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

‑‑‑‑Third Sched., Cl.7(c)‑‑‑Finance Act (XII of 1991)‑‑‑Assessment year 1991‑92‑‑‑Disposal of assets and treatment of resultant gains or losses‑‑ Capital gain arose out of single asset, i.e. sale of car prior to 30‑6‑1991 which was taxed by applying amendment made in Cl. 7(c) of the Third Schedule of the Income Tax Ordinance, 1979 by Finance Act, 1991‑‑Validity‑‑‑Transaction completed prior to amendment could not be charged to tax‑‑‑Argument of Department that Finance Act relevant to the accounting year ended prior to the same was of no help‑‑‑Provision created a charge which was not there when the transaction was completed and thus could not be applied retrospectively‑‑‑Addition made for the assessment year 1991‑92 was deleted by the Appellate Tribunal.  

(1983) 47 Tax 5 (Trib.); Maxwell on Interpretation of Statute 12th Edn., at p.216 and PLD 1969 SC 599 ref.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Charging provisions are always prospective unless otherwise provided.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Legislature is fully competent to legislate a provision with retrospective, operation‑‑‑Unless a charging provision has not been made retrospective, the same should always be treated as prospective.  

(d) Interpretation of statutes‑‑‑

‑‑‑‑ Retrospectivity in respect of a statute cannot be presumed.

(e) Interpretation of statutes‑‑‑

‑‑‑‑Retrospectivity even in a procedural law is to be avoided if it affects an existing right or otherwise causes inconvenience or injustice to any one.

Mirza Anwar Baig for Appellant.

Mrs. Sabiha Mujhaid, D.R. for Respondent.

Date of hearing: 24th April, 1997.

ORDER

KHAWAJA FAROOQ SAEED (JDICIAL MEMBER).‑‑‑In this assessee appeal the terminal profit of disposal of a Suzuki car charged to tax is being contested to be unjustified.

2. Brief facts of the case are that the assessee sold a car during the year for Rs.80,006. The I.T.O. found that the written down value of the same on 30‑6‑1990 was Rs.38,962. He, therefore, charged Rs.41,038 to tax as terminal profit during the impugned year. Prior to the amendment in Clause 7(c) of the Third Schedule, sale proceeds of any class of assets over its written down value was being treated as income of the assessee. In case, however, if the sale was restricted to one asset out of the class of assets its sale proceeds were not taxed. The amendment of 1991 brought in the charge on every asset as against class of assets and the excess of sale proceeds over the written down value of each case is now taxable. The impugned year before us is for 1991‑92 wherein the assessee sold one individual asset which has been charged by the I.T.O. who has given following observation in his support.

"This plea has been considered and it is pertinent to mention that w.e.f. assessment year 1991‑92 an amendment has been made in Third Schedule by virtue of which terminal profit/loss is now to be determined on the basis of individual asset. For assessment year under discussion, terminal profit is to be worked out an the basis of individual asset rather than a class of assets."

3. The question which has been taken up before us is whether the amendment brought in by Finance Act, 1991 is applicable to proceeds made prior to the 30th of June, 1991 or not. Before we give our findings we should first determine as to the nature of the present amendment in rule 7 of the 3rd Schedule which deals with the disposals of assets and treatment of resultant gains or losses. The rule was prescribed for creating a charge on the asset which are disposed of by the Companies who are likely to close down their business. It was felt that assets sold in such circumstances fetch more value than the one declared by the assessee in their balance sheet on account of yearly depreciation received by them in term of written down value. The legislature by way of insertion of above provisions intended to discourage pre‑mature sale of capital assets after a relatively short period to get the benefits of inflationary raise in prices and thus charged to tax such transactions which were claimed as exempt under the garb of capital gain earlier. It was again felt that by usage of the language `Class of Assets' the legislature has exempt a single transaction out of the class of assets and in this way if a person had more than one cars he could escape the charge by selling only one of them being a part of a class of assets. To avoid this situation the legislature brought in another amendment through ''Finance Act, 1991 by way of which a single transaction even if the same is a part of a class of asset has also been covered under the charging provisions of Income Tax Ordinance, 1979. The position that emerge is creation of a charge on an asset which was not there earlier through amendment by Finance Act, 1979. The charging provisions are always C prospective unless otherwise provided. It is a settled principle of law, however in our support we refer the judgment, which we feel is more relevant and applicable on all fours to the present case i.e. (1983) 47 Tax 5 (Trib.) In this case the learned Tribunal has given following findings:‑‑

"A bare perusal of the Explanation that it defines a notional income and makes it chargeable to tax. No doubt ordinarily the function or scope of an explanation is to explain the law as it exist. But in the instant case the legislature has shown to legislate a substantive charging provisions in .the garb of an explanation. In our view, the mere caption given to a particular provisions of law would not legally charge the real intent and purport of the provisions. Since we have not the least hesitation in holding that the said Explanation 8 is a charging provision, there is no escape from the conclusion that it cannot be given effect retrospectively in the absence of a specific provision making it operative in retrospection;

The legislature is fully competent to legislate a provision with retrospective operation and it is an established law that unless a charging provision has not been made retrospective, the same should always be treated as prospective. It is also equally established that the retrospectivity in respect of a statute cannot be presumed. Maxwell on interpretation of Statute 12th addition at page 216 contains one the most well‑known statement of the rule regarding restospectivity as expounded by R.M. Wright in Re‑Athlumney:

"Perhaps no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure, unless, that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. The rule has, in fact, two aspects for it "involves another and subordinate rule, to the effect that a statute is not to be construed so as to have a greater retrospective operation than its language renders necessary."

Mr. Qadeer‑ur‑Din Ahmed J. In PLD 1969 SC 599 Re: Nabi "Ahmed and another v. Home Secretary Government of West Pakistan examined the reasons for such presumption against restrospectivity. His lordship remarked:

"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 full significance, and implications of the protection cannot be fully appreciated unless we discover its reasons. This is not a statutory protection, yet the principle has by virtue of a presumption of fair‑play effectively checked encroachments on existing right by the all powerful British Parliament unless they were found to have been clearly and unambiguously so intended. The origin of this presumption is to be found in the conscientious abhorrence that all just men have for the un-justice that is inherent in changing 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. As a manifestation of more or less, a natural or instinctive sense of justice, perhaps an instinctive repugnance to what one feels to be injustice, the Courts have held that laws do not "impose new liabilities in respect of events taking place before their commencement."

Nevertheless, it is also a settled principle of law that retropsectivity even in a procedural law is to be avoided if it effects an existing right or otherwise causes inconvenience or in justice to anyone. Even if the impugned provision for arguments sake, as expressed by learned D.R. is to be considered an amendment in procedure, to which in principle we are not inclined to (agree), the same cannot charge a transaction completed by the assessee prior to the amendment. The argument of learned D.R. that the Finance Act regulates to assessment year relevant to the accounting year ended prior to the same is of no help to department. The provisions before us having created a charge which were not there when the transaction was completed cannot be applied retrospectively. The addition made by the I.T.O. and confirmed by the learned CIT(A) for the assessment year 1991‑92 is, therefore, deleted.

The case is disposed of in the manner and to the extent as mentioned above.

C.M.A./74/Tax (Trib.) Order accordingly.