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

‑‑‑‑Second Sched., Cls. 126 & 128--‑Exemption‑‑‑‑Purpose‑‑‑Basic purpose of allowing exemptions from tax on income was to promote the purpose of export and in return to earn foreign exchange for Pakistan.

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

‑‑‑‑Second Sched., Cls. 126 & 128‑‑‑Export Processing Zones Authority Ordinance (IV of 1980), S. 26‑‑‑Export Processing Zones Authority Rules, 1981‑‑ Exemption‑‑‑Industrial undertaking‑‑‑Supportive organiza tion ‑‑‑‑In no manner the Export Processing Zones Authority Ordinance 1980 and Export Processing Zones Authority Rules, 1981 could extend any tax concession to a support organization, such as a bank or an insurance company which was only admissible to an industrial undertaking under clauses 126 and 128 of the Second Schedule of the Income Tax Ordinance, 1979, for the simple reason that it was the domain of the legislature to levy tax on certain classes of income and to exempt certain classes of income from tax under the Income Tax Law.  

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

‑‑‑‑S. 14(2), First Sched., Part IV & Second Sched., Cls. 126 & 128‑‑‑Export Processing Zones Authority Ordinance (IV of 1980)‑‑ Exemption‑‑‑Industrial undertaking‑‑ Definition‑‑‑Extension of‑‑‑If the definition of an industrial undertaking was extended to include any supporting enterprise/organization, such as bank or insurance company, it should have been made by the Federal Government by a notification under S.14(2) of the Income Tax Ordinance, 1979 and not by any other law.

(d) Interpretation of statutes‑‑‑

‑‑‑‑Definition‑‑‑If no definition of a particular term is available in its particular place, its definition in the same enactment or in some other enactment may be adopted‑‑‑And if it is not available even in any enactment then its general meaning should be adopted.

(e) Export Processing Zones Authority Ordinance (IV of 1980)‑‑‑

‑‑‑‑Ss. 26 & 2(e)‑‑‑Export Processing Zone Authority Rules, 1981, Rr.5(3), 10 & 15(4)‑‑‑Industrial undertaking‑‑‑Supporting enterprises‑‑ S.2(e) of the Export Processing Zones Authority Ordinance, 1980 required that an industrial undertaking shall be further specified in this behalf by the Federal Government and that Export Processing Zones Authority Rules, 1981 were made under the said notification and that the rules had further specified supporting enterprises under Rr. 5(3) & 10 and to be more specific under R.15(4) of the Export Processing Zones Authority Rules, 1981‑‑‑Validity‑‑‑Export Processing Zones Authority Rules, 1981 had been made in exercise of powers conferred by S.26 of Export Processing Zones Authority Ordinance, 1980, and not under S.2(e) of Export Processing Zones Authority Ordinance, 1980‑‑‑S.26 of the Export Processing Zones Authority Ordinance, 1980 simply provided that the "Federal Government may, by notification in Official Gazette make rules for carrying out the purpose of the Ordinance".

(f) Export Processing Zones Authority Rules, 1981‑‑‑

‑‑‑‑Rr. 5(3) & 15(4)‑‑‑Income Tax Ordinance, (XXXI of 1979), Second Sched. Cl. 126 & 128‑‑‑Industrial undertaking‑‑‑Bank‑‑‑Under R.5(3) of the Export Processing Zones Authority Rules, 1981 there was mention of supporting enterprises to provide essential services and in R.15(4) of the Export Processing Zones Authority Rules, 1981 such supporting enterprises had been mentioned as "facilities" including banking, insurance and such service as may be specified by the Federal Government‑‑‑However, no notification had been issued by the Federal Government even under R.15(4) of the Export Processing Zones Authority Rules, 1981 to specify such service.  

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

‑‑‑‑Second Sched., Cls. 126 & 128, S. 14(2) & First Sched., Part IV‑‑ C.B.R. Notification No. III/29/86, dated 21‑4‑1991‑‑‑Export Processing Zones Authority Ordinance (IV of 1980), Ss. 2(e), 2(f) & 26‑‑ Export Processing Zones Authority Rules, 1981, Rr.5 (3), 10 & 15(4)‑‑ S.R.O. 1287(I)/82, dated 26‑12‑1982‑‑‑Exemption‑‑‑Industrial under taking‑‑‑Supportive organization ‑‑‑Bank‑‑‑Assessee set up his bank branch in Karachi Export Processing Zone and income of that bank branch was claimed exempt on the ground that bank was support enterprise to provide essential services to industrial undertaking in the Zone and it qualified as an industrial undertaking under the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑No exemption from its income was available to the Offshore Branch of Bank established in Karachi Export Processing Zone under clauses (126) and (128) of the 2nd Schedule of the Income Tax Ordinance, 1979‑‑‑Appeal of the assessee was dismissed by the Appellate Tribunal.  

I.T.A. No.4082/KB of 1987‑88 approved.

(2000) 81 Tax 139 disapproved.

Shabbir Hussain Vejlani, A.C.A. and Muhammad Irshad Ansari, I.T.P. for Appellant.

Ali Hasnain, D.R., Muhammad Farid and Khalique‑ur‑Rehman, F.C.A. for Respondent.

Date of hearing: 24th December, 2003.

ORDER

AGHA KAFEEL BARIK (ACCOUNTANT MEMBER).‑‑‑These two appeals have been filed by the assessee, a banking company, relevant to assessment years 1987‑88 and 1990‑91, on various grounds including the following ground which is common in both the appeals:

"That the Commissioner of Income Tax (Appeals) was not justified in confirming the order of the Deputy Commissioner of Income‑tax in respect of not allowing exempt income claimed for income from branch in Karachi Export Processing Zone".

2. However, when the appeals were fixed for hearing before a 'Division Bench it was brought to its knowledge by the learned A.R. of the assessee that there are two conflicting judgments‑‑both of Division Benches of the Tribunal‑‑on the, issue. One decision is in assessee's own case in I.T.A. No. 4082/KB of 1987‑88 (assessment year 1986‑87), dated 30‑5‑1997 and the other judgment in the case of National Bank of Pakistan reported as (2000) 81 Tax 139, dated 1‑10‑1999. Hence this Full Bench has been constituted to resolve the following issue:‑‑

"Whether under the facts and circumstances of the case, the learned CIT(A) was justified to refuse the claim of exemption for the income from branch of the bank situated at Karachi Export Processing Zone?"

3. The fact of the case, briefly, are as under: ‑‑

(i) Habib Bank Limited, a banking company, having its registered office in Karachi Pakistan set up a branch in Karachi Export Processing Zone and it was for the first time for assessment year 1986‑87 that the income of the assessee‑Bank from that branch was claimed exempt. But same was disallowed by the DCIT and also by the CIT(A) and the orders of the officers below were also upheld by the Tribunal on assessee's appeal in I.T.A. No.4082 of 1987‑88 (Assessment Year 1986‑87) vide order, dated 30‑5‑1997.

(ii) For two assessment years i.e. 1988‑89 and 1989‑90 the assessee claimed exemption on the same ground which was disallowed by the department. However, as informed by the leaned A.R., the assessee‑Company did not file any appeal on the, instructions of the Government to avoid litigation between the Government departments/corporation.

(iii) For assessment year 1987‑88 original order passed under section 62 was set aside by the CIT(A) vide his appellate order, dated 7‑11‑1988 on various issues, including income from bank branch in Karachi Export Processing Zone. Subsequently, de novo assessment was passed under section 62/132 of Income Tax Ordinance, 1979 by the Income Tax Panel 5 Cos. 1 Karachi which rejected the claim of exemption of income of Rs.44,102,497 claimed as exempt under clauses (126) and (128) of 2nd Schedule, in view of the history of the case which was for assessment year 1986‑87 in which the claim was rejected earlier and also because the assessee had not put forth any fresh plea for assessment year 1987‑88. This order was challenged before the CIT(A) who adjudicated the issue vide his order, dated 28‑12‑1993, and following the decision of his predecessor, confirmed the order of the Income Tax Penal held that no exemption is available under clause (128) to a bank.

(iv) For assessment year 1990‑91 assessment order was passed under section 62 by the IAC Range IV Cos. I on 15‑6‑1993 whereby he disallowed the claim of exemption of income amounting to Rs.3,29,56,651 from the branch of the bank in Karachi Export Processing Zone, under clauses (126) and (128) of 2nd Schedule of the Income Tax Ordinance, 1979. The DCIT has given his reasons for disallowing the claim as under:‑‑

"The assessee has claimed exempt income of Rs.329,56,651 being income from bank branch located in Karachi Export Processing Zone. The exemption has been claimed under clauses of (126) and (128) of the 'Second Schedule to the Income Tax Ordinance, 1979.

The exemption under the said clauses of the Second Schedule to the Income Tax Ordinance, 1979 is available if the following conditions are fulfilled.

(i) The undertaking whose income is exempt from tax is set up in EPZ.

(ii) The income of undertaking set up in EPZ accrues arises outside Pakistan.

(iii) The activities giving rise to exempt income are approved by the Federal Government.

"The claim of the assessee is not correct for the following reasons:‑‑

(i) The income does not accrue or arise outside Pakistan as the exempt income of undertaking is to be income from exports or from foreign country or partly from Pakistan to the extent permitted to the assessee. Income of Branch in EPZ is not covered. Income of which is not from foreign sources.

(ii) No approval of the Federal. Government has been obtained under clause (128) of 2nd Schedule of the Income Tax Ordinance.

(iii) The bank is not an industrial undertaking the definition of industrial undertaking as has been given in section 48 of the Income Tax Ordinance, 1979 which does not include a banking company. The definition of industrial undertaking in EPZ Act is for the purposes of exemption of import duties therefore, is applicable for customs duties purposes. Industrial undertaking is defined in the Income Tax Ordinance so in the presence of specific definition no other definition is to be relied upon.

"The assessee approached the C.B.R. for clarification. The C.B.R. vide No.III/29/86, dated 21‑4‑1991 clarified that the exemptions under clauses (126) and (128) are not available to the banks.

"Assessee's claim of exemption is therefore, rejected and income of Rs.3,29,56,651 is subjected to tax is Ordinary business income."

(v) On assessee's appeal the CIT(A),vide his appellate order, dated 31‑10‑1993 confirmed the order of the Assessing Officer with the following reasons:

"Appellant's grievances under these two heads do not carry much weight and the C.B.R. has also held exemption under clauses (126) and (128) are not available to banks. Similarly, rebate in tax is allowable only in case where income tax has actually been brought into Pakistan, which is not the case here.

The disallowances under these two heads are accordingly confirmed. "

(vi) Hence these two appeals are filed against orders of CIT (A), dated 28‑12‑1993 for assessment year 1987‑88 and dated 31‑10‑1993 for assessment year 1990‑91.

4. The learned counsel argued that the assessee‑Company had claimed exemption under clauses (126) & (128) of 2nd Schedule of Income Tax Ordinance, 1979 for both the years i.e. assessment year 1987‑88 and 1990‑91, but same was disallowed ‑by the DCIT and subsequently the orders of the DCIT were confirmed by the CIT(A) following the earlier orders .on his predecessor on this issue. The learned counsel argued that these decisions were incorrect as clause (126) of 2^nd Schedule of Income Tax Ordinance, 1979 clearly envisage that profit and gains derived by an assessee from an industrial undertaking set‑up in an Export Processing Lone created under Export Processing Zones Authority Ordinance, 1980 shall be exempt from tax for a period of five years. Clause (128) of 2nd Schedule further fortifies the claim of the assessee regarding exemption of income earned by its branch set up in Karachi Export Processing Zone, as it allows exemption from tax for "any income" accruing or arising outside Pakistan to an industrial undertaking set up in Export Processing Zone created under Export Processing Ordinance, 1980, the learned counsel argued.

5. For the facility of appreciation of facts clauses (126) and (128), which now stand omitted by Finance Ordinance, 2002, are reproduced as under:‑‑

Clause (126) "Profits and gains derived by an assessee from an industrial undertaking set up in an area declared by the Federal Government to be a "Zone" within the meaning of the Export Processing Zones Authority Ordinance, 1980 (IV of 1980), for a period of five years from the date of commencement of production, and for such further period as may be allowed by the Federal Government.

[Provided that nothing contained in this clause shall apply to an industrial undertaking set up after the 30th June, 1997].

Clause (128). "Any income accruing or arising outside Pakistan to an industrial undertaking set up in an area declared by the Federal Government to be `Zone' within the meaning of the Export Processing Zones Authority Ordinance, 1980 (IV of 1980), provided the said income accrues or arises from such activities of the said undertaking as are approved by the Federal Government.

[Provided that nothing contained in this clause shall apply to an industrial undertaking set up after the 30th June, 1997]".

6. The learned counsel argued that Karachi Export Processing Zone Authority was created by an enactment "Export Processing Zones Authority Ordinance, ‑1980" (Ordinance of IV of 1980) (hereinafter called E.P.Z.A. Ordinance 1980) and an industrial undertaking has been defined in section 2(e) of the said Ordinance as under:‑‑

(e) "`Industrial undertaking" means an industry, undertaking or establishment engaged in the production; distribution or processing of such goods or the providing of such services as may be specified in this behalf of the Federal Government."

7. Subsequently, the Federal Government made rules in exercise of its power conferred by section 26 of Export Processing Zones Authority Ordinance, 1980, for carrying out the purpose of the Ordinance. These rules notified by S.R.O. 1058(I)/81, dated 23‑9‑1981 are known as Export Processing Zones Authority Rules 1981 (hereinafter called as F.P.Z.A. Rules 1981). Subsequently, another S.R.O. 1287(I)/82, dated 26‑12‑1982 was issued certain amendments in these Rules. An important amendment was the insertion of sub‑rule (4) of rule 15 (titled as "Facilities") of Export Processing Zones Authority Rule 1981. The learned counsel argued that under the amended Export Processing Zones Authority Rules 1981, following provisions are made which amply prove that the branch of the assessee set up in Karachi Export Processing Zone is covered by the definition of an "industrial undertaking" in the Ordinance and qualifies for exemption under clauses (126) and (128) of 2nd Schedule of Income Tax Ordinance, 1979. He particularly referred to rule 5(3) which provides as under:‑‑

"(3) Supporting enterprises to provide essential services to industrial undertakings in the Zones shall be allowed to be set up.

8. It was argued by the learned counsel that the branch of the bank in Karachi Export Processing Zone is a support enterprise and has been set up by licence of State Bank of Pakistan in Karachi Export Processing Zone to provide essential services to industrial undertaking in the Zone, and thus it qualifies as an industrial undertaking under the Ordinance. He referred to Rule l0.whirh provides as under:

"Rule 10. Issue of licences to banks to open branches, etc. (1) Licences for opening of branches in a Zone to banks may be issued by the State Banks of Pakistan hereinafter in this rule and rule 11 referred to as the State Bank:

(a) to foreign banks operating in Pakistan outside the licensing policy on merit; and

(b) to Pakistan banks on merit.

The banks to whom licences are issued under sub‑rule (1) shall meet all preliminary expenses of opening of branches from their external resources.

(3) The Bank shall not allow the incorporation of any bank or subsidiaries thereof in a Zone.

(4) The branches of the banks opened in the Zones, hereafter in this rule and rule 11 referred to as branches, shall not be eligible for any financial assistance from the Bank.

(5) The Branches may, in addition to the business of banking, engage in all or any of the forms of business enumerated in section 7 of the Banking Companies Ordinance, 1962 (LVII of 1962)."

The bank set up its branch in Karachi Export Processing Zone under licence of State Bank of Pakistan No. BL‑11157, dated 10th January, 1982, in exercise of powers conferred on State Bank of Pakistan by rule 10 of Export Processing Zones Authority 1981. The bank branch was also allowed to deal in foreign exchange in the Karachi Export Processing Zone under rule 11 of Export Processing Zones Authority Rules 1981.

9. The learned counsel further argued that vide S.R.O. 1287(I)/82, dated 26‑12‑1982 sub‑rule (4) was inserted in rule 15 (Facilities) which authorizes setting up of the supporting enterprises including banking, insurance and such service as may be specified by the Federal Government, to be provided in a Zone. Amended Rule 15 reads as under:‑‑

"(15) Facilities (1) The Authority shall undertake to provide infrastructure facilities such as electricity, water, gas, telephone and telex which are considered necessary for efficient industrial operations in a Zone:

Provided that the cost of providing such facilities shall be born by industries set up in a Zone.

(2) The Authority may also provide to investors a list of contractors for providing necessary services such as stevedoring, movement of goods to and from a Zone factory design and construction for their information and guidance.

(3) Postal, fire services, first‑aid station and medical centers shall be provided within a Zone.

(4) Supporting enterprises including banking, Insurance and such service as may be specified by the Federal Government from time to time shall also be provided within a Zone.

10. The learned counsel argued that the above Rules made in exercise of Export Processing Zones Authority Ordinance 1980 explicitly proves the claim of the assessee that the bank branch in the Karachi of Export Processing Zone enjoyed the status of an "industrial undertaking" as it was providing banking facilities as supporting enterprise to other industrial undertakings set up in the Zone. Hence it duly qualified for exemption from tax under clauses (126) and (128) of 2nd Schedule of Income Tax Ordinance, 1979, the learned counsel argued.

11. The learned counsel further submitted a letter/certificate of the Secretary Export Processing Zone Authority Karachi, dated 3‑3‑1987 in which it has been certified that:

"Messrs Habib Bank Limited (Offshore Branch KEPZ) are investors in a `supporting enterprise' in the Karachi Export Processing Zone as defined in Cl. 2(e) & 2(f) of EPZA Ordinance IV of 1980 and laid down in Rule 15 sub‑rule (4) of EPZA Rules of 1981 issued under S.R.O. 1058(I)/81 amended through S.R.O. 1287(I)/82."

12. The learned counsel also argued that the C.B.R. Notification S. R. O. 1058(I)/81, dated 23‑9‑1981 issued in pursuance of section 26 of EPZA Ordinance, 1980 was ignored by the ITAT in the case of HBL for assessment year 1986‑87 while passing its order in I.T.A. No. 4082/KB of 1987‑88, dated 30‑5‑1997, whereas it was discussed at length in the case of National Bank of Pakistan by the ITAT, while passing its judgment, dated 1‑10‑1999 reported as (2000) 81 Tax 139. According to the learned counsel the reason for ignoring the said notification during the hearing of the appeal of HBL for 1986‑87 was that Mr. E.L'. Khawaja, Advocate, and the learned counsel of the assessee‑Bank, had inadvertently submitted before the Bench that there was no such notification issued in pursuance to section 2(e) of EPZA Ordinance, 1980, whereas S.R.O. 1058(I)/81, dated 3‑9‑1998 issued to notify EPZA Rules, 1981 was the notification issued in this regard, the learned A.R. argued. The relevant part of the order of the Tribunal in I.T.A. No. 4082/KB of 1987‑88, dated 30‑5‑1997 is reproduced below:‑‑

"(6) The next objection raised on behalf of the appellant is that the learned two officers below were not justified in refusing the claim of exemption for the income from its branch at Karachi Export Processing Zone. Mr. Khawaja has submitted that the exemption was claimed under clause 126 of the Second Schedule to the Income Tax Ordinance but the learned two officers below have wrongly considered clause 128 of the Second Schedule. He has contended that according to clause 126 of the Second Schedule to the Income Tax Ordinance, 1979 profits and gains derived by an assessee from an industrial undertaking set up in an area declared by the Federal Government to be a Zone within the meaning of the Export Processing Zones Authority Ordinance, 1980 (IV of 1980), for a period of five years from the date of commencement of production, and for such further period as may be allowed by the Federal Government enjoys exemption from tax. He has maintained that the Branch of Habib Bank Limited situated in the Export Processing Zone as an industrial undertaking according to the definition of industrial undertaking given in section 2(e) of the Export Processing Zone Authority Ordinance, 1980 which reads as follows:‑‑

Industrial undertaking' means an industry; undertaking or establishment engaged in the production, distribution or processing of such goods or the providing of such services as may be specified in this behalf by the Federal Government.

He has further submitted that according to rule 15(3) of Export Processing Zones Authority Rule, 1981 facility to be provided by the authority included supporting enterprises, including banking, insurance and such services as may be certified by the Federal Government from time to time. He has therefore, submitted that since the industrial undertaking as defined in section 2(e) of the Export Processing Zones Authority Ordinance means an industrial undertaking or establishment providing services and the virtue of sub‑rule (3) of rule 15, the authority is required to provide banking services which is being provided through the Branch of Habib Bank Limited, therefore, by virtue of fiction of law the Branch of Habib Bank Limited providing, services in the Export Processing Zone would be deemed to an industrial undertaking and, therefore, the profits and gains earned by the Branch of Habib Bank Limited proving services in the Export Processing Zone shall enjoy exemption.

7. We have carefully considered the contentions raised by Mr. Khawaja. The learned counsel has very ably knit the fabric of his 'arguments, but on closer examination, we find that a very important point has been missed with the result that entire warp and woof of the fabric has been shattered. Mr. Khawaja was failed to notice that in the definition of industrial undertaking contained in section 2(e) of the Export Processing Zones Authority Ordinance, 1980 it has been provided that the providing of such services as may be certified in this behalf by the Federal Government shall mean industrial undertaking. Thus the condition precedent for brining any service provided by the Export Processing Zone within the purview of industrial undertaking specification of the same by the Federal Government. We have asked Mr. Khawaja if the Federal Government has specified any such services by issuance of any notification to which Mr. Khawaja has very candidly replied that to the best of his knowledge no such notification has been issued. It is established principle of law that for the purpose of creating any fixation all the requirements are to be fulfilled meticulously. As the condition precedent in the present case has not been fulfilled, therefore, all painstaking arguments addressed by Mr. Khawaja and the entire edifice built thereon falls on ground having no foundation. It is, therefore, held that the exemption claimed is not available and consequently the findings of learned two officers below is not open to any exemption which is hereby maintained."

13. However, subsequently, in the case of National Bank of Pakistan a Division Bench of the Tribunal decided the same issue of income of a branch of National Bank set up in Karachi Export Processing Zone for the period relevant to assessment year 1996‑97, in favour of the bank, or its appeal ITA No. 487/KB of 1997‑98, vide order, dated 1‑10‑1999 also reported as (2000) 81 Tax 139. The learned counsel argued that while the facts of the case were identical with that of the assessee‑Bank, the issue was decided by the Tribunal in favour of National Bank of Pakistan with its finding as under:‑‑

"(23) The next objection common in all the appeals supra except the appeal for the assessment year 1992‑93 is against the impugned finding of the learned CIT(A) that the income of appellant's branch situated in the Export Processing Zone is not exempt from tax.

(24) The learned authorized representative of the appellant has submitted that this issue has been considered at length by the Tribunal in I.T.A. No. 19/KB of 1988‑89 (A.Y. 1985‑86), I.T.A. Nos. 172 & 176/KB of 1988‑89 (A.Y. 1986‑87 and 1987‑88), I.T.A. No. 1656/HQ of 1989‑90) (A.Y. 1988‑89), I.T.A. No. 1273/HQ of 1990‑91 (A.Y. 1989‑90) and I.T.A. No. 1297/KB of 1991‑92 (A.Y. 1990‑91) and it has been held vide order, dated 3‑6‑1998:

"(19) Having given our careful consideration to the foregoing facts and circumstances as well as the submissions made by the learned representatives of two sides we find that the Bank Branch set up by the appellant in the Export Processing Zone, Karachi, is an industrial undertaking as defined Clause (e) of section 2 of the EPZ Authority Ordinance, 1980 within the meaning of the "the providing of such services as are specified in this behalf by the Federal Governments under Rule 5 read with Rule 15 of the EPZA Rule, 1981 supra. We further find that the activities of the appellant's Branch are approved in this behalf by the Federal Government as enumerated in sub‑rule (4) and (5) of Rule 10 and sub‑rule (1) to sub‑rule (5) of Rule 11 and in view of the provisions of sub‑rules (1)(b), (3), (4) and (6) of Rule 10 as well as the provisions of Rule 11 supra, we are persuaded to agree with the learned A.R., of the appellant that one cannot escape the conclusion that the income accruing or arising to the Bank Branch from activities of the Branch, approved by the Federal Government supra, the income accruing or arising to the Branch outside Pakistan for the purposes of clause (128) of Part I of the Second Schedule to the Income Tax Ordinance, 1979, hence exempt from tax under Income Tax Ordinance, 1979. In our view, there can be no insinuation of intendment in the foregoing conclusion."

(25) Accordingly, the impugned orders on this point are found unsustainable; hence set aside with the direction to allow the exemption claimed on such income.

14. The learned D.R., on other hand, argued that the exemption was restricted to an industrial undertaking under clauses (126) and (128) of 2nd Schedule of the Income Tax Ordinance, 1979 and not to any support organization or enterprise such as banks insurance company etc. He also argued that EPZA Ordinance, 1980 and EPZA Rules 1981 do not over ride clauses (126) and (128) of 2nd Schedule of Income Tax Ordinance, 1979.

15. The learned D.R. further argued that in assessee's own case a reference was made to the C.B.R. on this issue on which the C B.R, vide a Letter No. III/29/86, dated 21‑4‑1991 clarified that exemption under were not available to a bank. He added that this Circular has been quoted by the DCIT in his assessment order under section 62 for assessment year 1990‑91 in rebuttal to assessee's claim of exemption. The learned D.R. also argued that as regards the decision of the Honourable Tribunal in the case of National Bank of Pakistan in I.T.A. No. 487/KB of 1997‑98 for assessment year 1996‑97, dated 1‑10‑1999, reported as (2000) 81 Tax 139 that was perhaps made ignoring the earlier decisions of the Division Bench, dated 30‑5‑1997 in the case of Habib Bank Ltd. as it was not referred by either side during the hearing of appeals of National Bank nor discussed or distinguished by the Division Bench in its order, dated 1‑10‑1999. He also submitted that the department has already filed an appeal under section 136(1) of Income Tax Ordinance, 1979 against the said decision of the Division Bench in the High Court of Sindh in year 2000. He presented a copy of the appeal in support of his argument that the said decision is disputed and cannot be relied upon.

16. The learned D.R. also argued that even under the EPZA Ordinance, 1980 and EPZA Rules 1981 there is no specific notification issued to cover a bank in the definition of an industrial undertaking', although in rule 15(4) there is a reference of supporting enterprises, including banking and insurance and such service as may be specified by the Federal Government, but no such specific notification under the said sub‑rule has been issued. He further argued that an Export Processing Zone is established to set up industrial undertakings but the facilities and the supporting enterprises cannot be treated identical to an industrial undertaking. The learned D.R. also referred to a letter/certificate, dated 3‑3‑1987 issued by Secretary EPZA to certify that, "Habib Bank Limited Offshore (KEPZ) are investors in a `supporting enterprises' in the Karachi Export Processing Zone as defined in clause 2(e) and 2(f) of EPZA Ordinance IV of 1980 and laid down in Rule 15(4) of EPZA Rules, 1981"; and argued that it is simply a letter clarifying a supporting enterprise and that in no way the Secretary EPZA has the authority to extend the meaning of an industrial undertaking, as defined in section 2(e), to any supporting enterprise such as Habib Bank Limited. The learned D. R. also argued that while an industrial undertaking has not been defined in clauses (126) and (128), for the purpose of tax rates, however in para. B of Part‑IV of first Schedule an `industrial, undertaking' has been defined as under:

"(1) `industrial undertaking' mean., an undertaking which is set up or commenced in Pakistan on or after the 14th day of August, 1947, and which employs (i) ten or more persons in Pakistan and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency; or (ii) twenty or more persons in Pakistan and does not involve the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency and which is:‑‑

(i) engaged in‑

(a) the manufacture of goods or materials or the subjection of goods ,or materials to any process, which substantially changes their original condition:

(b) ship‑building;

(c) generation, transformation, conversion, transmission or distribution of electrical energy, or the supply of hydraulic power; or

(d) the working of any mine, oil‑well or other source of mineral deposits not being an undertaking to which the Fifth Schedule applies; or

(ii) any other industrial undertaking which nay be approved by the Central Board of Revenue for the purposes of this clause.

17. After hearing both the sides and going through the record of the case, earlier decisions of Division Benches of the ITAT and various laws and notifications referred by the learned counsel in this regard we have to make our findings as under:‑‑

(i) Omitted clauses (126) and (128) of 2nd Schedule were inserted to allow exemption to income to an assessee from an industrial undertaking and also to income accruing or arising outside Pakistan to an industrial undertaking set up in such areas which were declared as Zones under EPZA Ordinance 1980. The basic purpose of allowing these exemptions from tart on income was to promote industrial activities for the purpose of export and to return to earn foreign exchange for Pakistan. An industrial undertaking, as used in these clauses has not been defined: But if it was to be defined it was by the proper authority, the Federal Government or the C.B.R. However, the C.B.R. vide its Circular letter No.III/29/86, dated 21‑4‑1991, quoted by the DCIT in his assessment order under section 62 for assessment year 1990‑91, on a reference made by the assessee‑Bank, clarified that the exemption is not allowable to a bank as it is not an industrial undertaking.

(ii) EPZA Ordinance 1980 was promulgated to set up export -oriented industries and EPZA Rules 1981 were made in. pursuance to section 26 of EPZA Ordinance 1980 for carrying out the purposes of the EPZA Ordinance, 1980. However, in no manner the EPZA Ordinance 1980 and EPZA Rules 1981 can C extend any tax concession to a support organization, such as a bank or an insurance company, which is only admissible to an industrial undertaking under clauses (126) and (128) of 2nd Schedule of Income Tax Ordinance, 1979, for the simple reason that it is the domain of the legislature to levy tax on certain classes of income and to exempt certain classes of income from tax under Income Tax. In this regard reference is made to section 14(1) of Income Tax Ordinance, 1979 which provides that the incomes or classes of income or person or classes of persons specified in the 2nd Schedule shall be exempt from tax under this Ordinance, subject to conditions and to the extent specified therein. Subsection (2) of section 14 further provides that only the Federal Government may, from time to time by Notification in the official Gazettee, make such amendment in the 2nd Schedule, by adding or omitting or making any change in any clause or condition there in as it may think fit subject to approval by the National Assembly. Thus if the definition of an industrial undertaking was extended to include any supporting enterprise/organization, such as bank or insurance company, it should have been made by the Federal Government by a notification under section 14(2) of Income Tax Ordinance, 1979 and not by any other law, as quoted or cited by the learned counsel for the appellant.

(iii) The argument of the learned D.R. that although an industrial undertaking has not been defined in 2nd Schedule, but a definition is available for the same in Part‑IV of First Schedule, as reproduced supra, has some force as it is a settled principle that if no definition of a particular term is available in its particular place, its definition in the same enactment or in some other enactment may be adopted. And if it is not available even in any enactment then its general meaning should be adopted. In this regard even the general meaning an `industrial undertaking does not favour the assessee which is a banking company and in no way is engaged in producing any goods for the market nor has employed any machinery for the purpose of its business activities.

(iv) Reference is also made to section 48 of Income Tax Ordinance, 1979 under whose exemption from tax is allowed to newly established industrial undertaking with certain conditions as laid down under subsection (2) of section 48. This section is identical to section 14 read with clauses (126) and (128) of 2nd Schedule. In subsection (2) of section 48 various conditions have been laid down including.

"(d) that it employs ten or more workers and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal agency; or twenty or more workers and does not involve the use of electrical energy or any other form of energy which is mechanically transmitted."

Although these conditions do not apply to clauses (126) and (128) yet it gives a general idea as to what an industrial undertaking for which an exemption is claimed has to be.

(v) We have also considered the arguments of the learned counsel that while section 2(e) of EPZA Ordinance, 1980 requires that an industrial undertaking shall be further specified in this behalf by the Federal Government and that EPZA, Rules, 1981 notified vide S.R.O. 1058(I)/81, dated 23‑9‑1981 are made under the said notification and that the Rules have further specified such supporting enterprises under rules 5(3), 10 and to be more specific under rule 15(4) of EPZA Rules, 1981. But we have noted that EPZA Rules, 1981 have been made in exercise of powers conferred by section 26 of EPZA Ordinance, 1980, and not under section 2(e) of EPZA Ordinance, 1980. Section 26 of EPZA Ordinance, 1980 simply provides that the "Federal Government may, by notification in official gazette may make rules for carrying out the purpose of this Ordinance."

(vi) As regards the argument of the learned counsel that the EPZA Rules 1981 covered the definition of an `industrial undertaking' to include a bank, we find that under rule 5(3) there is mention of supporting enterprises to provide essential services and in rule 15(4) such supporting enterprises have been mentioned as "facilities" including banking, insurance and such service as may be specified by the Federal Government. However, again no notification has been issued by the Federal Government even under rule 15(4) to specify such service.

(vii) In this purview when we 'go through the earlier two decisions of the Division Bench before us; one passed in assessee's own case in I.T.A. No. 4082/KB of 1987‑88 for assessment year 1986‑87, dated 30‑5‑1997 and the other judgment passed in the case of National Bank of Pakistan reported as (2000) 81 Tax 139, we find that the judgment of the Tribunal in assessee's own case in I.T.A. No.4082/KB of 1987‑88 for assessment year 1986‑87, dated 30‑5‑1987 is more logical, reasonable and based on analytical conclusion of facts and the law. In the said decision the learned Tribunal clearly held that, "in the definition of an industrial undertaking contained in section 2(e) of Export Processing Zone Authority Ordinance, 1980 it has been provided that the providing of such service as may be certified in this behalf by the Federal Government shall mean industrial undertaking. Thus the condition precedent for bringing any services provided by the Export Processing Zone within the purview of industrial undertaking is specification of the same by the Federal Government". But Mr. E.U. Khawaja had rightly, and not inadvertently, as contended by the learned counsel before us, submitted that the Federal Government had not specified any such service by issuance of any notification under section 2(e) of EPZA Ordinance, 1980.

18. Accordingly we hold that no exemption from its income is available to the Offshore Branch of Habib Bank Limited established in Karachi Export Processing Zone under clauses (126) and (128) of 2nd Schedule of Income Tax Ordinance, 1979. Both the appeals are therefore, dismissed on this issue for the reasons recorded by us in the afore-going paragraphs.

19. These appeals are decided to the extent that the issue of exemption of income from a branch of the Bank in Karachi Export Processing Zone is decided against the assessee. For the remaining issues the appeals may be placed before the Division Bench.

C.M.A./57/Tax (Trib.) Appeals dismissed.