COMMISSIONER OF INCOME TAX, COMPANIES-IV, KARACHI VS Messrs PAKISTAN ELECTRIC FITTINGS MANUFACTURING CO. LTD, through Directors, 2007 PTD-SUPREME-COURT 1933 (2000)

(On appeal from the judgment, dated 23-12-1993/3-1-2000 of the High Court Sindh, Karachi, passed in Income Tax Appeal No. 158 of 1998).

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136 & 156---Income Tax Appellate Rules, 1981, R. 20---Constitution of Pakistan (1973), Art. 185(3)---Order of Tribunal, dated 5-5-1996 dismissing appeal not challenged by way of reference---Tribunal dismissed application filed under R.20 of Income Tax Appellate Rules, 1981 against its such order---Tribunal dismissed application for rectification of its said order---Appeal to High Court on 16-6-1996 against said order---Acceptance of appeal by High Court despite objections as to maintainability of appeal and bar of limitation were raised---Validity---Supreme Court granted leave to appeal to consider questions, whether appeal to High Court filed on 16-6-1998 against original order, dated 5-5-1996 was time-barred and could be lawfully maintained; whether High Court failed to take into consideration various provisions of the statute and judgments rendered by Supreme Court on question of law involved; and whether impugned judgment could be sustained in law in view of peculiar facts and circumstances of the case.

Shaikh Haider, Advocate Supreme Court and S.M. Abbas Advocate-on-Record for Petitioners.

Nemo for Respondents.

ORDER

RANA BHAGWANDAS, J.---Leave to appeal is sought against the judgment of a Division Bench of the Sindh High Court, dated 3-1-2000 allowing Income Tax Appeal No. 1.58 of,1998 and setting aside the order passed by Income Tax Appellate Tribunal (hereinafter referred to as the ITAT) on an application under section 186 of the Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance).

2. Respondent is a private limited company incorporated in 1963 with an authorized capital of Rs.10 million (Rs. 1,00,00,000) with the main object of manufacturing electric fittings. For raising the factory the company acquired four adjoining industrial plots in Korangi Industrial Area in the sum of Rs.2,42,069.27. Expenditure on construction work in the assessment year 1966-67 was Rs.30,495 in the assessment year 1966-67 was Rs. 30,495, in the assessment year 1967-68 it was Rs.36,698, in the assessment year 1969-70 it was Rs. 90,366 and in the assessment year 1970-71 it was Rs. 37,877. Boundary wall was constructed by spending a sum of Rs.59,911 while water connection was acquired by spending a sum of Rs.950. In 1997-98, respondent proposed to transfer the -plots and construction raised thereon to Hyesons, Concrete Products Limited and agreement was signed between the parties transferring the plots to the latter company against the shares. The: transaction was approved by the Controller of Capital Issues in June, 1977 but the same was withdrawn in July, 1979. The plots and construction were thus restored to the respondent-company who by its sale on 25-2-1987 acquired a capital gain of Rs.98,74,360. This income was declared in the annual return for the assessment. year 1988-89 on which income tax in the sum: of Rs.48,87,808 was levied as income from business by way of adventure in the nature of trade in terms of section 2(11) of the Ordinance.

3. After unsuccessful appeal before the Commissioner of Income Tax (Appeals), a second Appeal bearing No. 641/KB of 1988-89 was filed before the ITAT which was dismissed on 5-5-1996. Petitioner did not impugn this order by way of Income Tax Reference in terms of section 136 of the Ordinance as it then stood. However, respondent made an application under Rule 20 of the Income Tax Appellate Rules, 1981, which was dismissed by ITA vide order, dated 20-5-1997. Respondent instead of seeking remedy against this order before proper forum moved another application for rectification of the order, dated 5-5-1996 in terms of section 156 of the Ordinance which was rejected on 14-3-1998.

4. Finding no redress before the tax authorities as well as the ITAT respondent preferred Income Tax Appeal No. 158 of 1998 before the learned High Court of Sindh in which serious preliminary objections were raised as to the maintainability of the appeal and the bar of limitation but the learned members of the Division Bench proceeded to repeal the same and allowed the appeal by the impugned judgment, hence this petition.

5. After hearing Mr. Shaikh Haider, learned counsel for the petitioner we are inclined to grant leave to appeal to consider, inter alia, the following questions:--

(1) Whether the Income Tax Appeal tiled on 16-6-1998 against the original order, dated 5-5-1996 was time-barred and. could be C lawfully maintained?

(2) Whether the learned High Court failed to take into consideration various provisions of the statute and judgments rendered by this Court on the questions of law involved? and'

(3) Whether the .impugned judgment can be sustained in law in the peculiar facts and circumstances of the case?

6. Order accordingly.

S.A.K./C-12/SCLeave granted.