COMMISSIONER OF INCOME-TAX VS NASIR ALI
1999 P T D 1173
[Supreme Court of Pakistan]
Present: Saidduzzaman Siddiqui, Raja Afrasiab Khan and Abdur Rehman Khan, JJ
COMMISSIONER OF INCOME-TAX
Versus
NASIR ALI and another
Civil Appeals Nos.959 of 1993 and 321 of 1994, decided on 30/11/1998.
(On appeal from the judgments of High Court of Sindh, dated 26-5-1992 passed in I.T.R. No. 49 of 1987 and dated 28-10-1993 passed in I.T.R. No.205 of 1988 respectively).
(a) Finance Act (XXXI of 1978)---
----S. 3(4)(a)---Constitution of Pakistan (1973), Art. 185(3)---Benefits of export rebate---Entitlement---Leave to appeal was granted by the Supreme Court to examine legal questions of general importance to the effect namely whether concession of export rebate in terms of S. 3(4)(a), Finance Act, 1978 was admissible not only to firm but the partners thereof as well and that judgment of the Indian High Court in Commissioner of Income tax v. Indo Marine Agencies (1973) 87 ITR 41 was distinguishable as the provisions of Indian Finance Act, 1963 were different from the provisions of Finance, Act, 1978.
(b) Interpretation of statutes-
---- Proviso to a section---Function---Principles of interpretation.
A proviso deals with the subject, which is covered by the enacting part of the provision. The proviso only carves out an exception which, but for the proviso, would fall within the language and meaning of the enacting part.
A proviso, therefore, has to be interpreted strictly, and where the language of main enacting part is clear and unambiguous, the proviso cannot by implication exclude from its purview what clearly falls within the express terms of the main enacting part.
The proviso only limits the operation of the main enacting part to the extent it is indicated in the proviso, meaning thereby that gut for the proviso the case would fall within the ambit of the enacting part.
(c) Finance Act (XXXI of 1978)---
----S. 3(4)(a)---Registered firm---Benefit of export rebate rebate contemplated under S.3(4)(a), Finance Act, 1978 was admissible both to the registered firm as well as its partners in respect of. super-tax and income-tax payable by them respectively---Principles.
Where the total income of "an assessee" includes any profit or gain derived from the export of goods manufactured in Pakistan, the income tax and super-tax payable in respect of such profit and gain is to be reduced by an amount equal to half of the income-tax and super-tax which is attributable to the sale proceeds of the export goods subject of course, to the conditions mentioned in clauses (b), (c) and (d) of section 3(4) of the Ordinance. The expression "an assessee" used in the enacting part cannot, by any logic of interpretation excludes from its purview the partners of a registered firm if they are assessed to income. The expression "an assessee" used in section 3(4)(a) of the Ordinance includes both the registered firm as well as its partners, if they are assessed to income-tax or super-tax. This conclusion is further fortified by the use of expression "income-tax and super-tax" in the main enacting part of section 3(4)(a) of the Ordinance. The firm pays only super-tax while the income-tax is paid by its partners. Therefore, the enacting part of section 3(4)(a) includes, within its ambit, both the registered firm and its partners. The export rebate contemplated under section 3(4)(a) of the Ordinance is admissible both to the registered firm as well as its partners in respect of super-tax and income-tax payable by them, respectively.
A reading of the proviso would show that it only lays down the method of calculation of the super-tax payable by the registered firm under paragraph (c) of para. 2 of the Schedule, which was introduced by the Ordinance. The proviso does not lay down anywhere that the reduction envisaged in the main enacting part of section 3(4)(a) of the Ordinance on account of export rebate to "an assessee" in respect of income-tax, would not be admissible. The proviso only limits the operation of the main enacting part to the extent it is indicated in the proviso, meaning thereby that but for the proviso, the case would fall within the ambit of the enacting part. The enacting part used two different expressions, namely; admissibility of export rebate out of the income-tax as well as super-tax while the proviso deals only with the super-tax which is payable by the registered firm. It is, therefore, quite clear that the proviso, in its operation, could not limit the concession of export rebate tax admissible on the income tax payable in terms of section 3(4)(a) of the Ordinance. The enacting part of the section is not to be construed in the light of the proviso but it is the proviso which is to be interpreted in light of the main enacting part of the statute. Under section 3(4)(a) of the Ordinance, both the registered firm as well as its partners are entitled to the export tax rebate in respect of the super-tax and income-tax payable by the registered firm and its partners respectively.
Nasrullah Awan, Advocate Supreme Court with S.M. Abbas, Advocate-on-Record for Appellant.
Nemo for Respondents.
Date of hearing: 11th November, 1998.
JUDGMENT
SAIDUZZAMAN SIDDIQUI, J.---The abovementioned appeals are filed with the leave of this Court to question two separate judgments of the High Court of Sindh, dated 26-5-1992 and 28-10-1993 disposing of two Income Tax References (I.T.Rs.) bearing Nos. 49 of 1987 and 205 of 1988 respectively. In both the I.T.Rs., the following question of law was referred to the High Court of Sindh, under section 136(1) of the Income Tax Ordinance, 1979, for decision relating to assessment year 1978-79:-
"Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in holding that the benefit of export rebate envisaged in clause (a) of subsection (4) of section 3 of the Finance Ordinance, 1978 is admissible to the partners in addition to the export rebate already allowed to Registered Firm in respect of its export sales.
The learned Division Bench of the High Court in I.T.R. No.49 of 1987 answered the above question of law as follows, which was followed by the other learned Division Bench of the said Court in I.T.R. No.205 of 1988:--
"Turning back to the provision of section 3(4)(a) of the Finance Ordinance, 1979, it may be pointed out that the section provides benefit to 'an assessee'.
There appears to be no controversy on the point that in view of the provisions contained in subsection (5) of section 23 of the repealed Income-tax Act, 1922 super-tax (but not income-tax) is payable by the firm, whereas income-tax is payable by its individual partners. The relevant provisions of the Finance Act makes reference only to 'an assessee' without making any distinction between a registered firm or its partners. No doubt, the proviso to section 3(4)(a) refers to a registered firm, however, as is evident from the language used in the proviso, the intention appears to be only to fix a ceiling which should not exceed the super-tax paid by such firm. However, nothing can be spelt out from the provisions of section 3(4)(a) to indicate that in case any benefit is derived by the firm under the said section, its partners are to be excluded there from. We would like to point out that as has been held by the Kerala High Court, the total income of the firm computed by the Income Tax Officer will have to be divided amongst its partners according to the proportion to which the profits are to be shared by them. Naturally if any profits or gains have been derived from the export of goods manufactured in Pakistan, the shares of the partners will include such profits or gains. If effect is to be given to the provisions of section 3(4)(a), of the Finance Ordinance, 1978, then benefit of the said provisions is to be provided to each of its partners individually while assessing his income-tax. The deduction referred to in the said section would be admissible in case of the individual partners notwithstanding the fact that the benefit under the said provisions has already been allowed to the firm of which they are the partners. Accordingly to the language used by the Legislature in section 3(4)(a), if the income of an assessee includes profits or gains derived from the export of goods as referred to in the said section, the assessee would be entitled to the deduction as provided in the said section. In our view, the question of availing the benefit of the said section twice under such circumstances would hardly arise. The question of availing the benefit twice would have arisen if income-tax was also payable by the firm besides its partners or super-tax was payable by the partners besides the firm, which is not the case in the present case."
Leave was granted in both the appeals to consider the following contention:--
"Mr. Nasrullah Awan, the learned counsel for the petitioner has contended that under the scheme of the Finance Act, both the registered firm and the partners could not have claimed benefits of rebate. He further contended that the judgment of the Indian High Court (Commissioner of Income-tax v. Indo-Marine Agencies (1973) 87 ITR 41) is distinguishable as the provisions of the Indian Finance Act, 1963 were different from the provisions of the Finance Act, 1978 involved herein. The question raised is a legal question of general importance. We, therefore, grant leave."
2. We have heard only Mr. Nasrullah Awan, the learned counsel for the appellant. None appeared for the respondents.
The learned counsel for the appellant contended that the High Courtby holding that the concession of export rebate in terms of clause (a) of subsection. (4) of section 3 of the Finance Ordinance, 1978 (hereinafter to be referred as 'the Ordinance'), is admissible not only to the registered firm but also to its partners, has in fact extended the benefit of rebate in respect of the same income twice, once to the firm and second time to its partners. This plea of the appellant was considered by the learned Judges of the High Court and repelled on the ground that under subsection (5) of section 23 of the repealed Income-tax Act of 1922, the firm is liable only to super-tax whereas income-tax is paid by its individual partners. This position is not disputed by the learned counsel for the appellant. Mr. Nasrullah, however, contended that in the impugned judgment of High Court as well as in the judgment of Income-tax Appellate Tribunal, reliance has been placed on a decision of Indian High Court of Kerala in the case of Commissioner of Income-tax, Kerala v. Indo-Marine Agencies, Cochin (1973) 87 ITR 41, which in turn proceeded on the provisions contained in section 2(5)(1) of Indian Finance Act, 1963. It is urged by the learned counsel that provisions of section 2(5)(1) of Indian Finance Act, 1963, differed substantially from the provisions contained in section 3(4)(a) of the Ordinance. The learned counsel specially referred to the proviso to section 3(4)(a) of the Ordinance to demonstrate the difference between the Indian provision and the provisions in the Ordinance. The decision of the above appeals, therefore, according to the, submissions of learned counsel, rests mainly on the true meaning and scope of the proviso to section 3(4)(a) of the Ordinance.
4. It is a well-settled principle of interpretation that a proviso deals with the subject, which is covered by the enacting part of the provision. The proviso only carves out an exception, which, but for the proviso, would fall within the language and meaning of the enacting part.
5. A proviso, therefore, has to be interpreted strictly, and where the language of main enacting part is clear and unambiguous, the proviso cannot by implication exclude from its purview what clearly falls within the express terms of the main enacting part. We would, therefore, first determine the scope and meaning of the main enacting part of section 3(4)(a) of the Ordinance in the light of the above stated legal position. It is quire clear from the enacting part of section 3(4)(a) of the Ordinance that where the total income of "an assessee" includes any profit or gain derived from the export of goods manufactured in Pakistan, the income-tax and super-tax payable in respect of such profit and gain is to be reduced by an amount equal to half of the income-tax and super-tax which is attributable to the sale proceeds of the export goods subject, of course, to the conditions mentioned in clause (b), (c) and (d) of section 3(4) of the Ordinance. The expression "an assessee" used in the enacting part cannot, by any logic of interpretation, exclude from its purview the partners of a registered firm if they are assessed to income.
We are, therefore, of the view that the expression "an assessee" used in section 3(4)(a) of the Ordinance include both the registered firm as well as its partners, if they are assessed to income tax or super-tax. This conclusion is further fortified by the use of expression "income-tax and super-tax" in the main enacting part of section 3(4)(a) of the Ordinance. It is admitted by the learned counsel for the appellant that the firm pays only super tax while the income-tax is paid by its partners. Therefore, we are in no doubt that the enacting part of section 3(4)(a) includes, within its ambit, both the registered firm and its partners. Accordingly, we hold that the export rebate contemplated under section 3(4)(a) of the Ordinance is admissible both to the registered firm as well as its partners in respect of super-tax and income-tax payable by them, respectively.
6. We now turn to the proviso which has been relied by the learned counsel for the appellant in support of his contention that export rebate concession is admissible only for the registered firm and not to its partners. A careful reading of the proviso would show that it only lays down the method of calculation of the super-tax payable by the registered firm under paragraph (c) of para. 2 of the Schedule, which was introduced by the Ordinance. The proviso does not lay down anywhere that the reduction envisaged in the main enacting part of section 3(4)(a) of the Ordinance on account of export rebate to "an assessee" in respect of income-tax, would not be admissible. As earlier pointed out by us, the proviso only limits the operation of the main enacting part to the extent it is indicated in the proviso, meaning thereby that but for the proviso, the case would fall within the ambit of the enacting part. The enacting part used two different expression, namely; admissibility of export rebate out of the income tax as well as super tax while the proviso deals only with the super-tax which is payable by the registered firm. It is, therefore, quite clear that the proviso in its operation could not limit the concession of export rebate tax admissible on the income tax payable in terms of section 3(4)(a) of the Ordinance. The enacting part of the section is not to be construed in the light of the proviso but it is the proviso which is to be interpreted in light of the main enacting part of the statute. We, therefore, agree with the conclusion of the learned Judges of the High Court of Sindh that under section 3(4)(a) of the Ordinance, both the registered firm as well as its partners are entitled to the export tax rebate in respect of the super-tax and income-tax payable by the registered firm and its partners respectively. No case for interference with the judgments of the High Court is made out. The appeals are accordingly dismissed. However, as the respondents have not appeared and contested the cases, there will be no order as to costs.
M.B.A./C-26/SAppeals dismissed,