I.T.A. No.877/KB/DB of 2000-2001, decided on 1st December, 2001. VS I.T.A. No.877/KB/DB of 2000-2001, decided on 1st December, 2001., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 993 (2001)

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

----S.80C(5A) [as inserted by Finance Act (IV of 1999) and omitted by Finance Ordinance (XXI of 2000)]---Applicability of S.80C(5A), Income Tax Ordinance, 1979---Section 80C(5A) of Ordinance was applicable from the assessment year 2000-2001 and its omission from the statute book would be effective from the assessment year 2001-2002.

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

----S.80.C(5A) [as inserted by Finance Act (IV of 1999)]---Nature of S.80C(5A), Income Tax Ordinance, 1979 is procedural and charging provision---Addition of subsection (5 A) in S. 80C of the Income Tax Ordinance, 1979 caused extra tax burden on the assessee, therefore, such provisions is as a charging provision---Section 80C of the Income Tax Ordinance, 1979 was both ' a charging as well as procedural section.

1998 PTD 2769; PLD 1969 SC 599; PLD 1998 SC 161; 1999 PTD 221 and I.T.A. No.2781/LB of 1998 rel.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 80C(5A) [as inserted by Finance Act (IV of 1999)] & Second "Sched., Part IV, cl. (9)---Assessment year 1999-2000---Difference of amount between tax worked out under S.80C 'of the Income Tax Ordinance, 1979 and under normal law as per S.80C(5A) of the Income Tax Ordinance was charged by the Assessing Officer to be paid by the assessee---Validity---Insertion of sub-section (5A) in S.80C of the Income Tax Ordinance,. 1979 would be applicable from the date it was enacted i.e. 1st July, 1999 onwards and the assessment period would be 2000-2001, therefore, said section would not apply to assessment year 1999-2000---Action taken under sub-section (5A) of S.80C of -the income Tax Ordinance, 1979 was not proper and addition made on such basis was deleted by the Tribunal.

1998 PTD 2769; PLD 1969 SC 599; PLD 1998 SC 161; 1989 PTD 221 and I.T.A. No.27811LB of 1998 rel.

Iqbal Naeem Pasha for Appellant.

Jafar Ali Khawaja, D.R. for Respondent..

Date of hearing: 10th November, 2001.

ORDER

SYED KABIRUL HASAN (JUDICIAL MEMBER).---In this appeal, the appellant/assessee is aggrieved by the order. of learned CIT(A) whereby he has confirmed the order of the Assessing Officer in. invoking the provisions of subsection (5A) of section 80C of the Income Tax Ordinance, 1979.

2. The brief facts are that the assessee being a manufacturer had opted for the Presumptive Tax Regime (PTR) under clause (9) of Part IV of the Second Schedule to the Ordinance for the assessment year 1999-2000. During the assessment proceedings, the assessee was confronted with the difference between tax worked out under section 80C and under normal law as per section 80C(5A) of the Ordinance to be paid by the assessee on the basis of tax liability worked out in the assessment order. The assessee took several pleas before the Assessing Officer which were not accepted by him and the order was passed and the tax liability was determined on the basis of section 80C(5A) of, the Ordinance. This order of the Assessing Officer was confirmed by learned CIT(A).

3. We have heard Mr. Iqbal Naeem Pasha, learned counsel for the assessee and Mr. Jafar Ali Khawaja, learned D.R. We have also perused the orders of learned CIT(A) as well as the Assessing Officer.

4. Mr. Iqbal Naeem Pasha, learned counsel has firstly contended that subsection (5A) was introduced by Finance Act, 1999 and was applicable from 1st July, 1999, therefore, this section was not applicable for the assessment year 1999-2000. Secondly, he has defined the word:

"derives" used to indicate that this word refers to subsequent events and not events prior to 1st July, 1999. Thirdly, he has relied upon clause (9) of Part IV of the Second Schedule to the Ordinance wherein it is clearly mentioned that if an assessee files a declaration, it is irrevocable and is applicable for three years. In view of this, the Assessing Officer was not justified to take the case of the assessee under subsection (SA) of section 80C.

5. Now, we take up the first contention of learned counsel. As far as the applicability of Finance Act is concerned, this is a correct position that any amendment brought by Finance Ordinance is applicable from the date it was promulgated. Normally, it is 1st July. Therefore, we do not need any authority on the subject. However, in order to understand this issue, it would be appropriate to refer to the relevant provisions, which are as under:---

"80C(5A)---Omission.---Before omission subsection (5A) .to section 80C reads as follows:---

(5A) Where an assessee derives income from any source which is subject to tax in accordance with provisions of this section, and the tax liability is less than the tax payable on such income had it not been chargeable to tax under this section, the difference in tax shall be payable in accordance with section 54 alongwith with the return of income, provisions of subsection (4) notwithstanding."

(This amendment was brought in by Finance Act, 1999 and was omitted by Finance Ordinance, 2000. This insertion and omission is very material which will be referred lateron).

"Clause (9) of Part (IV) of the Second Schedule to the Ordinance:

(9) The provisions of section 80C in so far as they relate to payments on account of supply of goods on which tax is deductible under subsection (4) of section 50 shall not apply in respect of any person, being a manufacturer of such goods, unless he opts for the presumptive tax regime;

Provided that a declaration of option is furnished in writing within three months of the commencement of the income year and such declaration shall be irrevocable and shall remain in force for three years;

Provided that nothing contained in this clause shall apply to any manufacturer of goods for which special rates of deduction of tax as specified under clause (c) of subsection (4) of section 50."

6. From the reading of both the provisions, it is clear that section 80C(5A) is applicable from the assessment year 2000-01 as the former order was made applicable from 1st July.. Likewise, the omission of subsection (5A) would be applicable from the assessment year 2001-02. The necessary case-law submitted by the learned counsel on the subject clearly spell out:

(i)1998 PTD 2769

"If some rights have accrued to a party under a law which is subsequently amended pr if substantive rights of parties are concerned, the amendment made in the existing law or the enforcement of a new law will not affect such rights and the effect of such an amendment would be generally prospective."

(ii) PLD 1969 SC 599

"Rights of the parties arising from facts which come into existence before the passing of a statute, should be presumed to be unaffected by it, -unless it is expressly or by necessary implication made retrospective . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .The origin of this presumption is to be found in the conscientious abhorrence that all just men have for the injustice that is inherent in ' charging the legal implications of a situation to the disadvantage of those who would otherwise benefit by ,a right which existed at the time of the change."

(iii) PLD 1998 SC 161

"It is a well-settled law that a new or an amending statute touching the vested rights of the parties operates prospectively unless the language of the legislation expressly provides for its retrospective operation. However, the presumption against the retrospective operation of a statute is not applicable to statutes dealing with the procedure as no vested right can be claimed by any party in respect of a procedure. The only exemption to the retrospective operation of a-procedure law is that if by giving it a retrospective operation, the vested right of a party is impaired then to that extent if operates prospectively. The above principles applicable to a new or an amending statute, however, cannot be applied strictly to the law declared by .the Court through interpretative process. The Courts while interpreting a law do not legislate or create any new law or amend the existing law. By interpreting the law, the Court only declare the true meaning of the law which already existed. Therefore, to that extent the law declared by the Court is applicable from the date the law is enacted."

(iv) 1989 PTD 221:

"It is a well-settled rule of interpretation that statutes creating new obligations or affecting existing rights and liabilities of subjects are presumed to be prospective in their operation unless they are specifically stated to be operative from a date prior to their enforcement. The following passages from Maxwell (Twelfth Edition) on the Interpretation of Statute may be quoted here on the point in issue:

"Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or' on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication......................................................... If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."

The learned counsel has also relied on case-law bearing I.T.A. No.2781/LB of 1998, dated 8-6-1999.

7. All the citations are on the point of interpretation of statute on the retrospective of prospective operation. The important point before us is that whether the provisions under discussion are substantive or procedural. The trite law is that the substantive amendment in the Fiscal statute shall have prospective effect. This position is an admitted position and there are no two opinions on this point. The above provisions do not fall under the heading of charging section, therefore, they appear to be procedural amendments. But due to addition of subsection (5A) in section 80C, some extra tax burden was put on the assessee, therefore, these amendments come under the provision of charging section. Since section 80C is both a charging as well as procedural section, therefore the case-law cited above are fully applicable to the case of the assessee.

8. In addition to above, we are of the view that by insertion or subsection (5A) in section 80C would be applicable from the date it was enacted i.e. 1st July, 1999 onwards,, therefore; the assessment date would be 2000-2001, therefore, this section will not apply to this assessment year i.e. 1999-2000. In view of this, the action taken under subsection (5A) of section 80C is not proper and the addition made on this basis is hereby deleted.

9. This appeal is disposed of to the extent and manner as indicated

C.M.A:/M.A.K./217/Tax(Trib.) Order accordingly