of the amounts so received in the account year, the assessee contended that as there were still further adjustments to be made till the contracts were finally settled in the following year when he might have to make payments instead of receiving payments, the income there from could not be ascertained in the account year. Rejecting the contention Court of Judicial Commissioner Nagpur held that actual payment received on account of contracts will running would be assessable income and the assessee could not escape liability simply because he might incur loss on the same account in the following year. In E.D. Sasson & Company Limited and others v. CIT, Bombay City the assessee-company were the managing agents of the other company under the Managing Agency agreement the assessee-company were entitled to receive as their remuneration, subject to a minimum a commission of certain percentage on the annual profit of the other company. The assessee-company assigned their office to ether managing agent and pay all their rights and benefits under the Managing Agency agreement. A question arose if the assignee managing agent was liable to pay tax on the accrual basis on the whole of the commission or whether the tax was payable by the assessee and the assignee on profit apportionment made between them of the amount received. The Supreme Court of India per majority held that in the circumstances of the case the managing agency commission was not liable to apportionment between the assessee and the assignee managing agent but the assignee was liable to pay tax on the whole commission. The next case cited as (1960) 39 ITR 566 is the same case earlier reported and discussed as 38 Tax Cases 426. Lastly learned Legal Advisor relies upon 1991 PTD 999 re: CIT v. Messrs Smith Kline and French of Pakistan. In that case Supreme Court of Pakistan while interpreting section 4(3)(vii) of the late Income-tax Act of 1922 held that burden of proof of the fact that any receipt by a person was an income was on the revenue. Further that if the department establishes that a receipt was income then the onus that such a receipt was exempt under any provision of the Act was on the assessee claiming the exemption.

26. After considering the rival submissions we are of the view that the assessee has a clear case for interference as for the exercise of revisional jurisdiction in the years 1987-88 to 1990-91 is concerned. The reported judgments relied upon by the learned counsel for the assessee are not only direct on the point but these also take care of the objections of the Revenue with regard to connotation and the meaning of the word "assessment". The issue before His Lordship Malik Muhammad Qayyum in re: Anjuman Shaheen v. I.A.C. 1993 PTD 1232 was exactly the same which falls for our consideration in the case of the assessee. The learned Judge expressly found that the provisions of section 66-A as originally enacted did not provide for revisional power with respect to orders which were subject-matter in appeal or revision. Also that such powers were made available with regard to appellate orders by amendment by the Finance Act, 1991 which was not retrospective in operation. The doctrine of merger in the context of these provisions was also examined to hold that where appeal was filed against order of the I.T.O. the original order ceased to exist and stood merged in the appellate `order which alone remained in the field and section 66-A as originally enacted could not be invoked by the IAC. Further that an order giving effect to an appellate order could not be considered as an assessment order under section 62 of the. Ordinance inasmuch as the final order of assessment in that case would be that of appellate forum. To the same effect were the findings recorded by the same learned Judge in 1993 PTD 1113 in the case of the same assessee. While deciding these cases the learned Single Bench of the Lahore High Court had before it the ratio settled by Supreme Court of Pakistan in re: 1992 PTD 932 re: Glaxo Laboratories Limited v. IAC. In that case the apex Court explained- the meaning of the word "merger" in the context of the Doctrine that on appeal an original order merged in the appellate order where after no original order remained available to be revised under section 66-A of the Ordinance. The reliance of the learned counsel on various reported judgments of the Tribunal on this issue is also relevant and pertinent. In 1988 PTD (Trib.) 775 a Full Bench of this Tribunal held that where original order was modified by Appellate Assistant Commissioner the assessment order merged with the appellate order and hence the appellate order held field and not the original assessment order. In the second case namely 1996 PTD (Trib.) 492 the amended sub section (1-A) of section 66-A was examined by a Division Bench of this Tribunal at Islamabad in the perspective of the changes brought about by it. It was accordingly held that in exercise of powers under the amended provision the IAC could give only such direction as would be independent of and not inconsistent with or in derogation of any determination made by the appellate forums. In that case as well the learned Benchs placed reliance upon the aforesaid judgment of the Supreme Court of Pakistan in re: Glaxo Laboratories Limited. The view of the Indian superior Courts with regard to Doctrine of merger also appears to be exactly the same as held by Courts in Pakistan. This is evident from the reported judgment relied upon by the learned counsel in re: ACIT v. Vijaya Lukshami Lorry Services (supra) and Russel Properties Limited v. A. Chaudhry, Additional Commissioner (supra). The distinction in legal situation before and after amendment in section 66-A by way of the Finance Act (XII of 1991) was explained with clarity by -his Lordship Mr. Ahmad Saeed Awan which hardly needs an elaboration. To reiterate it will be noted that the amendment in section 66-A was brought in order to discourage frivolous appeals filed to protect manoeuvred and erroneous orders prejudicial to the interest of the Revenue made by the assessing officers in favour of assessees. If such a situation really existed is not relevant for our purpose. However, the fact remains that their Lordships of the Lahore High Court in the aforesaid reported judgments and the Central Board of Revenue in its Circular No.8 of 1991, dated 30th June, 1991 are unanimous that before amendment in section 66-A of the IAC could not exercise revisional jurisdiction in respect of assessment orders against which appeals had been filed by the assessee.

27. The factual position as detailed earlier is not disputed between the parties. The Revenue agrees that the appeals against the assessment orders framed in the years 1987-88 to 1990-91 were taken to Commissioner (Appeals) as well as this Tribunal. It is also not disputed by the assessee that these appeals were taken on issues different from those which were made basis by the revising authority to exercise its jurisdiction. However, in the view of the aforesaid authoritative pronouncements before the amendment in section 66-A mere filing of appeal before a higher forum irrespective of the issues involved was sufficient to restrain an IAC from exercising its revisional jurisdiction in respect of an order appealed against. The appeals of the assessee from the assessment years 1976-77 to 1990-91 were disposed of by way of the aforesaid order, dated 20-10-1991 which to some extent was amended subsequently on 14-3-1992 when the assessee partly succeeded in its M.As. Nos.147, 147-A/LB/1991-92 (Assessment years 1989-90 and 1990-91). The factual as well as legal situation having been admitted, as said above, the assessee has the strongest possible case for interference by this Tribunal. It will be noted that the reported judgments relied upon by the learned Legal Advisor including 1986 PTD (Trib.) 839, 1987 PTD (Trib.) 279 and 1985 PTD 375 do not address the issue directly. In these judgments the revisional jurisdiction of an IAC was looked into from entirely a different angle to hold the same to be a wide and all embracing jurisdiction. In the second reported judgment, the definition clause namely section 2(7) of the Ordinance was considered. To say that "assessment" includes re-assessment and additional assessment is simply a statement of law as contained in the said clause. However, this definition does not, in any manner, control the Doctrine of merger as expounded by the superior Courts in Pakistan as well as India. The reported judgments relied upon by the learned counsel for the assessee being directly relevant to the issue in hand and the Revenue having failed to challenge the factual as well as legal proposition advanced at the Bar, we will hold that exercise of revisional jurisdiction by the IAC vide consolidated order recorded for the years 1987-88 to 1990-91 on 27-12-1994 was of no legal effect at all. Since the assessee has succeeded on its preliminary objection, the alternate legal submissions with regard to lack of error or prejudice to the interest of the Revenue need not be examined.

28. In the year 1991-92 the assessee has filed two appeals. One against the order framed under section 62 of the Ordinance w partly modified by the first appellate order dated 20-10-1992. The second appeal relates to the exercise of revisional jurisdiction by Commissioner of Income Tax, Range-III, Companies-I, Lahore under section 66-A against the order, dated 27-12-1994. As noted earlier the Revenue is in cross appeal in the year 1991-92 against deletion of addition under the head Cement Development Fund and setting aside of the issue pertaining to the addition made on account of freight subsidy.

29. The exercise of revisional jurisdiction of CIT(A) in this year is not hit by the doctrine of merger in view of the above amendment in the section. However, it is noted that the revising authority brushed aside the contention with regard to chargeability of tax on Cement Development Fund mainly for the reason that the assessee having itself declared the receipts as income there did not appear any dispute in that connection. However, this way of reasoning was not sufficient compliance of the order of Lahore High Court in the aforesaid writ petition dated 29-6-1994. The Revenue having given an understanding that it shall consider all issues raised in reply to the proposed exercise of revisional jurisdiction the rejection of a number of contentions raised in this behalf on the sole ground of the receipts having been returned as income and offered for taxation was not enough. We understand that in such a situation the assessee has a very weak case for interference. It is certainly in a precarious situation. However, the malady has to come to an end after all. Its roots are linked to the aforesaid agreement, dated 5-12-1988. This agreement leaves a lot to be desired. The opinion of the Law Division which persuaded the assessee to reach the kind of understanding with the Revenue has not been made available to us. Therefore, we cannot know the reasons or the basis on which the Law Division expressed the opinion that Cement Development Fund was an income of the assessee and therefore was taxable. One thing however is certain that the naive administration of the Corporation readily gave in without a resistance or even an attempt to put the opinion of the Law Division to any litmus test or judicial scrutiny. Since the Corporation was administered by the officers nominated by the Federal Government they did not appear to have strained at the adverse opinion of the Law Division. They may have had their own justifications for budging him. One important factor seems to be the idea that ultimate destination of the money still being the national coffer namely the Federal Consolidated Fund there was no use to put up a resistance. This is where the difference between a public and private sector becomes highlighted. A private entrepreneur would never have accepted the opinion of the Law Division as a gospel truth. Interestingly as we have been told the reference to the Law Division was made without involving the Corporation or its legal wing. The need, manner and method of reference which also remains obscure till today was apparently a one-sided exercise on the part of the Revenue. The reply to the reference was treated as an edict. It came it saw and conquered. The Corporation was threatened with an amount of arrears which made its very existence doubtful. Ordinarily a resistance and taking up the issue to the higher judicial forums was the correct answer. However as earlier noted the docile administration of the Corporation saw a solance in the generosity of the Revenue to ignore part of the arrears. The offer was a disguise to net in a hen laying golden eggs. The modalities carved out for this purpose namely, undertaking by the Revenue to cancel assessments earlier to 1987-88 under section 138 of the Ordinance and the promise of the assessee not to take the issue of chargeability of Cement Development Fund to any forum per se appears offensive to our legal system. Irrespective of the legality of the consideration the agreement smacks arbitrariness of thought and action on the part of the Revenue. To hold out a promise that an authority exercising quasi judicial powers namely Commissioner of Income Tax as revising authority under section 138 of the Ordinance will determine an issue in a particular manner sounds Greek to an ear accustomed to hear harmonious tunes of common law system. Also extending of a promise by a party not to approach a Court of Law in present or future coloured the whole arrangement. An agreement containing such a clause is not enforceable at law if it cannot be separated from rest of the stipulations though generally such promise is considered separable from the rest. Section 28 of the Contract Act (IX of 1872) provides that all agreements in restraint of legal proceedings shall be void. It may however be stressed that though an agreed assessment is not contemplated in the scheme of the Ordinance yet it is not prohibited either. The majority view of the Tribunal in the perspective of exercise of revisional jurisdiction in cases of agreed assessments is expressed in 1993 67 Tax 1 (Trib.). The minority view in that case was recorded by one of us the Judicial Member. Here it may further be pointed out that an agreed assessment may in certain cases be sustained for previous as well as current assessment year. However to agree in advance for the treatment of a particular receipt in a particular manner for all time to come is again neither in accordance with the practice nor it finds support from any of the provisions of the Ordinance or for that matter any other law.

30. The agreement in question in our considered view buried an important question as to taxability of Cement Development Fund. It was patently against policy of law which prohibits holding out promises about judicial or quasi judicial decisions and putting restraint on the right of a party to approach Courts. Such covenant with respect to future assessments was all the more illegal and therefore not binding. Every assessment year is an independent accounting period and therefore must be seen in the perspective of the four corners of the activities carried out of the declarations made for that period only. The said agreement between the Revenue and the assessee at best was applicable to the assessment order in question and all promises exchanged with regard to future assessments were neither binding nor enforceable. Also we are of the view that the assessee was not obliged to offer Cement Development Fund receipts as taxable. Although the case-law referred to by the learned counsel for the assessee on the issue as detailed in paras. 21 and 22 of the order is distinguishable yet we find that the assessee unnecessarily remained under the influence or trance of the agreement and acted like a proverbial "good boy". It went on to declare the receipts under the said head as taxable without reconsidering its position, the nature of receipt and the possibility to take the issue to a judicial forum for a final decision. Instead on a second thought it attempted to minimize its receipts under that head and started claiming expenses on account of subsidy and freight differential. This attempt was sought to be checked by the assessing officers in the years 1987-88 to 1990-91 and in case of the year 1991-92 by C.I.T. by way of revisional jurisdiction. The assessee tried to avoid the brunt of its agreement by introducing expenses which were neither claimed in any earlier years nor they otherwise formed part of the agreement.

31. Both the revenue as well as the assessee appear to have conveniently forgot that after framing of Managed Cement (Payment to Corporation) Rules, 1987 the legal position crystallized in Rule 3. These rules detailed the nature of the receipt, its purpose and the limitations of the Corporation to use it. Rule 3 titled as Cement Development Fund reads as under: ---

3. Cement Development Fund.---(1) The Federal Government shall at the beginning of each financial year fix the provisional amount payable by each unit to the Corporation in respect of each metric ton of cement produced and sold by it, on the basis of its budgeted profit. The amount so fixed shall be finally determined by the Federal Government during the year.

(2)(i) The proceeds of the amount paid by the units shall be credited to the CementDevelopment Fund Account in the Books of Accounts of the Corporation, and

(ii) shall constitute advances for issuance of shares by Corporation to the Federal Government.

(3) The Corporation shall, intimate to the Ministry the details of the periodical receipts of the fund and the actual quantity of cement sold by each unit.

(4) The amount of fund collected by the Corporation from its units shall be utilised with the prior approval of the Federal Government, as under: ---

(i) Government equity loan for the new cement projects schemes under taken by the Corporation.

(ii) Government equity loan for balancing modernization and rehabilitate of the on-going cement units.

(iii) Subsidy to a cement unit to compensate it for the differentials in transportation expenses of cement from one area to another or for the unforeseen or unavoidable heavy cost or losses.

(5) The amount of the fund shall be kept in a current account or short or long term deposit accounts until the amount is actually used by the Corporation.

(6) At the close of the financial year the Federal Government shall finally determine the amount to be paid to the Corporation by each unit with reference to its audited accounts. The difference in the provisional and final amount will be settled and accounted for accordingly.

(7) The final amount as fixed by the Federal Government for each unit under sub-rule (6) shall be notified in the official Gazette at the end of the financial year.

(8) Figures of the receipt and payment and the balance lying in the account of the Fund shall be reconciled by a representative of the Ministry quarterly.

(9) The Cement Development Fund Account shall be reflected in the final account of theCorporation and shall be audited by the statutory auditors.

(10) The Corporation shall issue its shares to the Federal Government in such instalments and at such times as may be agreed upon between the Ministry and the Corporation, out of the advances for shares referred to in clause (iii) of sub-rule (2)."

A glance on the aforesaid Rule enforced evidently, after opinion of the Law Division. had already been rendered, show that the Corporation had a very limited options to lay its hands upon the money received as Cement Development Fund and put in a separate current account. Also that it constituted advances for issue of shares by the Corporation to the Federal Government. In that sense which appears to be the principal use of the fund was in nature of advance received by the Corporation to issue shares to the Federal Government. If the Corporation as a matter of fact used whole or any part of such amount towards its business or other similar activity, then to that extent, it could be treated as its receipts or an interest free advance from the fund to be treated in accordance with the relevant provisions of the Ordinance. If it had no jurisdiction and as a matter of fact did not spend any sum in its business or allied purposes and the receipts in this head remained separate and an independent part of the accounts of the Corporation, then its treatment as income or taxable receipt does not appear justified.

32.Be that as it may, whether or not the Cement Development Fund was an income of the assessee was a question to be determined after examining the actual treatment of the sums by the Corporation. Particularly after the enforcement of the aforesaid Rules. Obviously this occasion never arose inasmuch as the assessee went on to disclose these receipts as taxable income. As observed earlier instead of reconsidering its position it tried to reduce liability by introducing and claiming various kinds of expenses to which the Revenue did not approve. This tug of war appears to have continued in rest of the assessment years before us. We are informed that in the years subsequent to those before us this issue is not a moot point inasmuch as statedly the constituent units having gone in losses are not contributing any sum towards Cement Development Fund.

33. The Cement Development Fund however remains the only issue between the parties to be dealt with in the assessment years 991-92 to 1994-95. The assessee, though late in the day and having itself disclosed it as a taxable receipts wants that its taxability should be re-considered. It is for this purpose that a request to the High Court in the aforesaid writ petition was made and was accepted by the learned Single Judge. Its claim of subsidies also is intrinsically related to the nature of receipts under this head. As noted earlier the assessee in the guise of claim of various kinds of subsidies attempted to reverse the affect of the agreement but the Revenue successfully blocked this way. The Revenue also made it sure that the assessee did not reduce its receipts under this head by taking benefit of the aforesaid notifications determining the rate of contribution based upon the manufacturing activity of the constituent units. This Tribunal having found in favour of the assessee when it amended its consolidated appellate order, dated 20-10-1991 by way of a miscellaneous application, dated 14-3-1992 learned first appellate 4uthority CIT(A), Lahore was totally unjustified in maintaining the addition of Rs.24,62,91,001 on account of Cement Development Fund levied by way of its order, dated 3-6-1991. The reasons advanced in this regard are totally extraneous and the comparison of rates charged for the levy during the previous year was also irrelevant. However, as noted above the matter will not be settled unless first the nature of Cement Development Fund is thoroughly examined and ruled upon by the Revenue. It is only after its determination as such that the question of various subsidies out of it could be considered in its right perspective.

34. In the year 1994-95 the assessee has also -agitated against the disallowances under section 24(i) of the Ordinance. This issue also needs to be re-examined in view of the contention of the assessee that calculation of pay and perquisites as made by the assessing officer is neither in accordance with the relevant provisions.

35. We could have examined the issue of C.D.F. ourselves yet in view of the fact that the assessee declared the aforesaid receipts as taxable income we will not be in a position to hold something against its declared version. However, for the reasons detailed earlier and in view of the judgment of the Lahore High Court we would like to allow it an opportunity to re-evaluate its position vis-a-vis the receipts disclosed in Cement Development Fund as well as the alleged expenses/subsidies doled out by it. For this purpose all the assessments framed in the years 1991-92 to 1994-95 are set aside. The assessee, if so advised, may like to re-cast its accounts and to revise the returns in their light. In such a case the assessing officer will examine the issue in detail by meeting every objection or explanation raised by the assessee against the proposed or expected treatment of the fund. Any expense claimed out of such fund shall, in the like manner, be examined. Mere reference to the orders recorded hitherto shall not be sufficient.

36. The assessee accordingly succeeds in toto in the years 1987-88 to 1990-91 inasmuch as the exercise of revisional jurisdiction by way of an order, dated 27-12-1994 under section 66-A is declared to be of no legal effect at all. The assessments framed in the years 1991-92 to 1994-95 shall be set aside and the assessee will succeed only to that extent. Since the assessment in the year 1991-92 also stands set aside, the appeal of the assessee against the exercise of revisional jurisdiction under section 66-A by C.I.T. through its order, dated 27-12-1994 shall succeed on account of cancellation of the assessment which was sought to be revised by way of that order. The departmental appeal shall, for similar reasons, be dismissed as having become infructuous.

C.M.A./2/(Trib.) Order accordingly.