I.T.A. NO.2285/LB OF 2000 VS I.T.A. NO.2285/LB OF 2000
2001 P T D (Trib.) 865
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and M. Munir Qureshi,
Accountant Member
I.T.A. No.2285/LB of 2000, decided on 16/11/2000.
(a) Protection of Economic Reforms Act (XII of 1992)---
----S.6---Exemption---Applicability---Question whether the case was covered under S.6 of the Economic Reforms Act, 1992 was a question of fact, which required appreciation of the facts and circumstances of the case.
(b) Interpretation of statutes-
---- Preamble---Preamble could be used in aid of the interpretation but if the main provision was clear in its application, Preamble was not to be read in as a part of the same---Preamble was not a part of statute and while interpreting a provision of law nothing should be read in so as to enhance or decrease its jurisdiction.
(c) Interpretation of statutes---
---- Fiscal statute---Express provision of law to be read to reach its natural and original meanings---Nothing to be read in and no one to be left untaxed if the provision so desired.
(d) Protection of Economic Reforms Act (XII of 1992)---
----S.6---Income Tax Ordinance (XXXI of 1979), Second Sched., Part I, cl.(126-D)---Exemption---Words used "otherwise notified" in S.6 of the Protection of Economic Reforms Act, 1992---Connotation---Section 6 of the Economic Reforms Act, 1992 clearly and unambiguously provided that only those exemptions shall qualify for protection which formed part in its own Sched.---Words used "otherwise notified" as used in Protection of Economic Reforms Act, 1992 could not be expanded so as to include notification issued under the Income-tax, Sales Tax, Excise Duty or any other enactment-- When the Legislature itself had enacted a Schedule for the protection of economic reforms in the Economic Reforms Act, 1992 and had mentioned certain reforms therein, there was no bar in adding the provision of Cl. (126-D) of the Second Sched. of the Income Tax Ordinance, 1979 in the Sched. of the Economic Reforms Act, 1992---Words "otherwise notified" as mentioned in the Act were not to be read in isolation but with reference to he Protection of Economic Reforms Act, 1992 and would not extend the jurisdiction as notified in Sched. of some other fiscal law.
(e) Protection of Economic Reforms Act (XII of 1992)---
---S.6---Income Tax Ordinance (XXXI of 1979), -S.14---Exemption---Words "otherwise notified" used in S.6 of the Economic Reforms Act, 1992-- Interpretation---If the words "otherwise notified" are interpreted to include all subsequent exemptions provided under- S.14 of - the Income Tax Ordinance, 1979 then their mentioning in the Second Sched. of the Protection of Economic Reforms Act, 1992 was unnecessary---Schedule deals with the exemption mentioned therein independently and needs no support from some other enactment---Provision of one Act could not be applied on the proceedings of another unless so provided in unequivocal terms---Not safe to import the meanings of one word from another law-- Income-Tax Ordinance, 1979 is an independent law, and its jurisdiction could not be reduced or enlarged by application of some other law unless the Legislature so desired by specific mentioning.
(f) Income Tax Ordinance (XXXI of 1979)---
----S.80-D, Second Sched., Part I, cl. (126-D) & S.66-A---Protection of Economic Reforms Act (XII of 1992), S.6---Minimum tax on income of certain persons---Exemption---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Assessee's income was exempt under cl.(126-D) of the Second Sched. of the Income Tax Ordinance, 1979---Minimum tax under S.80-D of the Income Tax Ordinance, 1979 was not charged by the Assessing Officer---Inspecting Additional Commissioner revised the order of the Assessing Officer being erroneous and prejudicial to the interest of Revenue and charged tax under S.80-D of the Income Tax Ordinance, 1979 on the ground that exemption from S.80-D was available only to the persons who were covered under the provisions of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 and under S.6 of the Economic Reforms Act, 1992---Assessee contended that S.6 of the Protection of Economic Reforms Act, 1992 not only covered the already introduced measures but it also protected the incoming reforms as the words used in this section are "otherwise notified"- Validity---If the Legislature had the intention to exclude cl.(126-D) from the charge of S.80-D, there was no reason for not specifically mentioning same in the Income Tax Ordinance, 1979 itself or in the Sched. of Protection of Economic Reforms Act, 1992, or the same could have been otherwise notified through unambiguous notification---Exemption started either prior to the Protection of Economic Reforms Act, 1992, or after, it could have so mentioned it in the Sched. of the Protection of Economic Reforms Act, 1992 or would have otherwise notified under the said Act---None of the exemptions otherwise provided in Second Sched. of the Income Tax Ordinance, 1979 be it earlier or subsequent to the Act, escaped the charge of S.80-D of the Income Tax Ordinance, 1979---Having escaped charge under S.80-D, the order of the Assessing Officer was "erroneous" and prejudicial to the interest of Revenue---Cancellation of Assessing Officer's order by the Inspecting Additional Commissioner was upheld by the Appellate Tribunal.
Messrs Ellahi Cotton Mills (Pvt.) Ltd.'s PLD 1997 SC 2 = 1997 PTD 1555; PLD 1969 Dacca 1; PLD 1969 Lah. 563; 1991 SCMR 657 and Writ Petition No. 11575 of 1998 ref.
Shahbaz Butt for Appellant.
Mrs. Talat Altaf, D.R. for Respondent.
Date of hearing: 22nd June, 2000.
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---This appeal has been filed by the assessee against order under section 66(A) finalized by learned I.A.C. The findings of the revising authority is that the I.T.O. having failed to charge tax under section 80D has committed a 'error' which has caused prejudice to the interest of Revenue. The learned A.R. of the assessee supporting assessee appeal argued that the assessee is a exempt unit under clause (126-D) of the Second Schedule and that the same stood protected by the Economic Reforms Act, 1992. The learned A.R. has placed reliance upon the Supreme Court judgment known as Messrs Ellahi Cotton Mills (Pvt.) Ltd. reported as PLD 1997 SC 582 = 1997 PTD 1555 and said that the ratio of the same is fully applicable on the facts an circumstances of -the present case. Referring page 3 of the order of the learned I.A.C. wherein he has said that the Department being in appeal earlier year before the Tribunal against the order of the C.I.T.(A) the decision for this year is 'erroneous' in so far as that the Assessing Officer has not charged minimum tax under section 80-D This observation, the learned A.R. said is against the spirit of law. Regarding the other reasons he further mentioned that the I.A.C. has taken support from the following arguments:
"The scheme of legislature is that where the law, requires not to charge minimum tax under S.80-D exemption, in this regard specifically been provided in Part IV of the Second Schedule to the Income Tax Ordinance, 1979. For instance, in clauses (14), (20) (21), (23), (27), (29), (32) etc. of Part IV of the Second Schedule Income Tax Ordinance, 1979 has granted exemption from application of specific provisions of section 80-D. However, non -applicability of section 80-D to the exempt units of clause 126-D of the Second Schedule to the Income Tax Ordinance has not been provided."
The learned I.A.C. has further referred that exemption from application of section 80D is in respect of the clauses mentioned as (118C), (118D) and (118E) of Second Schedule and not to any other income. In this regard he has put reliance on para. 53 of the order of the Honourable Supreme Court in the case of Ellahi Cotton Mills which is as follows:
"So far as the exemption from application of section 80D has been granted only in those cases which have been protected by the Economic Reforms Act and which have been mentioned in Notification No.S.R.O. 1283(1)/90, dated 13-12-1990 as mentioned in para. 53 of the order of Hon'ble Supreme Court of Pakistan in the case of Messrs. Ellahi Cotton and others. Notification No.S.R.O.1283/(I)/90, dated 13-12-1990 deals with only those cases which have been granted exemption under clauses (118C), (118D), (118E) of the Second Schedule to the Income Tax Ordinance, 1979 and no other clause of Second Schedule to the Income Tax Ordinance, 1979 is covered by the Economic Reforms Act. Therefore, minimum tax under section 80D is chargeable in this case."
In this way the learned I.A.C. came to the conclusion that section 6 of the Economic Reforms Act does not cover the provisions of Second Schedule in toto hence it was not a case of exemption from section 80D. He has further relied upon various provisions of Part IV of the Second Schedule mentioned by us above, wherein specific exemption has been allowed from application of section 80D to various industries and trades. The exemption from section 80D in his opinion, therefore, is available only to the persons who are covered under the provisions of Part IV of the Second Schedule and under section 6 of the Economic Reforms Act.
After narrating above references the learned A.R. has re-emphasized that his case is covered under the provisions of section 6 of the Economic Reforms Act hence ratio decidendi of the case of Messrs Ellahi Cotton applies on the facts and circumstances of this case. While arguing his case the learned A.R. also said that Tribunal has already allowed a similar favour to the assessee in the immediate preceding year.
So far as this last argument is concerned, we must accept that at the time of hearing of appeal in the immediate preceding year the arguments now advanced were not before us. Further the fact that section 6 does not cover the cases other than mentioned in clauses (118C), (118D) and (118E) of the Second Schedule was also not argued before the Tribunal. The issue that whether a case is covered under section 6 of the Economic Reforms Act is a question of fat, which required appreciation of the facts and circumstances of each case.
The arguments of learned A.R. mainly revolved against the preamble of the Economic Reforms Act, 1992. His arguments before us at the time of hearing of this appeal and his stay application, which we have separately decided, are that through the said, principle the Government showed its intention to take such fiscal measures which may help in development of the Economic atmosphere to attract investors. It drafted the same in the manner that it not only covered the already introduced measures but it also protected the incoming reforms, The same he said speaks as follows:
"Preamble:
And whereas a number of economic reforms have been introduced and are in the process of being introduced to achieve the aforesaid objectives".
The 'Economic Reforms' are defined in section 2(b) which, means economic policies and programmes, laws and regulations, announced, promulgated or implemented by the Government on and after the seventh day of November, 1990, relating to privatization of public sector enterprises and nationalized banks, promotion of saving and investments, introduction of fiscal incentives for industrialization, and deregulation of investment, banking, finance, exchange and payments systems, holding and transfer of currencies."
The overriding effect of this provision is given in section 3 which speaks as follows:---
"3. Act to override other laws.---The provisions of this Act shall have effect notwithstanding anything contained in the Foreign Exchange Regulation Act, 1947 (VII of 1947), the Customs Act, 1969 (IV of 1969), the Income Tax Ordinance, 1979 (XXXI of 1979), or any other law for the time being in force."
The learned A.R. has placed a great emphasis on the language of "The Preamble". His arguments in this regard were that the preamble is key of every enactment and in case of contradiction guidance should be sought from the same. While discussing the scope he mentioned 1969 Dacca 1 page 2. Further argument was that the express provision is to prevail upon the preamble and this in his opinion was to be read with section 2(b). Reference is made to PLD 1969 Lah. 563 and 1991 SCMR 657. It was stated that fiscal statutes couldn't be read in isolation. The provisions of fiscal statutes are always to be read in conjunction with the other provisions of the same enactment. The Economic Reforms Act was, therefore, to be read in conjunctions with the other provisions of the same, as its purpose i.e. economic uplift of the country. He argued that the act covered four categories:---
(1) The reforms introduced prior to enactment,
(2) Reforms which were already introduced and their life was enhanced by subsequent amendment,
(3) Reforms which were introduced subsequent to the enactment; and
(4) Those, which were, mentioned in the 'Schedule of the Act' itself.
He placed his case in the third category and on a question replied that the preamble of the Economic Reforms Act as well as section 2(b) read with section 6 therein covers the same. His further emphasis was on the words "otherwise notified" and he said that this includes notified in the Income Tax Ordinance and under section 14 of the income Tax Ordinance, 1979. He, therefore, urged that the application of section 80D should be declared to be as illegal.
The upshot of the arguments of the learned A.R. is that all the provisions introduced in the Second Schedule of the Income Tax Ordinance subsequent to the introduction of the. The Economic Reforms Act, 1990 are, covered under the protection.
The arguments of the department were precise and to the point. It has been said that the order of the I.A.C. is correct and the learned D.R. repeated whatever has been mentioned therein. He said that the law under discussion has provided protection to the reforms which have been mentioned in its schedule and not beyond.
This is where we should revert back to the arguments of learned A.R. It is true and there should not be any cavil about the understanding that the preamble can be used in aid of the interpretation, but it is a. settled principle of law that if the main provision is clear in its application, preamble is not to be read in as a part of the same. The settled principle of law is that preamble is not a part of statute and while interpreting a provision of law nothing should be read in so as to enhance or decrease its jurisdiction. This finding does not need any support, however, the judgment referred by the learned A.R. itself vide PLD 1969 Lah. 563 categorically says that the express provision is to prevail upon other laws. Further, the golden principle of interpretation with special reference to the fiscal laws, has been referred by the Hon'ble I.T.A.T. in dozen of cases. It says that the express provision of law is to be read to reach to its natural and original meanings. Nothing should be read in and no one should be left untaxed if the provision se desires. The Economic Reforms Act, in clear and unambiguous terms say in its section 6 that only those exemptions shall qualify for protection which forms part in its own schedule. The word used "otherwise notified" cannot be expanded so as to include notified under the Income-tax, Sales Tax, Excise Duty or any other enactment. When the legislature itself has enacted a schedule for the protection of Economic Reforms in the said Act and has mentioned certain reforms therein, there was no bar in adding the provision impugned, i.e. clause (126-D) of the Second Schedule of the Income Tax Ordinance in the schedule of the said Act itself. Section 6 of the Act speaks as follows:---
"6. Protection of fiscal incentives for setting up of industries. ---The fiscal incentives for investment provided by the Government through the statutory orders listed in the Schedule or otherwise notified shall continue in force for the term specified therein and shall not be altered to the disadvantage of the investors'."
.
Above section protects only those statutory orders, which are listed in the schedule shall be otherwise notified. The 'otherwise notified' is not to be read in isolation. It is with reference to the Protection of Economic Reforms Act, 1992 and would not extend the jurisdiction notified in Schedule of some other fiscal law. In this regard the provisions of Second Schedule of Income Tax Ordinance are governed under section 14 of the Income-tax Act which is an independent provision; and has a perpetual protection for the exemptions from the Income Tax Ordinance subject to the conditions and to the extent specified thereon.
The charge created under section 80D is with an overriding effect to the other provisions. It starts from the words "notwithstanding anything contained in this Ordinance or any other law for the time being in force" and is applicable where no tax is payable or where paid is less than 1/2% .... Further certain persons have been allowed exemption from section 80D, which includes N.I.T. (Units) Trust, Petroleum Dealers, Hub Power Company and certain other business houses specifically mentioned therein.
If the law makers had the intention; to exclude the impugned clause (126D) from the charge of section 80D, there was no reason for not specifically mentioning it in the Income Tax Ordinance itself or in the Schedule of Economic Reforms Act or the same could have been otherwise notified through unambiguous notification etc. At this stage we can mention with advantage finding of the Honourable High court in a case wherein exemption was claimed and allowed under clause (118B), however, minimum tax under section 80D was charged. The set-up period under this clause is from 1-7-1988 to 30-6-1993. Against the charging of minimum tax under section 80D Writ Petition No. 11575 of 1998 was filed with the honourable Lahore High Court, Lahore pleading that though said clause is not mentioned in the Schedule of section 6 of the Protection of Economic Reforms Act, 1992 yet section 6 also protects notification not specifically mentioned in the Schedule. However, the honourable Court did not allow the contention by placing reliance upon paragraphs Nos.52, 53, 54 and 57. of the judgment of the Supreme Court of Pakistan in the case of Ellahi Cotton Mills
This is where mentioning of para. 54 of the judgment Messrs Ellahi Cotton Mills Ltd. becomes relevant. The same speaks:---
"In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a general statute. In this view of the matter, assessee who fulfills the conditions of the notifications referred to in the Schedule to section 6 of Act XII of 1922, are entitled to the protection. The question, as to whether a particular assessee fulfills the conditions of the above notifications, is a question of fact which will have to be determined by the hierarchy provided under the Ordinance and not by this court. However, in order to eliminate multiplicity of litigation and to avert element of harassment to assessee, we have dealt with the legal aspect of above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal. "
There is, therefore, no cavil that the Economic Reforms Act though section 6 applies only on those assessees who fulfil the conditions of the notification referred in Schedule of said section of Act XII. In the case before us the assessee never had the claim that he is covered under the said notification. The claim of exemption as such is unfounded. In support of our finding we put further reliance upon the decision of honourable High Court in writ petition number mentioned above which speaks as follows:
"A cumulative reading of section 2(b) and the preamble would show that the saving clause applies only to the economic measures taken after 5th November, 1990 pursuant to the economic policy of the Government which granted the incentives. The intention of the legislature becomes manifest from the perusal of the Schedule. If the argument of the learned counsel is correct that section .6 applies to all the notifications issued before the promulgation of the Act, then there was no necessity of specifically mentioning two notifications in the Schedule. It is thus obvious that what section 6 says is the measure taken by the Government after 5th November, 1990 which was the date on which the then Government came into power." (Underlined for emphasis (sic))
The above para. is important from another angle. The learned A.R. while arguing stay application has interpreted the same to his convenience in the manner that the provision of Second Schedule under discussion was introduced subsequent to the introduction of the Economic Reforms Act, 1992. We, however, are unable to agree even on this point. We have already dilated upon this aspect and we, further get support from the above para. with special reference to para underlined by us. Further, we have already held that the legislature could always grant specific exemption by way of amendment or insertion in the Schedule of the Economic Reforms Act, 1992 itself. The legislature reserved its right to otherwise notify further reforms in the said Act and nothing could stop him for doing the same had it so intended by him.
We are firm about our view yet for another reason. If the arguments of learned A.R. are accepted, this will open a new Pandora's box. If the word "otherwise notified" is interpreted to include all subsequent exemptions provided under section 14 of the Income Tax Ordinance then its mentioning in the Second Schedule of the same was unnecessary. The Schedule deals with the exemption mentioned therein independently and needs no support from some other enactment. The provision of one Act cannot be applied on the proceedings of another unless so provided in unequivocal terms. The Courts never consider it safe to import the meanings. of one word from another law. Income Tax Ordinance is an independent law and its jurisdiction cannot be reduced or enlarged by application of some other law unless the legislature so desires by specific mentioning.
The upshot of the discussion, therefore is that if the legislature would have liked to grant exemption to any activity, which was, started either prior to the Economic Reforms Act, 1992, or after, it could have so mentioned it in the Schedule of the Act or would have otherwise notified under the said Act. None of the exemption otherwise provided in Second Schedule of the Income Tax Ordinance, 1979 be it earlier or subsequent to the said Act, therefore, escapes the charge of section 80D. Present case having escaped this charge the order of the I.T.O. was "erroneous" and prejudicial to the interest of Revenue. The cancellation of the same, therefore, is upheld.
The assessee's appeal as such stands dismissed.
M.B.A./55/Tax (Trib.)Appeal dismissed