HABIB CREDIT & EXCHANGE BANK LIMITED VS DEPUTY COMMISSIONER OF INCOME-TAX
2001 P T D 785
[Karachi High Court]
Before Saiyed Saeed Ashhad and Zahid Kurban Alavi, JJ
Messrs HABIB CREDIT & EXCHANGE BANK LIMITED
versus
DEPUTY COMMISSIONER OF INCOME‑TAX
I.T.A. No.D‑141 of 1998, decided on 03/02/2000.
Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S.136‑‑‑Banking Companies Ordinance (LVII of 1962), S.13‑‑‑Appeal to High Court‑‑‑Banking company‑‑‑Question of treatment given by the department to the money acquired by Banking company from surrender/sale of Federal Investment Bonds held by the banking company in pursuance of S.13, Banking Companies Ordinance, 1962‑‑‑Income‑tax Appellate Tribunal had not applied its mind and had not taken into consideration all the aspects of the case specially the issue dealing with the question as to whether said amount was to be treated as "Capital Asset" as was held by the banking company for purpose of earning income by selling the same in open market‑‑‑Appellate Tribunal had not advanced any plausible or cogent reason for vacating the discretion of Commissioner of Income‑tax (Appeals) to the effect that the same was to be examined for the purpose of deciding whether the same represented capital gain or income for investment‑‑‑Finding of the Tribunal having not been made with application of mind in accordance with law could not be sustained‑‑‑High Court set aside the order of the Tribunal and remanded the case to Deputy Commissioner of Income‑tax for deciding the issue/finding relating to the treatment to be given to the amount in question.
Iqbal Naeem Pasha for Appellant.
Jawaid Farooqui for Respondent.
Date of hearing: 3rd February, 2000.
JUDGMENT
SAIYED SAEED ASHHAD, J.‑‑‑This Income‑tax Appeal has been filed against the order of Income Tax Appellate Tribunal (Headquarters) Karachi, in I.T.As. No. 1303/KB to 1305/KB of 1997‑98, dated 16‑2‑1998.
The grievance of the Department which led to the filing of this appeal is with regard to the finding of the appellate tribunal on the issue regarding the treatment given to the money acquired from surrender/sale of Federal Investment Bonds, held by the appellant in pursuance of section 13 of the Banking Companies Ordinance, 1962. It is the case of the appellant that in pursuance of section 13(1)(a), it was required to maintain a general reserve of such minimum value as may be determined and notified by the State Bank of Pakistan from time to time. It has beers submitted by Mr. Iqbal Naeem Pasha that the Federal Investment Bonds to the tune of Rs.7,70,00,000 (Rupees seven crore and seventy lacs only) were actually purchased by the former Bank of Credit and Commerce International, hereinafter referred to as B.C.C.I. and the appellant came into possession thereof as a successor of former B.C.C.I. In the year 1995‑96, the appellant surrendered the said Federal Investment Bonds and received an amount of Rs.6,92,07,138 (Rupees `six‑ crore ninety two lacs seven thousand one hundred and thirty eight only), which amount was treated as "Business Profit" and was subjected to tax by the Income Tax Officer vide his order, dated 23‑5‑1996. The appellant's contention was that Federal Investment Bonds were held by them by way of investment on which they had received interest and it was an accretion to their assets, and the money obtained from surrender/liquidation thereof could not be treated as "Business Income" liable to tax. Accordingly, the order of the Assessing Officer was challenged by way of First Appeal and the Commissioner of Income Tax (Appeals) while dealing with this issue made the following observations in his order, dated 26‑6‑1996;‑‑‑
"The learned counsel for the appellant contended that investment in Government securities was made by the former B.C.C.I. from whom the appellant received these in succession and they had been held for more than twelve months. It is stated that the entire investment was made in' compliance to statutory requirements as approved by the State Bank of Pakistan vide Circular 16, dated 16‑6‑1976 for the purposes of subsection‑(13) of the Banking Companies Ordinance, 1962. It is further stated that in support of the claim, a statement showing weekly requirement and investment position was duly furnished.
The Assessing Officer did not accept the appellant's claim for the reason that 'the investments had no relevance to the statutory requirement and were always above the minimum requirement'. He, however, did not cite any specific instances.
The matter is, therefore, set aside and the DCIT is directed to thoroughly examine the weekly statements of investment and statutory requirements. Gain on sale of securities held within the statutory limits should then be treated as Capital Gain and on sale of excess holdings over the obligatory requirements under the law should be treated as normal business income. The appellant may, however, be duly confronted before proceedings in this regard."
The Department did not challenge this order and the matter was remanded to the Assessing Officer for deciding this issue in accordance with the directions of the Commissioner of Income‑tax (Appeals). However, the Deputy Commissioner of Income‑tax in the fresh assessment order did not comply with the directions of the Commissioner of Income‑tax (Appeals) and again perfunctorily and summarily decided this issue in a similar manner as was done in his previous assessment order holding that in spite of being called upon to furnish evidence as to whether the entire amount invested in the Federal Investment Bonds was done in accordance with the requirement of section 13 or a part thereof, was invested in accordance with section 13, the appellant/assessee did not respond therefore, he had no option but to treat the entire amount received from surrender of Federal Investment Bonds as "Business Income" and again subjected the same to tax. The appellant again filed First Appeal before the Commissioner of Income‑tax (Appeals) and he by his order, dated 25‑11‑1997, again set aside the finding of the Deputy Commissioner of Income‑tax on this issue and remanded the matter to him for compliance of his previous direction. This order of the Commissioner of Income‑tax (Appeals) was challenged by the Department by way of Second Appeal before the Income‑tax Appellate Tribunal. The Income‑tax Appellate Tribunal by its afore‑referred order set aside the order of the CIT (A) and restored the finding of the Deputy Commissioner of Income‑tax. It will be appropriate to reproduce the relevant portion from the order of the Tribunal, which is as under:‑‑‑
"Heard Mr. Muhammad Majid, learned representative of the Department and Mr. A.H. Khatri, learned counsel for the respondent. A perusal of the first appellate order shows that the learned C.I.T.(A) has discussed all the issues in detail and the learned D.R. is not able to advance any reasons warranting interference on our part except the direction relating to gain on sale of investment. All other findings are maintained except the direction in respect of income on sale of investment in Government securities. The directions in this behalf are vacated and the treatment given by DCIT is hereby restored."
A bare perusal of the portion reproduced from the order of the Tribunal is sufficient to convince us that the Tribunal had not applied its mind and had not taken into consideration all the aspects of the case specially the issue dealing with the question as to whether the amount received by the appellant from surrender of the Federal Investment Bonds was to be treated as "Capital Asset" or was held by them for the purpose of earning income by selling the same in open market. The Tribunal did not advance any plausible or cogent reason for vacating the directions of the Commissioner of Income? tax (Appeals) to the effect that the same was to be examined for the purpose of deciding whether the same represented Capital Gains or Income from investment.
Apart from the above, it is also to be observed that the first order of the Commissioner of Income‑tax (Appeals), dated 26‑6‑1996, wherein he had directed the Deputy Commissioner of Income‑tax to hold an inquiry as to whether the entire amount received by the appellant from surrender of the Federal Investment Bonds represented Capital Gains, oar part of it represented Capital Gains and part of it represented Business Income and to give a treatment accordingly, was not challenged by the Department and the same had attained finality. The CIT (A) in his order, dated 25‑11‑1997 had not given any new or fresh finding but had set aside first assessment and remanded the matter to the Deputy Commissioner of Income‑tax for compliance of the findings contained in his order, dated 26 6‑1996. In the circumstances, the Department having accepted the finding of the CIT(A) contained in his order, dated 26‑6‑1996 could not challenge the same by filing appeals being I.T.As. Nos. 1303/KB to 1305/KB of 1997‑98 as these appeals were filed against the order or CIT(A), dated 25‑11‑1997 wherein no new or fresh finding was given but only reiterated the findings contained in the order, dated 26‑6‑1996 which had attained finality. The order of the CIT(A), dated 25‑I1‑1997 did not furnish a cause of action to the Department to file appeal then. This aspect seems to have lost sight of by the Appellate Tribunal while dealing with the same in its order, dated 16‑2‑1998 in the appeals filed after about two years.
Upon the above discussion and observations, we are of the view that the finding of the Tribunal with regard to this issue was not made with application of mind in accordance with the provisions of law and cannot be' sustained.
The learned counsel appearing on behalf of the aforesaid parties had agreed that this appeal tray be heard and disposed of finally on merits at the Katcha Peshi stage. Accordingly, this appeal is admitted to regular hearing and is allowed, the impugned order of the Income‑tax Appellate Tribunal is set aside and the case is remanded to the Deputy Commissioner of Income ?tax for deciding the issue/finding relating to the treatment to be given to the amount of Rs.6,92,07,138 (Rupees six crore ninety two lacs seven thousand one hundred and thirty eight only), received by the appellant from surrender of Federal Investment Bonds in accordance with the findings of the CIT(A) in his order, dated 26‑6‑1996, after calling for the requisite information and material from the appellant.
M.B.A./H‑20/K ????????????????????????????????????????????????????????????????????????????????? Order accordingly.