FEDERATION OF PAKISTAN through Secretary Finance, Finance Division, Islamabad and others VS Messrs ZAMAN COTTON MILLS LTD., 2007 PTD-SUPREME-COURT 1999 (2006)

(On appeal from the judgment, dated 29-4-1999 and 1-11-2000 of the Peshawar High Court, Peshawar passed in Writ Petition No.1404 of 1999, 58, F.A.Os. Nos. 60, 63, 59, 62 and 64 of 2000).

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-CC & 80-D---Protection of Economic Reforms Act (XII of 1992), Ss. 2(1)(b) & 6---Exemption from minimum tax under S.80-C of Income Tax Ordinance, 1979---Entitlement---Establishment of industries in tax exempted area in pursuance of S.R.O. 60(I)/87, dated 20-1-1987---Incentive for investment granted to assessee in pursuance of S.R.O. 1283(I)/90, dated 13-12-1990 as provided in Second Sched. to S.6 of Protection of Economic Reforms Act, 1992---Whether assessee fulfilled conditions of S.R.O. 1283(I)/90 being a question of fact, would be decided by authority concerned while keeping in view provisions of S.2(b) read with Second Sched. to S.6 of Protection of Economic Reforms Act, 1992 read with Ss. 80-CC & 80-D of Income Tax Ordinance, 1979 and observations made by Supreme Court in PLD 1997 SC 582, para. 54.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/.O Finance, Islamabad and 6 others PLD 1997 SC 582 rel.

Muhammad Ilyas Khan, Senior Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Appellants (in C.A. No. 1819 of 2000).

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate-on-Record for Appellants (in C.A. Nos. 678 to 683 of 2003) with Mumtaz Ahmed, Member (Legal (C.B.R).

Raja Muhammad Akram, Senior Advocate Supreme Court for Respondents (in C.A. No. 1819 of 2000).

M. Sardar Khan Senior Advocate Supreme Court for Respondents (in C.A. No. 678 to 683 of 2003).

ORDER

IFTIKHAR MUHAMMAD CHAUDHRY, C.J.---These appeals, by leave of this Court are directed against the judgment, dated 29-4-1999 and 1-1 1-2000 of a learned Division Bench of the Peshawar High Court, Peshawar, whereby following questions were framed:--

(i) Whether on the facts and in the circumstances of the case, the learned ITAT, Peshawar Bench, Peshawar was justified to hold that the exemption under clause 122-C falls under section 6 of the Economic Reforms Act, 1992 and is therefore, protected from tax under section 80-D and 80-CC despite the fact that clause 122-C of the second schedule is not covered by "The Schedule" to section 6 and the notification mentioned in .the schedule to section 6 of the Protection of Economic Reforms Act, 1992.

(ii) Whether on the facts and circumstances of the case the L/ITAT was legally justified and right in holding that WWF is not leviable in case of industrial establishment whose income is exempt under Income Tax Ordinance, 1979."

2. Principal controversy in the instant appeals is whether respondent assessees are entitled for exemption from the minimum tax under section 80-D of the Income Tax Ordinance, 1979. In this behalf, it may be noted that the respondents-have established their Industries in the areas where the tax was exempted in pursuance of a notification S.R.O. 60(I)/87, dated 20-1-1987 subject to the conditions prescribed therein, Subsequent thereto, the Protection of Economic Reforms Act, 1992 was promulgated which provided protection of incentive granted to various assessees in pursuance of two notifications mentioned in the Schedule appended thereto. The one relating to the exemption of Income Tax was No. S.R.O. 1283(I)/1990, dated 13-12-1990. For the purpose of availing the protection thereunder, under section 6 of the Act provided that these fiscal incentives for investment provided by the Government through the statutory order listed in the Schedule of otherwise notified shall continue in force for the term specified therein and shall not be altered to the disadvantage of the investors. It so happened that prior to issuance of the Act, 1992, section 80-D was incorporated in the repealed Ordinance of 1979 through Finance Act, 1991. Learned counsel for the appellant stated that the High Court had not followed the provisions of section 6 of Act, 1992 strictly in pursuance whereof only those incentives were available in respect whereof a notification has been issued on and after the 7th of November, 1990 in terms of section 2(1)(b) of the Act, therefore, assessees are liable to pay minimum tax.

3. On the other hand, Raja Muhammad Akram, learned Senior Advocate Supreme Court and other counsel appearing on behalf of the assessees stated that this question has been dealt with by this Court in the case of Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/O Finance, Islamabad and 6 others (PLD 1997 SC 582), therefore, according to them, they are protected from the payment of the minimum tax as well under section 80-D or for that matter under section 80-CC. In, this behalf it may be noted that this:--

"(54) In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a genute. hi this view of the matter, assessees who fulfil the conditions of the notifications referred to in the Schedule to section 6 of Act, XII of 1992, are entitled to the protection. The question, as to whether a particular assessees fulfil the conditions of the above notifications, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance and not by this Court. However, in order to eliminate multiplicity of litigation and to avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not argued before the High Court .as we do not find any mention in any of the judgments under appeal."

4. It may be noted that in the above paragraph, it has been stated that if the question of fact whether the assessees/respondents fulfilled the condition of the notification mentioned iii Second Schedule (Notification, dated 13-12-1990), therefore, we consider it appropriate to remand the case to the concerned Authority for re-examining the, cases of the assessees keeping in view the provisions of section 2(b) read with section 6 of the Second Schedule of the Protection of Economic Reforms Act, 1992 read with sections 80-CC and 80-D of the repealed Income Tax Ordinance, 1979 as well as observations made by this Court in the para. which has been reproduced hereinabove after providing opportunity of hearing to all concerned.

5. Thus with the above observations, the appeals wile allowed, impugned order is set aside and the cases are remanded to the competent authority for decision in accordance with law.

S.A.K./F-3/SCCases remanded.