VS

2010 P T D (Trib.) 1127

[Income-tax Appellate Tribunal Pakistan]

Before Raja Lehrasab Khan, Judicial Member and Muhammad Iqbal Khan, Accountant Member

I.T.A. No. 281/LB of 2008, decided on 30/10/2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeals by Appellate Tribunal-Limitation--Non-passing of order within six months---Effect---Legislature had not prescribed limitation period for the decision of Appellate Tribunal and it could not be said that provisions of S.132(2A) of the Income Tax Ordinance, 2001 contained express limitation period for decision of Appellate Tribunal---Had it been the intention of legislature to prescribe limitation period for decision of Appellate Tribunal, it would have done so by the express provision---Legislature had not prescribed any consequence if the order is not passed by the Appellate Tribunal within six months of the filing of appeal.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.221(1) & (3)---Rectification of mistake---Limitation---Law had made it binding on the First Appellate Authority to pass an order an a rectification application filed under the provision of S.221 of the Income Tax Ordinance, 2001 before the expiration of the financial year next following the date on which the mistake was brought to their notice failing which the mistake shall be treated as rectified---While the Appellate Tribunal was authorized to rectify its order is subsection (1) of S.221 of the Income Tax Ordinance, 2001, it was specifically excluded from operation of limitation period prescribed in sub-section (3) of S.221 of the Income Tax Ordinance, 2001.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss. 132(2A) & 221(3)---Disposal of appeal by Appellate Tribunal---Rectification of mistake---Comparison of the provisions of S.132(2A) of the Income Tax Ordinance, 2001 with the provisions of S.221(3) of the said Ordinance, revealed that there was no such express provision in S.132(2A) of the Income Tax Ordinance, 2001 for deeming order or relief to be allowed to the taxpayer---Said provision squarely enunciate the intention of the legislature that through provisions of S.132(2A) of the Income Tax Ordinance, 2001 no such relief was intended to be given to the taxpayer.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeal by Appellate Tribunal---Nature of the relevant provisions whether mandatory or directory---Legislature had not set forth any consequences of failure to comply with provision of S.132(2A) of the Income Tax Ordinance, 2001, therefore, the provision of S.132 (2A) were not mandatory but directory in nature.

2008 PTD 60 and 2000 PTD 2872 rel.

(e) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeal by AppellateTribunal---Provisions of S.132(2A) of the Income Tax Ordinance, 2001 squarely fell within definition of `directory provision'.

2008 PTD 60 and 2000 PTD 2872 rel.

(f) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeal by Appellate Tribunal---Limitation---Deeming relief---Contention of the taxpayer regardingdeeming relief to taxpayer in failure of Appellate Tribunal to pass order within six months of the filing of appeal was illogical and unpractical on the ground that (for arguments sake) if the appellant before the Appellate Tribunal was the department and the Appellate Tribunal fails to pass order within six months of the filing of appeal by the department then appeal of the department will be deemed to have been allowed confirming tax demand created by the department which will neither be a legal nor acceptable situation for the taxpayer.

(g) Income-tax---

----Limitation---There was no time limitation for illegal order.

Pakistan Electric Fitting Manufacturing Company Ltd. through Directors v. C.I.T. and others 2000 PTD 2407 rel.

(h) Interpretation of Statutes---

----Fiscal statute---Principle of strict construction of fiscal statute is applicable to charging provisions and does not apply to machinery provisions.

2002 PTD 441 rel.

(i) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeals by Appellate Tribunal---Provisions of S.132(2A) of the Income Tax Ordinance, 2001 are machinery provision and to say that order not passed by the Appellate Tribunal within six months of filing of appeal would become time-barred, would be against the principles of interpretation of statute.

Pakistan Electric Fittings Manufacturing Company Ltd. through Directors v. CIT and others 2000 PTD 2407 and 2002 PTD 441 rel.

(j) Income Tax Ordinance (XLIX of 2001)---

----Preamble---Deeming provisions---Scope---Deeming provisions in the Income Tax Ordinance, 2001 are meant for specific purposes and they are specifically mentioned in various provisions of the Ordinance---Where there is no deeming provision anything cannot be construed as deemed to be done, as by doing so, one will go beyond the scope of the provisions of law.

PLD 1970 SC 29 rel.

(k) Interpretation of Statutes--

----Deeming provision---Construction of---While interpreting a deeming clause in a statute the court is bound to ascertain for what purpose and object the provision had been enacted.

PLD 1970 SC 29 rel.

(l) Interpretation of Statutes---

----Deeming provision---Effect---Effect of deeming provision is restricted to the section to which it is attached---Deeming provision cannot be interpreted or enlarged to other provisions of the statute.

2002 PTD 2112 rel.

(m) Interpretation of statutes---

----Deeming provision---Deeming provision in a statute cannot spill over to other provisions in a statute and is to be construed strictly within the four corners of its objects.

2002 PTD 2112 rel.

(n) Income Tax Ordinance (XLIX of 2001)---

----S. 132(2A)---Disposal of appeals by appellate Tribunal---Limitation--Deeming provision---Since there was no deeming provisions in S.132(2A) of the Income Tax Ordinance, 2001 for deeming relief in case of failure of Appellate Tribunal not to pass orders within six months of filing of appeal the contention of taxpayer for deeming relief was not sustainable in law---Deeming relief and limitation period in case of failure of the Appellate Tribunal to pass order within six months of filing of appeal was misdirected and not sustainable in law and was rejected by the appellate Tribunal.

PLD 1970 SC 29 and 2002 PTD 2112 rel.

(o) Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-IV, Cl.3A---Exemption and tax concession---Tax year, 2004---Income on account of waiver of mark up---Taxation of---Taxpayer contended that benefit of Cl.3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 should be allowed with retrospective effect for charge year, 2004---Department contended that unless specifically provided in law, the provisions of enactment could not be applied with retrospective effect specifically when the enactment relates to charging provision of law---Enactment was in the nature of charging provision it could not be applied retrospectively---Validity---Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was enacted vide Finance Act, 2004 which exempted income derived on account of waiver of profit on debt or the debt itself---No retrospective effect was given by the legislature to the said clause, exemption as such was applicable me. f. 1-7-2004 from tax year, 2005---Provisions of law granting exemption were to be strictly followed and to give retrospective effect to the same would be against the law---Assessing Authority had rightly taxed the income on account of waiver of mark-up in the case of taxpayer and the First Appellate Authority had also rightly upheld the order of Assessing Authority---Appellate Tribunal declined to interfere in the order of First Appellate Authority on the issue---Appeal of the taxpayer was dismissed by the Appellate Tribunal being not maintainable in law.

48 STC 466 (SC) and 1992 PTD 1681 ref.

48 STC 466; 1971 PTD 200; 1970 PTD 127; (1959) I-Tax (111-207) (SC Pak); Abdul Rehman v. Federation of Pakistan 2002 PTD 804 (H.C. Kar.); 2003 PTD 589; 2006 SCMR 1577 = 2006 PTD 2331 and 2005 PTD 830 rel.

(p) Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-IV Cl.3A---Exemption and tax concessions---Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was enacted through Finance Act, 2004 and it was effective from 1-7-2004 and benefit could not be given retrospectively---Since the Cl.3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was effective from 1-7-2004 the scope of remedial provisions incorporated could not be enlarged to cover periods not expressly falling under the exemption ambit.

48 STC 466 rel.

(q) Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-IV, Cl. 3A---Exemption and tax concessions---Retrospective effect---Fiscal statute should be construed strictly and the effect of Cl. 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 enacted through Finance Act, 2004, could not be given retrospectively.

(r) Interpretation of Statutes---

----Where the language of any statute or legal document is clear, the same has to be acted upon accordingly.

Abdul Rehman v. Federation of Pakistan 2002 PTD 804 rel.

(s) Interpretation of Statutes---

----While interpreting a fiscal statute there is no room for any intendment, interference or presumption.

2003 PTD 589 rel.

(t) Income Tax Ordinance (XLIX of 2001)---

----Second Sched., Part-IV, Cl.3A---Exemption and tax concessions---Retrospective effect---Construction of provisions relating to exemption and tax concessions---Scope---Provisions of Cl. (3A) of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 could not be construed or interpreted in a manner to give them retrospective effect.

(u) Interpretation of Statutes---

----Fiscal statute---Exemption provisions---Interpretation of---In case of exemption, law had to be interpreted strictly and not liberally in favour of assessee---Exemption was not to be extended to assessee unless specifically so provided in law.

2006 SCMR 1577 = 2006 PTD 2331 rel.

Ameenudin Ansari for Appellant.

Tariq Mustafa D.R. for Respondent.

ORDER

This appeal has been filed by the Taxpayer against the decision of the learned CIT(A) given vide her Orders No.63, dated 14-12-2007 for Tax Year, 2004. The grounds of appeal filed by the appellant are reproduced below:---

"That the order passed under section 122(5A) of the Income Tax Ordinance, 2001 by the learned Additional Commissioner of Income Tax is bad in law and erroneous on facts.

(2) That the learned Additional Commissioner of Income Tax was not justified to reject the exemption claimed under Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 in respect of waiver of mark-up under State Bank of Pakistan BPD Circular No.29 of 2002, dated October, 15, 2002 amounting to Rs.42,766,374.

(3) That the exemption claimed under Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 had wrongly interpreted as is not available retrospectively. The Supreme Court had in number of cases had decided that the remedial law be given retrospective operation. Accordingly the specific exemption provided under Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 is available to the appellant in respect of mark-up under State Bank of Pakistan BPD Circular No.29 of 2002, dated October, 15,2002 under section 70 of the Income Tax Ordinance, 2001.

(4) The appellant craves your permission to add, alter amend or delete any ground at or before the time of hearing."

2. On the date of hearing the taxpayer was presented by Mr. Ameenuddin Ansari Advocate while Mr. Tariq Mustafa attended as D.R.

3. Brief facts of the case as transpired from the record are that the taxpayer filed return income for Tax year, 2004 declaring income of Rs.814,064. The assessment was deemed to have been finalized under the provisions of section 120 of the Income Tax Ordinance, 2001. The Additional Commissioner of Income Tax found the deemed assessment erroneous in so far as prejudicial to the interest of Revenue and he issued show cause notice to the taxpayer as under;--

"On examination of your case record for the Tax year, 2004 revealed that you have declared income from mark-up amounting to Rs.42,766,374 and claimed it exempt under State Bank of Pakistan, Circular No.29 of 2002. The exemption claimed under State Bank of Pakistan, Circular is not allowable under Income Tax Ordinance and same is to be disallowed under section 70 of Income Tax Ordinance, 2001 and mark-up is be treated and taxed as income from business."

4. Counsel for the taxpayer filed reply to the above stated show-cause notice which is responded as under:--

"Reference is made to you notice under section 122(9) of the Income Tax Ordinance, 2001 along with letter No. Addl. CIT/Audit/Div-I/Cos-III/2007-08/71 both, dated August, 11, 2007 showing your intention to tax reversal of unpaid markup vide State Bank of Pakistan BPD Circular No.29 of 2002, dated October, 15, 2002 under section 70 of the Income Tax Ordinance, 2001. In this connection we draw your attention to Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 which specifically provide exemption of this income under section 70 of the Income Tax Ordinance, 2001.

In view of the above you would understanding the notice issued based on the misunderstanding which may be withdrawn with intimation to our client and oblige."

5. The Additional Commissioner of Income Tax in his amended assessment order passed under section 122(5A) of the Income Tax Ordinance, 2001 not finding the explanation of the taxpayer satisfactory again issued letter No.76, dated 20-8-2007 as under:--

"In this connection your attention is drawn to the fact that Clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 was inserted through the Finance Act, 2004 effective from 1-7-2004 i.e. period relevant to Tax year, 2005. In view of above the benefit of Clause 3A is not allowable in your case as the period involved is prior to the insertion of Clause 3A of Part-I V to Second Schedule, therefore, the exemption claimed under State Bank of Pakistan Circular is not allowable under Income Tax Ordinance, 2001."

6. The tax adviser of the taxpayer Messrs Aziz Associates vide their letter No.12-34-1329-2007, dated 25-8-2007 requested for adjournment which was granted upto 1-9-2007 but on due date no one attended.

7. The Additional Commissioner of Income Tax amended the order under section 121(1)/125 of the Income Tax Ordinance, 2001 as under: --

"In view of above, the assessment is amended by rejecting the exemption claimed on mark-up waived under State Bank of Pakistan Circular 29 of 2002 as exemption is not allowable under any provision of Income Tax Law during the tax year and same is disallowed under section 70 of Income Tax Ordinance, 2001 and taxed as income from business.

The assessment is amended as under:--

Income as per return

Rs. 814,064

Exemption claimed on waiver

Of mark-up disallowed as

Discussed above

Rs. 42,766,374

Revised Income

Rs. 43,580,438

Tax Calculation

-Tax on income Rs.700,000

Rs. 119,000

-Tax on balance

Rs.42,880,438

@ 35%

Rs. 15,080,153

Total Tax payable

Rs. 15,199,153

8. Being aggrieved with the above treatment, the taxpayer went in appeal before the learned CIT(A) and the learned CIT(A) decided the issue in favour of the revenue with the following observations:

"The matter has been considered. However, I find little force in the contentions of the learned AR. Even in remedial law, the intention of the legislature is to be ascertained through the appropriate wordings of the enactment. But here the enactment through Finance Act, 2004, clearly allows exemption in accordance with the State Bank Circular effective from Finance Act, 2004 for the period extending from 1-7-2004 and whenever any remedial provisions are incorporated they cannot be interpreted in two ways to restrict the scope of the charging section of the Ordinance for periods not expressly falling under the exemption ambit as laid down by the citation 48 STC 466 (SC). The question that needs adjudication is, as to when a statute becomes retrospective? The answer is clearly given through various judicial interpretations that a statute is retrospective when it takes away or impairs any vested right acquired under the existing Laws. In this context, the exemption was provided to those debts under Clause 3A which could not be otherwise set off against losses and such enactments cannot have retrospective effect unless expressly intended for retrospective effect. In the above context the enactment has rightly been termed by the Taxation Officer to take effect prospectively and not retrospectively. As such, there being no force in the contention of the learned AR the order of taxation officer stands confirmed and is upheld.

The appeal being devoid of any merits fails and is hereby rejected."

9. Being aggrieved with the order of the learned CIT(A), the taxpayer filed appeal before this appellate forum. During proceedings before this Court the learned counsel for the taxpayer initially raised legal objection stating that the decision to be made by the learned ITAT has become time-barred. He referred to provisions of subsection (2A) of section 132 of the Income Tax Ordinance, 2001. For convince the cited provisions of law is reproduced as under:

"Section 132(2A)

"The Appellate Tribunal shall decide the appeal within six months of its filing."

10. The counsel for the taxpayer contended that as per record of the learned ITAT available on the file of the taxpayer, the appeal was filed in the learned ITAT Karachi on 12-4-2008. It was contended by the learned counsel for the taxpayer that as more than six months have elapsed since the filing of appeal, the relief sought in the grounds of appeal, by the taxpayer shall be deemed to have been allowed to the taxpayer.

11. He further contended that when an appeal is filed before the appellate authority it is thrown open and order for the subordinate authority then does not hold the field. He relied upon judgment of the Honourable Supreme Court of Pakistan reported a 1992 PTD 1681 and referred to the following portion of the judgment.

...Assessment...Assessment orders as such do not have touch of finality unless all the forums are exhausted in which such orders can be challenged, so that the orders take the shape of final decisions. Assessment orders as such do not have touch of finality unless all the forums are exhausted in which such orders can be challenged so that the orders take the shape of final decision.

Order of assessment passed by Income Tax Officer is an order of original authority but is not final for the reason that it can be challenged in appeal or revision as the case may be and would be final only when it goes through all the forums and finding of the last forum shall be binding as conclusive.

Legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceedings.

When an appeal is filed against an assessment order before the A.A.C. the assessment is thrown open and the appellate proceedings constitute a continuation of the assessment proceedings.

The legislature when it provides a hierarchy of tribunals for the determination of a dispute is really providing one complete procedure for such determination, proceedings before different tribunals being only steps in this procedure.

Order passed in original proceedings is not final unless it crosses all the forum set up under that law in which it can be challenged and the order of the last forum would become final.

Garikapati Veeraya v. N. Subbiah Chaudhry and others PLD 1957 SC (Ind) 443; Commissioner of Wealth Tax v. Vimlaben Vadilal Mehta (1984) 145 ITR 11; F.A. Khan v. The Government of Pakistan PLD 1964 SC 520 and Chatturam and others v. Commissioner of Income Tax, Bihar (1947) 15 ITR 302 ref.

R.K. Garg v. Union of India and others 1982 SC Cases (Tax) 30 distinguished."

12. The learned counsel contended that since the order of the Taxation Officer after filing pf appeal in the learned ITAT did not hold ground and the learned ITAT did not pass order within stipulated period of six months of the filing of appeal, the relief prayed for by the taxpayer shall be deemed to haven been allowed.

13. The learned counsel of the Taxpayer also referred to judgment ,of the honourable Lahore High Court cited as 2008 PTD 60 and referred to the following paras of the judgment:--

"---Sections 36, proviso [as added by Finance Ordinance (XXI of 2000) and amended by Finance Act (I of 2003)], section 45(2) [as added by Finance Act (III of 2006)]---Initiation of proceedings for recovery of tax not levied or short-levied or erroneously refunded---Limitation---Period of 45 days prescribed for completion of adjudication proceedings by Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2006---Not directory, but mandatory---Principles.

The claim of the Revenue that the prescribed limitation of 45 days for completion of adjudication proceedings as provided through Finance Ordinance, 2000 and enhanced to 90 days by Finance Act, 2006 is merely directory cannot be accepted. Where inaction on the part of a public functionary within the prescribed time is likely to affect the rights of a citizen only within the prescribed time, it is mandatory. The acceptance of the law redundant and nugatory. Redundancy or superfluity of an Act of Parliament and a provisions of law cannot be readily accepted. All the moreso when the prescribed limit is beneficial for the citizen and restricts the executive power touch the pocket of a taxpayer thereby creating certainty, then after its expiry, even if there was a good case for creation of liability, he will not be dragged in."

14. The learned counsel for the taxpayer contended that in view of above judgment of the honorable Lahore High Court it has become clear that the provisions of section 132(2A) are mandatory and therefore, the learned Tribunal was under legal obligation to pass order on the appeal filed by the taxpayer on 12-4-2008 within six months of the filing of appeal.

15. The learned DR however contended that the learned counsel for the taxpayer has misconstrued the provisions of section 132(2A) which are of directory nature meant for expeditious disposal of appeals by the learned ITAT and this provisions have got nothing with limitation. He argued limitation is generally for Revenue Officers who charge taxes and not appellate fora.

16. We have heard the learned counsel for the taxpayer and DR from the department and have gone through the reported judgments of the honourable Superior Courts carefully. We do not agree with contention of the learned counsel of the taxpayer that under the provisions of section 132(2A) if the order is not passed by the learned ITAT within six months of filing of appeal, the relief prayed for by the taxpayer shall be deemed to have been allowed to the taxpayer on the following grounds.

17. The case-law quoted supra by the learned counsel for the taxpayer as 1992 PTD 1681 and relevant para. which has been reproduced above does not support the contention of the counsel for the taxpayer that the relief prayed for by the taxpayer shall be deemed to have been allowed if the learned ITAT does not pass order within six months of filing of appeal.

18 Their lordships in the above judgment have observed that order of the Income Tax Officer is not final for the reason that it can be challenged in appeal and would be final only when its goes through all the forums in which such orders can be challenged so that the orders take the status of final decision and finding of the last forum shall be binding as conclusive. The observation that when an appeal is filed, the case is thrown open has been clarified by the succeeding line in the judgment that appeal proceedings constitute a continuation of the assessment proceedings. All the above observations of the honourable Supreme Court of Pakistan nowhere impose the limitation period.

19. The legislature has not prescribed limitation period for the decision of the learned ITAT and it cannot be said that provisions of section 132(2A) contain express limitation period for decision of the learned ITAT. Had it been the intention of the legislature to prescribe limitation period for decision of the learned ITAT, it would have done so by the express provision of law. The legislature has not prescribed any consequence if the order is not passed by the learned ITAT within six months of the filing of appeal.

20. Wherever the legislature has wanted to prescribe limitation period for any action under the provisions of Income Tax Ordinance, 2001, it has done so by incorporating specific provisions. Example can be given of provisions of subsection (3) of section 221 which are reproduced as under:--

"Section 221. Rectification of mistakes.---(1) The Commissioner, the Commissioner (Appeals) or the Appellate Tribunal may, by an order in writing, amend any order passed by him to rectify any mistake apparent from the record on his or its own motion or any mistake brought to his or its notice by a taxpayer or, in the case of the Commissioner (Appeals) or the Appellate Tribunal, the Commissioner."

(3) Where a mistake apparent on the record is brought to the notice of the Commissioner or Commissioner (Appeals), as the case may be, and no order has been made under subsection (1) before the expiration of the financial year next following the date on which the mistake was brought to their notice, the mistake shall be treated as rectified and all the provisions of this Ordinance shall have effect accordingly."

21. Perusal of the above provisions of law would reveal that the law made it binding on the Commissioner or Commissioner (Appeals) to pass an order on a rectification application filed under the provisions of section 221 of the Income Tax Ordinance, 2001 before the expiration of the financial year next following the date on which the mistake was brought to their notice failing which the mistake shall be treated as rectified. But while Appellate Tribunal was authorized to rectify its order in subsection (1) of section 221, it was specifically excluded from operation of limitation period prescribed in subsection (3) of section 221 of the Income Tax Ordinance, 2001.

22. When we compare the provisions of section 132(2A) of the Income Tax Ordinance, 2001 with the provisions of section 221(3) of the Income Tax Ordinance, 1979 there is no such express provision in section 132(2A) for deeming order or relief to be allowed to the taxpayer. This squarely enunciate the intention of the legislature that through provisions of section 132(2A) no such relief was intended to be given to the taxpayer as requested by the counsel of the taxpayer.

23. It is further to be noted that legislature has not set forth any consequences of failure to comply with provision of section 132(2A) of the Income Tax Ordinance, 2001. In our considered opinion therefore the provisions of section 132(2A) of the Income Tax Ordinance, 2001 are not mandatory but directory in nature. Our view finds strength from the judgment of High Court of AJ&K cited as 2000 PTD 2872 wherein their Lordships observed as under:

"No universal rule or absolute test existed for determining whether a provision of law was mandatory or directory and it was to be determined according to the intention of the Legislature and the language which had been used in the provision. Ordinarily, where consequences of failure to comply with certain provisions were not stated those were to be deemed to be directory, and where the consequences were specifically mentioned, the provision was mandatory. Statute, as a general rule was understood to be directory when it contains matter merely of directions but it was construed as mandatory when those directions were followed up by an express provision that in default of following them, he had to face the consequences, provision was mandatory if its disobedience entailed a serious legal consequence."

24. We would also refer to the judgment of the honorable Lahore High Court cited as 2008 PTD 60, wherein their lordships have elucidated the difference between the directory and mandatory provisions of law very clearly with the following observations:

"Where inaction on the part of a public functionary within the prescribed time is like to affect the rights of a citizen, the prescription of time is deemed directory. However, where a public functionary is empowered to create liability against a citizen only within the prescribed time, it is mandatory."

25. In our opinion the answer to the legal objection regarding provisions of section 132(2A) cannot be given in more clear words than given by their lordships in above two judgments.

26. Looked into the context of interpretation of statutes as given by their lordships in above cited case, provisions of section 132(2A) in our considered opinion squarely falls within definition of directory provision.

27. The contention of the learned counsel for the Taxpayer regarding deeming relief to the taxpayer in failure of the learned ITAT to pass order within six months of the filing of appeal is also illogical and unpractical on the ground that for arguments sake if the appellant before the learned ITAT is the department and if the learned Tribunal fails to pass order within six months of the filing of appeal by the department then appeal of the department in above circumstances will be deemed to have been allowed confirming tax demand created by the department. Will it be a legal and acceptable situation for the taxpayer?

28. Some other situation may arise and that is either the department has created a liability against the taxpayer which is clearly against the provisions of law or the taxpayer has claimed an exemption of income which is again clearly against the provisions of law, will the failure of the learned ITAT in passing order within the six months of filing of appeal result in deeming order confirming automatically plea of the department or plea of the taxpayer for the illegal action? The superior Courts have therefore, rightly held there is no time limitation for illegal order. Reliance can be placed on a case-law cited as under:--

"Pakistan Electric Fittings Manufacturing Company Ltd. through Directors v. CIT and others 2000 PTD 2407.

The principle of law that orders in contravention to mandatory provision of law are a nullity and no limitation runs against such order seems well settled, in this respect reference is invited to Khawaja Muhammad v. Marduman Babar Kabol 1987 SCMR 1543, also Ali Muhammad v. Hussain Bukhsh PLD 1976 SC 37."

29. It may further be pointed out that the Superior Courts have held that the principle of strict construction of fiscal statute is applicable to charging provisions and does not apply to machinery provisions. Reliance is placed on' reported judgment of honorable High Court of Karachi cited as 2002 PTD 441 in the case of Deans Associates (Pvt.) Ltd. v. IAC of Income Tax wherein their Lordships observed as under:

"Principle of strict construction of fiscal statute is applicable only to taxing provisions such as charging provisions and not to those parts of statute which contain machinery provisions as per principle laid down in 1980 Tax LR 185."

30. In our opinion the provisions of section 132(2A) which are machinery provision in nature are squarely covered also by the judgment of the honorable High Court Karachi quoted supra and therefore to say that order not passed by the learned ITAT within six months of the filing of appeal would become time-barred, would be against the principle of interpretation of statues as laid down by the Superior Courts.

31. No doubt there are deeming provisions in Income Tax Ordinance, 2001 but they are meant for specific purposes and they are specifically mentioned in various provisions of the Ordinance. Accordingly where there is no deeming provisions, anything cannot be construed as deemed to be done as by doing so one will go beyond the scope of the provision of law. Our view finds strength from observation of the honourable Supreme Court of Pakistan in reported judgment cited as PLD 1970 SC 29 wherein their lordships observed that while interpreting a deeming clause in a statute the Courts are bound to ascertain for what 'purpose and object that the provision has been enacted.

32. It my further be mentioned that effect of deeming provision is restricted to the section to which it is attached and therefore deeming provision cannot be interpreted or enlarged to other provisions of the statute. The honourable High Court Lahore in a reported judgment cited as 2002 PTD 2112 observed that it is a settled law that deeming provisions in a statute cannot spill over to other provisions in a statute and are to be construed strictly within the four corners of their objects.

33. Since there are no deeming provisions in section 132(2A) for deeming relief in case of failure of the learned ITAT not to pass orders within six months of filing of appeal, therefore, the contention of the learned counsel for the taxpayer for deeming relief is not sustainable in law.

34. Keeping in view all the above discussion and various case-laws of the honourable Superior Courts, the legal plea taken by the learned counsel for the taxpayer for deeming relief and limitation period in case of failure of the learned ITAT to pass order within six months of filing of appeal is misdirected and not sustainable in law and therefore, is hereby rejected.

35. Now we take up the ground of appeal of the taxpayer on the issue of rejection of exemption claimed on income from waiver of mark up amounting to Rs.42,766,374 under clause 3A of Part-IV of Second Schedule to the Income Tax Ordinance, 2001. The Additional Commissioner of Income Tax however taxed the same under the provisions of section 70 of Income Tax Ordinance, 2001.

36. It would be expedient to reproduce provisions of section 70 and Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 which relate to the issue involved: They are reproduced below:

(a) "Section 70 of Recouped expenditure.---Where a person has been allowed a deduction for any expenditure or loss incurred in a tax year in the computation of the person's income chargeable to tax under a head of income and, subsequently, the person has received, in cash or in kind, any amount in respect of such expenditure or loss, the amount so received shall be included in the income chargeable under that head for the tax year in which it is received."

(b) Clause 3A of Part-IV of the Second Schedule.

"Clause (3A) The provisions of subsections (5) and (5A) of section 34 and section 70 shall not apply to any benefit derived by way of waiver of profit on debt or the debt itself under the State Bank of Pakistan, Banking Policy Department's Circular No.29 of 2002, dated the 15th October, 2002, to the extent not set off against the losses under Part-VIII of Chapter III."

37. The taxpayer has claimed income from waiver of markup amounting to Rs.42,766,374 and had claimed it exempt under State Bank of Pakistan Circular No.29 of 2002, dated 15-10-2002. The Additional Commissioner of Income Tax confronted the taxpayer at to why the claim of exemption may not be rejected and income taxed under section 70 of the Income Tax Ordinance, 2001. The taxpayer through their counsel Messrs Aziz Associates vide their letter No.K-34-1324/ 2007, dated 17-8-2007 submitted that Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 specifically provides exemption to this income and therefore notice issued may be withdrawn. The Additional Commissioner did not agree with the contention of the taxpayer on the ground that Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 was inserted through Finance Act, 2004 and is therefore, applicable for the period relevant to tax year, 2005. It was contended by the Additional Commissioner that this clause is not applicable for tax year, 2004 during which the taxpayer has claimed exemption of the interest income and accordingly taxed the waiver of markup at Rs.42,766,374. Being aggrieved by the treatment of the Additional Commissioner the taxpayer filed appeal before the learned CIT(A). The learned CIT(A) through her impugned order decided this issue against the taxpayer vide her impugned order quoted supra.

38. During proceedings before this Court the learned counsel for the taxpayer contended that benefit of Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 should be allowed to the taxpayer with retrospective effect for charge years, 2004 as well.

39. However the learned DR argued that unless specifically provided in the law, the provisions of enactment cannot be applied with retrospective effect specifically when the enactment relates to charging provisions of law. Since the enactment is in the nature of charging provision it cannot be applied retrospectively.

40. We have heard both the parties for the taxpayer and from the department, have perused the case record and the impugned order of the learned CIT(A) and of the Additional Commissioner of Income Tax. Our findings are as under:--

41. We are inclined to agree with findings of the Additional Commissioner as well as of the learned CIT(A) through her impugned order on the issue.

42. We are also of the firm opinion that the learned CIT(A) has rightly arrived at a conclusion in her impugned order that said clause 3A of Part IV of Second Schedule to the Income Tax Ordinance, 2001 was enacted through Finance Act, 2004 and therefore, it was effective from 1-7-2004 and benefit cannot be given retrospectively. Since the said Clause of the Financial Act, 2004 is effective from 1-7-2004 the scope of remedial provisions incorporated cannot be enlarged to cover periods not expressly falling under the exemption ambit as laid down by the citation 48 STC 466 (SC).

43. The Honorable Supreme Court of Pakistan in a reported judgment cited as 1971 PTD 200 in case of Hijina and Co. (Pakistan) Limited, Karachi v. Commissioner of Sales Tax, Central Karachi observed as under:

"We may here observe that interpreting the taxing statute the Courts must look to the words of the statute and interpret in the light of what is clearly expressed. It cannot imply anything which is not expressed, it cannot import provisions in the statute so as to support assumed deficiency."

44. The honourable Supreme Court of Pakistan in a reported case 1970 PTD 127 observed as under:--

"It is fundamental rule of law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in terms of the Act, or arises by necessary and distinct implication (see Maxwell on the Interpretation of Statutes 9th edition page 221) and Treatise on Statute Law by Caries 4th edition Page 329). It follows from this rule that, retrospective effect to a statute may be given either by express words or that the same may be inferred from the language employed."

45. Perusal of the judgment of the honourable Superior Courts would reveal that the scope of provisions of law on the subject-matter is very clear and the action of Additional Commissioner is quite in line with law.

46. The honourable Supreme Court of Pakistan in case reported as (1959) Tax (111-207) (S.C. Pak.) held that fiscal statute should be construed strictly and therefore the effect of Clause 3A of Part-IV of Second Schedule enacted through Finance Act, 2004 cannot be given retrospectively.

47. In case of A. Rehman v. Federation of Pakistan reported as 2002 PTD 804 (H.C. Kar.), the honourable High Court has laid down the ratio that where the language of any statute or legal document is clear, then the same has to be acted upon accordingly. Similarly the honourable High Court of Karachi in case reported as 2003 PTD 589 held that while interpreting a fiscal statute there is no room for any intendment, interference or presumption. After perusal of all the above quoted case laws we come to the conclusive conclusion that provisions of the said Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 cannot be construed or interpreted in a manner to give them retrospective effect as requested by the counsel for the taxpayer.

48. It also settled proposition of law that in case of exemption, law has to be interpreted strictly and not liberally in favour of assessee. Exemption is not be extended to assessee unless specifically so provided in law. Reliance can be placed on cases reported as 2006 SCMR 1577 = 2006 PTD 2331.

49. Their lordships in a reported case cited as 2005 PTD 830 observed as under:

"Taxes are meant by which State maintains its existence and anyone who claims exemption from such tax much on that account be clearly defined and founded on plain language---There must not be any doubt or any ambiguity upon which the claim to an exemption is founded---Where claim is based upon plain and clearly expressed intention of legislature, it is not justified to construe liberal interpretation---Provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly."

50. Clause 3A of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 was enacted vide Finance Act, 2004 which exempted income derived on account of waiver of profit on debt or the debt itself. No retrospectively effect was given by the legislation to the said clause. The said exemption as such is applicable w.e.f. 1-7-2004 from tax year, 2005. Provisions of law granting exemptions are to be strictly followed as held by superior Courts as discussed above, therefore to give it retrospective effect will be against the law and decision of the honourable Superior Courts.

51. After above discussion and keeping in view the ratio of various decisions of the Superior Courts, we have no doubt in our mind that Additional Commissioner has rightly taxed the income on account of waiver of mark up in the case of the taxpayer and the learned CIT(A) has also rightly upheld the order of the Additional Commissioner, therefore, we do not interfere in the impugned order of the learned CIT(A) on the issue. Accordingly appeal of the taxpayer in this case stands dismissed being not maintainable in law.

52. The appeal of the taxpayer is disposed of as above.

C. M. A. /40/Tax (Trib.)Order accordingly.