Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.136 & 50(4)(b), proviso (i)‑‑‑Reference to High Court‑‑‑Deduction of tax at source‑‑‑Purchase and buy back arrangement‑‑‑Question whether Appellate Tribunal was justified to reject the plea of the Department that deduction under S.50(4) of the Income Tax Ordinance, 1979 by leasing company on buy and lease back was not the final discharge of liability of the assessee by referring a case decided by the High Court holding that such deduction was covered under S.80‑C of the Income Tax Ordinance 1979‑‑‑Validity‑‑‑Fact that the Department had not contested the said judgment in higher forum on which the Tribunal had relied and the unreported judgment of High Court having never been placed before the Tribunal for checking of its contents could not go to favour the Department‑‑‑Language of S.50(4)(b), proviso (i) speaks of non‑charging of withholding tax on certain assets specifically‑‑‑Said provision was not containing the words "or to the purchase of an asset under a lease and buy .back arrangement by a Modarba or leasing company" as the same were inserted in 1998, but this could not be ignored that said proviso was of remedial nature as the same had provided relief to the taxpayers from deduction of the tax chargeable under S.50(4) of the Income Tax Ordinance, 1979 which had provided remedy against the deduction hence was applicable on all pending proceedings including appeal at any stage‑‑‑Even if there was a different finding with regard to application of S.50(4) of the Income Tax Ordinance, 1979 on purchase and buy back arrangement, such amend ment had come to the rescue of the same‑‑‑Department was considering such arrangement to be a supply, which impression had been reversed through the said amendment wherein exemption had been provided‑‑ Provision in its nature being curative and remedial was applicable to the present case‑‑‑Departmental application being devoid of any merit was dismissed by the Appellate Tribunal.

Sundara Finance Ltd. v. State of Kerala and another 17 STR 489 (SC); Shah Nawaz Limited's case 1993 SCMR 73; 1970 SCMR 872 and Statutory Construction by Crawford, 1940 Edn., para. 282 rel.

Sabiha Mujahid, D.R. for Appellant.

Dr. Ikramul Haq for Respondent.

Date of hearing: 24th April, 2002.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑This reference application has been filed at the instance of the Department. The question of law proposed for the consideration of the Honourable High Court speaks as follows:‑‑

"Whether under the facts and circumstances of the case, learned Income Tax Appellate Tribunal was justified to reject the plea of the department that deduction under section 50(4) by leasing company on buy and lease back is not the final discharge of liability of the assessee by referring the case of Messrs Chanab Fabrics Ltd., vide I.T.A. No. 749/LB of 1997, whereas the learned Division' Bench at Karachi in I.T.A. No.311/KB, dated 10‑11‑1998 held that such deduction is covered under section 80C of the Income Tax Ordinance, 1979."

The learned DR says that' it is a substantial question of law, which emerges out of the order of the ITAT. The question she remarked involves an issue that is of immense importance and a lot of pending appeals shall have effect of the same. She further remarked that in the presence of a different view of the ITAT Karachi vide I.T.A. No.311/KB, dated 10‑11‑1998 this in any case requires opinion of superior Courts.

On the other hand the learned AR says this question besides being vague does not otherwise bear any substantial question of law. The Tribunal has referred its own reported judgment, which has been followed in a number of other cases. Further, the department having not filed any appeal or reference against the referred judgment `Chenab Fabrics' should not at this stage involve the High Court in this un necessary litigation. He remarked that one may call this question a legal controversy but not a substantial legal issue in the manner that recently the Tribunal has in its judgment in the case of Kohinoor Fabrics Limited has further dilated upon this issue. In the said reported judgment, the Hon'ble ITAT has further found strength from a judgment decided by the Supreme Court of India in the case of Sundara, Finance Ltd. v. State of Kerala and another, 17 STR 489 (SC). Besides, the Legislature itself has amended law by way of an explanation which being curative, and remedial in nature is applicable retrospectively. This also alone is enough to hold that reference of this question to the High Court is quite unnecessary. In support of his question he has referred the famous case of Shah Nawaz Limited 1993 SCMR 73. Regarding his comments that only substantial question of law are to be sent he has relied upon 1970 SCMR 872.

The arguments of learned AR are quite relevant and impressive. The fact that the department has not contested the judgment in higher forum on which the tribunal has relied and the unreported judgment of Karachi Bench having never been placed before the Tribunal for checking of its contents cannot go to favour the department. The question whether remedial legislation can be given retrospective effect has been considered by the Crawford in his "Statutory Construction" (1940 Ed) in para. 282 as follows:‑‑

"282. Remedial statutes. ‑‑‑Even remedial statutes may be subject to the principles here to force discussed, opposing any construction which will give the enactment retrospective operation. Yet, since remedial statutes are usually looked upon with favour by the Courts they should be liberally construed. But there appears to be considerable confusion in the case with reference to giving remedial acts retrospective effect through construction. If the rule of liberal construction is to be applied, as it obviously should then any doubt should be resolved in favour of retrospective operation, if such operation does not destroy or disturb vested rights, impair the obligations of contracts, create new liabilities violate due process of law or contravenes some other Constitutional provision, and if such operation will carry out the intent of the Legislature as ascertained through the application of the principle of liberal construction. In other words, a statute relating to remedial law may properly, in several instances, be given retrospective operation."

Relying upon above the Honourable Supreme Court in re: Shahnawaz Limited and others have held as under:‑‑

"However, nothing has been adduced before us in support of the last mentioned submission. As explained in Crawford's `Statutory Construction' a statute relating to remedial laws may properly, in several instances, be given retrospective operation and we are of the opinion that as the amendment in the instant case was introduced to redress an injury which in the words of Circular No. 6 of 1973 (Income Tax) issued on 7th July, 1973 by the Central Board of Revenue itself was `designed to soften the law in favour of taxpayers who could previously be charged to additional tax up to the date of assessment even though the finalization of assessment was delayed due to no fault of theirs. 'This, was a proper case in which retrospective operation, to the extent the High Court gave to it, could be given to the amending law".

Following the above directions if, we see the language of section 50(4)(b) proviso (i) it speaks of non‑charge of withholding tax on certain assets specifically. It is true that the provision was not obtaining the words (or to the purchase of an asset under a lease and buy back arrangement by a Modarba or leasing company) and the same were inserted in 1998, but, this cannot be ignored that this proviso is of remedial nature as the same has provided relief to the taxpayers from deduction of the tax chargeable under section 50(4). It has provided remedy against the deduction hence is applicable on all pending proceedings including at any stage of appeal.

Before us this R.A. also is a continuation. As such even if there is a different finding with regard to application of section 50(4) on purchase and buy back arrangement, this amendment has come for the rescue of the same. The department was considering such arrangement to be a supply, which impression has been reversed through this amendment wherein exemption has been provided. The provision in its nature being curative and remedial is applicable on this case also. As a result this R.A. cannot be allowed for this reason also. The departmental application being devoid of any merit is hereby dismissed.

C.M.A./565/Tax(Trib.) Appeal dismissed.