1988 PLP 571 (PTD)

MUHAMMAD AFZAL ZULLAH, J. These appeals through leave of the Court between the same parties are directed against three separate judgments of the Sind High Court, whereby a question of law relating to rebate of super-tax allowed by Finance Acts, 1965, 1967 and 1968, was decided against the appellant-company. ,

2. One question for the examination of which leave to appeal was granted, is common to all the three appeals. It is to the effect; whether the appellant was entitled to a rebate of 10% on the super-tax payable by it by virtue of the relevant laws, namely, the Finance Acts, 1965, 1967 and 1968. The interpretation of Clause A-1 (v) Part A 11, Schedule IV of the Finance Act, 1965, is involved in Appeal No.88-K of 1983 and Clause A-1 (vi) Part II, Schedule V of Finance Act, 1967 in Appeal No.202-K of 1984, while the interpretation of Clause A-1 (vi) Part II, Schedule IV of the Finance Act, 1968, is involved in Appeal No.135-K of 1986. The language of all the provisions) is the same. It is reproduced below:- "a rebate of 10% shall be allowed in the case of a company to which clause (i) applies in respect of its income profits and gains to which sub-clause (9) of section 10 of the Income-tax Act, 1922 (XI of 1922) applies or which are derived by it from the processing, freezing, preserving and canning of food, vegetables. fruit, grain, meat, fish and poultry.

3. Three other questions in addition to the above-noted common question, were also noticed in one appeal, namely, 88-K of 1983 for examination in the leave granting order. They are as follows: "(1) Whether the High Court was justified in answering the question of law originally referred to it under section 66 of the Income Tax Act, 1922, adversely to the petitioner despite the fact that the said question had been superseded by another question which was formulated by consent on the basis of a direction of the High Court itself? (2) Whether the High Court had any jurisdiction to answer also question of law, which was no longer before it? (3) Whether, in the event that the High Court wanted to answer a superseded question of law, it was not obligatory on it to I first pass an order, after issuing notice and giving a hearing, intimating the petitioner of its intention to re-open a question which was no longer before the Court?"

4. The appellant-company claimed rebate on the so-called processing of grain (maize) for extracting corn oil. Besides oil, they obtain from the grain in this processing, starch and cattle feed. The Income-tax Officer rejected the claim of rebate of 10% under the above-quoted provision on the ground that:-- "The claim is not accepted as the assessee is a manufacturer of oil which does not mean processing of food. The word manufacture is clearly distinguishable from the word processing. " The appeals in this case before the Appellate Assistant Commissioner and Income-tax Appellate Tribunal also failed. The relevant part of the judgment of the Tribunal, which adversely affects the appellant and is quoted in all the three memos of appeals, reads as follows:- "In our opinion the context in which the word processing has been used and the mention of other modes prescribed alongwith it clearly indicates, that the method for the operation should be such that the subject-matter of the operation continues intact. There should be no disintegration of the goods processed upon nor should it totally disappear. If this happens then the operations carried out, in our opinion, would not amount simply to processing but to manufacturing which according to the various judicial pronouncements encompasses in itself an idea whereby some new things came into existence after a number of operations. The change that takes place after the operations is of a very material nature, the object being to change the identity of an article into that of another so as to make the newly-formed substance marketable. This clearly leads us to the goal, which is achieved by a number of processes step by step. In the present case for example, the washing of maize may be a process and cleaning would be another while pressurising through machinery may be a third process. The cumulative effect of these three processes would undoubtedly be manufacturing of totally distinguishable substance from the original maize grain. In our view, therefore if the appellant had performed any one of the above processes and had derived income during the course thereof the above concession may have been available to the appellant but after all the three processes are applied, the multiple activity no more remains a processing activity. In fact it turns into a manufacturing activity and as such goes out of the ambit of the concession granted."

5. It is noted in the impugned judgment, that the appellant sought in the proceedings before the High Court under Section 66 (1) of the Income-tax Act, the opinion of that Court in respect of the following question:- "Whether the Tribunal was justified in holding that the applicant was not entitled to a rebate of 10% on the super-tax payable by it by virtue of Clause A-1 (v) Part 11 Schedule IV of the Finance Act, 1965." Further, through an application (C.M.A..No.289 of 1982), the aforesaid question of law was sought by the appellant to be reformulated as follows: - "Whether the Tribunal was justified in holding that the applicant was not entitled to a rebate of 10% on the super-tax payable by it by virtue of Clause A-1 (v) , Part 11, Schedule I V of the Finance Act, 1965 on the ground that the applicant was "manufacturing" and not "processing" (a) Starch; (b) cattle-feed; and (c) corn oil."

6. It needs to be noticed here that the reframing of the question is involved only in Appeal No.88-K of 1983. In the other two appeals the question, as originally framed, remained before the High Court for determination. The learned Judges who heard and decided the subsequent two appeals, when resolving the question originally framed, followed the judgment, which had earlier been rendered in Appeal No.88-K of 1983. Therefore the reasoning in the Judgment of the High Court in this appeal (No.88-K of 1983) was mainly the subject-matter of arguments by the learned counsel before us.

7. The learned judges answered the re-framed question in the negative but, at the same time also, answered the question originally framed and referred to the High Court, in the affirmative. The relevant discussion in this behalf in paragraphs 3 to 6 in the impugned Judgment (C.A. No.88-K of 1983) is as follows:- "Income-tax Appellate Tribunal was of the view that the operations carried on by the applicant company.- for the production of starch, cattle feed and corn oil from maize were not "processing" but amounted to ,"manufacturing", and a distinction was drawn between these two operations, namely, processing and manufacturing. According to the Tribunal, the context in which the word "processing" had been used in the aforesaid legal provision indicated that the method for the operations should such that the subject-matter of the operations continued intact; there should be no disintegration of the goods processed upon nor it should totally disappear; "manufacturing" is an operation whereby some new thing comes into existence after a number of operations. We have heard Mr. Khalid Anwar, learned counsel for the applicant and Mr. Nasrullah Awan, learned counsel for the Department. According to learned counsel for the applicant, an unnecessary distinction was sought to be made by the Tribunal between "processing" and "manufacturing", there being no occasion or necessity for such distinction as the word "manufacturing" does not appear in the aforesaid legal provision. Both the learned counsel referred to the dictionary meaning of the word "process". Learned counsel for the applicant also relied upon the following case-laws: From a perusal of the dictionary meanings, and the judgments cited by learned counsel for the applicant, it would appear that the same operation or operations can be termed both as "process" as well as "manufacture". Further it is not necessary that for an operation to be called "manufacture", the raw material must lose its identity: We are, therefore, of the view that the Income-tax Tribunal was not right in creating a distinction between the word "processing" and "manufacture" in the circumstances of the case. The operations carried on by the applicant company in the conversion of maize into starch, cattle feed and corn oil could be termed as "process" and also as "manufacture". To this extent the reasoning of the Income-tax Appellate Tribunal was wrong and the applicant could not be disentitled to the rebate only on the ground that the applicant was "manufacturing" and not "processing" starch, battle feed and corn oil. We are, however, of the view that the applicant was not entitled to the rebate in the circumstances of the instant case. The words that are used in the aforesaid legal provision are "processing, freezing, preserving and canning." It is apparent that by the use of these words, the intention of the legislature was that rebate would only be allowed in case the items mentioned therein i.e. food, vegetable, grain, meat, fish and poultry retained their identity and were not consumed so as to create or produce a new item. Admittedly the operation of freezing, preserving or canning of these items would not change their identity and, therefore, the word "processing" as used in the aforesaid legal provision, is also to be interpreted or understood in the same manner, i.e. the identity of the raw material is not destroyed in the operation or operations. The reformulated question is answered in the negative. However, for the view that we have taken in para. 5 of this judgment, we consider it necessary to answer also the question originally referred through this application under section 66 of the Income Tax Act, 1922. As we are of the view that the applicant was not entitled to the rebate for the reasons recorded by us in para. 5 of this judgment the original question is answered in the affirmative."

8. The learned counsel for the appellant argued at length before us both on the question of (i) the interpretation of the relevant provision of the Finance Acts as also on the technical question; (ii) whether, after answering the re-framed questions in the negative, the original question should have been answered in the affirmative by the High Court. As in the two appeals of 1984 and 1986 the reframed question was not in-issue before the High Court nor before us and further because the issue involved in the third appeal (of 1983) in the form of the originally framed question as also in the form of question for examination in the leave granting order was No.(i) therefore, we would in the first instance, resolve the real controversy in that behalf.

9. The legal provision requiring interpretation when properly analysed, is to the following effect:- a rebate of 10% shall be allowed in the case of a company

in respect of its income, profits and gains

which are derived by it from the processing, freezing, preserving and canning of food, vegetables, fruit, grain, meat, fish and poultry.'

10. The Tribunal indeed noticed amongst others, the question whether in obtaining various products from the so-called processing of maize--including the corn oil, the appellant did in reality manufacture those end-products. It answered this question in the affirmative after examination of the distinction between processing and manufacture. That being so, it further held that no processing being involved, the appellant was not entitled to rebate. But it was only one aspect of the order.

11. The learned Judges of the High Court, after examination of some case-law on the connotation of "processing" and "manufacturing" did not agree with the Tribunal that the process involved in the present case amounted to manufacture and, accordingly, answered the re-framed question in the negative.

12. With due respect, it would not be correct to say that the 9nly reason which prevailed with the Tribunal for rendering a decision against the appellant related to the definition of manufacture and processing. It is also to be observed that although in cases like the present one, the distinction between the two might be relevant but, as will be shown in the context of the provision involved in this case, it would not have been necessary to do so. Even if it be assumed for the sake of argument that what the appellant was manufacturing would amount to processing, it was not permissible for the appellant to obtain the rebate unless and until another very important condition was satisfied; namely, that the product it was, processing was "grain". Undoubtedly maize is grain but the product regarding which rebate is being claimed is not grain. It is oil or for that matter starch. This interpretation is consistent with not only the intention of the legislature -but also the preceding words used in the relevant provision, namely the rebate shall be allowed in respect of 'income, profits and gains of the company which are derived from....'processing of the grain. Therefore, the income, profits and gains should obviously have nexus with the grain. If it becomes impossible, by conversion of the grain to another commodity, the income, profit and gain would not be then relatable to the grain. That being so even if we would have agreed with the High Court that the so-called processing in this case did not amount to manufacture, the other important condition noted above would still remain unsatisfied. Accordingly, the appellant could not have been allowed the rebate in question on the production of oil from grain even if it would have' been held to be through the processing of the grain. As already observed, on the view that we have taken regarding the second condition, it is not necessary to further examine the question whether the process involved in this case was not manufacture and whether in case it was' manufacture it was not included in the word "processing".

13. At this stage it needs to be mentioned that while dealing with the question, whether the processing in this case did not involve manufacture, learned counsel relied on the dictionary meaning of the word "process" so as to show that it did include manufacture. It is clarified that whenever a definition is sought to be culled out from the dictionary meaning of a word used in a legal provision, that meaning cannot be adopted in isolation of the context in which the word is used in the particular provision. If a statutory definition is normally to be given effect in the context of the provision in which the word concerned is used, it will be against the normal rules of interpretation to read the dictionary meaning either out or against the relevant context in the legal provision concerned. In this case the word processing has to be co- related firstly to the end-product in connection with which the income, profits and gains are being claimed for qualification regarding rebate on super-tax; and, secondly, the processing involved should have some nexus with the other modes of treatment of the commodities, namely, freezing, preserving and canning. '

14. The learned counsel for the appellant in this connection also argued that the principle of ejusdem generis would not apply in this case because the word processing has been used in the provision concerned before the words freezing, preserving and canning. According to him, it would have been applicable if this word would have followed the other words. It may be possible to agree with him that the principle of ejusdem generis in terms would not be applicable when determining the scope here of the word "processing". But, as already observed, no principle of interpretation of statutes would prevent the Court to determine the meaning and scope of a word in the context of the provision in which it has been used. In this case we have tried to discover that context and, strictly speaking, the rule relating to ejusdem generis is not involved.

15. In the light of the foregoing discussion, we agree with the High Court that the appellant is not entitled to the rebate of 10% on super-tax by virtue of the relevant provisions in the Finance Acts of 1965, 1967 and 1968 and thus the common question noted in the leave granting orders of all these three appeals is answered in the negative with the result that all the three appeals are liable to be dismissed.

16. A further question, however, needs to be examined. It is involved only in Civil Appeal No.88-K of 1983 whether on account of the issues noted in the leave granting order passed in that appeal, the final order to be passed by this Court in that appeal should be different notwithstanding the fact that the real issue involved in all the three appeals being the same, has to be decided against the appellant in the other two appeals.

17. The other questions have been reproduced in an earlier part of this judgment. They are to the effect, whether a superseded question should have been answered by the High Court against the appellant; whether that question was no longer before the High Court and it had no jurisdiction to answer the same; and, whether in the event the High Court wanted to answer the superseded question, it was not obligatory for it to re-open the earlier question by issuing notice and giving opportunity of hearing to the appellant in this behalf.

18. The learned counsel while reiterating the arguments noted in this behalf in the leave granting order, further contended; that the function of the High Court in cases referred to it under Section 66 is advisory only and is confined to considering and answering the actual question referred to it--Raja Bahadur Sir Rajendra Narayan Bhanj Deo v. Commissioner of Income-tax, Bihar and Orissa (AIR 1940 P.C.158); that the substance of the question formulated by the High Court after the initial reference should have preserved the substance of the original question and that the same should have arisen from the order of the appellate tribunal-- M.I. Barry & Co. v. C.I.T. 1959 P.T.D.478; that the High Court has no power to remand the case to the Tribunal for finding new- facts or embarking upon a new line of enquiry and (presumably the Supreme Court should not do the same) New Jehangir Vakil Mills Ltd. v. C.I.T. (1959 (Vol.IY Taxation 477); that the Supreme Court would not go beyond the question referred to the High Court or to consider matters outside its limits Keshardeo Chamria v. C.I.T. Bengal 1939 (Vo1.7) ITR 394; that the jurisdiction of the High Court under Section 66 of the Act is discretionary. and thus is very limited in scope and merely advisory in nature Odeon Cinema v . C .I. T. PLD 1971 Lah.632; that the High Court could not rely on new matter which was not before the Tribunal when it disposed of the appeal Manzoor Qadir v. C.I.T. PLD 1966 Lah. 495; when the High Court discovers anomaly in the question referred to it, it would be more appropriate course to send the case back to the Tribunal for clarification of the question Pakistan' v. Majestic Cinema 1965 PTD 349; if the question of law does not arise from the order of the Tribunal, it is not open to the High Court to adjudicate upon it even if there is material before it for so doing Dinshaw v. C.I.T. PLD 1967 Kar.372; and, that the High Court is not competent to reframe a question and decide a case on a point not considered by the appellate Tribunal Kusumben D. Mahadevia v. C.I.T. Bombay City 1960 (Vo1.2) Taxation 487.

19. This, the learned counsel submitted in the form of a written note in response to our query as to how the Supreme Court should deal with his technical objections when on a specific question noted in the leave granting order in this appeal and which is the only question involved in the other two appeals between the same parties for the interpretation of the same law, the real controversy can be resolved by this Court. We had also asked him to cite some precedent, if there is one from the Supreme Court of Pakistan, wherein this Court might itself have, after hearing the parties, answered the substantial question notwithstanding any technical bar. Though he remained unable to find any such case, our research staff brought to our notice Octavius Steel & Company Ltd. v. The Commissioner of Income-tax, Dacca PLD 1960 SC (Pak.) 371, in which this Court upheld the principle that an attempt should be made to clarify "the real questions which arise in the case" on the basis of admitted and authentic facts particularly when without such clarification, "the real, issue remains clouded in uncertainty." Accordingly, as noted at page 382 of the Report,, the Court considered it premissible and proper "to resettle and re-frame the question to extract the real issue and thus to facilitate its solution." The principle that emerges from the afore-noticed procedure adopted by this Court is that when the' technical difficulty is one of form of the question and no fresh determination of facts is necessary the Court can, rather/should for purpose of extracting the real issue so as to facilitate its solution, resettle and reframe the question. In this case it will not be necessary to formally reframe the question in Appeal No.88-K of 1983. Leave having already been granted on a question, which could have been the subject-matter of reframing, the same has been answered in this appeal as also in the two connected appeals.

20. The further technical objection that the High Court should have given a formal notice to the appellant for reframing the question originally framed, also loses any significance in the circumstances of this case, firstly, in similar circumstances, the Supreme Court in the case of Octavius Steel & Company Ltd, considered it proper to resettle the question and answer the same. Indeed the same procedure has already been adopted in this case when examining the common real question involved in the three appeals, secondly, it is not a case' where the same question was not before the High Court. It was originally so framed and the High Court heard the arguments on it. Therefore, it cannot be said that the appellant had no opportunity of assisting the High Court regarding the resolution of the question as originally framed. Thirdly it was at the instance of the appellant himself that the High Court reframed a question. The reframed question was proposed by the appellant himself. As reframed, it was likely to confuse the real issue and thus mislead the High Court. As reframed the question assumed that the tribunal had denied rebate to the appellant only on the ground "that the applicant was manufacturing and not processing....corn oil." In reality this was not the only' ground in the order of the Tribunal. It had also observed as follows:- "The Departmental Representative, on the other hand argued that the word "processing" used in the relevant provisions of law should be given a meaning which fits in the context of various other words like preserving, canning, freezing, etc.

"In our opinion the context in which the word "processing" has been used and the mention of other modes prescribed alongwith it, clearly indicates that the method for the operation should be such that the subject-matter of the operation continues intact." "There should be no disintegration of the goods processed upon nor should it totally disappear."

"The change that takes place after the operations is of a very material nature, the object being to change the identity of an article into that of another so as -to make the newly-formed substance marketable." 21.. It is true that at places observations were also made by the tribunal regarding difference between manufacture and processing and those observations can be read conjunctively and also disjunctively with some of the aforequoted observations. But the fact remains that the Tribunal did examine the question of law from various angles and the distinction made out between processing and manufacturing was only one of those aspects. With due respect neither the learned counsel for the appellant nor the learned Judges of the High Court realised this feature of the order of the Tribunal. But this defect is not as fatal to the case so as to justify rendering two conflicting Judgments by this Court, one interpreting the same provisions of law in the same context against the appellant, and the other by upholding only part of the High Court's Judgment answering the same question in favour of the appellant; particularly when the appellant is responsible for seeking reframing of a wrong question which resulted in the confusion giving rise to a technical objection raised by itself. To uphold such an objection, in these circumstances, would not advance the process of justice. We order accordingly; with the result, that all the three appeals are dismissed with costs. M.B.A./R-50/S Appeals dismissed.