P L D 1966 (W (PLP)

2. The relevant facts are that the assessee owned four cotton factories one each at Chichawatni, Jaranwala, Okara and Dipalpur. Chichawatni factory was sold in the accounting period corresponding to the assessment year 1958-59, resulting in a surplus of Rs. 96,493 and the Jaranwala factory sold in the succeeding year resulting in a surplus of Rs. 1,00,

913. The Income-tax Officer assessed both the amounts to tax, aggrieved by which the assessee preferred an appeal to the Appellate Assistant Commissioner on the ground that since the two factories were not used in the relevant accounting period the second proviso to section 10 (2) (vii) was not attracted. The contention did not find favour because in the opinion of the Appellate Assistant Commissioner the condition for the application of the proviso was fulfilled inasmuch as the assessee had carried on its normal business by the working of the remaining factories. In the second appeal by the assessee the Appellate Income-tax Tribunal on the authority of an Indian decision came to a contrary conclusion and held that the words "such building, machinery or plant" appearing in the second proviso "obviously refer to that machinery, building or plant which has been referred to in clause (iv) of section 10 (2) and they make it clear that only (that) building, machinery or plant is contemplated which had actually been used for the purposes of the business during the year of account." The assessee's appeals for . the years 1958-59 and 1959-60, in so far as they pertained to the surpluses made by the sales of the two factories were accordingly allowed.

3. Mr. Muhammad Amin Butt, learned counsel for the assessee, in addition to the contentions raised before the Tribunal, to which reference will be made. presently, also relied before us on the principle "that in a Taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look plainly at the language used." Cape Brandy Syndicate v. Inland Revenue Commissioner ((1921) 1 K B 64 at p. 71).

4. In order to appreciate the true import of the question raised in the reference, it is necessary to refer, at the outset, to the relevant provisions of section 10 of the Income-tax Act. They read as follows:- "10 (1) The tax shall be payable by an assessee under the head profits and gains of business, profession or vocation in respect of the profits or gains of any business, profession or vocation carried on by him. "(2) Subject to the provisions of this Act, such profits or gains shall be computed after making the following allowances, namely- (i) any rent paid for the premises in which such business, profession or vocation is carried on, provided that when any substantial part of the premises is used as a dwelling-house by the assessee, the allowance under -this clause shall be such sum as the Income-tax Officer may determine having regard to the proportional annual value of the part so used; (iv) in respect of insurance against risk of damage or destruc tion of buildings, machinery, plant, furniture, stocks or stores, used for the purposes of the business, profession or vocation, the amount of any premium paid; (vi) in respect of depreciation of such buildings, machinery, plant or furniture being the property of the assessee, a sum equivalent, where the assets are ships other than ships ordinarily plying on inland waters, to such percentage on the original cost thereof to the assessee as may in any case or class of cases be prescribed and where the buildings have been newly-erected, or the machinery or plant not being motor vehicles not plying for hire or machinery or plant entitled to the development allowance under clause (via) and not having previously been used in Pakistan has been installed after the first day of March 1945, a further sum . . . . in respect of the year of erection or installation or the year in which such building, plant or machinery is used by the assessee for the first time for the purposes of his business, profession or vocation or the year in which commercial production is commenced, whichever is the later equivalent- (vii) in respect of any such building, machinery or plant which has been sold, transferred by way of exchange, or is compulsorily acquired by a competent authority under any law for the time being in force, or discarded or demolished or destroyed in the previous year, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant is actually sold, transferred or compulsorily acquired, as the case may be, or its scrap value: Provided-that such amount is actually written off in the books of the assessee: Provided further that where the amount for which such building, machinery or a plant is sold, transferred or com pulsorily acquired, whether during the continuance of the business or after the cessation thereof, exceeds the written down value so much of the excess as does not exceed the difference between the original cost and written down value shall be deemed to be profits of the previous year in which the sale, transfer or compulsory acquisition, as the case may be, took place and the business, profession or vocation in which such building, machinery or plant has been used, shall, for the purposes of subsection (1), be deemed to be carried on by the assessee in the year in which the sale, exchange or acquisi tion, as the case may be, took place."

5. The section is in two parts. The provision relating to charge is contained in subsection (1) and the allowances to be deducted in computing the assessable income in subsection (2). The primary function of the section is, therefore, to bring to charge profits and gains of business, profession or vocation carried on by the assessee during the accounting period and it is in this connection that allowances enumerated in subsection (2) are to be deducted from the profits and gains to compute assess able income under subsection (1) a fact which has been overlooked in some of the reported cases while construing the second Proviso to clause (vii). The second proviso to clause (vi) was first amended by the Finance Act, 1,56, which reads as follows:- "Provided that where such business is set up on or after the first day of July 1961, the assessee may, by notice given in writing to the Income-tax Officer within six months of the setting up of the business, declare (such declaration once made being final) that the profits and gains thereof be determined in accordance with the provisions of section 15-BB and where such declaration is made, the provisions of the said section 15-BB shall, subject to the, conditions laid down therein being fulfilled, apply to the profits and gains of such business." In the original text, the words whether during the continuance of business or after the cessation thereof' did not find place with the result that in some cases it was held that the proviso did not apply where the business was closed' at any time during the accounting period and the building, machinery and plant were sold after the closure. In other words, it was considered necessary that the building, machinery and plant must have been used throughout the year for the purposes of the business, profession or vocation carried on by the assessee during the previous year. The words whether during the continuance of the business or closure thereof' were accordingly added by the Finance Act, 1954. Later on, another lacuna was found and in the subsequent line of cases it was held that if the assets sold were not used for the purposes of the assessee's business at any time during the accounting year neither clause (vii) nor the second proviso to it would come into operation. This necessitated another change. In consequence thereof, the Finance Act, 1962, added that "the business, profession or vacation in which such building, machinery or plant has been used shall for the purposes of subsection (1) be deemed to be carried in the year in which the sale, exchange or acquisition, as the case may be, took place." Since this amendment was made, subsequent to the assessments in question, the assessee felt fortified in the contention that as the factories sold by it were not used for the purposes of the business the second proviso to clause (vii) was not attracted. The weight of authorities cited by Mr. Muhammad Amin Butt is, no doubt, in favour of the assessee and the use of the word "such" in the opening part of the second proviso prima facie lends support to it; but as will be seen presently a proper analysis of section 10, in our opinion, leads clearly to an opposite conclusion. The word "such" in clauses (i), (iv), (vi) and (vii) provides that in order to earn allowances mentioned in them the building, machinery or plant must have been used for the purposes of business, profession or vocation in she previous year which yielded profits or gains brought to charge under subsection (1). The second proviso to clause (vii) is, however, an independent provision having no relation whatever with the use of the building, machinery or plant in the relevant accounting'' period. By this proviso the revenue, in fact, takes back what it had given by way of depreciation allowance in preceding years and not only in the previous year for otherwise the assessee, would receive allowance in excess of his original cost. The condition, on which the revenue takes back the allowance is, therefore, not dependent in any sense to the use of the building, machinery, or plant in the previous year but to the total allowance given to the assessee since he first came to use these assets for the purposes of his business. This is plain enough but due meaning must be given to the word "such" in the proviso on which so much stress has been laid in the cases relied upon by the Tribunal, e. g., Liquidator of Pursae Limited v. Commissioner of Income-tax, Behar ((1954) 26 1 T R 265) and Commissioner of Income-tax, Bombay City v. National Syndicate ((1961) 41 I T R 225). Grammatically "such" refers to `building, `machinery' and `plant' used for the purposes of the business; profession or vocation as provided in clauses (iv) and (vi), but it will be noticed that no specific accounting period is mentioned in these clauses. The result that the building, etc. must have been used in the previous year is, therefore, achieved by reading section 10 (1) along with section 3 of the Act which provides that tax shall be charged in respect of the total income of the previous year. There is, thus, no warrant for the proposition that building, machinery or plant must have been used in the relevant accounting period to attract the second proviso to clause (vii) of section 10 (2). Another reason cited in support of the Tribunal's view is that a proviso cannot travel beyond the scope of the main enactment. This, of course, is a well-established rule of interpretation, but apart from the use of the word such to which reference is made above, there are no words in the clause to the effect that the building, machinery or plant must have been used for the purposes of the business during the previous year. The second proviso, therefore, in no manner travels beyond the scope of the main enactment or seeks to control it. In fact as stated above, there is no true relationship between the main clause (vii) and the second proviso to it. The clause deals with an allowance and the proviso takes back what was given as an allowance in the preceding years. This leads us to the conclusion that notwithstanding that the two factories were not used for the purposes of the assessee's business during they relevant accounting period since depreciation was allowed one them in the preceding years under clause (vi) the same was liablal to be taken back to the extent the sale price exceeds the cost price. In this view, the amendment introduced by the Finance Act, 1962, can be considered as declaratory of the intention of the Legislature and not as a new taxing provision.

6. For the foregoing reasons, we find that the Tribunal was not right in holding that the- surplus arising out of the sale of the two factories by the assessee was not liable to tax under the second proviso to section 10(2)(vii) of the Income-tax Act. The reference is answered accordingly. In the circumstances of the case, there will, however, be no order as to costs. S. Q. Reference answered in negative.