P L D 1967 Karachi 559 (PLP)

WAHIDUDDIN AHMED, J.-This is a Reference under section 66 (1) of the Income-tax Act. It has arisen in the following circumstances.

2. The respondent assessee during the relevant assessment years 1956-57 and 1957-53 received amongst others a sum of Rs. 3,600 as his share of income as an allottee from Krishna Flour Mills of Sukkur, an evacuee property, under an allotment order made by the Rehabilitation Commissioner, Sind. This income was first declared by the assessee in his return of income but subsequently through a revised return this amount was claimed as exempt from the tax on the ground that this was 'public dues' within the meaning of section 2 (10) of the Displaced Persons (Compensation and Rehabilitation) Act, 19:8, and not an income. The Income-tax Officer turned down the assessee's contention and charged the income to tax along with other income of the assessee. The matter was taken to the Appellate Assistant Com missioner of Income-tax who held that the receipt in question was of a capital nature in the hands of the assessee and excluded this income for charging the tax. The Department challenged this order before the Income-tax Appellate Tribunal who agreed with the finding given by the lower appellate authority that in view of section 2 (10) (a) and (b) of the Displaced Persons (Compen sation and Rehabilitation) Act, 1958, the amount received by the assessee was of a capital nature and dismissed the departmental appeal. Thereupon the Commissioner of Income-tax, Karachi, moved the Income-tax Appellate Tribunal for referring the question of law arising from the order of the Tribunal to this Court under section 66 (1) of the Income-tax Act.

3. The learned Income-tax Appellate Tribunal has referred the following common question of taw for both the years to this Court for its determination :- "Whether on the facts and in the circumstances of the case, the sum of Rs. 3,600 which the assessee received as his share as an allottee of the Krishna Flour Mills was liable to tax for the assessment years 1956-57 and 1957-58 under the Income-tax Act? "

4. In support of the Reference, Mr. S. A. Nusrat, the learn ed counsel for the Department, has urged that the essential condi tion for the application of section 2 (10) (a) and (b) of the Displaced Persons (Compensation and Rehabilitation) Act, 1958, is that the amount should be in lieu of rent of the immovable property left in India and that there was nothing on the record to establish that the allotment to the assessee was in respect of the rent of the immovable property left by him in India. The learned counsel further contended that the allotment of the Krishna Flour Mills was made long before the Displaced Persons (Compensation and Rehabilitation) Act, 1958, came into force and the charge of tax for the years in question was settled before this Act came into force. In our opinion, the contention of the learned counsel has no force because if the Department had any doubt about the nature of the allotment made to the assessee it was their duty to find it out from the relevant authorities. In law the presump tion would be that the allotment in favour of the assessee was of the nature described in section 2 (10) (b) of the Displaced Persons (Compensation and Rehabilitation) Act, 19.58, that is to say:- "(b) any amount received in lieu of rent of an immovable property other than agricultural land left in India or in any area occupied by India through allotment of a share in any evacuee property made by the Industries Rehabilitation Board consti tuted under the Pakistan Rehabilitation Act, 1956." It is not disputed that the allotment in question was made by the Industries Rehabilitation Board, Sind, and, therefore, it can reasonably be presumed that it must have been of the nature described in the above provision of law. Mr. Nusrat, the learned counsel for the Department, was unable to controvert this position. The learned Appellate Assistant Commissioner and the Income-tax Appellate Tribunal also came to the same conclusion. In these circumstances, it is not open to the Department to raise any doubt about the nature of the allotment made to the assessee in respect of the above Krishna Flour Mills.

5. The next question is whether the amount inn question received by the assessee as his share as an allottee of the Krishna Flour Mills was liable to tax for the relevant assessment years. It is not disputed that under section 12 of the Displaced Persons (Compensation and Rehabilitation) Act, 1958, any income received by an allottee from an evacuee property of the nature described above is treated as an advance payment towards the claim of the property abandoned by him in the Indian territory. Under the second proviso to subsection (2) of section 12 it is clearly provided that if such dues are not in excess of the verified claim under Schedule VI to the Registration of Claims (Displaced Persons) Act, 1956, they shall be settled against such a claim. Further in clause (b) of subsection (2) of section 12 of the Dis placed Persons (Compensation and Rehabilitation) Act, 1958, it is provided that if such dues are in excess of such claim, the amount so in excess shall be recovered from the compensation payable from the compensation pool. In these circumstances, the learned Income-tax Tribunal was perfectly justified in coming to the con clusion that the amount received by the assessee cannot be cons trued as revenue receipt but receipts of a capital nature. Once it is found that any advance was received by an allottee from the evacuee property of the nature described above it has to be accounted for later on after his claim is verified and he is liable to get its adjustment towards the verified claim or to pay back the excess amount received by him. The position in law would be that the receipt of such an amount is not in the nature of an income assessable to income-tax. We would, therefore, uphold the view taken by the learned Income-tax Appellate Tribunal on this aspect of the question.

6. Accordingly we would answer the question referred to this Court in the negative. In the circumstances of the present case the parties are directed to bear their own costs. S. Q. Reference answered in the negative.