M. As. (Rect.) Nos. 34/KB to 36/KB of 2002 in I. T. As. Nos. 1486/KB to 1488/KB of 2000-2001 VS M. As. (Rect.) Nos. 34/KB to 36/KB of 2002 in I. T. As. Nos. 1486/KB to 1488/KB of 2000-2001, 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2156 (2002)

Income‑tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.156, 34, 37, 2(12), (24), (44), 14, 16, 17, 19, 22, 23, 27, 28, 30, 49, First Sched. Part IV, Para. A, Cl.(4) & Second Sched., Part I, Cl. (116)‑‑‑Rectification of mistake‑‑‑Set‑off of loss‑‑‑Loss from dealing in stocks and shares‑‑‑Loss from dealing in stocks and shares was computable under the head "capital gain" as it was not liable to be set‑.off against income under any other heads as provided in S.34 of the Income Tax Ordinance, 1979 and was liable to be carried forward in the light of provisions of S.37 of the Income Tax Ordinance, 1979‑‑‑Assessee moved for rectification for the same on the ground that notwithstanding the provisions of S.34 of the Income Tax Ordinance, 1979, the loss under the head capital gains will have to be included in the total income if it had arisen by disposal of assets within 12 months in view of cl. (4) of para. A of Part IV of the First Sched. to Income Tax Ordinance, 1979‑‑‑ Validity‑‑When the capital loss was not allowed to beset‑off against income under other heads, then the total income computed in accordance with law, would not contain any portion as the said income pertained to capital gain and there would, practically be no applicability of cl. (4) of para. A of Part IV of the First Sched. to the Income‑tax Ordinance, 1979‑‑‑No mistake apparent from record existed so far as the orders of the Tribunal were concerned‑‑ Applications for rectifications were disposed of accordingly by the Tribunal.

2002 PTD (Trib.) 283 maintained.

Aminuddin Ansari and Muhammad Aleem for Appellant.

Mahfooz‑ur‑Rehman Pasha, I.A.C. and Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 1st February, 2002.

ORDER

MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBERS).‑‑‑The appeals filed by the appellant for the assessment years 1997‑98, 1998‑99 and 1999‑2000 against the order of the IAC passed on 31‑5‑2001 under section 66‑A of the Income‑tax Ordinance, 1979 (hereinafter referred to as "the Ordinance") were decided by this Tribunal on 21‑8‑2001 cited as 2002 PTD (Trib.) 283. After discussing the relevant legal provisions and the case‑law this Tribunal had in principle maintained the decision of the IAC who had held that, income in respect of business of dealing in stocks and shares‑‑‑

(i) is not to be computed under the head income from business, or profession as per sections 22 and 23 of the Ordinance it is computable as capital gain or capital loss under the provisions of sections 27 and 28 of the Ordinance;

(ii) in case of profit and gain, such profit is includable in the total income of the year and then after computation of .total income in this manner, the tax is to be charged keeping in view the provisions of clause (4) of Para. A of Part‑IV of the First Schedule and clause (116) of Part. I of Second Schedule to the Ordinance; and

(iii) in case of loss this loss, cannot be set off in that year against income computed under other heads of income, as provided in section 34 of the Ordinance and is to be only carried forward in accordance with the provisions of section 37 of the Ordinance.

2. The learned Advocate has submitted on behalf of the appellant applications under section 156 of the Ordinance for all the assessment years 1997‑98, 1998‑99 and 1999‑2000. These read as under:‑‑

"On behalf of above named applicant/assessee‑Company, it is submitted that the capital loss having been incurred within twelve months as per record of assessment which includes details of final accounts and details of capital loss furnished to the Deputy CIT at the time of assessment; the set‑off of capital loss as per section 2(12) read with section 2(24) and also read with clause (4). of Para. A of Part. IV of the First Schedule of Income Tax Ordinance, 1979 was rightly made under section 62 of Income Tax Ordinance, 1979 and as such the action of the learned I.A.C. under section 66‑A of Income Tax Ordinance, 1979 was erroneous and without jurisdiction.

Therefore, in the facts and circumstances of the case, the confirmation of order of the learned I.A.C: by this Honourable Tribunal also is erroneous and is able to correction under section 156 of Income Tax Ordinance, 1979.

As the mistake is apparent from record, this Honourable Tribunal may be pleased to recall its order, dated 21‑8‑2001, annul the order of the I.A.C. passed under section 66‑A of Income Tax Ordinance, 1979 and restore the original order of the learned Deputy CIT passed under section 62 of Income Tax Ordinance, 1979 in the interest of justice."

3. In order to consider and dispose of the applications, these were fixed for hearing. After perusing the orders passed by this Tribunal in appeal referred to above and hearing arguments of the representatives of both the parties, the applications are disposed of through this common order.

4. It is argued by the learned A.R., that in view of the proviso to subsection (1) of section 14, and section 49 of the Ordinance the allowances, deductions or incomes exempt are to be included in the total income of an assessee and in this view of the matter even if the income under the head capital gains is exempt under the Ordinance or results into loss, this is to be included in the total income. Also there is specific provision of charging tax with regard to income under the head capital gains as provided in clause (4) of para. A of Part IV of the First Schedule which prescribes that where 'the total income of an assessee includes any income chargeable under the head capital gains (hereinafter referred to "as the said income") the tax including super tax payable by the assessee on his total income is to be calculated as if the said income were included in the total income, provided the said income had arisen as a result of disposal by the assessee of his capital assets after not more than 12 months from the date of their acquisition by him. It is asserted by the learned A.R. that this being a specific provision overrides other provisions of law. According to him notwithstanding the provisions of section 34 of the Ordinance, the loss under the head capital gains will have to be included in the total income if it has arisen by disposal of asset's within 12 months of their acquisition as is the situation in the present case.

6. Mr. Mahfooz‑ur‑Rehman Pasha, the learned I.A.C. representing the department states that there. is a very fine distinction between the words used in sections 16, 17, 19, 22 and 30 of the Ordinance on the one hand and the words used in section 27 on the other hand. He explains that in all the sections quoted above, except section 27 it is the "income" under that head which is being computed whereas in section 27 it is "profits or gains" which is computed and is deemed to be income. According to him, the Legislature was, conscious of the fact that special treatment was being accorded to the losses arising out of transfer of capital assets as per section 37 of the Ordinance and that is why different language was purposely used in these sections. Further, it is asserted by Mr. Pasha that since on all issues raised by the learned A.R. in his applications or during arguments this Tribunal has already given definite findings, there is no mistake apparent from record which can be rectified by this Tribunal.

7. Due consideration has been given to the submissions made by the representatives of both the parties. The learned A.R. has conceded that the first step under the Ordinance is to compute total income of a person and it is only thereafter, that question will arise on applicability of the First Schedule, or the Second Schedule of the Ordinance. The total income is computed in accordance with the provisions .of Chapter‑IV of the Ordinance. It may be noted that section 37 is a part of Chapter-IV, and therefore, is to be kept in view while computing total income. The caption of the First Schedule is, "The First Schedule (See sections 9, 10 and 50)". Section 50 deals with withholding taxes and the First Schedule prescribes their rates. Section 9 ‑and 10 are charging sections for Income‑tax, Super Tax and Surcharge in respect of total income of the year. The crux of the matter is that before applying the First Schedule, total income is to be computed to accordance with the provisions of law contained in Chapter IV of the Ordinance. This being the settled position of law, we can see that when the capital loss is not allowed to be set of against income under other heads, then the total income thus computed in accordance with law will not contain any portion as the said income pertaining to capital gains and there would, therefore, practically be no applicability of clause (4) of para. A of Part IV of the First Schedule to the Ordinance. In this view of the matter, for reasons given above, we hold that there is no mistake apparent from record so far as the orders of this Tribunal are concerned in respect of Income‑tax Appeals referred to above and the applications for rectification are accordingly disposed of in this manner.

C.M.A./M.A.K./356/Tax(Trib.) Order accordingly.