COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE VS PAK. INDUSTRIAL PROMOTORS LTD., LAHORE
2001 P T D 1433
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
THE COMMISSIONER OF INCOME‑TAX,CENTRAL ZONE, LAHORE
versus
Messrs PAK. INDUSTRIAL PROMOTORS LTD. LAHORE
C.T.R. No.83 of 1991, decided on 24/11/2000.
Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑First Sched., Part II, Part A, cl. (1)(v)‑‑‑Rebate on super‑tax‑‑ Entitlement‑‑‑Processing, preserving and canning of food, vegetable, fruit, grain, meat, fish and poultry as mentioned in First Sched., Part II, Part A, Cl.(1)(v) of the Income Tax Ordinance, 1979 had restricted application which certainly could not be extended to . Ice Cream or its products‑‑ Principles‑‑‑Rebate on the super‑tax was allowable only to those companies which were engaged in processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat and poultry.
"Processing, freezing, preserving and canning of food, vegetable, fruit, .grain, meat, fish and poultry" had restricted application which certainly could not be extended to Ice Cream or its products. The view that after the Ice Cream had been prepared and till it was distributed, the activity undertaken by the assessee amounted to "preserving" was not right. The idea was certainly far‑fetched and not relevant to the intention of the law for which the concession was allowed. A rebate in rate of tax takes the colour of exemption and, therefore, the same principles of interpretation are required to be adopted. These principles clearly indicate a strict interpretation of these provisions. Also that in case of an ambiguity, the interpretation has to be the one in favour of the Revenue.
To preserve a thing means to get it in a certain condition for a certain period of time to ensure the quality as well as utility of the food item after a certain period of time. In the present case it was only a distribution to various outlets where the retailers had their own refrigerators and other similar kinds of machinery to receive the item and to get it in a certain form till it actually reached the hands of buyers. The process in which the prepared ice cream was transported from factory to sale outlets was not of the kind of "preservation" contemplated by the provisions of the First Schedule of the Ordinance. View expressed by Ministry of Commerce in their letter dated 8‑10‑1987 wherein they had rated ice cream under the category of Dairy Industry was also not impressive. The assessee never crystallized the context in which that opinion was expressed. However, even if that view was correct in its own limited meaning, the concession of rebate was not given even to Dairy Products. It was meant for the purpose and to encourage an industry which was engaged in processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat, fish and poultry. The assessee company was evidently not processing, preserving or canning any of the seven items given in the said clause. The use of words vegetable, fruit, grain etc. after the word "food" clearly specified and restricted the meaning of the word "food" in terms of the six categories which followed. Obviously the word "food" does not admit of a restricted meaning. One person's food may be a health hazard for the other. The. use of specific words in the clause after the use of general expression of "food" clearly indicated the intention of the Legislature that 10% rebate on the super‑tax was allowable only to those companies which were engaged in processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat and poultry. Since the Ice Cream produced by the assessee‑company did not fall in any of the said categories, Tribunal was not correct in recording the finding. The meaning given by Ministry of Commerce had no relevancy to the concession claimed 'by the company.
Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652 ref.
Crescent Sugar Mills and Distillery Ltd. v. C.I.T., Lahore 1981 PTD 43 distinguished.
Muhammad Ilyas Khan for Revenue. Nemo for Respondent.
ORDER
NASIM SIKANDAR, J.‑‑‑This is a case stated by the Lahore Bench of the Income‑tax Appellate Tribunal. The questions framed for our opinion and answer are stated below:‑‑‑
(a) Whether, item manufactured by the assessee company is entitled to 10% rebate of super tax as provided under any of the provisions made under sub‑clause (v) of clause (1) of para. A of Part II of the First Schedule to the Income Tax Ordinance, 1979?
(b) Whether on the facts and circumstances of the case, the Tribunal was justified in allowing super tax rebate to the assessee company under sub‑clause (v) of clause (1) of para. A of Part II of the First Schedule of the Income Tax Ordinance, 1979 by holding that an element of preserving was involved in transporting the ice cream from the factory to the sale point designations?
2. The assessee‑respondent is a private limited Company which during the period involved viz. assessment years 1981‑82 to 1986‑87 engaged itself in manufacturing of ice Cream. While disclosing income at various sums in these years, the assessee claimed 10% super tax rebate as per provisions of clause (v) of sub‑para. (1) of para. A of Part II of the First Schedule of Income Tax Ordinance, 1979 which at the relevant time read as under:‑‑‑
"a rebate of 10% to such Company in respect of its income profits and gains to which clause (c) of section 26 applies or which are derived by it in Pakistan from processing freezing, preserving and canning of food, vegetable, fruit, grain, meat, fish and poultry."
3. However, the Assessing Officer refused the claim on the ground that the last para of the aforesaid clause' clearly stated different types of food item like fruit, grain, meat etc. indicating the intention of the legislature that 10% rebate on super tax was allowable only to the companies which were engaged in preserving, canning, freezing or processing of the items which exist as food in their natural shape.
4. The learned First Appellate Authority also agreed. However, on further appeal, a Division Bench of the Income‑tax Appellate Tribunal found the assessee to be entitled to the said rebate. In view of the learned Member after freezing in the factory, the Ice Cream was transported in freezer‑fitted motor vans for delivery at selling points for distribution to far‑flung places. The activity, according to the learned Member was a distinct and additional activity with the sole purpose to ensure that the food item is preserved and retained its flavour and quality so that it is not decomposed. In their view, that activity could safely be classified as falling under the category .of "preserving" as mentioned in paragraph A(1)(v) of Part II. of the First Schedule to the Ordinance.
5. After hearing the learned counsel for the Revenue, we will agree that the learned Tribunal unnecessarily stretched the meaning of the words of the statute to hold that the respondent was entitled to the claimed rebate. The Assessing Officer was clearly justified in holding that "processing, freezing, preserving and canning of food, vegetable, fruit, grain meat, fish and poultry" had restricted application which certainly could not be extended. to Ice Cream or its products. The view adopted by the Tribunal that after the Ice Cream had been prepared and till it was distributed, the activity undertaken by the assessee company amounted to "preserving" has also not appealed us. The idea was certainly far-fetched and not relevant to the intention of the law for which the aforesaid concession was allowed. A rebate in rate of tax takes the colour of exemption and, therefore, the same principles of interpretation are required to be adopted. These principles as expounded by the Hon'ble Supreme Court in 1992 SCMR 1652 Re: Army Welfare Sugar Mills Ltd. v. Federation of Pakistan clearly indicate a strict interpretation of these provisions. Also that the case of an ambiguity, the interpretation has to be the one in favour of the Revenue.
6. In the case in hand, the learned Tribunal adopted a contradictory view. On one hand they did not subscribe the theory that Ice Cream was a food product which after the process of hardening and freezing was entitled to the concession of rebate in supper tax. At the same time by holding the ice cream as a food item they proceeded to allow the concession of rebate on account of the alleged activity after the process of production had already been completed. To preserve a thing means to get it in a certain condition for a certain period of time to ensure the quality as well as utility of the food item after a certain period of time. In the case, in hand, it was only a distribution to various outlets where the retailers had their own refrigerators' and other similar kinds of machinery to receive the item and to get it in a certain form till it actually reached the hands of buyers: The process in which the prepared ice cream was transported from factory to sale out‑lets was not of the kind of "preservation" contemplated by the aforesaid provisions of the First Schedule of the Ordinance. Also we are of the view that the Tribunal was wrongly impressed by the view expressed by Ministry of Commerce in their letter dated 8‑10-1987 wherein they had rated ice cream under the category of Dairy Industry. The assessee never crystallized the context in which that opinion was expressed. However, even if that he correct in its own limited meaning, the concession of rebate was not given even to Dairy Products. It was meant for the purpose and to encourage an industry which was engaged in processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat, fish and poultry. The assessee company was evidently not processing, preserving or canning any of the seven items given in the said clause. The use of words vegetable, fruit, grain etc. after the word "food" clearly specified and restricted the meaning of the word "food" in terms of the six categories which followed. Obviously the word "food" does not admit of a restricted meaning. One person's food may be a health hazard for the other. The use of specific words in the clause after the use of general expression of "food" clearly indicated the intention of the legislature that 10% rebate on the super tax was allowable only to those companies which were engaged in processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat and poultry. Since the Ice Cream produced by the respondent assessee company did not fall in any of the said categories, the learned Tribunal, as observed earlier, was not correct in recording the aforesaid finding. Also we are of the view that the meaning given by Ministry of Commerce, Islamabad had no relevancy to the concession claimed by the company.
7. Lastly, we would like to express that the learned Tribunal manifestly misunderstood the opinion expressed by this Court in Re: Crescent Sugar Mills and Distillery Ltd. v. C.I.T. Lahore 1981 PTD 43.
8. In the perspective of the aforesaid judgment and the provisions of the First Schedule of the Income Tax Ordinance, 1979 our answer to the question is in the negative.
M.B.A./C‑60/LReference answered.