AMIN SPINNING MILLS LTD., INDUSTRIAL AREA MIRPUR AZAD KASHMIR VS COMMISSIONER OF INCOME TAX (AJ&K), 2017 PTD-SUPREME-COURT-AZAD-KASHMIR 201 (2015)

Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference to the High Court---Limitation---High Court dismissed Reference being time barred----Validity---When Income Tax Appellate Tribunal passed order and notice was served then the party or assessee or Commissioner Income Tax might move an application to the Tribunal within a period of 90 days to refer the question of law to the High court arising out of such order---If Income Tax Appellate Tribunal refused to refer the question of law to the High Court then assessee or Commissioner Income Tax could file a reference in the High Court within 120 days after receipt of notice of refusal by the Tribunal---Income Tax Appellate Tribunal had passed order on 30-10-2004 which was conveyed to the appellants on 06-11-2004---Reference was filed before the High Court on 04-03-2005 which was within time---Impugned judgment passed by the High Court was set aside and case was remanded for decision on merit---Appeal was allowed accordingly.

Khan Iftikhar Hussain Khan of Mamdot (represented by 6 heirs) v. Messrs Ghulam Nabi Corporation Ltd., Lahore PLD 1961 SC 550; Dost Muhammad and 15 others v. The State PLD 1971 Lah. 381 and Walton Tabacco Company (Pvt.) Ltd. and others v. Azad Govt. of the State of Jammu and Kashmir and others 1999 CLC 66 ref.

Haji Muhammad Afzal for Appellant (in Civil Appeals Nos. 20 to 35 of 2015).

Muhammad Rafique Dar for Respondents (in Civil Appeals Nos. 20 to 35 of 2015).

Date of hearing: 26th February, 2015.

JUDGMENT

MOHAMMAD AZAM KHAN, C.J.---All the above titled appeals by leave of the Court arise out of the judgments of the High Court, whereby reference applications filed by the appellants under section 136 of Income Tax Ordinance, 1979 read with section 133(4) of the Income Tax Ordinance, 2001, have been dismissed as being filed beyond period of limitation. Since identical question of law and facts are involved in the cases, therefore, all the appeals are being disposed of through this single judgment.

2.At the very outset, Mr. Muhammad Rafique Dar, counsel for the respondents raised a preliminary objection that references in the High Court and petition for leave to appeals in this Court have been filed without lawful authority. The Counsel has been engaged by Muhammad Naeem, Director of the Company without valid resolution. The copy of resolution is a photocopy attested by the Advocate. It has not been attested by the competent authority and the Directors who passed resolution are not the Directors of the company and resolution has been passed by circulation. There is no concept of passing of resolution through a circulation. Section 173 of the Companies Ordinance, 1984, provides a procedure for meeting of Board of. Directors and the minutes of proceedings of meeting. The learned counsel argued that counsel for the appellants has produced photocopy of memorandum/articles of association and Form 29, which are not attested by the authorized, person and cannot be produced in this Court at the time of arguments. The learned counsel relied upon the cases reported as Khan Iftikhar Hussain Khan of Mamdot (represented by 6 heirs) v. Messrs Ghulam Nabi Corporation Ltd., Lahore [PLD 1961 SC 550], Dost Muhammad and 15 others v. The State [PLD 1971 Lah. 381] and Walton Tabacco Company (Pvt.) Ltd. and others v. Azad Govt. of the State of Jammu and Kashmir and others [1999 CLC 66].

3.In the case reported as Khan Iftikhar Hussain Khan of Mamdot (represented by 6 heirs) v. Messrs Ghulam Nabi Corporation Ltd., Lahore [PLD 1971 SC 550], it was observed that a suit on behalf of the company by a person (director incharge of company) is not competent unless authorized by a resolution by the company.

4.The case reported Dost Muhammad and 15 others v. The State [PLD 1971 Lah. 381], is a bail case, it is not relevant.

5.In the case reported as Walton Tobacco Company (Pvt.) Ltd. and others v. Azad Govt. of the State of Jammu and Kashmir and others [1993 CLC 66], the AJ&K High Court has held that a writ petition shall be accompanied by memorandum/articles of association and the resolution of Board of Directors containing the names of the Directors who had participated in meeting and such meeting should also authorize a specific person for filing of constitutional petition. The law laid down in the referred cases is correct, that the proceedings in all the Courts on behalf of the company have to be filed through a person who has been duly authorized by the Board of Directors through resolution.

6.Haji Muhammad Afzal, counsel for the appellants, while replying to the preliminary objection, submitted that the resolution was passed by the Directors of the company by circulation on 08.02.2005 wherein the Directors of the company whose names are mentioned in Form 29, passed a resolution validly. The learned counsel submitted that the company is attached by the High Court in civil litigation. Under law, when company is attached Directors, who were Directors of the company at the time of order of attachment by the Court shall continue to function as such till the decision of case which is yet to be decided by the High Court. The Directors of the company who passed resolution are valid Directors. The learned counsel submitted that the provisions of Article 71 of Memorandum/articles of association empowers the Directors of the company to pass any resolution by circulation in the light of the provisions contained in section 196 of the Companies Ordinance.

7.We have heard the learned counsel for the parties on the preliminary objection and perused the record.

8.Section 173 of the Companies Ordinance, 1984 provides that every company shall cause a fair and accurate summary of the minutes of all proceedings of the general meetings and meetings of its directors and committee of directors along with the names of those participating in such meetings, to be entered in properly maintained books. Any such minutes, if purporting to be signed by the chairman of the respective meeting at which the proceedings were held, or by the chairman of the next succeeding meeting, shall be evidence of the proceedings. There is original resolution passed by circulation on 18.03.2005, which is signed by Haji Muhammad Yaqoob Ch. Muhammad Naeem, Ch. Shoukat and Haji Muhammad Saleem, the Directors of the company. It is not a photocopy. The resolution empowers Ch. Muhammad Naeem to prosecute all orders passed by the ITAT before the High Court and this Court. Ch. Muhammad Naeem has been authorized to sign all the minutes of meetings which may be required for filing of the proceedings before the High Court and this Court. The authorized Director has engaged the counsel to do the needful.

9.Appeals Nos.21, 23, 26, 27, 28, 30, 31, 33 and 34 arise out of the judgment of High Court passed in reference applications on 17.07.2004. The appeals have been filed on the basis of resolution passed on 04.06.2004 in the meeting of the Board of Directors, chaired by Ch. Muhammad Saeed. In Appeal No.35, the order of the ITAT dated 21.10.2004 has been challenged. The reference application in the High Court has been filed on 22.10.2005. The original resolution passed by circulation on 18.02.2004 is on record. Appeals Nos.22 24, 25 and 29, have been filed from the judgment of the High Court dated 13.06.2013 in the references filed in the High Court on 17.07.2005 from the order passed by the ITAT dated 28.02.2005. The references were filed in the High Court on the basis of resolution passed in the meeting of the Board of Directors held on 04.06.2005 which was presided over by Ch. Muhammad Saeed Chairman of the Board of Directors. Copies of the said resolution have been filed with reference in the High Court and with appeals in this Court.

10.A perusal of copies of Form A Form 29 of different periods provide that Haji Muhammad Saleem, Ch. Muhammad Saeed, Ch. Muhammad Naeem, Haji Muhammad Yaqoob, Ch. Muhammad Zulifiqar and Mrs. Shaugufta Saeed are directors of the company. Referred resolution has been passed by the said directors validly.

11.There are two types of resolution. The resolutions passed in the meeting of Board of Directors of the company and the resolutions passed by circulation.

We have perused Article 71 of memorandum/articles of association of the company Article 71 provides the resolution by circulation. It is reproduce a under:--

"71. RESOULATION BY CIRCULATION

Subject to the provisions of Section 196 of the Ordinance, a resolution in writing, signed by all the Directors or affirmed by them through telex or telegram shall be as valid and effectual as if it had been passed at a meeting of the Directors duly called and constituted. "

A perusal of same reveals that in the light of provisions contained in section 196 of the Companies Ordinance, 1984, a resolution in writing signed by all the Directors or affirmed by them through circulation has valid effect as it had been passed at a meeting of the Directors duly called and constituted. Section 196 of the Companies Ordinance, 1984, empowers the Directors of the company that they shall manage the business of a company for payment of expenses incurred in promoting and registering the company, and may exercise all such powers of the company as are not by this Ordinance, or by the articles of association, or by a special resolution, required to be exercised by the company in general meeting. The section empowers the Directors to do all the lawful acts on behalf of the company. The memorandum/articles of association of the company have been approved by the Board of Directors of the company registered under the Companies Ordinance. Article 71 is not against the provision of the Companies Ordinance, 1984 therefore, a resolution by circulation under Article 71 of the memorandum/articles of association is a valid resolution passed in the meeting of the Board of Directors. The argument is overruled. The reference application in the High Court and the petitions for leave to appeal in this Court, have been filed through duly authorized Director of the company.

12.Haji Muhammad Afzal, counsel for the appellants argued that the limitation for filing of reference application under section 136(2) of the Income Tax Ordinance, 1979 and section 133(5) of the Income Tax Ordinance, 2001, is 120 days, when the 1TAT refuses to refer the question of law to the High Court. In all the above referred cases, the ITAT refused to refer the question of law to the High Court therefore, a reference under section 133(4) of the Income Tax Ordinance, 2001 has to be filed within a period of 120 days in the High Court. All the above referred appeals have been filed within a period of 120 days. The finding of the High Court that limitation for filing reference is 90 days is not correct.

13.While contoverting the arguments Mr. Muhammad Rafique Dar, counsel for the respondents argued that the references have not competently been filed because the ITAT has not refused to refer the question of law to the High Court. A reference in High Court is only competent, when the ITAT refuses to refer a question of law to the High Court. The learned counsel argued that references have been filed under Income Tax Ordinance, 1979 which was not law of the land in years 2004 and 2005. The learned counsel further argued that the references have been filed under section 136 of Income Tax Ordinance, 1979 read with section 133(4) of Income Tax Ordinance, 2001, therefore, the limitation will be 90 days under subsection (1) of section 136 and not 120 days under subsection (2) of section 136.

14.We have heard the learned counsel for the parties and perused the record.

15.Under section 133(1) of the Income Tax Ordinance, 2001, when the Tribunal passes an order and a notice is served upon, the party or assessee or Commissioner may move an application to the ITAT within a period of 90 days to refer the question of law to the High Court arising out of such order. Subsection (4) of section 133 of the Income Tax Ordinance, 2001 postulates that if a Tribunal refuses to refer the question of law to the High Court then assessee or Commissioner may file a reference in the High Court. The limitation for filing such reference under section 133(5) is 120 days after receipt of notice of refusal by the ITAT. Under subsection (1) of section 133 of the Income Tax Ordinance, 2001 a reference application has to be moved to the ITAT from the order passed by the Tribunal under Section 132. If the Tribunal under subsection (4) of section 133 refuses to refer the question of law to the High Court then the assessee or Commissioner may file a reference to the High Court within a period of 120 days. The arguments of the learned counsel for the respondents that references to the High Court filed by the appellants were not competent because these were filed under Section 136 and not under Section 136(2) of Income Tax Ordinance, 2001. It shall be deemed to have been filed under sub-section (1), therefore, the period shall be treated as 90 days. The arguments is misconceived. Section 136 consisting of 10 Subsections. Subsection (1) deals with the applications to be moved to the Appellate Tribunal and subsection (2) deals with the applications to be moved to the High Court upon refusal by the Appellate Tribunal.

16.Another arguments of counsel for the respondents that the references before the High Court were not maintainable because Appellate Tribunal has not refused to refer the question of law to the High Court. The applications have been partly accepted and partly, rejected. The ITAT has ordered for referring the matter partly to the High Court. When the applications were partly rejected, the assessee as of right under subsection (4) of Section 133 is entitled to file reference in the High Court. The arguments has no force, it is hereby repelled. The references were competently filed under Section 133(4) of the Income Tax Ordinance, 2001.

17.It is worth mentioning, that Income Tax Ordinance, 2001 was adapted in AJ&K on 25.10.2002, through the Azad Jammu and Kashmir Income Tax (Adaptation, Enforcement and Validation) Act, 2002, and was made applicable w.e.f. 01.07.2002. Section 136 of Income Tax Ordinance, 1979 was kept intact for the pending cases and limitation for filing of reference in High Court was also same under section 133(5) of the Income Tax Ordinance, 2001. The amending Income Tax Ordinance, 2001 was adapted, on 28.07.2005, through the Azad Jammu and Kashmir Income Tax (Adoptation) Act, 2005 and effect was given to it from 01.07.2005. Not only Section 133 was changed but Forum was also changed and instead of filing an application before the ITAT for referring the matter to the High Court direct reference application has been provided under subsection (1) of Section 133 of the Income Tax Ordinance, 2001. In all the cases, the proceedings were pending before the ITAT before the amendment brought in the Income Tax Ordinance in 2005, therefore, the limitation for filing reference was 120 days. The High Court has dismissed the references on the ground that these are filed beyond the period of limitation.

18.In Appeal No.20, the ITAT passed the order on 30.10.2004 which was conveyed to the appellants on 06.11.2004. The appellant filed the reference in the High Court on 04.03.2005. The period comes to 118 days, which is within limitation.

19.In Appeals Nos.21 23 26 27, 28, 30, 31, 33 and 34 the ITAT passed orders on 28.02.2005, which were conveyed to the appellants on 09.03 2005. The references were filed in the High Court on 07.07.2005. The period comes to 120 days. All the references have been filed within the period of limitation.

20.In Appeal No.35, the ITAT passed an order on 21.10.2004, it was conveyed to appellant on 25.10.2004. The reference was filed in the

High Court on 22 02 2005 within a period of 120 days. The reference is within the period of limitation.

21.In Appeals Nos.22, 24, 25 and 29, the ITAT passed orders on 28.2.2005 which were conveyed to the appellants on 09.03.2005. The reference were filed in the High Court on 07.07.2005. The period comes to 120 days. The references were filed within the period of limitation.

23.(sic) The High Court has dismissed all the references in the above titled appeals as being filed beyond period of limitation. We have reached the conclusion as stated above, that all the references have been filed under section 133(4) of Income Tax Ordinance, 2001 (un-amended) within a period of 120 days. Therefore, all appeals are accepted, judgment of the High Court is set aside and the cases are remanded to the High Court for decision on merit. There will be no order as to costs.

ZC/72/SC(AJ&K) Case remanded.