INDUS BASIN & CO. VS COMMISSIONER OF INCOME-TAX, 2002 PTD-KARACHI-HIGH-COURT-SINDH 2169 (2001)

2002 P T D 2169

[Karachi High Court]

Before Zahid Kurban Alvi and Muhammad Mujeebullah Siddiqui, JJ

Messrs INDUS BASIN & CO.

Versus

COMMISSIONER OF INCOME‑TAX

I.T.R. No.218 of 1991, decided on 30/11/2001.

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

‑‑‑‑Ss.23(1)(v), 136(1), Rr.(1)(2)(3)(3A), 2, Tables I, II, II‑A, 6, 7(b)(i)(ii), 8(5) & Third Sched.‑‑‑Sale of factory building‑‑ Depreciation allowance ‑‑‑Assessee declared purchase price of building as original cost and after deducting therefrom accumulated depreciation worked out the written down value‑‑‑Excess amount earned on such sale over and above the original cost of land was declared as capital gain, which was exempt from income‑tax‑‑ Assessing Officer treated sale proceeds in excess of written down value of assets as income of the year liable to be‑taxed ‑‑‑First Appellate Authority and Tribunal upheld treatment given by Assessing Officer‑‑‑Validity‑‑‑Tribunal had missed the point that depreciation was allowed on the building and only for the purpose of rate of depreciation three categories of buildings had been described, nonetheless all three categories retained their basic feature of being the building‑‑‑Tribunal while creating distinction had added the expression "ordinary" with expression "building" used in R.2, Table I of Third Sched. to Income Tax Ordinance, 1979, which was against the principle of interpretation of statutes‑‑‑Word "building" had been used in its broader sense inclusive of all the three categories of buildings appearing at Serial Nos. I, II and II‑A of Table to R.2 of Third Sched.‑‑‑Categories of various assets under particular head did not have the effect of taking away any class of assets beyond the parameters of main heading of the asset‑‑‑Assessing Officer while applying R.7(b) of Third Sched. had equated the expression "sale proceeds" with total sale consideration while ignoring the fact that Legislature had not used the expression "sale consideration" or "sale price" in R.7(b), but had used the. expression "sale proceeds"‑‑ Legislature had not left the determination of sale proceeds at the discretion of Assessing Officer‑‑‑Sale proceeds in case of actual sale would mean sale price thereof or fair market value, whichever was higher‑‑‑Term "sale proceeds" in case of a building would mean an amount equal to the lower of original costs, sale price or fair market value, whichever was higher‑‑‑First proviso to R.8(5) was applicable to ordinary building as well as to other categories of building‑‑ Tribunal had ignored the provisions of R.6 to the effect that limitation of depreciation allowance for all sorts of buildings was same, which would not exceed the original cost of any asset‑‑ Interpretation placed by Tribunal was not in consonance with the law‑‑‑High Court answered the question in negative.

(b) Interpretation of Statutes‑‑‑

‑‑‑‑ Power of Court‑‑‑Courts have to interpret the law as it stands and have no authority to add, delete or subtract any word in or from the language used in the statute.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Expression, word or a term defined and used in a statute‑‑ Deviation from definition given in the statute‑‑‑Scope‑‑‑Court is not empowered to deviate from the definition given in the statute.

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

‑‑‑‑Third Sched., R.8‑‑‑Word "Building" defined in unqualified terms in R.8 of Third Sched. of Income Tax Ordinance, 1979‑‑‑Definitions of word or terms as given in R.8 of Third Sched. would be taken in unqualified and unconditional terms for purpose of entire scheme pertaining to depreciation allowance contained in Third Sched.

(e) Interpretation of statutes‑‑‑

‑‑‑‑ Law is to be interpreted in the totality of the scheme contained in a particular statute and is not to be taken in isolation.

(f) Interpretation of statutes‑‑‑

‑‑‑‑ Definition in a statute‑‑‑Where Legislature has itself given a particular definition, that has to be adhered to.

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

‑‑‑‑S.23(1)(v) & Third Sched.‑‑‑Depreciation allowance‑‑‑Provision for allowing depreciation is in deviation of the ordinary rule pertaining to admissibility of expenses/deductions‑‑‑Deductions or expenses are ordinarily allowed, which pertain to capital expenditure, but expenses in nature of repairs are allowed‑‑‑Value of capital assets is depreciated and decreased with passage of time and it is not possible to make good the loss/decrease in value through repairs‑‑ Legislature in its own wisdom had allowed depreciation on the notional basis and by deeming provisions‑‑‑Computation depreciation allowance‑‑‑Principles.

Iqbal Pasha for Applicant.

Jawad Farooqui for Respondent.

Date of hearing: 30th November, 2001.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.‑‑‑In this reference under section 136 (1) of Income Tax Ordinance, the following question of law his been referred for our opinion:

"(1) Whether the learned Appellate Tribunal correctly interpreted the word Building appearing in the first proviso to Rule, 8(5) of the Third Schedule, by holding that the same is confined to a `Building" appearing on serial No. 1 of the Table annexed to Rule 2 and does not include `Building' appearing on serial numbers II and II‑A of the said Table?

2. Briefly stated the relevant facts giving rise to above question of law are, that the applicant purchased factory building for the sum of Rs.1,18,191 and subsequently it was sold for a sum of Rs.7,50,000. The applicant in its return of total income for the assessment year 1986‑87 declared the original cost at Rs.1.18.191 for which it was purchased and after deduction of accumulated depreciation at Rs.22,408 up to 30th June, 1985, worked out the written down value at Rs.95,783. The excess of Rs.6,31,809 earned on sale of the plot over and above the original costs of the land was declared as capital gain and exempt from payment of income‑tax. The Assessing Officer confronted the applicant with proposition that under the provisions of clause (7)(b)(i) of the 3rd Schedule of the Income ax Ordinance, 1979 the sale proceeds in excess of W.D.V. (Written gown Value) of the assets shall be treated as income of the year and axed. According to Assessing Officer the plea of capital gains exempt from tax was not tenable and the entire excess amount was taxable income. The applicant took plea that the total accumulated depreciation on factory building amounting to Rs.22,408 was credited n the Profit and Loss A/C and was offered for tax in accordance with clause (7)(b)(i) of the 3rd Schedule to the Income Tax Ordinance, 1979. The applicant contended that the working of capital gain and taxable amount has been rightly declared and the deemed income under clause (7)(b)(i) of the 3rd Schedule to the Income Tax Ordinance, 1979 was to be worked out on the basis of original cost of the assets. However, the Assessing Officer did not accept the plea and held that the capital gain claimed at Rs.6,18,808 as exempt income in Part II of the return was taxable under the provisions of clause 7(b)(i) of the 3rd Schedule to the Income Tax Ordinance, 1979, which provides that the sale proceeds in excess of written down value of the assets shall be treated as income of the year liable to be taxed. The Assessing Officer thus added the amount of Rs.6,31,809 to the total income of the applicant and taxed the same accordingly.

3. The applicant being aggrieved preferred First Appeal before the C.I.T. (Appeals) Zone‑A‑VI, Karachi, contending that according to proviso to rule 8(5) of the Third Schedule, "Sale proceeds" has been equated with original cost and sale price whichever is lower, and therefore, the applicant had correctly declared the sale proceeds under the proviso to sub‑rule (5) of Rule 8 of the 3rd Schedule at Rs.1,18,191 being the original cost and had thereby rightly declared the income at Rs.22,408 by deducting the W.D.V. of Rs.95,783 from the said sale proceeds. It was submitted that the Assessing Officer has misdirected in taking the sale proceeds at Rs.7,50,000 by ignoring the proviso to rule 8(5) of the 3rd Schedule and has fallen in error in computing the income by taking the sale proceeds at Rs.7,50,000 and deducting the cost of Rs.1,18,191 from the said amount. The learned Commissioner of Income‑tax did not give any finding on this point and upheld the treatment given by the Assessing Officer for the reason the factory building and land was sold with the intention of earnings profit, and therefore, exemption was not available.

4. The applicant still feeling aggrieved preferred Second Appeal before the Income‑tax Appellate Tribunal (I.T.A.T.). It was contended before the Tribunal that the written down value for the purpose of Third Schedule to the Income Tax Ordinance, 1979, is to be determined by keeping the definitions given in rule 8 of the Third Schedule. It was submitted that according to rule 7(b)(i) and (ii) of the Third Schedule to the Income Tax Ordinance, 1979, if the sale proceeds obtained from any class of assets exceed the written down value the excess shall be deemed to be the income of the assessee for that particular year and if the sale proceeds are less than the written down value, then the deficit shall be deemed to be the expenditure deductible from the profits and gain of the business or profession in that year. It was further contended that both the officers below had erred in valuing the factory building for the purpose of Third Schedule to the Income Tax Ordinance, at the sale price of Rs.7,50,000 for which the applicant sold the same. According to the learned counsel for the applicant, it should have been taken at Rs.1,18,191 which was the original cost at which the applicant had acquired the factory building in dispute. Reliance was placed in this behalf on the provisions contained in rule 8(5)(a) and the first proviso which reads as follows:

"(5) `sale proceeds' means‑‑‑

(a) where the asset is actually sold, the sale price thereof or the fair market value, whichever is the higher:

Provided that in the case of a building the term `sale proceeds' shall mean an amount equal to the lower of the following, namely‑‑‑

(a) original cost, and

(b) sale price or fair market value, whichever is higher."

5. It was contended on behalf of Revenue that rule 2 of the Schedule, specifically describes assets/properties in respect of depreciation can or is to be claimed. It was submitted that 'building', there are three sub‑headings ‑‑‑(i) building 'not otherwise specified', (ii) factory or workshop 'excluding godowns', and (iii) residential quarters for labour. It was further contended that in view of the above description of the assets under the heading 'building' the factory building could not be equated with the building as mentioned at serial No.(i) so as to determine its sale proceeds in accordance with the first proviso to rule 8(5) of the Third Schedule which was to be lower of the original cost and sale price or fair market value, whichever was higher.

6. The learned Division Bench of the I.T.A.T. observed that for the purpose of arriving at a correct decision with regard to the above issue, the most important question which requires determination is as to what should have been the sale proceeds of the factory building for the purpose of rule 7 of the Third Schedule, which has described the various assets/properties in respect of which depreciation allowance can be claimed. The first heading in the table describing the assets and specifying the rates of depreciation allowance is with regard to building and. under this heading there are three classes of assets. According to the learned Members of the I. T. A. T. it was pertinent to note that building or workshop has been separately mentioned under the heading building. By making provision for building and, factory or workshop separately under the heading 'building', the Legislature had made a clear distinction in respect of an ordinary building and a factory or workshop building and the two cannot be equated with each other and cannot be treated as one and the same asset. It was observed that an ordinary building and a factory or workshop are two distinct classes of assets under the heading 'building'. It was concluded that for the purpose of determination of the sale proceeds of the factory building in dispute the first proviso to rule 8(5) of the Third Schedule could not be pressed into action and the sale proceeds in respect of the factory building in dispute could not be taken to be an amount determined to be equal to the lower of the original cost, and sale price or fair market value, whichever was higher and it will have to be determined at an amount higher than the sale price or the fair market value in accordance with rule 8(5) of the Third Schedule. With these findings the treatment given by the Assessing Officer was upheld.

7. We have heard the learned Advocates for the parties. They have reiterated contentions raised before I.T.A.T.

8. Mr. Iqbal Salman Pasha, learned counsel for the applicant has added the contention‑s that the term 'building' has been used in various rules in the Third Schedule which have been framed for the purpose of computation of depreciation allowance and for the purpose of Third Schedule definitions have been given in rule 8. According to the learned counsel, the expression 'building and sale proceeds' as defined in rule 8 of the Third Schedule to the Income Tax Ordinance, 1979, is to be applied for the purpose of the entire Third Schedule and the learned Members of, the' I.T.A.T. were not justified in. creating a distinction in respect of one category of the building and the other. He has further submitted that the learned I.T.A.T. has fallen in serious error in holding that the expression 'building' used at Serial No.1, in rule 2 only, is envisaged for the purpose of proviso to rule 8(5)(a) and the factory or workshop or residential quarters for labour which are also specie of building for the purpose of Third Schedule to the Income Tax Ordinance are not entitled to the benefit of concession given in the first proviso to rule 8(5)(a) and that the sale proceeds in the case of factory building is to be determined in accordance with the main provisions contained .in rule 8(5)(a), treating the factory building as a separate asset and not as an ordinary building.

Mr. Pasha has contended that the learned Members of the I.T.A.T. have missed the point that rule 2 gives the description of the assets under three headings, building, furniture and machinery and has prescribed the rate of depreciation on the basis of written down value of the assets for the purpose of computing allowance under rule 1 of the Third Schedule and the sub‑headings in the table under rule 2 fall under the main category of asset signified in the heading of each category. He has further submitted that the learned Members of the I.T.A.T, have added the word 'Ordinary' to the expression building and have thereby exceeded their jurisdiction under ,the interpretation of statutes and have actually travelled into the field of legislation, thereby creating a new class of asset which is not envisaged under rule 2 of the Third Schedule.

9. In order to appreciate the contentions raised by Mr. Iqbal Salman Pasha, it would be appropriate to reproduce the provisions contained in section 23(1)(v) of the Income Tax Ordinance, 1979, and the relevant rules in the Third Schedule thereof, framed to carry out the purposes of the main section 23(1)(v) as it stood in the year 1986, which read as follows:

"23. Deductions.‑ ‑‑(1) In computing the income under the head 'income from business or profession', the following allowances and deductions shall be made, namely‑‑‑

(v) in respect of depreciation of any such building, machinery, plant, furniture or fittings, being the property of the assessee, the allowance admissible under the Third Schedule."

"1. Allowance for depreciation.‑‑‑(1) Where, in any income year, any building., machinery, plant or furniture owned by an assessee is used for purposes of any business or profession carried on by him, or in any income year commencing on or after the first day of July, 1982, any machinery or plant is given on lease by the assessee; being a scheduled bank, a financial institution for such modaraba or leasing company as is approved by the Central Board of Revenue for purposes of this Schedule, on such conditions as may be specified, an allowance for depreciation shall be made in computing the profits and gains of the business or profession of the assessee in the manner hereinafter provided.

(1A) The provisions of sub‑rule (1) shall in the like manner apply to a building given on lease in any income year commencing on or after the first day of July, 1986, provided that the said building is used by the lessee for the purposes of his business or profession.

(2) Where any such building, machinery, plant or furniture is not wholly used for the purposes of the business or profession, the allowance under sub‑rule (1) shall be restricted to the fair proportional part of the amount which would be admissible if such building, machinery, plant or furniture ware wholly so used.

(3) No allowance under this rule shall be made unless‑

(a)‑‑‑‑‑‑‑‑‑‑

(b) such building, machinery, plant or furniture has been so used during the income year.

(3A) Where any building, furniture, machinery or plant is used for the purposes of business or profession during any income year for which the income from such business or profession is exempt from tax, depreciation admissible under sub‑rule (1) shall be deemed to have been allowed in respect of the said income year and after expiration of the exemption period written down value of such assets shall be determined in accordance with sub‑clause (ii) of clause (b) of sub‑rule (7) of rule 8.

2. Rates of depreciation allowance. ‑‑‑(1) The allowance under rule 1 shall be computed at the rates specified in the Table annexed hereto.

TABLE

Class of Asset	Description	Rate percent. of the written down value.
1	2	3
BUILDING
I.	Building (not otherwise specified)	5 (General rate)
II.	Factory or workshop excluding godowns and offices)	10
IIA	Residential quarters for labour	10

5. Initial depreciation. ‑‑(1) Where any building has been newly -erected, or any machinery or plant has been installed, in Pakistan at any time between the first day of July, 1976, and the thirtieth day of June, 2000 (both dates inclusive), further depreciation allowance in respect of the year of erection or installation or the year in which such building, machinery or plant is used by the assessee for the first time for the purposes of his business or profession or the year in which commercial production is commenced, whichever is the later, shall be allowed at the following rates, namely:‑‑‑

	Rates
(a) in the case of residential building for the industrial labour the erection of which is begun and completed between the first day of July, 1979 and the thirtieth day of June, 2000 (both dates inclusive)	25 % of written down value

Explanation. ‑‑‑The expression `residential building for industrial labour means building constructed for use as dwelling houses by workmen and other persons. employed on monthly wages not exceeding one thousand rupees in an industrial undertaking which fulfils the conditions specified in clauses (a), (d) and (e) of subsection (2) of section 48 or any other industrial undertaking which is approved by the Central Board of Revenue for the purposes of this rule.

(aa) in the case of building given on lease by the assessee, being a scheduled bank, a financial institution for such modaraba or leasing company as is approved by the Central Board of Revenue for purposes of this Schedule, on or after the first day of July, 1986, if the said building is used by the lessee for purposes of his business or profession.	10 % of the written down value.
(aaa) in the case of a building owned and used by an educational institution.	25% of the written down value
(b) in the case of other building	10% of the written down value
(c) in the case of machinery or plant (other than x‑ray and electro‑therapeutic apparatus and accessories. or ships or motor vehicles not plying for hire)	25 % of the written down value

(2) Nothing contained in sub‑rule (1) shall apply in the case of‑‑‑

(a) -----------------------

(b) -----------------------

(ba) ----------------------

(c) any building, plant or machinery owned or used by an industrial undertaking to which clause (118‑B) of the Second Schedule applies;

(d) -----------------------

6. Limitation as to allowance for depreciation. ‑‑‑The aggregate of the allowance for depreciation allowed under this Ordinance and the repealed Act shall not exceed the original cost of any asset.

7. Disposal of assets and treatment of resultant gains of losses.‑‑‑Notwithstanding anything contained in this Ordinance or the repealed Act, where, in any income year,‑‑

(a) any assets or is disposed of by an assessee, no allowance under rules 1, 3, 4 or 5 shall be made in respect thereof in that year;

(b) any asset is disposed of by an assessee‑‑‑

(i) if the sale proceeds thereof exceed the written down value, the excess shall be deemed to be the income of the assessee of that year chargeable under the head "income from business or profession";

(ii) if the sale proceeds are less than the written down value, the deficit shall be deemed to be an expenditure deductible from the profits and gains of the business or profession of that year,

and the business or profession for the purposes of which the said asset was used before its disposal, shall be deemed to be carried on by the assessee during that year and all the provisions of this Ordinance shall apply accordingly.

8. For the purpose of this Schedule‑‑‑

(1) - - -

(2) - - -

(3)- - -

(4) - - -

(5) "sale proceeds" means‑‑‑

(a) where the asset is actually sold, the sale price thereof or the fair market value, whichever is the higher:

Provided that in the case of a building the term "sale proceeds" shall mean an amount equal to the lower of the following, namely:‑‑‑

(a) original cost, and

(b) sale price pr fair market value, whichever is higher;"

(6) -----------------

(7) `Written down value', means‑

(a) in the case of a ship or any asset to which sub‑rule (3) of rule 2 applies,‑‑‑

(i) for purpose of rule 7, as is sub‑clause (b) and

(ii) for any other purpose, the actual cost thereof to the assessee; and

(b) in the case of other assets‑‑‑

(i) where the asset was acquired in the income year, the actual cost thereof to the assessee; and

(ii) where the asset 3[***] was acquired before the income year, the actual cost thereof to the assessee as reduced by the aggregate of the allowance for depreciation allowed to him under this Ordinance or the repealed Act in respect of the assessment for earlier years.

10. A perusal of the above provisions shows that under section 23(1)(v), of the Income Tax Ordinance, depreciation allowance is allowed while computing the income under the head "income from business or profession" in respect of such building, machinery, plant, furniture or fittings which are property of the assessee. The depreciation allowance is admissible in accordance with the provisions contained in Third Schedule. In rule 1(1) of the Third Schedule it is again reiterated that the allowance for depreciation shall be allowed in respect of building, machinery, plant or furniture owned by an assessee with further condition that it is used for the purpose of. any business or profession carried on by him. It is further provided in rule 1(1) that the depreciation allowance shall be allowed in the manner provided in the subsequent rules. In sub‑rule (1A) the word `building' has been used as done in section 23(1)(v) and sub rule (1) rule 1 of the Third Schedule. In sub‑rule (2) of rule 1, the word `building' has been used alongwith the other assets and similarly in rule 1(3)(b) and sub‑rule (3A).

11. When we come to rule 2, we find that the rate of depreciation has been specified for the purpose of allowance under rule 1 and here for the first time various categories of building, machinery and plant have been given in Column No. l of the Table in rule 2, stated as class of asset. In Column No.2 of the said Table the description of the, categories of assets under a particular class of asset has been described and in Column No.3 different rates of depreciation have beers specified in respect of different categories of assets under the same heading. However, the written down value on which the rate of depreciation is to be computed has remained unaffected. The written down value has been defined in sub‑rule (7) of rule 8 of the Third Schedule. When we read the provisions contained in section 23(1)(v), rule 1(1), (IA), (2), (3) and (3A) alongwith rule 2, we find that, broadly speaking there are three categories of assets on which depreciation is allowed. First, building, secondly, furniture and thirdly, machinery and plant. Thus, the first main heading in the f Table annexed to rule 2 is to be read in the same sense as used to section 23(1)(v) and rule 1(1) of the Third Schedule ‑for the simple reason that rule 1, in the Third Schedule has been framed for carrying out the purposes of section 23(1)(v) and rule 2 and all subsequent rules have been framed for the same purposes. If the view held by the learned Tribunal is accepted, to the effect that in first proviso to rule 8(5), the word `building' refers to the expression 'building' at serial No. 1 in the Table annexed to rule 2, then the result would be that the assets described at Serial Nos. II and IIA under the main heading, `building' shall be excluded from the purview of expression `building' and it is not in consonance with the entire scheme pertaining to the allowance of depreciation under the income Tax Ordinance. The reason being that, once the factory or workshop and the residential quarters for labour, appearing at Serial Nos. II and II‑A in the Table annexed to rule 2 are excluded from the purview of asset building it shall' be automatically 'excluded from the asset on which depreciation is to be allowed. The learned Members of the Tribunal have tried to create a distinction in the three categories of assets appearing at Serial Nos. I, II and II‑A under the main heading `building' in the Table annexed to rule 2, by saying that, 'by making proviso for building and factory or workshop separately under the heading `building', the Legislature had made a clear distinction in respect of an ordinary building and a factory or' workshop building and the two cannot be equated with each other and cannot be treated as one and the same asset. An ordinary building and a factory or workshop building are two distinct classes of assets under the heading `building'."

12. We are persuaded to agree with the submission of learned counsel for the applicant that the line of argument adopted by the learned Members of the Tribunal is fallacious and not in consonance with the scheme of law and interpretation of statutes. We are, of the considered opinion that the learned Tribunal has, missed the point that, the depreciation is allowed on the building, and it is for the purpose of the rate of depreciation only that three categories of buildings have been described, nonetheless all the three categories retain their basic feature of being the building. The learned Tribunal in order to create the distinction had to add expression `ordinary' with expression `building' used at Serial No. 1, but in doing so the very cardinal principle of the interpretation of statutes was lost sight of, that the Courts are merely supposed to interpret the law as it is and have no. authority to add, delete or subtract any word in or from the language used in the statute. Thus the addition of word `ordinary' with `expression' building used by the Legislature is against the principles of the interpretation of statutes. In doing so, the I.T.A.T.I further fell in error by ignoring the principle that when an expression, word or term, is used by the Legislature in a particular statute at various places and the said term or word has been defined in the statute with the note that the definitions in the said statute shall be implied unless the context otherwise requires, then ordinarily the definition given in the statute is to be accepted while applying or interpreting the provisions of that particular statute, and if any deviation is to be made then it has to be shown that the context. in which the said word or term has been used requires otherwise. For doing so, the Court is bound to explain and highlight the context which requires deviation from the definition given in the statute and must show with reference to the context that a word or term should take some other complexion or colour, with particular reference to the context. However, if the definitions are given in unqualified terms and it is not stated in the definition clause that the words or terms used may be taken in any other sense with reference to the context then the Court is not empowered to assign, any other meaning to the word or term used in the statute. Now we see that in section 2 of the Income Tax Ordinance, 1979, it is provided that the definitions given ‑therein shall be taken for the purpose of Ordinance, unless the context otherwise requires. The word `building' is not defined in this section. It is defined in rule 8 of Third Schedule to the Income Tax Ordinance, 1979 in unqualified terms and says that for the purpose of Third Schedule the definitions given in rule 8 shall be implied. The definitions of, the words or terms given in rule 8 of the Third Schedule are to be taken in unqualified and unconditional terms for the purpose of entire scheme pertaining to the depreciation contained) in the Third Schedule.

13. The learned I.T.A.T. further ignored another cardinal principle of the interpretation of statutes that a law is to be interpreted in the totality of the scheme contained in a particular statute and is not to be taken in isolation. We have seen chat, the word 'building' has been used in its broader sense which is inclusive of all the three categories of buildings appearing at Serial Nos. I, III and II‑A, under the heading `building', in Table annexed to rule 2. We have already referred to the use of term `building', in section 23(1)(v), rule 1, (1), (2), (3), (3A) and rule 2 of the Third Schedule. In rule 5 of the Third Schedule also, word `building' has been used for the purpose of allowing initial depreciation but for the purpose of rate of depreciation, different categories have been given at Serial Nos.(a), (aa), (aaa) and (b). Under clauses (a), (aa) and (aaa) the nature and use of the building has been described while in clause (b) it is simply stated, `in the case of other building'. It means that clause (b) in rule 5(1) is in the nature of residuary clause and similar is the position of rule 2 where at Serial No.1, it is described as building (not otherwise specified) while at Serial Nos. II and II‑A Factory or workshop (excluding godowns and offices) and residential quarters for labour have been described, meaning thereby that at Serial Nos. II and II‑A description of the buildings have been given and Serial No.1 is residuary in nature. Reading of rule 2 and rule 5 shows that the Legislature after giving particular description of some categories of the building has left all other categories of ‑building in residuary provisions. It is pertinent to observe, here that the categories of various assets under particular head, does not has the effect of taking away any class of asset out‑side or beyond the parameters of main heading of the asset. In other words, notwithstanding, the classification of assets in different categories for the purpose of rate of depreciation all of them belong to the same specie under which they, are categorized.

14. We further find that the Assessing Officer while applying rule 7(b) of the Third Schedule, equated the expression "sale proceeds" with total sale consideration as per registered sale‑deed, ignoring the fact that the Legislature has not used the expression sale consideration or sale price in rule 7(b) but has: used the expression `sale proceeds'. The Legislature has not left the determination of sale proceeds at the discretion of Assessing Officer and has defined the same in rule 8(5). In the case of actual sale it has been defined to mean the sale price thereof or the fair market value, whichever is higher but has added a proviso by Finance Ordinance, 1980‑to the effect that in case of a building the term "sale proceeds" shall meat an amount equal to the lower of original cost and sale price or, fair market value whichever is higher. Thus when the Legislature has itself given a particular definition that has to be adhered to. The Assessing Officer has not given any finding on the point that the proviso to rule 8(5) in the Third Schedule is not applicable in case of sale proceeds pertaining to the factory building. It appears that the Assessing Officer worked out the income under rule 7(b) of the Third Schedule out of ignorance and without taking into consideration the first to proviso rule 8(5). This point was raised by the Assessee before the learned C.I.T. (Appeals) for the first time and as already observed by us, the learned C.I.T. (Appeals) gave no finding on this point. It was reiterated before the Tribunal and the learned Members of the Tribunal held that the Assessing Office‑rightly treated the factory building as a separate asset and not as an ordinary building while determining its sale proceeds, in accordance with rule 8(5)(a). It further appears to us that the learned Members of the Tribunal did not advert to the fact that the provision for allowing depreciation is in deviation of the ordinary rule pertaining to the admissibility of the expenses/deduction. Ordinarily no expenses or deductions are allowed which pertain to the capital expenditure. However, expenses in the nature of repairs are allowed. But the Legislature has considered in its own wisdom that with the passage of time the value of capital assets is depreciated and decreased. However, it is not possible to make good the loss/decrease, in value, through repairs, and therefore, depreciation is allowed on the notional basis and by deeming provisions. For this purpose various deeming provisions have beer made and provision for determining the written down value has been enacted. The depreciation is allowed at the rate prescribed in the Third Schedule to the Income Tax Ordinance, which is at a percentage of the written down value and it has been specifically stated in rule 6 of the Third Schedule that the aggregate of the allowance for depreciation allowed shall not exceed the original cost, of any asset. Now keeping these considerations and provisions in view it has been provided in rule 7 that if any asset is disposed of by an assessee, and the sale proceeds exceed the written down 'value the excess shall be deemed to be the income of the assessee of that year chargeable under the head "Income from business or profession" and if the sale proceeds are less than the written down value, .the deficit shall be deemed to be an expenditure deductible from the profits and gains of the business or profession of that year. As already observed the depreciation is allowed to make good the loss in the value of capital assets under the heading building, furniture and machinery and plant on notional basis. If any such asset is sold it becomes possible to determine whether the allowance which has been allowed on account of depreciation, was in accordance with decrease, in the value of assets or it was more or less. If the depreciation has been allowed in accordance with actual decrease in the value, which is reflected from the sale proceeds then neither addition is to be made to the income nor any further expenditure is to be allowed. However, if it is found that the depreciation allowed was more than the decrease in the value of the asset the excess of such amount is deemed to be income and is charge to tax. If the depreciation allowed is less than the decrease, in the value of the assets, the loss is made good by allowing further expenditure from the profits and gain of business or profession of that year. The provisos, to rule 8(5) have been added in order to strike a balance, while implementing the provisions contained in Third Schedule. It would be discriminatory to hold that the first proviso is applicable to an ordinary building only (a term which has not been used by the Legislature at all) and is not applicable to the other categories of the buildings. While making this interpretation the learned Members of the Tribunal have further ignored the provisions contained in rule 6 to the effect that the limitation of depreciation allowance for ail sorts of buildings is the same, to wit, it shall not exceed the original cost of any asset.

15. For the foregoing reasons, it is held that the interpretation placed by the Tribunal is not in consonance with the law. The question referred to us which has been reproduced in the earlier part of this judgment is answered in negative.

A copy of this judgment should be sent to the Income‑tax Appellate Tribunal, Karachi under the seal of the Court and the signature of the Registrar. The I.T.A.T. shall pass necessary order to dispose of the case conformably to this judgment.

S.A.K./I-50/KReference answered.