1981 PLP (Trib (PTD)

GHULAM MURTAZA KHAN (MEMBER).‑The appellant, a private limited company, has disputed the order of the learned Appellate Assistant Commis sioner for upholding the Income‑tax Officer's order passed under section 35 of the Income‑tax Act. Ground No. 3, alternatively challenges the disallow ance of 10 % rebate of super tax purported to have been provided under clause 4(iv) of Part‑II of the First Schedule of the Finance Act, 1974. These objections are common in the first two assessment years. In the assessment order for 1976‑77, however, the appellant has questioned the confirmation of disallowance of Rs. 40,000 by the learned Appellate Assistant Commissioner out of the claim of cartage and Commission expenses, which according to the appellant, implies a direction for disallowance of a, higher amount than that originally disallowed by the Income‑tax Officer. The three appeals are being disposed of by the same order.

2. The appellant, is engaged in the processing, packing and sale of spices (Masalahjat). We first take up the appeals for the assessment year 1974‑75 and 1975‑76 where identical issues, as indicated below, are involved. At the time of original assessment of both the years, the Income‑tax Officer had allowed a rebate of 10 % in super‑tax as provided for in clause 4(iv) of Part‑II of the First Schedule of the Finance Act 1974. According to this clause‑ (iv) a rebate of 10 % to such company in respect of its income, profits and gains to which subsection (9) of section 10 of the Income‑tax Act 1922 (XI of 1922) applies or which are derived by it in Pakistan from processing, freezing, preserving and canning of food, vegetable, fruit, grain, meat, fish and poultry." Later on, it occurred to the Income‑tax Officer that the `Mashalajat' could not be termed as "food" as contemplated in the aforesaid clause of the First Schedule and hence, after issuing a show‑cause notice to the appellant, the Income‑tax Officer took back the rebate which was wrongly allowed by passing an order dated 12‑1‑1977 under section 35 of the Income‑tax Act.

3. The appellant, preferred appeals before the learned Appellate Assistant Commissioner, against the validity of orders passed under section

35. The learned Appellate Assistant Commissioner however, observed that the mistake, which the Income‑tax Officer committed at the time of original assessment, was quite apparent and glaring which did not require any special effort to discover it and hence he was justified in passing the orders under section

35. In support of his contention, the learned Authorised Representa tive relied upon a case reported as (1965) 56 I T R

114. The learned Appellate Assistant Commissioner further observed that a mistake for purposes of rectification under section 35 need not simply be a clerical mistake because the mistake of fact as well as of law car. also be obvious and thus fall within the purview of section 35 of the Income‑tax Act. For this opinion, the learned Appellate Assistant Commissioner relied upon the Indian Supreme Court decision reported as (1958) 34 I T R 143.

4. The appellant has now come before this Tribunal against the order of the learned Appellate Assistant Commissioner. It is contended by the learned counsel appearing on behalf of the appellant that once the Income- tax Officer has given a clear finding on the issue under dispute i.e. by allowing a 10% rebate as contemplated in the clause 4(iv) of Part‑II of the First Schedule of the Finance Act 1974, according to the learned counsel, this rebate was allowed by the Income‑tax Officer of after applying his mind to the facts of the case and for that matter, the proceedings under section 35 amounted to revision of his own orders, which he was not competent to do. The case of the appellant is that the clause allowing rebate clearly mentioned that it would be available to the company on its income derived from processing of spices which is nothing but a sort of processing of food and more specifically of vegetable. According to the learned counsel, all spices are a product of vegetables and as such they are covered by the item enumerated in the aforesaid clause. In support of his contention that spices fall within the definition of vegetable, the learned counsel read the meaning of the word spices from Harves' World Encyclopaedia, Vol. 20, p. 3686 where spice is defined as a vegetable substance. Similarly volume 21, p. 3950 of the above Encyclopaedia gives the meaning of the word "vegetable". He contends that spices which are a product of vegetable, which is one of the items on which super tax rebate is admissible. These dictionary meanings do not help the appellant's case because the meaning of these words given by different dictionaries are more or less similar. We have, in any case, discussed in detail, the succeeding paragraphs, the meaning of the words "vegetable" and "Spice" which do not at all support the appellant's case. The learned counsel also made reference in the decisions of the two Indian High Courts reported as (1955) 28 I T R 885 and (1958) 33 I T R 228, The learned counsel however could not explain or argue his case as to how and in what manner these decisions would substantiate the appellant case. The learned counsel vehemently contends that in this case the Income‑tax Officer considered the contents of the clause and thereafter allowed the rebate and hence he was now debarred from withdrawing the rebate by his order under section 35 of the Income‑tax Act. Alternatively, the learned counsel contends that, as explained by him in the earlier paragraphs, the processing of spices was nothing but processing of vegetable and as such the rebate should be made available to the appellant.

5. The learned Departmental Representative on the other hand contends that the Income‑tax Officer allowed to rebate in a routine manner after going through the aforesaid clause. Later on, it occurred to him that the assessee was engaged in processing and packing of spices which could not be considered as processing food and hence the rebate would not be admissible in its case. The learned Departmental Representative further contends that section 35 gives wide powers to the assessing officer for rectifying legal as well as factual errors which are apparent from record. Even if it considered to an error of law it was quite apparent from the record, and as such the Income‑tax Officer rectified the error by passing orders under section 35 of the Income tax Act, which were valid in law and also find support from the decisions cited by the learned Appellate Assistant Commissioner.

6. We have carefully considered, the facts of the case and we are of the opinion that the Income‑tax Officer, after noting the obvious error of law committed by him, 'issued notice for rectification and then passed orders withdrawing the rebate which was allowed iii the original assessment orders. It will be observed that while allowing the rebate in the assessment order, the Income‑tax Officer made a reference to the assessee's counsel letter dated 2‑10‑1975 in which the rebate was claimed. The operative portion of the Income‑tax Officer's original assessment order for 1974‑75 is reproduced below for the sake of convenient reference:‑ "The assessee vide their counsel's letter dated 2‑10‑1975 has claimed rebate on super‑tax at 10%. It is contended that under clause (iv) of Part II to First Schedule of the Finance Act 1974, an assessee deriving income from processing preserving and canning of food is entitled to rebate on super‑tax at 10%. Since the assessee's nature of business falls within the aforesaid provision of the Finance Act the assessee is entitled to rebate on super tax at 10%."

7. A plain reading of the relevant portion of the Income‑tax Officer's order indicates that lie considered that the assessee was deriving income from processing etc. of food and was thus entitled to rebate of super‑tax as claimed by its counsel. It shows that he did not apply his mind to the relevant provisions off the Finance Act or the precise nature of the items being processed by the appellant and allowed the rebate as claimed. Later on, it occurred to him that the appellant was not processing any food because the processing of spices cannot he considered as processing of food and as such he rectified this obvious error under section 35 of the Income‑tax Act. After examining all the facts of the case and relying on the decisions of the Indian High Court, cited by the learned Appellate Assistant Commissioner and also considered by us, we have no hesitation in holding that the order of the Income‑tax Officer passed under section 35 simply rectified a mistake which was quite apparent from records and as such we uphold the orders of the learned Appellate Assistant Commissioner.

8. We now take up the alternative plea of the appellant that spices were covered by the word vegetables whose processing was eligible for the rebate provided by the Finance Act. As discussed in detail in the earlier paragraphs, of this order, we do not subscribe to the view of the learned counsel that spices, by any stretch of imagination, could be considered as vegetables. A vegetable as commonly understood is a plant specially herbacious or apart of one, used for food like potato, turnip, beans etc. This is the meaning of vegetable given by the Concise Oxford Dictionary. The word `spice' according to the Shorter Oxford Dictionary means: "One or other various strongly flavoured or aromatics of vegetable origin, obtained from tropical plants commonly used as codiments." Similarly, the Shorter Oxford Dictionary gives the meaning of the word "vegetable" as under:‑ "A plant cultivated for food, especially an edible herb or root used for human consumption and commonly eaten either cooked or raw..."

9. In popular sense vegetables are items of food which are eaten either in raw form or cooked. The spices are neither food nor vegetables. The have no doubt, their origin in the plants but the same cannot be called as food or vegetable. In fact they are simply aromatic or pungent vegetable substances used only to flavour food e.g. cloves, paper etc. Thus taken and considering the words vegetables and spices in plain and popular sense we have no manner of doubt in holding that spices can neither be called food nor vegetable, and thus they do not fall within the purview of the relevant: clause of the Finance Act, 1974. Even the elementary principles of interpre tation of statutes lay down that while interpreting the words or language in a tax statute one has to rely on strict construction of words and phrase. Justice Rowlatt in his decision reported as (1931) 1 K B 64 (and later on followed in some other decision) observed 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 a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." In the background of the above principles, spices processed by the appellant cannot be considered as the processing of vegetables because in most popular sense, vegetable aroused as a food whereas the spices, although they have a vegetable origin, cannot be considered as vegetable consumed as food. Spice, can only be used as codiments, and never as food itself. In this view of the matter the learned counsel of the appellant fails on this ground as well. We, accordingly sustain the orders of the Departmental Officer's below in respect of, the assessment year 1974‑75 and 1975‑76.

10. In this year the solitary objection of the appellant appears to be of an academic nature. It concerns the claim of a sum of Rs. 1,10,089 which, according to the learned Counsel, is incorrectly mentioned as pertaining to the brokerage and commission alone paid to Messrs Associated Textile Consultants Limited, whereas in actuality it pertains to brokerage and commission on purchase as well as the commission paid to Messrs Associated T....C....L.... at 3 % on exports made by the appellant. The Learned Appellate Assistant Commissioner, while giving his finding on this issue, wrote that the said amount has been claimed as a brokerage and commission paid at the rate of 3 % to another sister concern on the export amounting to Rs. 11,50,

067. On this basis, according to the learned Appellate Assistant Commissioner, the claim should have been around Rs. 34,500 and not Rs. 1,10,

089. He, therefore, observed that the Income‑tax Officer made the disallowance in a cursory manner and at a very conservative figure ; and for this reason he remitted the issue back to the Income‑tax Officer for re examination of the claim and make the disallowance apporpriately. The learned Counsel apprehends that this observation of the learned Appellate Assistant Commissioner may be misunderstood by the Income‑tax Officer which be misunderstood by the Income‑tax Officer which may ultimately result in enhancement of the disallowance.

11. We have heard the learned Departmental Representative also on this point and we are of the opinion that the observations of the learned Appellate Assistant Commissioner should cause no apprehension in the mind of the appellant, because the learned Appellate Assistant Commissioner has set aside the issue with the direction that the whole position in this regard may be re‑examined and disallowance be made properly. The directions are clear and the Income‑tax Officer has to re‑examine the issue and dispose of the matter strictly in accordance with the law. These directions from us should allay the apprehension of the appellant.

12. In the result, the three appeals are disposed of as indicated above. Order accordingly.