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

----S. 12(9A) & Second Sched.; Part IV, Cl. (59)---Companies Ordinance (XLVII of 1984), S. 245---Income deemed to accrue or arise in Pakistan---Companies Ordinance, 1984 is separate with its own implication and S. 12(9A) of the Income Tax Ordinance, 1979 read with Cl. 59 of Part IV of Second Sched. of the Income Tax Ordinance, 1979 was entirely different and independent---Purpose of the two enactments may be similar, however, application and implication of their default were also not interlinked---Default of the Income Tax Ordinance, 1979 had to be dealt with under its own provisions.

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

----Ss.136, 12(9A) & Second Sched., Part IV, Cl. (59)---Companies Ordinance (XLVII of 1984), S.245---Reference to High Court---Deemed income---Over rule of time limit for distribution of dividends---No overriding effect of provisions of Companies Ordinance, 1984 over the Income Tax Ordinance, 1979---Question referred without substance-- Validity---When it is said that remedial provision in terms of Cl. (59) in Part IV of the Second Sched. of the Income Tax Ordinance, 1979 had come to reduce the rigours of S.12(9A) of the Income Tax Ordinance, 1979 and for this purpose it is commented that this may perhaps was by keeping in view S.245 of the Companies Ordinance, 1984 it did not mean that it had considered the provisions of Companies Ordinance, 1984 as applicable in the income-tax proceedings because it was only a comment to say that in the presence of the governing clause under S.245 of the Companies Ordinance, 1984 the introduction of S.12(9A) of the Income Tax Ordinance, 1979 was not justified, this however, did not mean that after its introduction its application could be corrupted by taking queue from the language of the provisions of the Companies Ordinance, 1984---While defining a provision in an enactment, help from other laws was never safe---Reference applications were rejected by the Appellate Tribunal on the ground that questions were not properly drafted and were also without substance.

(c) Interpretation of statutes---

----While defining a provision in an enactment, help from other laws was never safe.

M. Akram Tahir, D.R. for Applicant (in R.A. No.327/LB of 2003).

Naveed A. Andrabi for Respondent (in R.A. No.327/LB of 2003).

Naveed A. Andrabi for Applicant (in R.A. No. 360/LB of 2003).

M. Akram Tahir, D.R. for Respondent (in R.A. No.360/LB of 2003).

Date of hearing: 27th August, 2003.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---The reference applications have been filed. by the assessee as well as by the department. The department has framed one question while the assessee has come up with four questions. The same speak as follows:--

Department- Question:--

"Whether on the facts and circumstances of the case the learned ITAT was justified to hold that by fulfilling the limit of quantum of dividend to be issued under the provision of clause (59) of Part IV of 2nd Schedule the time limit for distribution of dividends as prescribed in section 12(9A) is also overruled".

Assessee Questions:--

(1)Whether on the fact and in the circumstances of the case, the Honourable Tribunal was justified in confirming the action of the respondent on the issue of time of distribution of dividend?

(2)Whether on the facts and in the circumstances of the case, the definition of the word "Distribution" adopted by the Honourable Tribunal is justified?

(3)Whether on the facts and in the circumstances of the case, the Honourable Tribunal was justified in holding that parent law governing the companies i.e., The Companies Ordinance, 1984 cannot override the provisions of repealed Income Tax Ordinance, 1979?:

(4)Whether on the facts and in the circumstances of the case, the Honourable Tribunal was justified in holding that correlated provisions of the Companies Ordinance, 1984 (section 245) do not have overriding effect over the provisions of repealed Income Tax Ordinance, 1979 (section 12 (9A))?

The learned DR said that the judgment is of the first impression and the decision of the Tribunal is on an issue which requires detailed dilation by the superior Courts. Not only that a large number of Revenue is involved into it but also that the question proposed is of substantial nature and it does arise out of the order of the ITAT. When confronted questions posed by learned AR, he remarked that they are more of arguments and repetition of the one issue twice. He said that the questions are vague and they do not subscribe to any important issue. Reverting back to his own question he said that the provisions of section 12(9A) are independent and clause 59 of Part IV of the Second Schedule has come only as an aid to this provision. Clause 59 does not override the provisions of section 12(9A) and the time prescribed of seven months in the main provision i.e. 12(9A) is applicable in respect of the distribution of dividend even if the same is covered within the provision of clause 59 of the Part IV of the Second Schedule.

The learned AR on his turn said that the question posed by the Department is of non-substantial nature. The law interpreted by the Tribunal is very clear in its application and the time of the High Court should not be wasted for such a clear issue. He referred judgments quoted as 2003 PTD 1223, 2003 PTD 722, 2003 PTD 589 and 2002 PTD 2869. In all the referred judgments he said that the higher and the superior Courts have held that the questions though may arise from the order of the ITAT but if have no substance should not be referred. Regarding his own questions he said that the Tribunal was not correct in holding that decision to distribute and deposit of the amount in a separate account for the purpose of distribution, does not amount to distribution. He said that the purpose having been identified and visible from the action of the company through the circumstantial evidence even if the dividend warrant has not reached the hands of the shareholder it amounts to distribution. He also repeated that under the circumstances the dictionary meanings of distribution were to be adopted which in his opinion include identification and earmarking of the profit for distribution to the shareholders.

We have heard both and have perused the record as well as of the ITAT. The ITAT has discussed in detail each and every aspect of the issue in threadbare. The provisions of Income Tax Ordinance have been held to be as independent. It has also been held that the Company Law is separate with its own implication and section 12(9A) read with clause 59 of the Part-IV of the Second Schedule is entirely different anal independent. The purpose of the two sections may be similar, however application and implication of their default are also not interlinked. The default of the Income Tax Ordinance has to be dealt with by the provisions of the same enactment. Our finding at page 16 of the order as, referred by learned AR is also keeping in view these basic principles of law and interpretation.

The point of view of the Tribunal, therefore, is very clear. When it says that remedial provision in terms of clause 59 in Part IV has come to reduce the rigours of section 12(9A) and for this purpose comments that this may perhaps was keeping in view section 245 of the Companies Act it does not mean that it has considered the provision of Company Law as application in the income-tax proceedings. It was only a comment to say that in the presence of the governing clause under section 245 of the Companies Law the introduction of section 12(9A) was not justified. This, however, does not mean that after its introduction its application can be corrupted by taking queue from the language of the provisions of the company. It is a settled principle of interpretation that while defining a provision in one enactment the help from other laws is never safe. These facts kept in view the questions posed either by the Department or by the assessee, all are considered as firstly not properly drafted and secondly without substance. The result is obvious. Both the reference applications are rejected.

C.M.A./903/Tax (Trib.)Application rejected.