COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONES, PESHAWAR VS RIVER SIDE CHEMICALS (PVT.) LTD. GADOON
2008 P T D 1157
[Supreme Court of Pakistan]
Present: Abdul Hameed Dogar, C.J. and Muhammad Nawaz Abbasi, J
COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONES, PESHAWAR
Versus
Messrs RIVER SIDE CHEMICALS (PVT.) LTD. GADOON
Civil Petition Nos. 827-829 of 2007, decided on 19/12/2007.
(On appeal from the judgment dated 12-6-2007 passed by Peshawar High Court, Peshawar in T.R. No.159 of 2003).
Income Tax Ordinance (XXXI of 1979)---
----Second Sched., Part I, Cls. (122-C) & (118-C)---Exemption, grant of---Conditions---Grant of concession in the nature of exemption from payment of duties must be given strict interpretation and the person getting such benefit must satisfy all conditions for such exemption but once the required conditions are complied with, the exemption available to a person under the law cannot be taken away by the concerned authorities in their discretion.
Federation of Pakistan v. Zaman Cotton Mills 2001 SCMR 563 distinguished.
Mumtaz A. Sheikh, Member F.B.R. for Petitioner.
Nemo for Respondent.
Date of hearing: 19th December, 2007.
JUDGMENT
MUHAMMAD NAWAZ ABBASI, J.---These two connected petitions under Article 185(3) of the Constitution have been directed against the consolidated judgment dated 12-6-2007, involving common question of law and facts, rendered by a learned Division Bench of the Peshawar High Court, Peshawar in Tax References.
2. The precise question involved in the appeal before the Income Tax Appellant Tribunal, was whether the assessee would be entitled to tax holiday under Clause 122-C of Part-I of the 2nd Schedule to the Income Tax Ordinance, 1979 or his case would fall within the ambit of Clause 118-C of the said Schedule. The Tribunal having discussed the matter in detail, rendered its decision as under:
We have considered all the relevant facts and materials. It has been noted that originally exemption was allowed under clause(118-C) of Second Schedule to the Income-Tax Ordinance, 1979. While for subsequent year it was allowed under clause (122-C) of Part-I of Second Schedule to the Ordinance. In order to remove this mistake a rectification application under section 156 of the Ordinance was filed to claim that respondent-Company is exempt from payment of tax under clause (118-C) instead of clause (122-C). This application was turned down by assessing officer, while on appeal the First Appellate Authority accepted the plea of respondent-Company and allowed exemption under clause (118-C) of Second Schedule to the Ordinance, Department later on approached the Income Tax Appellate Tribunal and the matter was decided vide I.T.A. No.308 (PB) of 96-97 dated 17-2-1997 once again in favour of respondent-Company. Subsequently, a similar reference application under section 136(1) was also rejected by this Bench of the Tribunal. So, keeping this factual position of the case in view, where the question of exemption has been settled by this Tribunal and it was been held that the company is exempt under clause (118-C) of the 2nd Schedule to the Income Tax Ordinance, 1979, the questions (i) & (ii) became infructuous.
As regards 3rd question, while placing reliance on the decision of Karachi Bench vide I.T.A. No. 136/KB of 1998-99 dated 23-9-98 and I.T.A. No. 284/KB of 99-2000 dated 11-12-99 this Bench of the Tribunal has held that income earned from Bank deposits in the post production period is exempt from tax in the case of assessee .
Since, the legal position on the issue is absolutely clear, hence there is no need to refer this question to the Hon'ble High Court for its opinion. Therefore, the same is rejected.
Apart from it, these reference applications have been filed under subsection (1) section 133 of the new Income Tax Ordinance, 2001; while we are of the considered view that reference applications for assessment years under consideration should have been filed under subsection (1) of section 136 of the Income Tax Ordinance, 1979, for the reason that actually this Tribunal gave its finding under section 135 of the Income Tax Ordinance, 1979.
For the above reasons, these applications fail and are hereby rejected.
3. The petitioner being aggrieved of the decision of the Tribunal, filed a reference under section 133(1) of the Income Tax Ordinance, 2001, before the High Court raising the following question of law:--
(i) Whether on the facts and in the circumstances of the case, the ITAT was legally justified to confirm the order of the C.I.T.(A) who set aside the assessment on the issue of tax under section 80-D in the light of Honourable Supreme Court of Pakistan's decision on the grounds that the Honourable Supreme Court of Pakistan has deleted tax under section 80-D in those cases which are enjoying tax holiday under section 118-C whereas the case of the assessee enjoys tax holiday under section 122-C?
(ii) Whether on the facts and in the circumstances of the case the ITAT, Peshawar was legally justified in holding that clause (122-C) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979, is covered by section 6 of the Protection of Economics Reforms Act, 1992 whereas the said Act factually does not extend protection to the said clause?
(iii) Whether the ITAT, on the facts and circumstances of the case, was legally justified to delete tax under section 80-D whereas the Honourable Supreme Court of Pakistan had already given leave to appeal in a Civil Petition No. 2001 SCMR 563 in the case of Messrs Zaman Cotton Mills whose income is also exempt under section 122-C?
(iv) Whether on the facts and in the circumstances of the case, the L/ITAT, Peshawar was justified to direct the application of clause (118-C) of Part-I of the Second Schedule instead of clause (122-C) while assessee has already availed facilities under section 122-C?
(v) Whether, the ITAT, on the facts and circumstances of the case, was legally justified to confirm the order of the C.I.T.(A) by holding that interest income was business income and could not be subjected to tax whereas the same was taxable as a separate block of income under section 30 of the Income Tax Ordinance, 1979?
(vi) Whether the ITAT, on the facts and circumstances of the case, was legally justified to confirm the order of the L/C.I.T. (A) whereas the Honourable Sindh High Court Karachi in the case of C.I.T. v." Khairul Hayat Amin & Co. Limited has held that interest income is not a part of business income and is thus taxable under section 30 of the Income Tax Ordinance, 1979?
(vii) Whether, the ITAT, on the facts and circumstances of the case, was leally justified in holding that the reference application should have been filed under section 136(1) of the Income Tax Ordinance, 1979, instead of section 133 (1) of the Income Tax Ordinance, 2001, whereas the former statute stood repealed and the latter one had come into force w.e.f. 1-7-2002 by virtue of S.R.O. 381(I)/2002 dated June 15, 2002 reads with section 238 of the Income Tax Ordinance, 2001?"
4. The High Court disposed of the reference vide impugned judgment as under:--
In the case in hand, the respondent/assessee's case was finally assessed by the learned Tribunal under section 118C and not under clause 122-C, therefore, the judgment and order passed in Civil Appeal No. 1918/2000 Federation of Pakistan v. Zaman Cotton Mills is not applicable to the case in hand as no question of exemption under clause 122-C was left to be resolved.
In question No.1 it has been mentioned that the assessee enjoys tax holiday under clause 122-C. As mentioned above, the Tribunal has in clear words mentioned that the case of the assessee was finally assessed under clause 118-C rather than clause 122-C. With the said decision of the Tribunal question Nos. I and II have become irrelevant and not entertainable. Question No. III has been answered in the above paragraphs.
Question No. IV being not part of the origin Reference to the Tribunal, hence was not entertainable, however, for the clarification, it has been answered in the above paragraphs. Questions Nos. V to VI were either not pressed before the Tribunal or were not part of the original Reference, hence are not entertainable. All the questions are answered in the above terms.
5. Mr. Mumtaz A. Sheikh Member F.B.R., representing the department has contended that respondent is a private Limited Company which was incorporated in the registered name on 25-3-1990 and was deriving income from manufacturing and sale of detergent washing soap. The company was allowed benefit of section 122-C(Part-1) to the Schedule of Income Tax Ordinance, 1979, by the Deputy Commissioner Income Tax/Wealth Tax Companies Zone, Circle-2, Peshawar, on the start of commercial production whereas the assertion of the company was that it was entitled to the benefit of section 118-C of the schedule to the Ordinance. The company thus filed an application under section 156 of the Ordinance and on dismissal of the application, filed an appeal before Commission of Income Tax (A-I), Peshawar which succeeded and company was allowed benefit of Clause 118-C of the Second Schedule to the Income Tax Ordinance, 1979. The above order passed by the Commission in appeal was further upheld by the Appellate Tribunal as well as by the High Court in tax reference.
6. The departmental representative placing reliance on the judgment in CA No. 1918/2000, Federation of Pakistan v. Zaman Cotton Mills (2001 SCMR 563) contended that the impugned judgment/order of the learned High Court was contrary to law firstly for the reason that in the case of Zaman Cotton Mills (supra) leave was granted by this Court to consider the question whether that tax liability determined under section 80-D of the Income Tax Ordinance, 1979, was legal and the assessee could avail the benefit of tax holiday under Clause 122-C supra and secondly, whether Tribunal was right in holding that protection of section 6 of the Economic Reforms Act 1992 was extendable to clause 122-C of Part-I of the Second Schedule to the Income Tax Ordinance, 1979. In nutshell, Mr. Mumtaz Sheikh, argued that in the facts and circumstances of the present case, .the view taken by the Tribunal and High Court that company was entitled to the benefit of clause 118-C of Part-I of the Second Schedule to the Ordinance was based on misconception of law. The next point asserted before us was that after repeal of Income Tax Ordinance, 1979, the reference application under the said Ordinance was not maintainable.
7. We have heard Hafiz S.A. Rehman, learned Senior Advocate Supreme Court for the respondents as well as Mr. Mumtaz A. Sheikh, learned Member (Legal) F.B.R. and have considered their respective arguments in the light of record as well as relevant provisions of Customs Act, 1969. The bare perusal of the impugned judgment shows that the answers to the questions, raised before the Tribunal and the High Court were free from any ambiguity as it is apparent on record that the case of respondent/assessees was assessed under clause 118-C and not under clause 122-C of Part-I to the Second Schedule to the Income Tax Ordinance, 1979. The proposition involved in Federation of Pakistan v. Zaman Cotton Mills (2001 SCMR 563) having no nexus with the point in issue in the present case, may not be helpful to resolve the controversy whether the company was entitled to exemption under clause 118-C, Part-I to the Second Schedule of Income Tax Ordinance, 1979 or not? Be that as it may, the assessment of the company under clause 118-C referred to above, would make the certain question raised therein, irrelevant and learned counsel for the petitioner has not been able to satisfy us that in the facts and circumstances of the present case, the assessee was not entitled to the benefit of clause 118-C ibid. The assertion of the Department that the initial assessment of the company under clause 122-C was based on the factual consideration in the light of which the claim of assessment under clause 118-C ibid was beyond the scope of law was not substantiated and supported by a legal and valid reason calling interference of this Court in the concurrent judgment rendered by the Tribunal and the High Court in the matter. There is no cavil to the proposition that the grant of concession in the nature of exemption from payment of duties must be given strict interpretation and the person getting such benefit must satisfy all conditions for such exemption out once the required conditions are complied with, the exemption available to a person under the law cannot be taken away by the concerned authorities in their discretion.
8. We having considered the matter in the light of relevant provisions and the questions raised before the Tribunal as well the High Court, have not been able to find out any justification for interference in the impugned judgment and consequently, for the reasons given above, find that the High Court has not committed any illegality or irregularity in answering the questions raised before it in the impugned judgment, therefore, these petitions being without any substance are accordingly dismissed.
M.B.A./C-2/SCPetitions dismissed.