2004 PLP (Trib (PTD)

11. This was inserted in Second Schedule Part-I for interest on foreign currency accounts and no tax was collected on these even after the insertion of section 80B until the clause was made ineffective on 16-12-1999 and the Department did not tax any foreign currency income, why section 80DD is getting different treatment and if it was intention of the legislature to withdraw the exemption it would have specifically mentioned it in the Second Schedule. He further opined that Economic Reforms Act is a special legislation and section 3 of the said Act specifically states the provision of the Income Tax Ordinance shall 'not apply and in order to give effect to this superior law special clauses were added in the Second Schedule to the Income Tax Ordinance, 1979. Now the Income Tax Authorities are interpreting income-tax law as a superior law and want to deny the provisions of Economic Reforms Act, 1992 through amendments in the Income Tax Ordinance, 1979. He further submitted that the Economic Reforms Act, 1992 is a promise by the Government of Pakistan to the general public and when a member of the public acts on this offer it becomes a contract and any deviation from this would be a breach of contract. Under clause (118-C) of the Second Schedule to the Ordinance, the Government of Pakistan has offered that if any industry is set up between a specific time in specific area, it will enjoy tax holiday for a period of 8 years. Now when people have spent millions of rupees accepting these terms, the Government cannot withdraw the tax holiday being the basic incentive for setting up and spending such huge amounts. The fact remains that the legislation has not gone back on its promise, it, is the Tax Department who is trying to interpret the law wrongly. The case of Al-Samrez quoted by the learned counsel for Department at the time of hearing in fact strengthens the case of the assessee. Certain concessions/exemptions were allowed by the Government in custom duty and on its withdrawal. It was held that where letter of credits have been opened prior to withdrawal, exemption cannot be refused.

12. After considering arguments of the parties and from impugned orders of the lower authorities, it reveals that Assessing Officer levied tax under section 80DD read with section 50(5) of the Ordinance on the import of edible oil. At the time of assessment proceedings it was pleaded by A.R. of the assessee that their cases are exempt under clause (118-C) of the Second Schedule to the Ordinance in the light of Hon'ble Supreme Court of Pakistan's judgment in Ellahi Cotton Mills, wherein it has been held that minimum tax under section 80DD is not payable by the unit enjoying exemptions under clause (118-C), therefore, by extending the same corollary, no tax under section 80DD is payable by the units exempt under clause (118-C) of the Second Schedule to the Ordinance. The Assessing Officer rejected -the plea of assessee by recording the reason that section 80DD was inserted through Finance Act, 1999 and thus being latest in nature, its provisions enjoy precedents over the provisions of clause (118-C) of the Second Schedule to the Ordinance. He further relied on the C.B.R.'s Letter No. F.1-167 (ITI)/99, dated 20-9-2001 wherein it has been clarified that tax under section 80DD is chargeable to the unit enjoying exemption under clause (118-C). Hence, considering the provision of section 80DD the tax calculated under section 50(5) on the import of edible oil by industrial undertaking constitutes the minimum tax payable by them, he levied the tax under section 80DD of the Ordinance. The said treatment of the Assessing Officer assailed before the CITs (A), who deleted the tax levied under section 80DD of the Ordinance. The operative part of the impugned findings are reproduced as under:-- "The assessment record has been perused and the case was discussed in detail with A.R. of the appellant. The reliance of the appellant on he reported case of Sindh High Court in Reema Cooking Oil v. Federation of Pakistan and others (2002 PTD 1023) is relevant and applicable in the case of appellant and as tax under section 80D in both the years i.e. 2000-2001 and 2001-2002 is not justified, hence it is accordingly deleted."

13. While successor in office in the case of Messrs Latif Ghee Industries has recorded his finding in the following manner: "Assessment record has been perused. It transpires that appellant-Company is enjoying tax holiday under clause (118-C) of the Second Schedule to the Income Tax Ordinance, 1979. Tax was levied under section 80DD on the basis of history of the case. However, said treatment given in the preceding year has been rejected in appeal by my learned predecessor in the appellant own case Vide A.O. No.750, dated 10-7-2002 relying on the judgment of Hon'ble Sindh High Court vide reported case of Reema Cooking Oil v. Federation of Pakistan. It is held by the Hon'ble Court that a bare perusal of section 80DD of the Income Tax Ordinance, 1979 shows that it is in the nature of presumptive tax regime and is substantially of the same nature as section 80D of the. Income Tax Ordinance which has been held to be void by the Hon'ble Supreme Court of Pakistan in the case of Ellahi Cotton Mills Ltd. Since facts of the case for the years under appeal remain the same, therefore, in the light of treatment meted out in the preceding year the tax levied under section 80DD is deleted."

14. The main crux of the arguments on the part of the appellant/department is that the impugned orders being sketchy and non-judicious should be remanded to First Appellate Authority to re-adjudicate it in judicious manner. However, on the part of the Department it was also' pleaded by learned Deputy Attorney-General that section 80DD being part of Income Tax law being general statute and subsequent in time series shall override the special law as contained in the Economic Reforms Act XII of 1992. While on the other hand, the learned counsels and authorized representatives of the respondents assessees contended that the relevant provision contained in section 80DD read with section 50(5) and proviso to section 50(5) being of general nature consisting of general words did not expressly mention the repeal or ouster of special law "of, Economic Reforms Act, 1992 which provide protection to the exempted clauses under the Second Schedule to the Ordinance. On behalf of the respondents it was also that almost the Hon'ble Sindh High Court had decided the matter but due to having alternate remedy available to assessee, the Court had directed to approach the income-tax hierarchy for their remedy. As the impugned orders have been based on the judgment of Hon'ble Sindh High Court in Reema Cooking Oil reported as 2002 PTD 1023, while the Hon'ble Sindh High Court has relied upon the judgment of Apex, Court of the country in Ellahi Cotton Mills reported as (1997) 76 Tax 5 (SC Pak). And the section of law involved are 80D and 80DD of the Ordinance, 1979, therefore, we would like to reproduce the relevant paras of the judgments of higher and superior Court, section 80D, section.80DD and section 50(5) alongwith its proviso. Relevant portion of the judgment of Hon'ble Karachi High Court at page 1025 and 1026 of PTD 2002 is as under: "A bare perusal of the above section shows that it is in the nature of presumptive tax regime and is substantially of the same nature as section 80D of the Income Tax Ordinance, 1979, which has been held to be valid by the Hon'ble Supreme Court, in the case of Ellahi Cotton Mills, referred to above. Thus, after the authoritative pronouncement by the Hon'ble Supreme Court in the case of Ellahi Cotton Mills disposing of all the points, which have been raised in this petition, no fresh consideration is required by this Court. So far as the question of protection under section 6 of Economic Reforms Act, 1992 is concerned, the Hon'ble Supreme Court has dealt with this issue also in the case of Ellahi Cotton Mills (supra) and if the petitioner enjoys any exemption protection, he can agitate the same with the Departmental Authorities in the light of the above judgment of the Hon'ble Supreme Court." Para 54 of the judgment of Hon'ble Supreme Court of Pakistan is reproduced as follows:-- In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a general statute. In this view of the matter, assessees who fulfil the conditions of the notifications referred to in the Schedule to section 6 of the Act XII of 1992, are entitled to the protection. The question, as to whether a particular assessee fulfils the conditions of the above notifications, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance and to avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal." Section 80D: "Minimum tax on income of certain persons. (1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where no tax is payable or paid by a company or a registered firm, an individual, an association of persons, an unregistered firm or a Hindu undivided family which, not being a company, does not qualify for assessment under the self-assessment scheme under subsection (1) of section 59 resident in Pakistan or the tax payable or paid is less than one-half per cent of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company or a registered firm, an individual, an association of persons, an un registered firm or a Hindu undivided family which, not being a company, does not qualify for assessment under the self-assessment scheme under subsection (1) of section 59 and tax thereon shall be charged in the manner specified in subsection (2)." Section 80DD: "Minimum tax on income of importers of edible oils, etc.- Notwithstanding anything contained in this Ordinance, or any other law for the time being in force, the tax collected under subsection (5) of section 50 on import of edible oils as raw material by an industrial undertaking shall be deemed to be the minimum amount of tax payable under this Ordinance and where the final tax liability determined under this Ordinance exceeds the amount collected under the said subsection, the said amount shall be adjustable against such liability of the said industrial undertaking." Section 50(5) "

50. Deduction of tax at source. (1) to 4A..................... (5) Notwithstanding anything contained in any law for the time being in force, (a) the Collector of Customs shall, in the case of every importer of goods, collect advance tax computed, on the basis of the value of such goods as increased by the customs duty and sales tax, if any, levied thereon, at the rates specified in the First Schedule, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such importer for assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, in which the "said date', as referred to therein, falls, whichever is the later: (b) the tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act, 1969 (IV of 1969) shall, so far as may be, apply accordingly: Provided that in the case of a manufacturer importing raw materials, other than edible oils, exclusively for its own use, the Regional Commissioner of Income-tax may certify reduction of the rate of collection up to one hundred percent, if the aggregate of tax paid or collected during that year equals the amount of tax paid by such assessee in the immediately preceding year and the certificate is not issue during the first year of assessee's business: Provided further that the provisions of this subsection shall not apply to- (i) any person re-importing re-usable containers for re-export qualifying for customs and sales tax exemption on temporary import under customs Notification S.R.O. 344(I)/95, dated the 25th April, 1995; or (ii) any person importing the following petroleum products, namely;-- "Motor Spirit (MS), Furnace Oil (FO ), JP-1 and MTBE:" Provided also that if at any stage it is known that the provisions of this proviso have been misused, such person shall be treated as an assessee in default in respect of such tax and be treated accordingly."

15. From plain reading of section 80D and 80DD, it is evident that both the sections of law are para materia to each other to the extent that minimum tax is payable in both of the sections. Section 80D had been inserted in 1991, whereas section 80DD has been inserted vide Finance Act 1999, while the protection to exemption has been provided vide Economic Reforms Act XII of 1992, hence section 80D is earlier than the Economic Reforms Act 1992, whereas section 80DD is subsequent in time series. In section 80D it has specifically been incorporated that tax under this section is payable by all those in the matter of whom otherwise no tax is payable either for the reason that no tax is chargeable or due to enjoying tax holiday. Whereas in 80DD it has not been so specifically incorporated rather this section says that tax collected under section 50(5) on the import of edible oil as raw material by an industrial undertaking shall be deemed to be the minimum tax payable under this Ordinance. Whereas according to S.R.O. 593(I)/91, dated 30-6-1991 said subsection (5) of section 50 is not applicable to exempted unit. The relevant portion of S.R.O. 593(I)/91 is reproduced for ready reference. "S.R.O. 593(I)/91.-In exercise of the powers conferred by the proviso to subsection (5) of section 50 of the Income Tax Ordinance, 1979 (XXXI of 1979), hereinafter referred to as the Ordinance, and in supersession of its Notification No. S.R.O. 658(I)/81, dated 25th June, 1981, the Central Board of Revenue is pleased to specify the following to be the classes of persons to whom the said subsection shall not apply, namely:-- (i) a Provincial Government

(ii) to(v) ............................... (vi) persons, other than commercial Importers, who produce a certificate from the Commissioner of Income-tax concerned to the effect that

(a) their income during the income year .is exempt from tax; (b) their income during the income year is not likely to be chargeable to tax; or (c) no tax is likely to be payable by them on their income during the income year on account of any brought forward loss, depreciation allowance or tax credit.

16. Whereas proviso to subsection (5) of section 50 is relevant to those assessees who are paying tax and RCIT may certify the reduction of tax if the tax paid or collected during the assessment year equals the amount of tax assessed and paid by the assessee in the preceding assessment year. However, power of RCIT in cases of importer of edible oil has been curtailed vide Finance Act 1999. However, this power of RCIT is relevant to assessees, who are paying tax as it envisaged from the proviso to section 50(5) of the Ordinance.

17. Now coming to the question that when at the same time on the same subject both the special as well as general law are in field, which one prevails, over the other? To answer this question it is to be stated that an authority to impose or levy the tax cannot be deduced or inferred from doubtful imports of words, or where to statutes are in field at the same time, or where an ambiguity is found, or where it is uncertain to determine the exact intention of legislation, or where the word used in statute are capable of two interpretation, one in favour of assessee and one in favour of Revenue in such condition/situation which is favourable to assessee be adopted. Similarly, where there are general words in a later Act, which in the present case is section 80DD of the Ordinance 1979, are capable of reasons or sensible application without extending them to subject specially dealt with earlier legislation (Economic Reforms Act XII 1992), the earlier legislation cannot be held to have been indirectly repealed, altered, or abrogated from merely by force or general words without particular intention to do so. In this regard the cases-law referred by the learned counsel, Mr. Sikandar Hayat Khan on behalf of the respondent: PLD 1985 SC 159 page 164:

18. It is not uncommon to find one statute treating a subject in general terms and another treating only a part of the same subject-matter in a more minute manner. Where this situation exists, the two statutes should be read together and harmonized. This is especially where the two statutes are in pari materia. In the event of repugnancy the special statute should prevail, in the absence of a contrary legislative intent since the specific statute more clearly evidences the legislative intent than the general statute does. And this rule that a statute relating to a specific subject controls a general statute which includes the special subject is not necessarily dependent on the time of the enactment of two statutes.

19. The general rule, that prior statutes are held to be repealed by implication by subsequent statutes, if the two are repugnant, is said not to apply if the prior enactment is special and the subsequent enactment is general, the rule of law being, as stated by Lora Salborne in Seward v. Wera Craz "that where there are general words to a later Act capable of reasonable and sensible application without extending them to subjects' specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so". There is a well-known rule which has application to this case, which is that .a subsequent General Act does not affect a prior Special Act by implication. The general maxim is, Generalia Specialibus Non Derogant i.e. general provisions will not abrogate special provisions. When the legislature has given its attention to a separate subject and made provision for it, the presumption is that a subsequent general enactment is riot intended to interfere with the special provisions unless it manifests that intention very clearly.

20. Page 173; the principle of interpretation stems from the legal maxim Generalis Speicalibus Non Derogant. A general later law does not abrogate an earlier special one by mere implication. Generalia Speciallibus Non Derogant, or, in other words, where there are general words in a later Act capable of reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so. In such cases it is presumed to have only general cases in view, and not particular cases which have been already otherwise provided for by the Special Act.

21. That in PLD 1972 Lahore 41 it has been held on page 47 as under;--

22. It will be, seen that the argument addressed by the learned counsel is clearly untenable in the light of the principles just stated. The same conclusion emerges from the observations made by their Lordships of the Supreme Court in Saiyyid Abui A'la Maudoodi and others v. The Government of West Pakistan and another (1). At page 781 it is stated as under;-- `In such circumstances I would have no hesitation in holding that where a special statute dealing with a special subject created special liabilities as also provided a special remedy or procedure for the enforcement of that liability then in order to bring about the consequences contemplated by that statute for the breaches of its provisions recourse should be had to that statute and to no other statute.'

23. Again in PLD 1968 Lahore 344 it has been held vide para 15 at page 352 as under;-- The principle that the general law would not prevail over a specific enactment is now well-settled and one may refer in this behalf to AIR 1921 Lahore 280; AIR 1941 Lahore 364; AIR 1936 All. 222; AIR 1932 PC 252; AIR 1950 Mad. ?? AIR 1934 Sindh 89; AIR 1934 Bombay 16; and AIR ?? Nag.

180. The principles which emerge from the Authorities are that where special provision is made in a special statute that special provision excludes the operation of a general provision in the general law.

24. That reliance can be placed on another case in support of the proposition that -a Special Act is neither repealed nor abrogated by a subsequent General Act as was held in AIR 1932 PC

26. In this case it was held by Lord Wright as under: "When the legislature has given its consent to a, separate subject and made provisions for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless it manifests that intention very clearly."

25. That in 1958 SC India 341 the Court has held that, if in a taxing statute two interpretations come out of it, then the interpretation which favours the assessee should be adopted. Its the present appeal before the learned Appellate Tribunal only one interpretation comes out of Economic Reforms Act (XII of 1992) read with section 80DD and therefore, it was to be construed in favour of the assessee. Even if, it were to be said that two interpretations can possibly come out of it, which temptation is however repelled, the interpretation which favours the assessee will have to be accepted and that, is that, the earlier special law will over-ride the general law. This, interpreta tion is also consistent with the policy objects of the Government of Pakistan.

26. That in toe same direction there is another case from the Indian jurisdiction reported as 1974 94 ITR 129 wherein it has been held as under:-- `In Mahadeolal Kanodia v. The Administrator General of West Bengal it was held that it is a sound rule of interpretation of beneficent legislation that in case of ambiguity the construction which advances the beneficent purpose should be accepted in preference to the one which defeats that purpose. Section 10(29) is a piece of beneficent legislation. It is designed to benefit corporations earning income from letting of godowns or warehouses for, inter alia, facilitating the marketing of commodities. If a corporation constituted for, inter alia, warehousing of commodities is excluded, the purpose of exempting income from letting of warehouses, inter alia, for facilitating the marketing of commodities would be defeated. This is another reason for not construing the term "marketing" in. its narrow sense'.

27. That in AIR 1965 SC India 871, it was held that a meaning to be attached to any Word would depend upon the context in which it is used. The learned Supreme Court of Pakistan has allowed exemption based on Economic Reforms Act (XII of 1992) on the ground that it was subsequent in time series and therefore, was binding on a general statute which was already a part of the earlier statute. However as said earlier the learned Supreme Court did not dwell on a situation where the special law in this case the Economic Reforms Act (XII of 1992) was earlier in the time series while the general, provisions in the statute were subsequent to it. In the absence of such a finding decisions rendered by the Supreme Court in PLD 1985 SC Pakistan 159 also supports case of the respondent for an exemption under the Economic Reforms Act (XII of 1992) although earlier in the time series. Since this legal point is supported by a plethora of case-law, it does give another direction to the interpretation which may be given in cases where the Special Act in the time series happens to be earlier in comparison to a later general statute. Therefore, in the presence of weighty case-law by a Court at the highest level in Pakistan and also by the superior judiciary in India in favour of the respondent will have to be accepted on the ratio of decision in (1958) SC India 341 and PLD 1985 SC Pakistan 159.

28. In respect of serial No.4 of the grounds of appeal, it may be stated that, a circular of the C.B.R. has no value in the eyes of law as was held by the learned Supreme Court of Pakistan in a famous case reported as 1993 SCMR 1232 at page 1259, which is sated hereunder: It is evident from the above provisions that though the Central Board of Revenue has administrative control over the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, ally interpretation placed by the Central Board of Revenue, on a statutory provision cannot be treated as a Pronouncement by forum competent to adjudicate upon such a question judicially or quasi judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which may interfere with the judicial or quas-judicial functions entrusted to the various functionaries under a statute.

29. So in the light of the above discussions and reasons, we are of the view that Department has failed to make out-any case for acceptance of their appeals on merit, whereas the arguments advanced and cases-law referred on behalf of the respondents support the contentions of assessees wherein it has been held that when the legislature has given its attention to a separate subject and made a provision for it, the presumption is that a subsequent general enactment is not intended to interfere with special provision unless it manifests that intention very clearly, whereas in the present situation in the absence of any specific provision that section 80DD will prevail over the Economic Reforms Act XII of 1992, later statute i.e. Economic Reforms Act XII of 1992 though earlier in time consequence will prevail over section 80DD of the general statute. We, therefore, uphold the deletion of tax under section 80DD as a consequence of which, all the departmental appeals on this issue stands dismissed.

30. We also find the finding of learned/CIT(A) in the case of Messrs Latif Ghee Industries on the issue of interest income to be in line with the various judgments of L/ITAT, therefore, his finding is confirmed as such. The learned CIT(A) has set aside the order passed under section 52 of the Ordinance in the case of Hussain Daud Ghee Mills with certain directions and the Department has failed to prove before us as to what prejudice has caused to it, hence the order of learned CIT(A) is confirmed. Whereas the deletion of addition towards trading as well as P&L account expenses in the case of Messrs Ashraf Industries have been properly reasoned and justified, hence no interference is warranted on our part.

31. As a result, all the departmental appeals fail and are hereby rejected. C.M.A./963/Tax (Trib.) Appeal rejected.