COMMISSIONER OF INCOME TAX AND WEALTH TAX, SIALKOT ZONE VS Messrs MAQBOOL AHMED GILL, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 1757 (2006)

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

----S. 136---Remand order of Appellate Tribunal generally would not give rise to a question of law.

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

----S. 19---Income Tax Rules, 1982, Rr. 4 & 5---Self-hired house by a salaried owner---Receipt of 80% of basic pay by assessee as rent from employer---Such receipt treated as income from property after allowing 1/5th thereof on account of repair etc.---Addition in such receipt of 15% of basic pay of assessee on account of unfurnished accommodation provided to him by employer---Validity---If such receipt was treated as income from property, assessee as employee was still entitled to exemption of 45 % of basic salary as admissible house rent allowance contemplated in R.4 of Income Tax Rules, 1982---Such addition would amount to tax same amount twice---Such self-hired house could not be treated as rent free unfurnished accommodation provided by employer.

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

----S. 136---Jurisdiction of High Court under S.136 of Income Tax Ordinance, 1979---Nature, purpose and scope---Such jurisdiction was not that of a court of appeal---Such jurisdiction being advisory in nature and its purpose being resolution of problematic or debatable legal question of substantial nature and of general application to a sizable class of assessee---Tribunal must refuse to make reference, if not certain, as to whether question framed raised a substantial legal issue---Principles.

Jurisdiction of High Court under section 136, Income Tax Ordinance, 1979 is advisory nature and is required to be invoked only when the issues raised before and decided by Tribunal were of substantial nature and general application to a sizable class of assessees. The nature of jurisdiction of High Court is clearly distinguishable from its appellate or the revisional jurisdiction. The most important difference is that during the pendency of a reference, the appeal before the Tribunal is deemed pending and in case the view adopted by the Tribunal is varied, it is again listed before them and then decided in the light of the opinion expressed by High Court. The purpose of reference is not to get a decision for or against a party before the Tribunal. It is only the resolution of a problematic or debatable legal question. A "point of law", cannot be equated with the expression "question of law", and that the question referred must be a disputed or disputable question of law. The object of reference is to get decision from the High Court on a problematic or debatable question and not on an obvious or simple point of law. Accordingly, the reply to a question affirmative or negative should settle a pattern of guidance both for the revenue as well as the assessee besides the Tribunal, who had sought the advice in the first instance. Therefore, the practice on the part of the revenue or the assessees, which at times is aided by the Tribunal to treat High Court as a court of appeals needs to be disapproved. Factual controversies should not be allowed to be converted into legal issues only by dint of draftsmanship or employment of legal language in style, which is usual to the framing of such questions. In case, the Tribunal is not certain if the question framed raises a substantial legal issue, it must refuse to make a reference as in that case, the assessed or the revenue will have to approach High Court under subsection (2) of section 136 of Income Tax Ordinance, 1979 and satisfy, before admission, that the question raised/ framed is of substance. Therefore, unless a question framed by the Tribunal at the instance of an assessee or the revenue under section 136(1) of the Income Tax Ordinance, 1979 fulfils the aforesaid standard of general interest, application and relevancy to the over all assessment, it shall be deemed to be question of fact. The principle that an advice should never be given unless asked for also has another angle. With regards to reference proceedings under the Income Tax Ordinance, 1979, it means that an advice should not be sought unless it is absolutely necessary for the guidance of the parties and for smooth and effective flowing of the assessment stream.

C.I.T. v. Messrs Immninon International, Lahore 2001 PTD 900; Lungla (Sylhet) Tea Co. Ltd. v. Commissioner of Income Tax, Dacca Circle, Dacca 1970 SCMR 872 and C.I.T. v. Basanta Kumar Agarwalla (1983) 140 ITR 418 fol.

Khadim Hussain Malik for Appellant.

Nemo for Respondent.

Date of hearing: 29th November, 2006.

JUDGMENT

NASIM SIKANDAR, J.---The respondent is an individual and during the period relevant to the assessment years 1994-95 and 1995-96 derived income from salary as an employee of the Habib Bank Limited. The two returns filed by him were accepted under self-assessment scheme contemplated in section 59-A (Assessment on the basis of return of the late Income Tax Ordinance, 1979).

2. The Inspecting Addl. Commissioner on 16-3-1998 by invoking the provisions of section 66-A (Power of Inspecting Additional Commissioner) to revise (Deputy Commissioner's order), proceeded to modify the assessment framed or deemed to have been framed under self-assessment scheme and computed the net income of assessee in the two years respectively at Rs.231,700 and 235,204. Earlier it was noted that the respondent-assessee had received 80% of his basic salary as rent ceiling from his employer on account of self-hired house. According to the revising authority the amount of rental ceiling received by the assessee from the employer was liable to be treated as his income from property and therefore, liable to be taxed under section 19 of the late Ordinance after allowing 1/5th on account of repair etc. Also the revising authority added another sum of rupees equal to 15% of the basic salary of the assessee on account of unfurnished accommodation having been provided to him by his employer.

3. On appeal by way of the impugned order, dated 27-11-1998 the learned members of the Income Tax Appellate Tribunal, Lahore Bench, Lahore expressed the view that the amount received as rental ceiling from the employer even if treated as income from property the assessee as an employee was still entitled to exemption of 45% of his basic salary as admissible house rent allowance contemplated in Rule 4 of the late Income Tax Rules, 1982. Also they disapproved addition of 15% of the basic salary on account of unfurnished accommodation by the employer on the ground of having taxed the same amount twice. Thereafter they set aside the impugned order passed by the I.A.C. under section 66-A and directed that the income from property assessed under section 19 of the late Ordinance be calculated after deduction of 45% of the minimum time scale of the basic pay from the total amount received from employer for self-hiring of the house.

4. According to the Revenue following questions of law arise out of the order of the Income Tax Appellate Tribunal:--

(1) Whether on facts and in the circumstances of the case the learned ITAT was justified to restrict assessee under self-hiring scheme to the amount of such rent minus admissible house rent allowance not exceeding 45% of the time scale of the assessee?

(2) Whether on facts and in the circumstances of the case the learned ITAT was justified in directing to fix ALV of the property in a manner not prescribed in section 19 of the Income Tax Ordinance, 1979?

(3) Whether in the facts and circumstances of the case learned ITAT was justified in directing not to make addition of 15% of pay on account of unfurnished accommodation under rule 5 of the Income Tax Rules, 1982, although the assessee was provided with unfurnished accommodation by his employer?

5. After hearing the learned counsel for the appellant/revenue we are not persuaded to entertain the appeal or to admit the aforesaid questions for our consideration and answer for the following reasons:--

First, as a general rule the remanding order of the Tribunal does not give rise to a question of law.

Second, the direction made by the learned members of, the Tribunal while remanding the matter otherwise find support from the provisions of the late Income Tax Ordinance as well as Rules 4 and 5 of the said Rules. We are in agreement with the view expressed by the learned Members of the Tribunal-that Rules, 4 and 5 of the aforesaid Rules when read together did not justify addition of 15% on account of rent free unfurnished accommodation. Both rules were clearly meant for two different situations. The revising authority having opted to tax the rental ceiling received by the assessee as his income from property he was clearly entitled to the admissible house rent allowance of 45% of the minimum of the time scale of his basic salary. There was, therefore, absolutely no reason available with the revising authority to treat the self-hired accommodation as rent free unfurnished accommodation provided by the employer.

Third, the issue of treatment of the rental income received by an employee from his employer on account of self-hired accommodation does not give rise to a substantial legal controversy between the parties to be resolved by this Court.

Fourth, in an opinion expressed on 14-11-2000 in C.T.R. No.20 of 1991 reported as re: CIT v. Messrs Imminon International, Lahore 2001 PTD 900 we have discussed the law relating to referable jurisdiction of this Court under fiscal statutes, particularly the Income Tax law in the light of judgment of the Supreme Court of Pakistan in re: The Lungla (Sylhet) Tea Co. Ltd. v. Commissioner of Income Tax, Dacca Circle, Dacca (1970 SCMR 872). The Hon'ble apex Court in that case -held that every question of law was not required to be referred to the High Court and that only a question having some substance needed to be so referred. A portion of our opinion reads as under:--

"It has been our experience that the revenue in case of an adverse decision invariably goes for an application for reference to this Court and is generally well obliged by the Tribunal. The revenue, the assessee as well as the Tribunal need to understand the precise nature of the jurisdiction of this Court as also the purpose for which it has been conferred. Without an iota of doubt this jurisdiction is advisory in nature and is required to be invoked only when the issues raised before and decided by the Tribunal were of substantial nature and of general application to a sizable class of assessees. The nature of jurisdiction of this Court is clearly distinguishable from its appellate or the revisional jurisdiction. The most important difference, which needs to be noted is that during the pendency of a reference the appeal before the Tribunal is deemed pending and in case the view adopted by the Tribunal is varied it is again listed before them and then decided the light of the opinion expressed by this Court. The purpose of reference is not to get a decision for or against a party before the Tribunal. It is only the resolution of a problematic or debatable legal question. In re: CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418, their Lordships expressed the view that "a point of law" could not be equated with the expression "question of law" and that the question referred must be a disputed or disputable question of law. Further that the object of reference was to get decision from the High Court on a problematic or debatable question and not an obvious or simple point of law. Accordingly the reply to a question affirmative or negative, should normally settle a pattern of guidance both for the revenue as well as the assessee besides c the Tribunal who had sought the advice in the first instance. Therefore, the practice on the part of the revenue or the assessee which at times is aided by the Tribunal to treat this Court as a Court Appeal needs to be disapproved. Factual controversies should not be allowed to be converted into legal issues only by dint of draftsmanship or employment of legal language in style which is usual to the framing of such questions. In case the Tribunal is not certain if the question framed raises a substantial legal issue, it must refuse to make a reference as in that case the assessee or the revenue will have to approach this Court under subsection (2) of section 136 and satisfy, before admission, that the question raised/framed is of substance. Therefore, unless a question framed by the Tribunal at the instance of an assessee or the revenue under section 136(1) or brought directly before this Court under section 136(2) of the Income Tax Ordinance, 1979 fulfils the aforesaid standard of general interest, application and relevancy to the over all assessment proceedings, it shall be deemed to be question of fact. The principle that an advice should never be given unless asked for also has another angle. With regards to reference proceedings under the Ordinance it means that an advice should not be sought unless it is absolutely necessary for the guidance of the parties and for smooth and effective flowing of the assessment stream."

6. The above questions as framed in our view do not raise a substantial legal controversy between the parties and therefore, we will decline to answer.

7. Answer declined.

S.A.K./C-8/LAnswer refused.