I.T.AS. NOS.693/I8 AND 694/18 OF 1999-2000 VS I.T.AS. NOS.693/I8 AND 694/18 OF 1999-2000
2001 P T D (Trib.) 1017
[Income-tax Appellate Tribunal Pakistan]
Before Jameel Ahmed Bhutto, Accountant Member and Syed Masood ul Hassan Shah, Judicial Member
I.T.As. Nos. 693/IB and 694/113 of 1999-2000, decided on 20/11/2000.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 156, 35 & 30---Rectification of mistake---Carry-forward of business loss---Income from other sources---Interest income---Business income-- Business loss---Carried forward---Set off against interest income-- Rectification of---On pointing out by the Audit Authorities that assessee was not entitled to set off interest income against brought forward business losses, Assessing Officer rectified his order under S.156 of the Income Tax Ordinance, 1979 and interest income was charged to tax under the head "income from other sources" under S.30 of the Income Tax Ordinance, 1979 on the ground that as per S.35 of the Income 'Tax Ordinance, 1979 while setting off carried forward losses the source of business income should be the same---Assessee contended that interest income was adjustable against brought forward losses and any debatable point of law could not be rectified under S.1.56 of the Income Tax Ordinance, 1979---First Appellate Authority found that rectification was carried out on the basis of observation made by the Audit Authorities and not by independent application of mind and that such order under S.156 of the Income Tax Ordinance, 1979 was not maintainable as the same represented the change of opinion and that the two activities of the assessee could not be separated and the decisive test was unity or control and not the nature of the two lines of business---Order under S.156 of the Income Tax Ordinance, 1979 by the Assessing Officer was cancelled by the First Appellate Authority---Validity---Plain reading of S.35 of the Income Tax Ordinance, 1979 would show that, carry forward of business losses was to be set off and restricted only against the profits and gains of the same business or profession and not against any other head of income specified in S.15 of the Income Tax Ordinance, 1979---Interest income of the assessee was declared as income from other sources and charged to tax in the preceding years as a separate head under S.30 of the Income Tax Ordinance, 1979 was immaterial; that mistake apparent from record was observed by the Audit Authorities---Assessing Officer himself applied his mind to such apparent mistake from record and independently passed the order under S.156 of the Income Tax Ordinance, 1979---No exception could be taken to the pointation of such mistake by the Audit Authorities and subsequent proceedings for rectification were taken by the Assessing Officer because the mistake was very much apparent on the face of record and no debatable point of law or controversial fact was involved---No interconnection, interlacing, interdependence and unity was found to be embracing any two businesses---Appellate Tribunal vacated the order of the First Appellate Authority and restored the order of the Assessing Officer made under S.156 of the Income Tax Ordinance, 1979.
Snam Progetti S.P.A. v. Additional Commissioner of Income-tax, New Delhi and others (1981) 132 ITR 70; CIT v. Eastern Bank Limited PLD 1982 Kar. 680; Produce Exchange Corporation v. CIT (1971) 24 Tax 1 (SC India); C.I.T., Dacca v. Amin Jute Company (1969) 19 Tax 103; 1976 PTD 109 and 1988 PTD 147 distinguished.
2000 PTD 363; 1999 PTD (Trib.) 708 and I.T.A. No. 455 (IB) of 1997-98 ref.
(b) Income Tax Ordinance (XXXI of 1979)--
----S.156---Rectification of mistakes---Essential conditions. The essential conditions for exercise of power under section 156 of the Ordinance is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence and that the mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Any mistake which is patent and obvious on record can be termed as x mistake apparent from record and corrected by exercising power under section 156 of the Ordinance.
Abdul Jalil, D.C.I.T./D.R. for Appellant.
Zahid Hussain, A.C.M.A. for Respondent.
Date of hearing: 14th November, 2000.
ORDER
JAMEEL AHMED BHUTTO (ACCOUNTANT MEMBER).---The above captioned appeals at the instance of the department are directed against the appellate order, dated 15-11-1999 (hereafter the impugned order) passed by the learned CIT(A), Zone-I, Islamabad, in respect of the assessment years 1992-93 and 1993-94 whereby the order, dated 7-10-1998 made under section 156 of the Income Tax Ordinance, 1979 (hereafter the Ordinance) has been cancelled.
2. The impugned order is contested on the ground that a plain reading of section 35 of the Ordinance suggests that the brought forward business losses cannot be set off against other income and the learned CIT (A) was not justified in equating business income with interest income (the latter chargeable to tax under section 30 as income from other sources) especially when the assessee company had been itself showing interest income as income from other sources and subjected to tax accordingly.
3. We have heard the arguments advanced by the representatives of both the parties and considered the facts and circumstances of the case in the light of the orders passed by the officers below.
4. The relevant facts giving rise to these appeals are that during the course of audit of. Income Tax Circle-O1, Islamabad, it was observed by the audit authorities that the assessee-company was not entitled to the carry forward of B.F. Losses against the interest income of Rs. 18,39,197 for the assessment year 1992-93 and Rs. 22,59,963 for the assessment year 1993-94 included in the declared figures, when assessments were finalized on 30-1-1995 by accepting the declared version of the assessee for these years.The Assessing Officer issued a show-cause notice confronting the assessee- company on the said point but the notice remained un-complied with, as on the due date neither anybody attended the office of the Assessing Officer nor filed application for adjournment. Under these circumstances, the Assessing Officer held that the assessee-company had no objection to the proposed rectification. Accordingly, the assessments for the charge years 1992-93 and 1993-94 were rectified by restricting the B.F. Losses against business loss for each year and the balance interest income of Rs. 18,39,197 and Rs. 22,59,963 was taxed for the two years respectively. The assessee-company applied for the rectification of the said order, dated 7-10-1998 vide letter, dated 25-10-1999. The Assessing Officer replied on 28-10-1999 that carry forward of business loss and its consequential effects can be taken up by pressing into action section 35 and not by placing reliance upon section 34 of the Ordinance. The contention of the assessee-company was rejected and it was stated in the said reply that there was not an iota of doubt that loss sustained in business and profession can always be carried forward, but law places embargo as far as the question of their set off arises and, therefore, in the case of the assessee the other income chargeable to tax under section 30 of the Ordinance could not be set off against the carry forward business losses because as per section 35 while setting off of carried forward losses the source of business income should also be the same.
5. The assessee-company preferred appeal against the abovementioned decision of the Assessing Officer and it was contended that interest income was adjustable against brought forward losses. In support of this contention, reliance was placed on case-law of Indian and Pakistani jurisdiction namely (i) Snam Progetti S.P.A. v. Additional Commissioner of Income Tax, New Delhi and others reported as (1981) 132 ITR 70 (Delhi H.C.), (ii) CIT v. Eastern Bank Limited reported as PLD 1982 Kar. 680, (iii) Produce Exchange Corporation v. CIT reported as (1971) 74 Tax 1 (SC India) and (iv) CIT, Dacca v. Amin Jute Company reported as (1969) 19 Tax 103 (H.C. Dacca). It was further contended that section 156 of the Ordinance clearly stated that a mistake apparent from record only can be rectified and any debatable point of law cannot be rectified. According to the learned A.R. of the assessee, the order under section 156 represented change of opinion. Reliance was placed on the case-law reported as 1976 PTD 109 and 1988 PM 147. The learned CIT(A) accepted the contentions of the assessee -company and placing reliance on the case-law cited by the A.R. of the assessee, held that the Assessing Officer was not justified to rectify the assessments by disallowing adjustments of brought forward losses against ingest income for the assessment years 1992-93 and 1993-94. He also observed that such rectification was carried out on the basis of observations made by the audit authorities and not by independent application of mind and that the order under section 156 of the Ordinance was not maintainable as it represented change of opinion. The learned CIT(A) further held that the interest income was adjustable against the brought forward losses on the strength of the case-law that two activities of a company cannot be separated and the decisive test was unity or control and not the nature of the two lines of business. In view of the reasons assigned in the impugned order, the order under' section 156 of the Ordinance was found not maintainable and cancelled; hence these appeals.
6. Having considered all aspects of the case, we are of the firm opinion that the impugned order which was expected to be a quasi judicial order with well-reasoned findings recorded therein, has been passed by the learned CIT(A) in a slip-shod manner, without proper appreciation of facts, correct reading of the case-law and appraisal of the material on record. It is clearly mentioned in section 35 of the Ordinance that carried forward loss under the head income from business or profession' can be set off only against the profits and gains of such business or profession assessable in the following year if such business or profession continues to be carried on by the assessee for that assessment year. For facility of reference, section 35 of the Ordinance is reproduced as under:-
"35. Carry forward of business losses.---Where an assessee sustains a loss in any assessment year under the head 'Income from business or profession' (not being a loss to which section 36 applies) and the loss cannot be wholly set off under section 34, so much of the loss as has not been set off, or the whole of the loss where the assessee has no income under any other head, shall be carried-forward subject to clause (v) of subsection (1) of section 23, to the following assessment year and set off against the profits and gains, if any, of such business or profession assessable for that year if such business or profession continues to be carried on by the assessee for that assessment year; and if the loss cannot be wholly set off in this manner, the amount of the loss not so set off shall be carried forward to the following assessment year, and so on but no loss shall be carried forward to more than six assessment years immediately succeeding the assessment year for which the loss was first computed.,
Provided that, where the said loss relates to an assessment year commencing on or after the first day of July, 1976, and is sustained by any such assessee, being the owner of an industrial unit which is declared sick and is being rehabilitated under the scheme approved by the Federal Government, as may be notified by the Central Board of Revenue in the official Gazette, this section shall have effect as if for the words 'six assessment years' the words 'ten assessment years' were substituted."
7. A plain reading of section 35, reproduced above, shows that the carry forward of business losses is to be set off and restricted only against the profits and gains of the same business or profession in the following assessment year (s) and not against any other head of income specified in section 15 of the Ordinance which includes income from other sources chargeable under section 30 of the Ordinance. In this case, interest income of the assessee-company was being declared as income from other sources and charged to tax in the preceding years as a separate head under section 30 of the Ordinance and not in any way connected with income from business or profession of the assessee-company which was separately chargeable under the distinct head under section 22 of the Ordinance. Although there could be no estoppel against law and deviation could be made from past treatment, but it had to be for very strong reasons either on the basis of correct interpretation of law or reliable material to distinguish the facts for the years under consideration as compared to the preceding assessment years.This was not the case when the interest income of the assessee-company chargeable to tax under section 30 of the Ordinance was overlooked for the assessment years 1992-93 and 1993-94. The earlier assessment, order, dated 30-1-1995, which was subsequently rectified under section 156 on 7-10-1998, had not discussed this aspect of the case and the question of change of opinion by the Assessing Officer did not arise. It was immaterial that the mistake apparent from record was observed by the audit authorities because the Assessing Officer himself applied his mind to such apparent mistake from record and independently passed the order under section 156 of the Ordinance. No exception could be taken to the pointation of such mistake by the Audit Authorities and subsequent proceedings for rectification taken by the Assessing Officer because the mistake was very much apparent on the face of record and no debatable point of law or controversial fact was involved in the case. It is now well-settled law that the essential condition for exercise of power under section 156 of the Ordinance is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence and that the mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Any mistake which is patent and obvious on record can be termed as a mistake apparent from record and corrected by exercising power under section 156 of the Ordinance. In the instant case, the Assessing Officer did not enter into any controversy, made no investigation into the matter, did not reassess any evidence or take into consideration additional evidence and did not form any opinion about interpretation of any provision of law different from the earlier interpretation. It was a pure and simple case of rectification of a mistake apparent from the record.
8. The learned CIT(A) has fallen in error by placing reliance on irrelevant case-law, where facts and circumstances of each case were clearly distinguishable from the case in hand, and no different interpretation of the provisions of section 35 of the Ordinance was made. Thus, in the case of Snam Progetti S.P.A., reported as (1981) 132 ITR 70, the Delhi High Court held that the business income of the Italian company carrying on business as engineers and contractors in the field of petroleum and petro-chemical plants and having huge contracts, each running into millions of US Dollars in India, was also not different from income from interest on bank deposits because the assessee had not come from Italy to make bank deposits in India but had come to carry on business and the income earned by depositing spare funds in banks and earning interest income thereon was also business income of the assessee and for the purpose of set off, it could not be treated as separate from business income. The ratio decidendi of this reported case, could not be considered in favour of the assessee-company, in view of the, detailed discussion in the judgment of the Delhi High Court reproduced as under:-
"The main question for decision is whether the 'interest income' could be treated as 'business income'. The answer to this question has to depend on how we are to consider the interest income derived by the petitioner. No doubt, normally on the placing of funds in banks on short term or long term deposits the interest income derived from those sources would be 'income from other sources', but there have been cases in which such income has been treated as income from business, notwithstanding the fact that it is interest income. The adjustment allowable under the Income-tax Act in respect of losses and gains are set out in sections 71 and 72 of the Act as far as they are material in this case. If this a gain under one hand and a loss under another head (excluding the case of capital gain), then there could be an adjustment or set off between the loss of one head and the gain or income of another head in the same year, but in the case of carry forward losses, the carry forward is allowed under section 72 and the set off of losses has to be against business income. The carry forward loss in one business can be set off against the income from another business but this does not apply to income from other sources. For instance, if there is a carry forward business loss cannot be adjusted against 'Income from other sources', such as dividend income or interest income. This legal position is not in dispute. The question in the present case is whether the interest income itself can be treated as business income. For this purpose, the various decisions cited before the Additional Commissioner were very material. In CIT v. Cocanada Radhaswami Bank Ltd. (1965) 57 ITR. 306 (SC), the question was whether the income derived from securities by a bank, which would otherwise be 'income from other sources', could be used for the purpose of adjustment against carry forward losses. It was held that as the securities form part of the trading assets of the bank, the income could be set off. In CIT v. Chugandas & Co. (1965) 55 ITR 17 (SC), the question before the Court was whether the assessee was entitled to the benefit of section 25(3) of the Indian Income-tax Act, 1922, in respect of interest on securities. It was concluded that the section did not apply to non-business income. However, the securities, in this case, were held to constitute the stock-in-trade of the business and, therefore, the income from securities was treated as equivalent to business income. In United Commercial Bank Ltd. v. CIT (1957) 32 ITR 688 (SC), it was held on a case very similar to the present that the interest on securities derived by the United Commercial Bank Ltd. could be set off against losses. The question had arisen in this way. Interest on securities for the assessment year in question was quite substantial but there was a loss under the head 'Business income'. The net income was Rs. 14,95,826. This net income was interest income minus business loss. In the year previous to this there was a net loss of Rs. 3,21,929 which was claimed to be set off against the aforementioned net income. The ITO rejected the claim for set off on the ground that the net income was not income from business but from securities. The assessee appealed unsuccessfully up to the Tribunal and then on a reference to the High Court it was held that the income from securities and the income from banking business were under two separate heads, and so there could be no set off. On further appeal to the Supreme Court, the assessee succeeded. The plea which was accepted by the Supreme Court was that though the interest income was to be assessed under section 8 of the Act and the business income under section 10 of the Act, still a set off could be given under section 24(2) of the Act. (Those references are to the Act of 1922). The point that was decided by the Supreme Court was that though the interest income was taxed under section 8 of the Act, it would remain profits from the banking business. The mere fact that for the purposes of taxation a different section applied did not mean that the interest ceased to be derived from banking. Hence, the interest income as well as the general banking income of the bank was really derived from one activity, namely, that of banking. This principle has now to be applied to the present case.
If a person runs a bank or other business and utilises his funds for the purpose of that business, it is also open to the same person to use some of the funds for business and to keep a part of the funds in a form where it yields income. The question to be seen in such a case is whether the interest income is derived also from what may be described as 'business activity'. If it is so derived then the mere fact that it is taxed under a different section will make no difference. The approach to the problem has, therefore, to be disassociated from the section under which the tax is imposed on the form of income.
To revert again to the United Commercial Bank's case (1957) 32 ITR 688 (SC), the bank which had funds deposited with it by its customers and its own capital, could utilise the funds either by lending the same to others or by making various investments. Indeed, in the case of banks, it is compulsory to place some of the funds in securities. The question that would then arise would be whether the interest income is not also a part of the banking activity.
If it is, then notwithstanding the fact that the charge of income tax is under the head 'Interest on securities', the income would be from banking and not from mere investment. In the present case, the assessee claimed that it has funds which it derived from business and which are used only in business and for no other purpose. If they are spare funds, then they are deposited in banks and, hence, it is clear that this income is also business income. To repeat what was said earlier, the company has not come from Italy to make bank deposits in India but has come to carry on business. If at any time it has spare funds it prefers not to keep the same idle but makes deposits in banks which give some income. This also is, therefore, business income and for the purpose of set off has not to be treated as separate from business income.
The judgments just referred to give full support to the petitioner. Therefore, we are of the view that set off had to be granted and could not be refused merely because interest income is taxed under a separate head.
We would, thus, allow the petition and grant the prayer of the petitioners.We would hold that the income from interest on bank deposits is also business income for the purpose of set off. In the circumstances of the case particularly we note that the contractor is engaged in very large contracts. The rejoinder affidavit shows that there is a contract with Tata's Mithapur, Gujarat, for 250 million $, one with Coromandel Fertilisers for 200 millions $, one at Nangal Expansion, Haryana, for 30 million $, one for Hindustan Lever for 300 million $, one which is described as a modifications in MRL for 15 million $ and for setting up a refinery in Turkey jointly with some other Indian concern is for 200 million $. These huge contracts would show that very large funds will have to be available with the petitioner from time to time. It would, therefore, necessitate the petitioner having large liquid funds at times and a businessman placed in such a situation would normally try to get some interest on such deposits and the same would be considered as business income. We would, therefore, hold that set off as claimed has to be allowed even against interest on securities. However, in view of the nature of the case, we leave the parties to bear their own costs."
The other reported case CIT v. Eastern Bank Limited PLD 1982 Kar. 680 referred to in the impugned order was also not relevant and could not be relied upon in favour of the assessee company. In the said case of a banking company, the finding of the learned Tribunal was that the securities and shares were held by the bank as its trading assets and, therefore, the Hon'ble High Court, Karachi expressed the view that the income from them would form a part of income of the bank from its banking business. This decision of the Hon' able High Court was also based on a case from Indian jurisdiction namely Western State Trading Company Limited v. CIT Central, Calcutta (1971) 80 ITR 21, wherein it was held by the Supreme Court of India that if shares are held by the assessee as part of its trading assets, the dividends of those shares would form part of the income from the business of the assessee and the assessee will, therefore, be entitled to claim set off of losses from its business carried forward from earlier years against the dividends of the current year. The judgment of the Hon'ble Sindh High Court, considered in the light of the facts and circumstances of the case discussed therein, clearly shows that the said income from other sources was part of the banking business and could not be separated for the purposes of set off of losses carried forward from earlier years.This reported case is not comparable with the facts and circumstances of the case in hand where interest income was never a part of the business of the assessee-company.
9. The learned CIT(A) also failed to appreciate the ratio of the judgment of the Supreme Court of India in the case Produce Exchange Corporation v. CIT reported as (1971) 24 Tax 1 (SC India) where the question decided was whether the business activities of the company dealing in shares and its dealings in commodities and selling agencies on commission basis, constituted the same business within the meaning of section 24(2) of the Indian Income-tax Act, 1922 (since repealed). This question was considered and answered in the affirmative on the basis discussed in the said
"The High Court held, following their judgment in Shree Ramesh Cotton Mills Ltd. v. Commissioner of Income-tax (1967) 64 ITR 317 (Cal.), that the "essential matter to be considered in determining whether the two businesses carried on by the assessee constitute the same business, is about the nature of the two businesses the manner in which they are conducted being a secondary consideration'. They observed that 'unity of control or management, the employment of the same or common finance, the user of the same business premises and the record of the transactions in the same set of books of accounts are matters to be considered only when it is found that the two businesses are of the same nature. Merely because the transactions in shares consist of sales and purchase as to dealings in other commodities like sugar, molasses, etc., the two activities cannot be held to form one unit of business', and that the Tribunal erred in holding that because there was complete unity of control and the shares formed a part of a number of commodities in which the assessee dealt, the whole trading activity formed one business.
Section 24(2) of the Indian Income-tax Act, 1922, as in force in the relevant years, read as follows:
'Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, under the head 'Profits and gains of business, profession or vocation', and the loss cannot be wholly set off under sub section (1), the portion not so set off shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly so set off, the amount of loss not set off shall be carried forward to the following year and soon;
The section contemplated that the loss which could not be wholly set off against the other income under subsection (1) could be carried forward to the following year and set off only against the profits and gains, if any, from the same business. There was difference of opinion among the High Courts as to the meaning of the words 'same business'. It is unnecessary to refer to those authorities. This Court in Commissioner of Income-tax v. Prithvi Insurance Co. Ltd. ((1967) 63 ITR 632 (SC) set out the test for determining whether two lines of business constitute the 'same business' within the meaning of section 24(2) at the relevant time. It was observed at page 637:
'A fairly adequate test for determining whether the two constitute the same business is furnished by what Rowlatt, J. said in Scales v. George Thompson & Co. Ltd. ((1927) 13 T.C. 83, 89 (K.B.)):
'Was there any interconnection, any interlacing, any inter dependence, any unity at all embracing those two businesses?'
That interconnection, interlacing, interdependence and unity are furnished in this case by the existence of common management, common business organisation, common administration, common fund and a common place of business."
Applying that test it the present case there is no doubt that there is a common management of the share and stock business and other lines of businesses, unity of trading organisation, common employees, common administration, a common fund and a common place of business."
In the instant case for our consideration, there has been no interconnection, interlacing, interdependence and unity embracing any two businesses of the assessee. Therefore, interest income chargeable under section 30 of the Ordinance as a separate source of income specified under section 15 could not be treated as income from the business of the assessee-company which was chargeable under section 22 of the Ordinance.
10. The learned CIT has further placed reliance on the case CIT, Dacca v. Amin Jute Bailing Company decided by Dacca High Court and reported as (1969) 19 Tax 103 (H.C. Dacca). In the facts and circumstances of this reported case, it was held by Dacca High Court that there was definitely interconnection and interdependence between the insurance agency and the jute business and the two came within the meaning of the expression "same business" occurring in subsection (2) of section 24 of the repealed Income Tax Act. It was observed by the Hon'able High Court that in the case before them it was seen that the assessee had not insured the jute or any other goods of anyone else, it had merely insured its own jute. The agency had been undertaken by the same management and it was being carried on for the purposes of its own jute business. Had the assessee undertaken insurance of goods of other persons, the character of the agency in that goods would have definitely changed and in that case it would have been separate and distinct business but on the facts found by the Tribunal; the Hon'able High Court saw no reason whatsoever to interfere with the conclusion reached by it that the insurance agency came within the meaning of the expression "same business". The facts of this reported case are also clearly distinguishable because the assessee in that case was doing business and income from the two business activities was from the same business, which is not the case before us.
11. As regards the scope of rectification of a mistake apparent from record under section 156 of the Ordinance, the learned CIT has again fallen in error in relying upon the two cases reported as 1976 PTD 109 and 1988 PTD 147. In the first mentioned case, there was a question of law which was not free from doubt and the Income Tax Officer was held to be not justified in thinking that on that question there could be no two opinions. It was not open to the officer to go into true scope of the relevant provisions of the Act in the proceedings under section 154 of the Indian Income Tax Act, 1961 because the question had to be established by a long drawn process of reasoning and a decision on a debatable point of law was held to be not a mistake apparent from record. The mistake apparent from the record in the present case before us did not involve any debatable point of law or a question which was required to be established by a long drawn process of reasoning. There were no two opinions on the point that the interest income of the assessee which was separately charged to tax in the preceding years was erroneously overlooked for the assessment years 1992-93 and 1993-94 and the assessments had to be rectified by restricting the brought forward business losses against the business income only and income from interest
12. The learned CIT(A) has also not been able to appreciate the facts and circumstances of the case D.D. Shroff v. ITO reported as 1988 PTD 147 where there was change of view by ITO who was held to be not competent to nullify .the order of the appellate authority since the proper course was to file appeal before the next appellate authority and the notice for rectification of mistake under section 156 by the ITO was held to be unwarranted exercise of powers.In that case, the ITO in his original assessment order included the amount of super tax paid by the firm for working out the individual shares of the partners.The Commissioner set aside the order of the ITO and directed him to compute the income-tax on the income of the partners after excluding the super tax paid by the firm in accordance with the formula given in the case-law. The Hon'able High Court expressed the view that the ITO could not nullify the order of the appellate authority in disguise of a notice under section 156 of the Ordinance. It was observed in the judgment "if we were to condone the above act, there would be chaos as it would be open to an ITO to undo even the order of the Income Tax Appellate Tribunal. Even if the view of the Commissioner was erroneous, the proper course for the department was to have filed an appeal before the Income Tax Tribunal and then a reference before the High Court but it cannot be undone by invoking section 156 of the Ordinance." The judgment in this case was delivered in a different set of circumstances and the facts were clearly distinguishable as compared to the position of the case before us. Reliance on this reported case was, therefore, misplaced.
13. It may be observed that the Hon'able High Court, Karachi in the case reported as 2000 PTD 363 has dealt with the comparative position of cases from Indian jurisdiction and the provisions contained in the Ordinance. In that case, it is held that in the absence of a finding that the assessee was doing the business of money lending, interest income could not be treated as business income so as to be charged to tax under section 22 of the Ordinance and that the interest income was to be charged under section 30 of the Ordinance which specifically includes interest income under the head "Income from other sources". It was pointed out 'to the Hon'able High Court that in the Indian Income Act, 1961 the provisions relating to "Income from other sources" contained in section 56 thereof do not include or provide for any inclusion of interest income as income from other sources, whereas section 30 of the Ordinance relating to "Income from other sources" specifically includes interest income within its scope.
14. It may be mentioned that the Full Bench of this Tribunal in the case reported as 1999 PTD (Trib.) 708 has also dealt with the question of interest income chargeable under section 30 of the Ordinance and its connection with unutilised business capital and business income chargeable under section 22 of the Ordinance. It was held that these two sources of income were distinctly different and could not be part of the same business.
15. In I.T.A. No. 455 (IB) of 1997-98 for the assessment year 1993-94 decided by us on 19-6-2000 we have also followed the ratio decidendi of various cases in the context of the Ordinance and expressed the opinion that the interest income of the assessee was chargeable under the head "Income from other sources" under section 30(2)(b) of the Ordinance and it could not be included in the total income of the assessee under any other head classified under section 15(a) to (e) of the Ordinance because it was definitely not the income from business or profession chargeable under section 22 against which allowances or deductions could be made under section 23 of the Ordinance.
16. For the facts and reasons stated above, we hold that the impugned order is not sustainable in law and the learned CIT(A) was not justified to cancel the order, dated 7-10-1998 made by the Assessing Officer under section 156 of the Ordinance. We, therefore, vacate the impugned order and restore that of the Assessing Officer. Resultantly, the appeals of the department succeed.
C.M.A./M.A.K./61/Tax (Trib.) Appeals accepted.