(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., cl. (129)‑‑‑C.B.R. Circular No. 20 of 1988, dated 8‑10‑1988‑Exemption‑‑‑Words "subject to such conditions as may be specified therein" and "where it is so specified" in cl. (129), Second Sched. of Income Tax Ordinance, 1979, and C.B.R. Circular No.20 of 1985‑‑‑Effect‑‑‑Words "subject to such conditions as ‑may be specified therein" 'and "where it is so specified" in the Second Sched. and the Circular makes it clear that the exemption available in the Sched. is subject to the condition specified therein and if there is no‑condition specified obviously the exemption allowed is without any strings.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 156, 14(1) & Second Sched., cl. (129)‑‑‑C.B.R. Circular No.20, dated 8‑10‑1988‑‑‑Rectification application‑‑‑Calculation of export, rebate‑‑‑Inclusion of wealth tax for determining the total income for purpose of calculation of export rebate‑‑‑Wealth tax paid could only by added for the purposes of determining the tax rates‑‑‑Export rebate was to be calculated after reducing wealth tax from the total income‑‑ Mistake having been committed‑‑‑Application for rectification was maintainable and‑should have been accepted.

Shaukat Amin, F.C.A. for Appellant.

Muhammad Asif; D.R. for Respondent. .

Date of hearing: 16th August, 2001..

ORDER

KIJAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑These appeals have been filed by the assessee on a common ground, which is as follows:

These appeals have been filed by the assessee on a common ground, which is as follows:‑‑‑

That the learned ITO's rejection of the appellant's application, dated 3rd June, 1992 under section 156 of the Income Tax Ordinance 1979 is based on misinterpretation of proviso to section 14 of the Ordinance and Rule 216 of the Income Tax' Rules, 1982 for exclusion of wealth tax paid while determining the total income for the purpose of cal cu ti on of export rebate.

'The brief facts of the case are that the assessee filed an application for rectification, which was rejected by the Assessing Officer The First Appellate Authority on the merits of the issue has also rejected further appeal filed on the basis of the same.

The learned D.R. on a point of order challenged maintainability of appeal on the ground that the issue involved was not covered within the provisions of section 156 hence First Appellate Authority was not justified in giving finding on merits and the case should be rejected in limine. He said that he is conscious of the fact that this is assessee's appeal, however, in view of the Rules of the Income Tax Appellate Tribunal he has raised this objection. The learned Tribunal, he remarked has the jurisdiction to give findings on a cross argument by the respondent if it goes to the root of the issues.

We are fully conscious of the relevant provisions, however it is not applicable on the circumstances of the present case. Said rule applies where in a case relief has been allowed on one of the various issues raised and argued before the First Appellate Authority and in' further appeal by the other part the learned Tribunal feels that the finding was not correct. In such circumstances the other issues not dilated upon by the First Appellate Authority remain un-adjudicated and the Tribunal herein seized with the power to adjudicate such issues even in an appeal filed by the other party. This is not exhaustive but only an enumerative example of the circumstances in which Rule 22 of the ITAT applies. In the present case this situation does not exist. It is an appeal by the assessee and this point does not arise either from the order or the grounds. The objection of learned D.R., therefore, is overruled

Coming w the main case the assessees contention is that while calculating rebate on account of exports, wealth tax has not been reduced from the total income, which is deviation of the legal requirements and rights of the assessee. He pointed out from the order of rectification that reliance of the Assessing Officer' is on proviso of section 14(l) and Circular No.20 of 1988 which speaks as follows.‑‑‑

"Provided that, where any income which is exempt from tax under any provision of Second Schedule such income, as maybe specified in the said Schedule and subject to such conditions as may be specified therein shall be included in the total income, so however that the tax shall not be payable in respect of such income. "

The extract from Circular No.20 of 1988, dated October 8, 1988 is as follows:‑‑‑

"A proviso has been added to subsection (1) of section 14 of the Ordinance, whereby any income which is exempt under any provision of the Second Schedule to the Ordinance, shall, where it is so specified, be included in the total income. However, tax shall not be chargeable on such exempt income. The effect of this provision is that by including the tax‑exempt income in the total income, the tax rate and the tax payable on that portion of that the total income which is chargeable to tax, may in some cases, 'be higher than what would have been if such inclusion were not made."

According to learned A.R. the provisions of section 14(1) has been misunderstood as it does not apply on the whole of the Second Schedule and is with special reference to agricultural income and share from AOP which are otherwise exempt but are included in total income for rate purposes. The Circular of the C.B.R. he said has correctly explained the provision which, however, 'is misunderstood by the Assessing Officer and the relevant portions in section as well as in the Circular that required special attention are, subject to such conditions as may be specified therein' and `where it is so specified' as mentioned in 'section 14(l) and the Circular respectively.

The provisions of Second Schedule under discussion is clause 129 and the same has not added any such condition within its language so as to come within the scope of the provisions of section 14(l) and above Circular. The A.R. therefore, urged that officers below be directed to allow the assessee reduction of the wealth tax before calculating rebate.

The learned' D. R. argued that the Assessing Officer has very ably explained the actual provisions and the assessee is not entitled to this reduction from the total income. He made reference to section 14 wherein he said the total income means and includes only such income, which is earned from said source. What he meant was that the total income from business under section 22 is determinable after reducing the expenses allowable under .section 23. He, therefore, urged that the order be upheld.

Before deciding the issue reverting back to section 14(1), relevant Circular of the C.B.R. and Clause 129 of the Second Schedule shall be‑of help. So far as section 14(1) and Circular No.20 is concerned emphasis in both is on the words "subject to such conditions as may be specified therein" and "where it is so specified". These two mentioning in the Second Schedule and the Circular makes it clear that the exemption available in the Schedule is subject to the condition specified therein and if there is no condition obviously the exemption allowed is without any .strings. The provisions under review speak as follows:‑‑‑

"THE SECOND SCHEDULE

Income, or classes of income or persons or classes of persons, enumerated below, shall be exempt from tax, subject to the conditions and to the extent specified hereunder:‑‑

Clause 129. Any amount paid by assessee by way of wealth tax under the Wealth Tax Act, 1963 (XV of 1963)."

The proviso of section 14(l) apparently does not apply on the provision now referred by us. There is no exception and no qualification for the exemption. It is a plain provision, which does not include any such impression that the exemption is subject to inclusion of wealth tax for rate purposes or rebate shall be calculated before its reduction from total income.

To further explain one can refer Clause 1 of the Second Schedule. It is where the Legislature in its wisdom has laid down certain exceptions through a proviso. The Clause 1 of the Second Schedule deals with agricultural income and it speaks as follows:‑‑‑

Clause 1. Agricultural income.

Above exemption is qualified to the extent and in the manner as follows:‑‑‑

Provided that in case an assessee has, in any income year, any income (other. than the agricultural income), which is chargeable to tax (hereinafter called "chargeable income").

The agricultural income shall be included in the total income; so however that the same proportion to the chargeable income as the tax on total income bears to the total income:‑‑

Provided further that nothing contained in the first proviso shall apply in the case of an individual, not being director of a company, whose chargeable income does not consist of, or include, income chargeable under the head income from business or profession..

From above example the matter becomes clear. Agricultural income on one hang has been exempted and the same remained unqualified till 1991 when through an amendment above proviso was introduced. This proviso 'relates to the qualifications subject to which the exemption shall be available to agricultural income. No such exception has been mentioned in clause 129 to the Second Schedule. Various methods of interpreting the fiscal statutes have come to discussion in a chain of reported judgments. The golden principle on which the Courts have unanimity, is the adoption of literal meanings i.e. interpretation of the law as it appears in a plain reading and not going beyond the intentments and the purposes of the Legislature. Keeping in view the same, we are firm in our view that clause 129 of the Second Schedule could only be added for the purposes of determining the tax rates and export rebate thereof if it was so provided in the clause itself. The lawmakers having riot provided any such exception, the intention is clear. There is no reason for us to hold that the rebate is to be calculated before reducing wealth tax from the total income. The findings of the subordinate officer are total misconception. We, therefore, without any hesitation hold that mistake does exist and the application filed by the assessee should have been accepted.

The I.T.O. therefore, is directed to calculate rebate after reducing wealth tax from the total income.

C.M.A./M.A.K./199/Tax(Trib.) Order accordingly.