1982 PLP (Trib (PTD)

Income‑tax Act (XI of 1922)‑‑ ‑--‑Ss. 15‑A & 16‑Exemption from tax‑Interpretation of statutes‑ Section 16 saying that while computing total income various exemp tions mentioned therein have to be included while S. 15‑AA not saying that exemption granted by this section should be excluded from total income but says that so much of investment as forms part of total income should not be taxed‑Basic principle of interpreta tion: Two provisions of law apparently contradictory in nature

Effort to be made to reconcile such provisions‑Legislature not to be supposed to have intended to contradict itself ‑ Interpretation of Ss. 16 & 15‑AA read together: While total income could remain as it is inclusive of sum invested by assessee but in calculating tax so much of sum invested (subject of course to limitation prescribed by various sections) has to be deducted from total income as not taxable Interpretation of S. 15‑AA as being not applicable in case of super‑tax-- Leads to absurdity‑Word "tax" as used in S. 15‑AA includes both income‑tax and super‑ tax‑Assessee, held, entitled to exemption of investment as envisaged in S. 15‑AA to super‑tax as well‑[I. T. A's Nos. 13 and 14 of 1978‑79 dissented from]. I. T. A's. Nos. 13 and 14 of 1978‑79 dissented from. Maxwell on Interpretation of Statutes, 9th Edn., p. 163; Jamal Din v Muhammad Aslam P L D 1965 Lah. 503; Muhammad Zaman v. Collector of Hazara District P L D 1964 Pesh. 47 and Messrs Perfume Supply Co. v C. I. T. (1968) 17 Taxation 116 ref. ORDER These are three appeals of a registered firm deriving income from sate of footwear on retail basis and relate to assessment years 1975‑76, 1976‑77 and 1977‑

78. The declared and assessed position is as under :‑‑ Rs. 1975‑76 Sales declared. G. P. rate shown. 5,30,894 16.2% Sales estimated. G. P. rate applied. 6,50,000 20% The A. A. C. reduced the sales to and maintained the G. P. rate. 6,00,000 1976‑77 Sales declared. G. P. rate shown. 6,12,957 15.6% Sales estimated. G. P. rate applied. 7,40,000 20% The A. A. C. reduced the sales to and maintained the G. P. rate. 7,20,000 1974‑75 (6 months) Sales declared. G. P. rate shown. 2,17,901 16.5% Sales estimated. G. P. rate applied. 2,25,000 20% The A. A. C. confirmed this treatment. For the year 1975‑76 the assessee's only grievance is against disallowance of investment amounting to Rs. 10,

030. The assessee had purchased Defence Saving Certificates for an amount of Rs. 10,000 which he claimed to be Deducted from his total income tinder section 15‑AA. The officers below allow ed rebate of Rs. 852 and did not deduct the full amount of Rs. 10,000 from the total income. It was contended by the learned A. R. that under section 15‑AA of the Income‑tax Act, tax is not payable by an assessee on so much of his total income as is invested in the various purchases mentioned under that section. It was contended that the learned A. A. C. has erred in making distinction in total income and taxable income. The A. A. C. has rejected the claim of the assessee on the ground that super‑tax is leviable on the total income of the firm and not on taxable income and if the investment made under section 15‑AA is deducted from the total income it will no longer remain his total income as the balance of the income would be tax able income. It was argued that super‑tax is chargeable on the total income and not on taxable income and therefore such a deduction could not be allowed. The learned A. A. C. has relied upon a decision of the Tribunal in I. T. A. Nos. 13 & 14 of 1978‑79 dated 31‑7‑1979. In order to examine and analyse this proposition of law section 15‑AA may be reproduced :‑ 15‑AA. Exemption of investment in Government Securities, etc .‑(1) Subject to the provisions of subsections (3) and (4) of section 15 and sub section (3) of this section, the tax shall not be payable by an assessee, not being a company, on so much of his total income as is invested by him in the purchase of Post Office Saving Certificates, Unit Trust Certificates, not being Bearer Certificates issued by the National Investment (Unit) Trust and such Government Securities (including development Loans) and shares of such investment companies as may be specified by the Central Board of Revenue in this behalf. There is no dispute that any exception mentioned in this section are appli cable in the present case which are therefore not relevant for the purposes of the proposition which is proposed to be discussed: The important and significant words in section 15‑AA are that tax (not super‑tax or income‑tax) is not payable on the total income to the extent of the investment. The second important words is 'assessee'. Now tax has been defined under section 2(14) of the Income‑tax Act which is reproduced below :‑ 2(14) `tax' means income‑tax, super‑tax, surcharge, and additional tax chargeable or payable under this Act and includes any interest, penalty, fee or any sum or amount or other leviable or payable under this Act. The word 'assessee' has also been defined in section 2(2) which is also re produced below:‑ 2(2) 'assessee' means a person by whom income‑tax or any other sum of money is payable under this Act and includes every person in respect of whom any proceeding under this Act has been taken for the assess ment of his income or of the loss sustained by him or of the amount of refund due to him and every person who is required to file a return of income under section

22. From the bare reading of the above definitions it is clear that the word 'tax' includes 'super‑tax' and the word 'assessee' includes a Registered firm. Therefore by reading these two definitions in section 15‑AA it would be read as income‑tax or super‑tax would not be payable by an assessee including a Registered Firm on so much of his total income as is invested by him ". The super‑tax is charged under section 55 of the Income‑tax Act which again is reproduced below :‑

55. Charge of super‑tax.‑(1) In addition to the income‑tax charges for any year, there shall be charge, levied and paid for that year in respect of the total income of the previous year or previous years as the case may be of any person, cu additional duty of incoms‑tax (in this Act referred to as super‑tax) at the rate or rates laid down for that year by the Central Act. The super‑tax is in fact an additional duty of income‑tax. It appears that ix is for convenience that the Legislature has called this income‑tax as super‑tax to create a destinction otherwise the super‑tax is also income‑tax or additional duty on income. So far as the provisions which have been reproduced above are concerned no difficulty is created in interpreting them. However a difficulty is created by section 16 of the Income‑tax Act reproduced below :‑

16. Exemptions and exclusions in determining the total income. (1) In computing the total income of an assessee‑‑ (a) any sum exempted under the first and third Proviso to sub section (1) of section 7, the second and third Proviso to section 8, subsection (2) of sections 14,

15. Section 15‑A, section 15‑AA, section 15‑B, section 15‑C, section 15‑CC, section 15‑CCC, section 15‑D . and section 15‑F, section 15‑H, section 15‑HH shall be included. While section 15‑AA says that tax shall not be payable on so much of the total income of an assessee as has been invested by him under that section, this section says that while computing total income the sums exempted under various sections mentioned in the section, including section 15‑AA shall be included. On careful analysis of these sections it would be evident that the difficulty is more apparent than real. All that section 16 says is that while computing total income various exemptions enumerated therein have to be included. On the other hand section 15‑AA does not say that exemption granted by this section should be excluded from the total income. What it says is that so much of the investment which is part of the total income will not be taxed. In other words while total income would remain as it is an inclusive of the sum invested by an assessee but in--calculating the tax, so much of the sum invested, of course subject to the limitation prescribed by various sections is to be deducted from the total income as that amount is not taxable. It is a basic principle of interpretation that when two provisions of law are apparently contradictor in nature effort should be made to reconcile the two provisions because the Legislature must not be supposed to have intended to contradict itself, Following passage from Maxwell's Interpretation of Statutes 9th Edition page 163 may be reproduced below :‑ "An author must be supposed to be consistent with himself and therefore, if in one place be has expressed his mind clearly it ought to b presumed that he is still of the same mind in another place, unless it clearly appears that he has changed it. In this respect, the work of the Legislature is created in the same manner as that of any other author, and the language of every enactment must be constructed as far as possible in accordance with the terms of every other statute which it does not in express terms modify or repeal. The law, therefore will not allow revocation or alternation of a statute by construction when the words may be capable of proper operation without it. It cannot be assumed that the Parliament has given with one hand what it has taken away with another." The interpretation that section 15‑AA is not applicable in case of super‑tax would lead to absurdity. As stated above the word `tax' has been use in this section which includes both income‑tax and super‑tax. Even if it be presumed that the word `tax' only means income‑tax section 16 would still create the same difficulty as in the case of super‑tax. In other word if section 16 is to be interpreted in any other manner that would mak section 15‑AA alongwith other sections mentioned in section 16, as redundant. It is the duty of the Judge to make such construction as shall suppress the mischief and advance the remedy and to reconcile the seemingly contradictory provisions in the same statute. In Jamal Din v. Muhammad Aslam (P L D 1965 Lah. 503), the Lahore High Court upholding this principle observed :‑ "It is well‑settled rule of construction that the provisions contained in an Act bearing on the same subject‑matter should be so interpreted so as to yield harmonious results, avoiding a conflict and a contradiction. Same view was expressed by a Full Bench of the West Pakistan High Court in Muhammad Zaman v. Collector of Hazara District (P L D 1964 Pesh. 47). It observed as follows :‑ "In view of the well‑recognised principle of interpretation that if there are two provisions in the same enactment, they must, if possible be so read as to give effect to both, we see no difficulty in holding that they are not inconsistent or irreconcilable and can stand together." As for the concept of total income and the taxable income that has been irrelevantly imported by the learned A. A. C. after making deduction under section 15‑AA the balance still remains the total income. The income before deduction can be called as gross total income and after deduction made under section 15‑AA it will be total income. As has been discussed above by virtue of section 16, notwithstanding the deduction made under various sections mentioned therein, the total income is not affected. What is exempt b section 15‑AA is a pact of the total income which does not necessarily man that the balance after deduction would be taxable income as there may be some more deductions to be made which are allowable under the law. Now coming to the decision of the Tribunal quoted above and relied upon by the A. A. C. suffice it to say that the superior Courts have already decided this issue which, perhaps, was not brought to the notice of the Tribunal. The case in point is Messrs Perfumes Supply Co. v. C. I. T. ((1968) 17 Tax. 116). In that case the learned Judges of the Dacca High Court have elaborately discussed the above proposition and have taken the same view as I have taken. The operating paragraph of that case is reproduced below :‑‑ "Omission of section 15‑AA from section 58 is significant and should never be lost sight of. It has been contended by Mr. Afzalul Haque that section 15‑AA applied to income‑tax only. A short answer to this contention is that if section 15‑AA applied to income‑tax then by, reason of the provision of section 58, section 15‑AA is also applicable to super‑tax, for it provides that except certain exemptions all the provisions of the Act relating to income‑tax shall apply to super‑tax. Section 15‑AA has not been mentioned as an exception. That make it clear that section 15‑AA also applies to super‑tax. We are, therefore, clearly of opinion that the assessee a registered firm is entitled to exemption of investment as envisaged in section 15‑AA to super‑tax as well and the question must, therefore, be answered in the affirmative." If the question is as to which precedent is to be followed, the lower Court's view has to give way for the view expressed by a superior Court. In these circumstances it is directed that the amount of Rs. 10,000 should be deducted from the total income of the assessee for the year 1975‑76 for the[ purposes of calculating the super‑tax. ' Assessment years 1976‑77 and 1977‑78.‑In these years it was con tended by the A. R. that the sales as reduced by the A. A. C. are still excessive. Keeping in view the sales estimated for the years 1974‑75 and 1975‑76 the sales as have been reduced by the A. A. C. appear to be still excessive particularly in the year 1977‑78 as the assessee has pleaded reduction on account of political disturbances. The sales are, therefore, reduced to Rs. 7,00,000 for the year 1976‑77 and to Rs. 6,80,000 for the year 1977‑78.

3. All the three appeals succeed to the extent and in the manner indicated above. Appeals allowed.