1999 PLP (Trib (PTD)

Section 3-A of the Banking Companies Ordinance,, 1962 (As inserted by Banking Companies (Amendment) Act (XXX of 1972) 3-A Limited application of Ordinance to certain financial institutions: The provisions of sections (6, 25, 25-A, 29, 32, 33, 40, 41, 42, 83, 84 and 941) of this Ordinance shall, with such modifications as the State Bank may determine from time to time apply, namely: (i) First Credit and Discount Company Limited; and (ii) Prudential Discount and Guarantee House Limited: In relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment Corporation of Pakistan, the National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation and such other companies, corporations or institutions, as the Federal Government may from time to time, by notification in the Official Gazette, specify in this behalf. Section 3-A of the Banking Companies Ordinance, 1962 (As substituted by Banking Companies (Amendment Act (XIV of 1997) 3-A (l) The provisions of sections 6, 25, 25-A, 25-AA, 29, 31, 32, 33, 40, 41, 41-A, 41-B, 41-C, 41-D, 42, 83, 84 and 94 of this Ordinance shall, with such modifications as the State Bank may determine from time to time in relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment- Corporation of Pakistan, the National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation, the National Development Finance Corporation, the Pakistan Kuwait Investment Company Limited, the Bankers Equity Limited, the Pak-Libya Holding Company Limited, the Saudi-Pak Industrial and Agricultural Investment Company Limited, the Small Business Finance Corporation, the Regional Development Finance Corporation, Investment Finance Companies, venture capital companies, housing finance companies and such other companies, corporations or institutions or class of companies, corporations or institutions which carry on one or more of the business enumerated in section 7 of this Ordinance, save and except for leasing companies and modaraba companies, as the Federal Government may from time to time by notification in the Official Gazette, specify in this behalf. Section 87 of the Banking Companies Ordinance, 1962 87: Restriction on acceptance of deposits withdrawable by cheque: No person other than a banking company, the State Bank, the National Bank of Pakistan or any other banking institution notified by the Federal Government in this behalf shall accept from the public deposits of money withdrawable by cheque. Section 27 A of the Banking Companies Ordinance. 1962 . 27-A Prohibition of advertising for deposits and collection. Notwithstanding anything contained in any other law for the time being in force, no company, firm or person, not being a banking company/or a corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues or the Corporate Law Authority or the registrar Cooperative Societies, shall solicit or invite deposits of money from the public through advertisements in the public media or by postal circulars, handbills, displays in public places or by any other means, or collect or receive any deposits of money in pursuance thereof: Explanation: For the purpose of this section, 'deposits of money' shall be deemed to include money called, invited or collected for the purpose, or declared object, of investment or borrowing in any business carried on, or proposed to be carried on, by the company, firm or person by whom, or on whose behalf, such money is called, invited, collected or received irrespective of the nature of the relationship, arrangement or terms offered or provided by such company, firm or person to the person making the investment, deposits of money or payment or of the basis or understanding on which the money is so called, invited, collected or received. Section 29 of the Banking Companies Ordinance. 1962: 29. Maintenance of Liquid assets.

(1) Every banking company (and every financial institution specified in section 3A) shall maintain in Pakistan in cash, gold or unencumbered approved securities valued at a price not exceeding (the lower of the cost or) the current market price, an amount which shall not at the close of business on any day be less than (such percentage) of the total to its time and demand liabilities in Pakistan (as may be notified by the State Bank from time to time). (Provided that the State Bank may separately specify for banking companies or financial institutions the applicable percentage either in general or in relation to any class of banking companies or any class of financial institutions or to any bank or financial institution ` in particular; and Explanation: For the purposes of this section, 'unencumbered approved securities' of a banking company (or financial institution) shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of ('and the liabilities shall not include the paid up capital or the reserved or any credit balance in the profit and loss account of the Banking Company or, as the case may be, the financial institution or any such liabilities as may be notified by the State Bank for the purposes of this section shall be added). (2) In computing the amount provided for subsection (1),, any deposit required under the proviso to subsection (3) of section 13 to be made with the State Bank by a banking company incorporated outside Pakistan and any balance maintained in Pakistan by a banking company in current account with (or in profit and loss sharing term deposit account with the State Bank) including in the case of Scheduled, bank the balance required to be so maintained under subsection (1) of section 36 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956), shall be deemed to be cash maintained. (3) Every banking company shall, before the close of the month succeeding the month to which the return relates, furnish to the State Bank monthly return in the prescribed form and manner showing particulars of the company's assets maintained in accordance with this section and its time and demand liabilities in Pakistan at the close of business on each (Thursday) during the month, or if any (Thursday) is a public holiday under the Negotiable Instruments Act, 1881 (XXXVI of 1881), at the close of business on the preceding working day.

24. It will also be appropriate to reproduce the relevant provisions in S.R.O. 585(1)/87 issued by the Government of Pakistan, Finance Division in exercise of the power conferred by subsections (4) and (4A) of section 3 of the Capital Issues (Continuance of Control) Act, 1947 (XXIX of 1947):

Para. 2(g): 'investment finance company' means a company registered and granted license under this notification to undertake and carry on the business of an investment finance company; Para. 4: Objects and functions:

The objects and functions of investment finance companies shall be as follows, namely; (a) Money market activities: (i) Issuing short-term paper of its own or certificate of deposit or investments of not less than 30 days maturity. (ii) Trading in commercial paper issued by its clients, Government securities, promissory notes, banker's acceptances and other money market instruments acting either as a broker or acting on its own account. (iii) Assisting in the issue of commercial paper, including introduction of companies to the money market, preparation of documentation, distribution and market making. (iv) Acting as broker or on its own account in 'Call Money Market' (b) Capital market activities:

(v) Trading in listed securities, both equity and non-equity instruments, acting either as broker or acting on its own account. (vi) Providing professional analysis of securities of both institutional and individual investors. (vii) Issuing of long-term certificates of deposit or investment and underwriting of stocks and shares, short and long term Participation Term Certificates and other negotiable term obligations of corporations and financial institutions, acting singly or jointly as manager underwriter and distributor of such issues and taking an active part in all stages of preparation for such issues either public issues or private placement. (viii) Floating and managing both opened and close end mutual funds and managing portfolios of stocks and shares, pension and provident funds, Participation Term Certificates and other negotiable and debt instruments for both individual and institutional clients, on a discretionary as well as non-discretionary basis. (ix) Providing margin loans to individual and institutional investors. (x) Offering of cash management accounts to enable clients to shift at their discretion among various investment alternatives. (c) Project financing activities: (xi) Making investments in project through underwriting of public issue of stocks and shares and securities, short-term and long-term Participation Term Certificates and Term Finance Certificates of varying features. (xii) Guaranteeing and counter-guaranteeing loans and obligations. (d) Corporate financial services: (xiii) Acting adviser and financial agent for companies in obtaining direct bank loans, syndicated loans, export credits, leases and project finance, both domestically and internationally. (xiv) Assisting companies in private placement of debt and equity, domestically and abroad. (xv) Acting as adviser to companies in corporate or financial restructuring as well as in the preparation of resource mobilisation plans. (xvi) Acting as adviser to companies in mergers, acquisition and divestitures. (xvii) Assisting Companies with cash management systems. (xviii) Preparing feasibility, market or industry studies for companies, both domestic and foreign. (xix) Raising equity, such as through venture capital, for new and existing companies, by acting as a financial intermediary. (e) General: (xx) Carrying on any other investment finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Bank Companies Ordinance, 1962 (LVII of 1962) and the .Insurance Act, 1938 (IV of 1938) respectively, and in this connection they will neither issue cheque books nor accept deposits. (xxi) Raising funds through equity, foreign debentures, both short and long term, commercial paper issued abroad, sale of short and long term Participation Term Certificates and Term Finance Certificates, deposit and investment certificates, floating and managing of _ Modarabas and through other methods and instruments: Provided that the period of term finance certificates and other instruments shall not be less than 30 days.

25. Reliance has been placed on the decisions of Central Board of Revenue and State Bank of Pakistan determining the status of investment finance companies/development finance companies which are also reproduced below for the sake of convenience:

C. No. IT-JI/ 1(48)/70-pt Government of Pakistan Central Board of Revenue Islamabad, the 9th August, 1987 From: Khaja Habibullah Chief (Income-tax) To: Mr. M. A. Majeed, Regional Commissioner of Income-tax, Southern Region, ' Karachi. Subject: LIABILITY OF B.E.L., P.I.C.I.C., N.D.F.C. TO BE TAXED AS BANKING OR NON-BANKING COMPANIES Kindly refer to the correspondence to the above subject.

2. The matter has been considered in consultation with all the concerned authorities and it has been decided that B.E.L., P.I.C.I.C. and N.D.F.C. will not be treated as banking companies for the purpose of First Schedule to the Income Tax Ordinance, 1979. (Sd.) (Khaja Habibullah) Chief (Income-tax) STATE BANK OF PAKISTAN N.B.F.I s. REGULATION & SUPERVISION DEPARTMENT CENTRAL DIRECTORATE P.O. BOX N0.4456 KARACHI N. B. F. Is. Circular No. 1 5th December, 1991 Chief Executives of D.F.I s. Investment Banks, Leasing Companies, Modarabas and Housing Finance Companies Dear Sir, As you are aware, the Government has, through an amendment in the Banking Companies Ordinance, 1962 assigned the responsibility of supervising the business of N.B.F.I s to the State Bank of Pakistan. The State Bank has, accordingly, framed Rules of Business for N.B.F.I s. These appear in paragraph 11 below. These rules will come into force with effect from 1st January, 1992. The rules will govern the business of N.B.F.Is. with they are permitted to undertake under the relevant laws, S.R.O s. Notifications, Government Concept, Charters etc. The rules should not be construed as permission to undertake business which you are not authorised to do. All transactions taking place on or after 1st January 1992 shall be in conformity with these rules. It should be ensured that undertaking of business on or after Ist January, 1992 does not result in violation of these rules. Business undertaken prior to 1st January, 1992 shall be regularised within reasonable time, Process of regularisation may be taken in hand immediately and completed as early as possible. The State Bank will monitor the progress of regularisation through quarterly progress reports. II. RULES OF BUSINESS A. DEFINITIONS , For the purposes of these regulations:

(a) 'N.B.F.I.' means a Non-Bank Financial Institution and includes a D.F.R. Modaraba Leasing Company, House Finance Company and Investment Bank. "

26. Taking guidance from the principle that where a word is used in an enactment which is capable of various shades of meaning, the particular meaning, to be attached must be arrived at by reference to the scheme of the 'Act or of the section in particular taken as a code and particularly from the dictum laid down by Lord Blackburn in Taurquand v. Board of Trade (1886) II AC 286 "in construing this Act' (English bankruptcy Act) of course like every other Act we must take the whole of the Act together, and as this is a very long Act containing, about 60 pages of very closely printed matter, it requires, in order to that we may be certain that we omit nothing that one should look carefully at it all together and consider of the clauses", I have examined the Income Tax Ordinance closely to ascertain if the legislature has referred to financial institution as a separate and distinct entity other than bank or not, so that another principle that legislature does not waste the word and that when different, distinct and specific words/terms/expressions have been used by the legislature, they convey different connotation, and I have found that the legislature has used the terms financial institution in contradistinction to banking company in the following provisions of the Income Tax Ordinance. Section 12(18) of the Income Tax Ordinance, 1979. Where any sum claimed, or shown, to have been received as loan or advance or gift by an assessee during any income year commencing on or after the first day of July, 1998, from any person, not being a banking company, or a financial institution notified by the Central Board of Revenue for this purpose, otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding a National Tax Number, the said sum shall be deemed to be the income of the assessee for the said income year chargeable to tax under this Ordinance. Provided that, where the said loan or advance or gift is claimed or shown by way of the explanation, referred to in subsection (1) of section 13, in a case to which the first proviso to the said subsection applies, the income under this subsection shall relate to the assessment year referred to in the said proviso. Any sum paid on or, after day of July 1985, to a scheduled bank, a financial institution, or such modaraba or leasing company as is approved by the Central Board of Revenue for the purposes of the Third Schedule, by way of lease money in respect of an asset taken on lease by the assessee and used for the purpose of any business or profession carried on by him. Any person responsible for paying any sum by way of interest (or profit) on an account or deposit maintained with any banking company, (or any financial institution) shall deduct, at the time of credit of such interest (or profit) to the account of the recipient, or at the time of payment thereof, whichever is earlier, tax at the rates specified in the First Schedule. Provided further that nothing contained in this subsection shall apply to any sum paid or credit before the first day of July, 1989) Any income derived by any person, not being a bank, a banking company, financial institution, a development financing institution or a company engaged in the business of insurance, by way of return on bearer bonds issued by the Pakistan Water and Power Development Authority, established under the Pakistan Water and Power Development Authority Act, 1958 (West Pakistan Act No.XXXI of 1958). (Provided that nothing contained in this clause shall apply in respect of return on bonds issued on or after the first day of July, 1991) The provisions of clause (i) of section 24 shall not apply to any expenditure incurred by a banking company or a financial institution (owned and) controlled by the Federal Government on the provisions of Perquisites, allowances or other benefits to any employee in pursuance of any law. Where, in any income year, any building, machinery, plant or furniture owned by an assessee is issued for purposes of any business or profession carried on by him, or in any income year commencing on or after the first day of July, 1982, any machinery or plant is given on lease by the assessee, being a scheduled bank, a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for the purposes of this Schedule, on such conditions as may be specified, and allowance for depreciation shall be made in computing the profits and gains of the business or profession of the assessee in the manner hereinafter provided. Where any building has been newly erected, or any machinery or plant has been installed, in Pakistan at any time between the first day of July, 1976, and the thirtieth day of June 2000 (both dates inclusive), further depreciation allowance in respect of the year of erection or installation or the year in which such building, machinery or plant is used by the assessee for the first time for the purposes of this business or profession or the year in which commercial production is commenced, whichever is the later, shall be allowed at the following rates, namely:

(aa) in the case of a building given on lease by the assessee, being a scheduled bank, a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for the purposes of this Schedule, on or after the first day of July, 1986, if the said building is used by the lessee for purposes of his business or profession. Ten per cent of the written down value (cc) In the case of machinery or plant (other than ships or motor vehicles not plying for hire), given on lease by the assessee, being a scheduled bank a financial institution (or such modaraba or leasing company as is) approved by the Central Board of Revenue for purposes of (this Schedule) on or after the first day of July, 1982. Forty per cent of the written down value (and in respect of any assessment year commencing on or after the first day of July,1989 twenty-five per cent of the written down value. 2nd Proviso Rule 8(5) of the Third Schedule to the Income Tax Ordinance, 1979 Provided also that in case of an asset leased by a scheduled bank, a financial institution or any modaraba or leasing company which is approved by the Central Board of Revenue the term 'sale proceeds' shall mean the residual value received by such leasing company on maturity of lease agreement with the first lease, subject to the condition that the residual value plus the amount realized during the currency of the agreement towards cost of the asset is not less than the original cost to the lessor. Explanation:, The expression 'sold' as used in the second proviso, includes a transfer by way of exchange or otherwise or a compulsory acquisition under any law for the time being in force.

27. A perusal of the four earlier judgments by the Division Benches of this Tribunal sitting at Lahore, Islamabad and Peshawar shows that the learned representatives for the parties resorted to the interpretative process for ascertaining if under the Income Tax Ordinance, banking company and financial institution are to be given same status or different and distinct status. Resort was made to the interpretation of expression banking and banking company as defined in section 5(b) and (c) of the Banking Companies Ordinance, 1962 with reference to the provision contained in section 2(10) of the Income Tax Ordinance, 1979 on the linguistic discipline before considering the statute i.e. the Income Tax Ordinance, 1979 itself. In three Division Benches of this Tribunal holding the view that investment finance companies not banking companies, the law was examined on the same linguistic discipline as done in the judgment of another Division Bench of this Tribunal sitting at Lahore reported as 1997 PTD (Trib.) 786, though contrary conclusion was drawn. In all the four judgments by Division Benches of this Tribunal requiring consideration by us in this Full Bench the consideration revolves round the interpretation/terms 'banking' and 'banking company' in isolation, without considering the other provisions in the Income Tax Ordinance itself and likewise the definition of the words 'banking' and 'banking business' contained in section 5(b) and (c) of the Banking Companies Ordinance have been considered without aid from the other provision contained in the Banking Companies Ordinance itself. In the very learned and detailed judgment reported as 1997 PTD (Trib.) 786 the entire attention appears to have been concentrated on the linguistic analysis of definition contained in section 5(b) of the Banking Companies Ordinance, 1962 and support in this behalf has been drawn from the judgments of Hon'ble Sindh High Court and Lahore High Court, particularly in the case of Farooq Ahmad v. Federation of Pakistan 1988 CLC 1731 and Haideri International Finance Limited v. State Bank of Pakistan 1986 CLC 2197, as well as oversees Pak Credit and Investment Corporation Private Limited v. Governor of State Bank of Pakistan. However, it appears that a very important principle of the interpretation of statutes and the law of precedent was lost sight of, that the words take their shares and colour from the context in which they are used and the law of precedent is to be used with care and caution, as the judgments of the superior Courts are given in the context of issues arising in a particular set of fact and in the context on the particular point of law raised and decided. Thus we find that in the case of Haideri International Finance Limited v. State Bank of Pakistan 1986 CLC 2197 on which the learned counsel for the department has heavily relied upon before us and on which reliance was placed by the learned Members of the Division Bench in the judgment reported as 1997 PTD (Trib.) 786, writ petition was filed challenging the declaration made by the State Bank of Pakistan under section 43-B of the Banking Companies Ordinance, 1962, after proceedings under section 43-A of the said ordinance for the reason that the petitioner was transacting banking business in contravention of section 27 of the Banking Companies Ordinance, 1962. In the case of Overseas Pak Credit and Investment Corporation (Pvt.) Limited (supra) also writ petition was filed challenging declaration made by the Governor of State Bank of Pakistan under section 43 of the Banking Companies Ordinance, 1962. In the case of Farooq Ahmad v. Federation of Pakistan (supra) the petition was filed challenging the show-cause notice by the State Bank of Pakistan as to why the petitioner should not be prosecuted for violation of section 27-A of the Banking Companies Ordinance, 1962. It is provided in section 27(1) that no individual or association or body of individuals not being a company shall carry on banking business in Pakistan unless it holds licence issued by the State Bank of Pakistan. Section 27-A prohibits advertising for deposits and collection by any company, firm or person not being a banking company or corporation or authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues or the Corporate Law Authority or Registrar Cooperative Societies. In Pro-section 43-A of the Banking Companies ordinance, 1962 the State Bank is empowered to initiate proceeding if business of banking is, transacted in contravention of subsection (1) of section 27 or deposit of money is received in contravention of section 27-A. Under section 43B of the Banking Companies Ordinance, 1962 the State Bank is empowered to hold enquiry under section 43-A to issue declaration in this behalf. The facts in the cited cases are, therefore, distinguishable from the facts of the present case. As already explained, in the case of Farooq Ahmad v. Federation of Pakistan, there was violation of the provisions contained in section 27-A as deposits were solicited through advertisement. While no such question is involved in the cases under consideration and on the contrary under section 27-A, the investment finance institutions are allowed to do so as is permissible to banking companies or corporations or authorities established by the Federal Government. The reason being that the investment finance companies/institutions are duly authorised by the Controller of Capital Issues. In the case of Haideri International Finance Limited and Oversees Pak. Credit and Investment Corporation, the State Bank of Pakistan had initiated action under sections 43-A and 43-B of the Banking Companies Ordinance, 1962 for contravention of the provisions contained in section 27(1) of the Banking Companies Ordinance, 1962 while in the case of Investment Finance Companies, the State Bank of Pakistan in spite of exercising control under section 3-A of the Banking Companies Ordinance, 1962 and conducting audit of the Investment Finance Corporations has not issued any declaration to the effect that Investment Finance Companies are engaged in banking in violation of section 27(1) of the Banking Companies Ordinance. The State Bank of Pakistan being in full knowledge of fact that the Investment finance companies have not been issued licence for banking and that they have been issued licence by the Controller of Capital Issues and that the investment finance companies are accepting deposits, are lending the deposits so received for the purpose of investment and that on maturity of the certificate of investment are returning bank the deposits with interest and prior to the maturity of the certificate of investment without interest, has framed regulations treating the investment finance companies as ' non banking financial institution'. Thus, the facts and circumstances being different in the cases decided by the Hon'ble Lahore High Court and Sindh High Court it would not be proper to treat the judgments as precedent for the purpose of deciding whether for the purpose of Income Tax Ordinance the investment finance companies can be treated as banking companies. Before proceeding to the discussions whereby we will make attempt to discover the intention of legislature, if for the purpose of Income Tax Ordinance, 1979 the legislature has included the investment finance companies in the expression banking companies. We would like to refer another judgment of the Sindh High Court in the case of Shams Textile Mills Limited v. Federation of Pakistan PLD 1992 Kar.

513. In this case vires of the banking companies (Recovery of Loans Ordinance, 1979) (XIX of 1979) was challenged. A contention was raised in this case that Entry 28 of the Fourth Schedule to the Constitution of Pakistan (1973) does not empower the Federal Legislature to enact an Ordinance of the nature in question for providing for the recovery of loans advanced by a financial institution whose business is money lending, as money lending is a provincial subject. On behalf of Federation of Pakistan it was urged that the word 'bank' used in Entry 28 is of wide connotation, susceptible to a meaning, which will include a financial institution. Hon'ble Justice Mr. Ajmal Mian (as his Lordship then was) did not hold that financial institution is a banking company, rather after examination of various provisions contained in the Banking Companies Ordinance, 1962 Banks (Nationalization) Act, 1974, Banking Companies (Recovery of Loans) Ordinance, 1979 held that, "a financial institution can be declared as a banking company for the purpose of Ordinance by a Notification in the official gazette by the Federal Government." The effect of insertion of section 3-A of the Banking Companies Ordinance was also considered by their Lordships. It was held as follows:

"It cannot be denied that on account of tremendous growth in the National and International commerce and industries new financing institutions have emerged throughout the world specialising in special branch of financial dealings. The Government of Pakistan with the object to develop industry and commerce etc. has caused the establishment of numerous financial institutions like I.D.B.P. and P.I.C.I.C. etc. Strictly speaking it can be urged that respondent No.3 is not carrying on Banking business. In this regard it may be pertinent to observe that the very fact that under section 3-A of the Banking Companies Ordinance, 1962 the provisions of section 25 and 41 of the said Ordinance have been made applicable to financial institutions named therein and the fact that the definition of 'Banking Company' given in section 2(a) of the Ordinance separately mentions a Financial Institution supports Mr. Mumtaz Hussain's contention that a financial institution is not a banking company in strict sense. However, at the same time it cannot be denied that there is nexus between the financial institution like respondent No.3 and a banking company inasmuch as that the former also lends money against security. A banking company ordinarily receives deposits from public, Which it in turn loans out to public and relationship between a banker and its customer is that of a debtor and of a creditor, respectively, whereas respondent No.3 receives loan in the form of foreign exchange with the object to loan out of the same for the developing industries in Pakistan. (c) It may also be pertinent to refer to section 3-A of the Banking Companies Ordinance, 1962, which reads as follows:

"3-A. The provisions of sections 25 and 41 of this Ordinance, shall with such modifications as the State Bank may determine from time to time in relation to activities which have implications for the monetary or credit policies of the State Bank, apply to the Investment Corporation of Pakistan, National Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House Building Finance Corporation and such other companies or institutions, or class of companies, corporations or institutions as the Federal Government may from time to time, by notification in the official gazette, specify in this behalf." It may be noticed that under the above quoted section which was enacted by the Banking Companies (Amendment) Act, 1972 (XXX of 1972), the provisions of sections 25 and 41 of the said Ordinance with such modifications as the State Bank may determine from time to time in relation to activities which may have implications of the monetary or credit policies of the State Bank, were made applicable to the financial institutions named in the above quoted section, which include P.I.C.I.C. i.e. respondent No.3. It may be pertinent to observe that section 25 empowers the State Bank to determine the policy in relation to advances to be followed by the Banking Companies generally or by any banking company in particular. It also empowers the State Bank under section 25(2) to impose penalty of Rs.2,000 or in the case of continuing default a penalty of Rs.500 per day for non-observance of the policy framed by the State Bank under section 25(1). Moreover, subsections (2) to (6) of the above section further empowers the State Bank to provide loan ceiling etc. and other measures. The effect of subsections (1) to (6) of section 25 is to give effective financial control to the State Bank of Pakistan over the Banking Companies, whereas section 41 of the said Ordinance empowers the State Bank to give direction from time to time to the banking companies generally or a banking company in particular on the subject-matters mentioned therein. The accumulative effect of sections 25 and 41 of the aforesaid Ordinance is to bring in effective control of State Bank all the banking companies. The application of sections 25 and 41 of the Ordinance to financial institutions mentioned in the above quoted section 3-A, which includes P.I.C.I.C. indicates that the said financial institutions are equated with the banking companies for the purpose of inter alia effective financial and administrative control of the State Bank of Pakistan. In other words, even the above banking companies Ordinance has established nexus between the banking companies and the aforesaid financial institutions as to their working. In our view the word 'banking' is susceptible to cover financial institutions dealing with or specializing in a special branch of banking. What is to be seen is as to whether in pith and substance the impugned Ordinance is with respect to particular category covered by the above Entry 28. "

28. It is pertinent to note that his Lordship Mr. Justice Ajmal Mian, after making observation that, "strictly speaking it can be urged that respondent No.3 is not carrying on banking business." and that, "in this regard it may be pertinent to observe that very fact that under section 3-A of the Banking Companies Ordinance, 1962 the provisions of sections 25 and 41 of the said Ordinance have been made applicable to financial institutions named therein and the fact that the definition of banking company given in section 2(a) of the Ordinance separately mentions the financial institution supports Mr. Mumtaz Hussain' contentions that a financial institution is not a banking company in strict since," merely held that there was a nexus between the financial institution and a banking company. It was not held that the Federation of Pakistan is empowered to legislate in respect of a financial institution by virtue of Entry 28 in fourth Schedule Part I of the Constitution of Pakistan which refers to the banking, but it was held that the Banking Companies (Recovery of Loans) Ordinance, 1979 (XIX of 1979) was intra vires the powers of Federal Government because of Entry 3 read with Entry 2 of the Concurrent legislative list. The Hon'ble Sindh High Court further held that, "the financial institution has a definite connotation. Under the above section only a financial institution can be declared as banking company for the purpose of Ordinance." Mr. Iqbal Naeem Pasha, learned counsel for the respondent has heavily relied on the above judgment of Hon'ble Sindh High Court. He has contended that although the provisions contained in the Income Tax Ordinance, 1979 were not involved in the above case but the point if financial institution is per se, a banking company came specifically for consideration for the first time and after thorough examination of the various provisions contained in the Banking Companies Ordinance, 1962 and the other laws on banking, it was held that strictly speaking the financial institution was not a banking company and that a financial institution has a definite connotation and that a financial institution can be declared as a banking company for the purpose of Banking Companies (Recovery of Loans) Ordinance, 1979. It is also very pertinent that their Lordships Mr. Justice Ajmal Mian and Mr. Justice Nasir Aslam Zahid, referred to a very basic principle of the interpretation of statute that in the definition of banking company given under section 2(a) of the Banking Companies (Recovery of Loans). Ordinance, 1979 legislative separately mentions a financial institution, which supports the contention of Mr. Mumtaz Hussain, Advocate that a financial institution is not a banking company in strict sence.

29. Now we proceeds to examine whether the legislature has treated a financial institution as a banking company for the purpose of Income Tax Ordinance, 1979. We have already referred to the principles of interpretation of statute to the effect that the legislature does not waste any word and when distinct words/expressions/terms are used by the legislature, they will ordinarily connote different and distinct meanings. After the authoritative pronouncement in the case of Shams Textile Mills Limited (supra) we need not to dilate further on conceptual plan. A perusal of the various provisions in the Income Tax Ordinance referred to in para. 26 of this Order we find that in section 12(18) of the Income Tax Ordinance the legislature has distinctly and separately mentioning 'banking company' or financial institution. Likewise in sections 23(1)(vi-a), 50(2-A), clause (79-A) Part I of the Second Schedule, clause (3) Part IV of the Second Schedule and Rules 1-(1), 5(1)(aa)(ec) and 2nd Proviso to Rule 8(5) of the Third Schedule, the word financial institutions has been separately used alongwith banking company /scheduled bank. The expression scheduled bank has been defined in section 2(m) of the State Bank of Pakistan Act, 1956 to mean a bank for the time being included in the list of banks maintained under subsection (1) of section

37. Section 37, subsection (2) reads as follows:

"(2) The Bank shall, by notification, in the official Gazette

(a) declare any bank to be scheduled bank which is carrying on the business of banking in Pakistan and which

(i) is a banking company as defined in section 227-F of the Companies Act, 1913, or a Cooperative Bank, or a corporation or a company incorporated by or established under any law in force any place in or outside Pakistan; (ii) has a paid-up capital and reserves an aggregate value of not less than five lakhs of rupees."

30. We will discuss the implication of above provision while considering the provisions contained in Banking Companies Ordinance, 1962. For the time being it will suffice to observe that in spite of incorporating the definition of banking contained in section 5(b) of the Banking Companies Ordinance, 1962 in the Income Tax Ordinance, 1979 by virtue of definition in section 2(10) of the Income Tax Ordinance, 1979, the Legislature has separately mentioned banking company and the financial institution. If the intention of legislature would have been to include the financial institution in the definition of banking company, then there was no necessity of separately mentioning financial institution in various provisions of the Income Tax Ordinance, 1979. It is also a cardinal principle of the interpretation of statue that no oblivion can be attributed to the legislature and if it is held that the financial institution is a banking company for the purpose of Income Tax Ordinance, 1979 it cannot be done without doing violence to the provisions contained in the Income Tax Ordinance, 1979 referred to above and without violating various principles of interpretation of statute as follows: (i) it means to attributing of oblivion to the legislature; (ii) it means to say that legislature has wasted its word; (iii) it will render the word financial institution used in various provisions as superfluous and redundant; and (iv) such interpretation would be an attempt to discover the intention of legislature on linguistic discipline only by taking the particular provision in isolation and by ignoring the other provisions contained in the Income Tax Ordinance, 1979. In other words it would amount to make an attempt to discover the intention of legislature by ignoring the entire scheme of the Act and considering of the particular provision in isolation.

31. For the foregoing reasons we are of the considered opinion that in the light of principles of the interpretation of statute referred to above, the intention of legislature is very clear that for the purposes of Income Tax Ordinance, 1979 banking company and the financial institution have been referred to separately and distinctly and, thus, they are to be treated accordingly. It would be appropriate to examine the issue in the light of provisions contained in the Banking Companies Ordinance, 1962 also. We have already referred to the judgment of Hon'ble Sindh High Court in the case of Shams Textile Mills Limited in which their Lordships have already considered the issue with reference to section 3-A of the Banking Companies Ordinance, 1962 and section 5(b) and (c) of the Banking Companies Ordinance, 1962 with reference to the Entry 28 of the Fourth Schedule to the Constitution of Islamic Republic of Pakistan. Their Lordships have clearly held that the banking company and financial institution enjoy separate status although a financial institution can be notified as a banking company for the purpose of section 3-A of the Banking Companies Ordinance, 1962. We will, therefore, not dilate on this aspect and shall merely follow the ratio of above judgment. We will examine another aspect which pertains to the interpretation of expression, 'repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise'. In the Division Bench judgment of this Tribunal expressing view that financial institution is a banking company a lengthy discussion has been made 1997 PTD (Trib.)

786. Iii this case it was contended on behalf of the department that accepting deposits for the purpose of lending them further for making investment means to borrowing and the deposits are returned to the investor as per terms as to the period or even before expiry of such period and, therefore, the financial institutions were engaged in banking business notwithstanding the fact that it was not being treated so by various official agencies in Pakistan including Central Board of Revenue and the State Bank of Pakistan. The main plea on behalf of the assessee was that they were not issuing a cheque book, no current and saving account was opened, not collections were being made from other banks on behalf of customers or depositors and. the investment company are not Members of clearing same and, therefore, they cannot be treated as a banking company. The learned Members of the Division Bench considered the contentions with reference to various judgment, from English Jurisdiction and considered the connotation of the expression 'otherwise' in the light of judgments from Pakistan and Indian jurisdiction. Dictionary meanings of the expression 'otherwise' were also considered and it was held with reference to the judgment in Haideri International Finance Limited, 'the accepting of deposits for the purpose of investing or lending but repayable on demand or otherwise falls within the mischief of this definition. The repayment may be made through any mode and not necessarily by cheque or draft as usual practice in the recognized bank." It was further observed as follows:

"The treatment extended to an assessee by one official agency may at best one of the pleas or defences which may be put up. However, if the provision of law is clearly applicable to a certain situation, a particular treatment or recognition by one official agency cannot be a bar against the application of that provision of law. There is neither an estoppel against law nor the view point of one official agency can be taken as a promissory estoppel against all other organs of the State. It may further be noted that the alleged 'finance investment' business is a recent development and any distinction made by the State Bank or Finance Division relates more to its fiscal policies rather than a category recognizable at law. The term 'investment finance business' has not been defined anywhere not even in the said S.R.O. No.585 of July, 1987 under which the assessee was granted a licence to operate. The State Bank can conveniently allow a party to do banking without treating it as a bank. However, as long the above definition clause, as it stands, remains a part of the statute, a changed nomenclature will not alter the intention and desire of the Parliament Law, it is perhaps rightly said, sometimes lags behind practice. Yet its certainty, consistency and persistency are vital for any legal system to exit. No fault lies with the words of law used or employed to express a situation which will incurably be the comprehension of drafters and legislators at the particular time in history. The fault, if any, lies with those who, in spite of feeling winds of change are slow in taking alongwith words of law to the changing directions."

32. After considering the expression 'otherwise' on linguistic discipline the learned Members of the Division Bench held that the plea that the banking should be considered on pure practical aspect or the definition contained in section 5(b) of the Banking Companies Ordinance, 1962 may be considered without the words: 'otherwise' was not acceptable. They hold as follows:

"We will refuse to oblige for the simple reason that here we have a delimitation of a business which needs to be seen through the letters of law the windows opened to look at banking rather than looking at the words of the statute from behind a bank counter. Learned A.R. for the assessee may well be right in explaining the common aspects of modern banking. However, his contentions cannot be granted because our consideration of the scope of banking must remain confined to the words used in the statute. These words can neither be enlarged nor ignored or squeezed to be pushed into the supposed pattern of practice."

33. The Division Bench finally held that the definition of the banking company as contained in section 2(10) of the Income Tax Ordinance, 1979 read with clause (b) of section 5 of the Banking Companies Ordinance, 1962 is fairly wide. The fact that a company accepts deposits for investment or lending falls within its ambit if other indicators are also present. The second portion of definition contains the test, which in turn refers to the actual practice of a company by prescribing as to how and when these deposits are demanded and paid back. Thus, certain modes of repayment or withdrawals are considered as relevant for consideration of banking business. Mere fact that a company is not effecting withdrawals by cheques, drafts or orders will not by itself take it outside the mischief of the definition clause.

34. With all respects and due deference to our learned brother, the Judicial Member who authored the above judgment after taking lot of pains and efforts, it appears that a proper assistance was not provided to the learned Members of the Division Bench. Although it was observed that the law is dynamic but the approach in interpreting the law was not fully sociological, progressive, dynamic and purposive. It was taken note of that the finance investment business is a recent development and we fully agree with these observations but it is not possible to agree that any distinction made by the State Bank of Pakistan or Finance Division relates more to its fiscal policies rather than a category recognizable at law. We will presently further show that the finding that investment finance business has not been defined even in S.R.O. No.585 of July 1987 under which investment finance companies were granted licence to operate, is not correct. Although it is correct that during the modern age the pace of development and progress is too fast and the process of legislation sometimes lags behind but in the present case we are not persuaded to agree with the view that in spite of feeling winds of change the legislature was slow in taking alongwith words of law to the changing directions. We have already shown that in the Income Tax Ordinance itself the legislature has separately and distinctly referred to various institutions including banking company and financial institution. Even prior to the promulgation of Income Tax Ordinance, 1979 the legislature had taken note of the development of institutions in the field of investment other than banking companies. For the sake of brevity we would not like to give elaborate discussion regarding the historical development of the banking companies and the scope of business activities in which the banking companies are engaged. Such details are already given in section 7 of the Banking Companies Ordinance, 1962. We will only give a passing remark that every, banking company is in essence an investment finance institution as well but every investment finance institution is not a banking company. At present we are dealing with the developments in the field of investment and finance of which the legislature has taken notice. Section 15-AA was inserted in the Income-tax Act, 1922 in the year 1953. It was amended from time to time and by Finance Act, 1965 the expression investment companies was included. On promulgation of Income Tax Ordinance, 1979 which repeated the Income-tax Act, 1922, the expression Pakistani investment companies was used in section 41(D). Again in section 43 subsection (2) the expression investment company was used. It was provided in subsection (3) of section 43 that the C.B.R. may make rules regulating procedure for the grant of approval under section V and in pursuance thereof rule 38 was framed. In rule 38 the expression investment company was used and in subsection (2) investment company was defined as follows:

" 'Investment Company' means a company engaged principle or wholly, in buying and selling securities of other companies and includes a company, not being a holding company, the investment of which in the share capital of other companies at in one time is of an amount equivalent to 80 % of the aggregate of its own paid up capital and free reserve but does not include a bank or an insurance company or a corporation which is a member of Stock Exchange."

35. Prior to the promulgation of Income Tax Ordinance, 1979 section 3A was inserted in the Banking Companies Ordinance, 1962 by Amendment Act (XXX of 1972) which has been substituted by Amendment Act (XIV of 1997). Subsequently S.R.O. 585(1)/87 issued by the Government of Pakistan, Finance Division in exercise of the power conferred by sub-sections (4) and (4A) of section 3 of the Capital Issues (Continuance of Control) Act, 1947. Thus investment finance companies were regularized and brought within the frame work of law by issuance of S.R.O. 585(1)/87. In para. 2(g) investment finance company was defined to 'mean company registered and granted licence under the said notification to under take and carry on the business of an investment finance company. In para. 5 of the above S.R.O. the object and functions of investment company were enumerated in detail which has already been reproduced in earlier part of this order. In para.5(20) it was specifically provided that the investment finance company can carry on other investment finance business specifically allowed by the Controller with the exception of banking business and insurance business as defined in the Banking Companies Ordinance, 1962 and the insurance Act, 1938 respectively and in this connection they will neither issue cheque books nor accept deposits. Thus, we find that in rule 38 of the i income Tax Rules, 1982 the banks and insurance companies were specifically excluded from the definition of investment company and likewise in S.R.O. 585, also the banking business and insurance business has been expressly excluded from the investment finance business. We further find that the issuance of cheque book or acceptance of deposits in connection with banking business has been specifically excluded from the investment finance business.

36. After showing that the legislature has taken notice of the development in the field of investment and finance, we will examine the provisions contained in Banking Companies Ordinance, 1962 other than section 3A. Section 27A has been inserted by Finance Act, 1990 whereby in addition to a barking company a corporation or an authority established by the Federal Government or a company duly authorised in this behalf by the Controller of Capital Issues has been permitted to solicit or invite deposit of money from public through advertisement. Section 29 of the Banking Companies Ordinance, 1962 has been amended by Ordinance, 3 of 1994 through which the expression, 'and every financial institution specified in section 3A' has been inserted after the words 'banking company'. Prior to that a proviso was added to section 29 by Act, VII of 1.965 which reads as follows:

"Provided that the State Bank may separately specify for banking companies or financial institutions the applicable percentage either in general or in relation to any clause of banking companies or any clause of financial institution or to any banking or financial institution in particular. "

37. In explanation to section 29 words 'or financial institution' were added by Ordinance 3 of 1994. In this explanation also the expression banking company or financial institution has been used. Thus, we find that the legislature fully knowing the definition of banking company given in ' section 5(b) of the Banking Companies Ordinance, 1962 has separately and distinctly inserted the expression finance institution in various sections of the Ordinance.

38. We have already shown that in the earlier Division Bench judgment of this Tribunal reported as 1997 PTD (Trib.) 786 it has been held that in 2nd part of the definition of banking contained in section 5(b) of the Banking Companies Ordinance, 1962 the words 'withdrawable' by cheque, draft, order or otherwise is not very material and it is sufficient to bring the repayment through any mode, the transaction of deposits and repayment thereof within the perameters of banking, we would again like to observe with respect that the words repayable on demand or otherwise and the modes of withdrawals got more attention and the expression 'withdrawable' was not given due importance. The word 'withdrawable' has not been defined in the Banking Companies Ordinance, 1962 or any other law which has been referred to us. However, the principle that the words acquire the meaning and colour from the context in which they are used in very much attracted here. A perusal of para. 5 of S.R.O. 585 under which the investment finance companies are granted licence to carry on the investment finance business shows that the investment finance companies received deposits by issuance of short-term paper of its own or certificate of deposits or investment of not less than 30 days maturity and issuance of long-term certificate of deposits or investment. The pro forma of certificate of deposits/certificate of investment has been produced before us to show that the amount of investment is payable to the registered holder on surrender of the certificate at the office of issue. It has been further stated before us that if the certificate of deposit/investment is surrendered after maturity the profit thereon is paid. However, if the certificate is surrendered prior to maturity no profit is paid thereon. Be that as it may, the fact which has not been controverted is that the investment/deposits is payable on surrender of certificate and not otherwise. Mr lqbal Naeem Pasha has produced copy of letter from State Bank of Pakistan, dated 30th September, 1993 according to which the State Bank of Pakistan in pursuance of control which it has on the non-banking financial institutions (as nomenclature is given by the State Bank of Pakistan to the financial institutions) are permitted to give premature encashment of the certificate of investment subject to the condition that no profit will be paid on the certificate so encashed. It shows that the repayment of the deposits with the financial institutions/finance investment companies is on surrender and encashment of the certificate, meaning thereby that withdrawal of the part, investment/deposits is not permissible in the case of investment finance, companies. In these circumstances the word 'withdrawable' by cheque, draft, order or otherwise gains importance. According to Chambers Dictionary (1993 Edition) the word 'withdrawal' means; an act of gradual process of withdrawing and the removal of money from a bank account'. Thus when the expression withdrawable has been used in section 5(b) of the Banking Companies Ordinance, 1962 it envisaged, first, an account current or saving and secondly, the right of the account holder to take out or remove the money gradually, though having the right of withdrawing the amount in one transaction as well. In the case of investment finance companies neither there is any account of depositor opened with the finance company in the nature of current or saving account nor there is any way for gradual or piece meal withdrawal of deposit at the option of depositor. The entire deposit is encashed on surrender of certificate of investment/deposit on maturity of certificate or prior to maturity but the repayment is in the form of total disinvestment of the entire investment/deposit. Now in this background when we examine the provisions contained in section 87 of the Banking Companies Ordinance, 1962 we find that the words 'withdrawable' cheque, drafts, order or otherwise' are not without significance. It is provided in section 87 of the Banking Companies Ordinance, 1962 that no person other than a banking company, the State Bank of Pakistan, the National Bank of Pakistan or any other biking institution notified by the Federal Government in this behalf shall accept from the public deposits money 'withdrawable' by cheque. Here we would like to refer even at the cost of reputation and the provision contained in para. 5(xx) of S.R.O. 585(1)/87 specifically stating that the investment finance company is not allowed to do banking business and in this connection they will neither issue cheque books nor accept deposits. So far the acceptance of deposits, lending the same for investment and repayment of deposits are concerned the banking companies and investment finance companies both are engaged in the above activities but one of the main point of distinction drawing a broad line of demarcation and not a thin line as held in the Division Bench Judgment of this Tribunal reported as 1997 PTD (Trib.) 786 is of receiving deposits withdrawable by cheque. It appears that the provisions contained in section 87 of Banking Companies Ordinance, 1962 were not brought to the notice of learned Division Bench which decided the case cited above.

39. For the foregoing reasons it is held that in addition to the Income Tax Ordinance, 1979, the legislature has made a clear distinction in banking company and investment finance company/finance institution in the Banking Companies Ordinance, 1962 as well. At this juncture we would like to observe that the maxim 'expressio' unius exclusio altarisis (the express mention of one thing means the exclusion of the other) is fully applicable in the issue under consideration. After showing that the legislature has expressly manifested its intention by enacting various provisions in the Income Tax Ordinance, 1979 and the Banking Companies Ordinance, 1962 that the banking companies and financial institutions are separate and distinct entities, we have no hesitation in holding that when the language of statute and the intention of legislature is explicit and clear, it cannot be defeated by any interpretative process or by any other doctrine of law. Any interpretation of law by recourse to any doctrine or logic against the manifest intention of legislature which can be inferred by referring the language of statute is against the golden principle of interpretation of statutes.

40. Consequent to the above findings it is held that the investment finance companies are not the banking companies and, therefore, the law has not been correctly exposed and propounded in Division Bench judgment of this Tribunal reported as 1997 PTD (Trib.) 786 which is hereby. Consequently we agree with the view held by three other Division Benches of this Tribunal sitting at Lahore, Peshawar and Islamabad which have been referred to in the earlier part of this order and the view held that investment finance companies/finance institutions are not banking companies is hereby approved.

41. Consequent to the above findings it is held that the First Appellate Authorities in all the above appeals rightly held that the respondents engaged in the business of investment finance business are not banking companies. The appeals at the instance of department on this issue stand dismissed accordingly. The other issues, if any, may be placed before a Division Bench. (Sd.) (Muhammad Mujibullah Siddiqui), Chairman.

42. INAM ELLAHI SHEIKH (ACCOUNTANT MEMBER).

In have perused the above order proposed by the Hon'ble Chairman, on the issue whether the assessees/respondents in these appeals are banking companies or not in the light of the provision of Income Tax -Ordinance, 1979. At the outset, I may mention that I was the signatory to the order reported as 1997 PTD (Trib.) 786 authored by the then Judicial Member, Mr. Nasim Sikandar, who has since been elevated to the High Court. The Hon'ble Chairman has proposed to overrule such order of the Division Bench of the Tribunal and he has passed very elaborate and detailed order after considering the various provisions of not only the Income Tax Ordinance and the Banking Companies Ordinance as well as S.R.O. 585(1)/87 but also various other laws after considering the principles of interpretation as well as various case laws. In the order reported as 1997 PTD (Trib.) 786 I have given the following observations while agreeing with the order passed by the learned Judicial Member:

33. Inam Ellahi Sheikh (Accountant Member).

I have carefully perused the order proposed by my learned brother, the Judicial Member, in the above four cross-appeals. I have been especially impressed by the well-reasoned and detailed order on the issue of status of the assessee whether this is a banking company or otherwise. My learned brother, the Judicial Member, has set aside the issue with certain directions as given in para 31 of the order. I respectfully agree with the conclusion reached by my learned brother for all the reasons recorded therein: However, while setting aside the assessment on the issue of status, I feel that the Assessing Officer should also look at the status assigned to similar other companies by the tax department. If the Assessing Officer wishes to assign a different status to the present assessee as against that assigned to the other assessees already discussed above who have been recognised to be non-banking institutions although conducting similar business, the Assessing Officer should record his reasons for such discrimination after confronting the assessee. With these brief observations I record my findings that I fully agreed with the order proposed by my learned brother, the Judicial Member and the appeals be decided as proposed by him." Although the assessment in that case was set aside but in paragraph 31 of the same order (see para. 13, page 30 above) it was held that the definition of the banking company as contained in subsection (10) of section 2 of the Income Tax Ordinance read with Clause (b) of section 5 of the Banking Companies Ordinance, was 'fairly wide'. However, in paragraph 28 of such reported order, it was emphasised that the Revenue should have been on its guard and conducted a factual enquiry in view of the assessee's denial of being a banking company. A special reference was made to the mode of withdrawals involved in that case. Since the matter was being remanded back to the Assessing Officer with certain directions and also I had passed my remarks about the treatment being given to other similar non-banking financial institutions, I did not take long to agree with the decision of setting aside of assessment.

43. At the time of hearing of the present appeals, an enquiry was made from L.A. as to the ultimate fate of such assessment in the reassessment proceedings and the learned L.A. could not provide any answer. Nevertheless, it appears that the above order is taken to have decided the issue finally in favour of the Revenue so far as the Division Bench was concerned. In paragraph 24 of the same order, a reference was made to the discussion of section 5(b) of the Banking Companies Ordinance in the cases of re: Farooq Ahmad (supra) and M/s. Haidery International Finance Limited (supra). In such cases it was observed that term banking given in section 5 of the Banking Companies Ordinance was fairly wide and that the acceptance of the deposits for the purposes of investing or lending but repayable on demand or otherwise which could be withdrawn by cheque, draft order or otherwise would fall within the mischief of this definition. Perhaps these observations of the High courts conveyed the impression that Division Bench had accepted the departmental point of view. However, in such a case there would not have been any need to set aside the assessment if the term 'otherwise' in the mode of repayment could be given such wide meanings.

44. Having given reasons for subscribing to the order reported as 1997 PTD (Trib.) 786, I would now offer my comments on the proposed order of the Hon'ble Chairman in the following manner.

45. As Hon'ble Chairman has rightly pointed out in paragraph 34 above, proper assistance had not been provided to the Division Bench while considering the appeals involved in the order reported as 1997 (Trib.)

786. I dare go a little further and would say that even at the time of the hearing of the present appeals placed before the present Bench of the Tribunal, proper assistance was not available from both the parties. I must appreciate the tremendous efforts made by the Hon'ble Chairman in writing the above order in the absence of such proper assistance from the parties, especially his efforts in digging out the reference to the term financial institutions not only in the Banking Companies Ordinance but also in the Income Tax Ordinance and other laws. I fully agree with the interpretation made by the Hon'ble Chairman that the legislature could not have used the terms financial institution and investment finance companies in various parts of the Income Tax Ordinance as well as Banking Companies Ordinance if it had intended to treat a financial institution as a banking company. Without going into a further detailed reasoning I would express my agreement with the Hon'ble Chairman that the assessees-respondents in present appeals are not banking companies as meant in Banking Companies Ordinance referred in subsection (10) of section 2 of the Income Tax Ordinance.

46. However, subsection (10) of section 2 of the Income Tax Ordinance further goes to include in the definition of a 'banking company' "anybody corporate formed by, or under any law for the time being in force which transacts the business of banking in Pakistan". The assessee in the present case is a company incorporated under the Companies Ordinance, 1984 have a body corporate, and has a licence to conduct business as an investment finance company under the provisions of the S.R.O. 585(1)/87. Such S.R.O. prohibits the company from carrying on banking business and also it prohibits issuance of cheque books or accepting deposits as laid down in clauses (xx) of the objects of such finance company. There is no dispute over the facts that these companies have not issued any cheque book. It is also not the case of the Revenue that any action has been taken by the State Bank of Pakistan against these assessees for violation of such condition or for conducting unauthorised banking business as was in the cases of Haidery and Farooq Ahmad referred to above. Still a question may arise that the assessee may be doing business attracting the penal provisions-and such violation may have escaped the attention of the authorities. If an assessee, being a body corporate, was conducting banking business in contravention of the laws, in my humble view it would still be hit by the definition given in sub section (10) of section 2 of the Income Tax Ordinance. In my humble view some aspects of this issue have still been overlooked. The term 'banking' has been defined in section 5(b) of the Banking Companies Ordinance which has already been reproduced in para. 23 of this order. This definition starts with the term 'accepting, for the purpose of deposits of money from the public'. On the other hand clause (a) of para. 5 of S.R.O. 585 authorises an investment finance company the 'issuance of short term papers' and specifically prohibits the acceptance of the deposits (see para. 24 above). There is no dispute over the fact that the assessees in the present appeals did not open any account, current or term, into which the money could be deposited. The banking companies, in the ordinary sense, open various types of accounts such as Current, Savings, P.L.S., Term Deposit Account, Notice Deposit Account, in addition to issuance of deposit receipts which latter factor is common with the finance companies. Since the law has used different wordings for the term 'banking' in the Banking Companies Ordinance and the functions allowed to an investment finance company, different meanings have to be assigned to such functions.

47. As already mentioned above, the assessment involved in the order reported as 1997 PTD (Trib.) 786 was set aside to conduct of factual enquiry on the mode of withdrawal, although in the earlier para. it had apparently been indicated that the mode of withdrawal did not matter significantly in view of the presence of the word 'otherwise' after cheque, draft, order. Since an impression has been conveyed by the reported order referred to above to have settled the matter in favour of the Revenue, I would like to offer a few comments on this issue as well, especially after going through the detailed order of the Hon'ble Chairman, There is a dispute whether the term 'otherwise' has similar meaning to cheque, draft, or order or does it mean any other mode of withdrawal. Applying the same principle of interpretation that no unnecessary word was used by the legislature. I feel that the presence of the word cheque, draft, order would be rendered unnecessary if we were to give the word 'otherwise' a very wide meaning. The legislature could have easily skipped these words and stopped at 'withdrawalable' or used the words 'in any manner' or other similar term thereafter.

48. Agreed. (Sd.) (Sd.) (Muhammad Tauqir Afzal Malik) (Inam Ellahi Sheikh) Judicial Member Accountant Member C.M.A./66-Tax(Trib.) Order accordingly.