1984 PLP 231 (PTD)

Iqbal Naim Pasha for Respondent. Date of hearing: 17th November, 1983. MUHAMMAD ZAHOORUL HAQ, J. ‑This is a Reference by the Commissioner of Income‑tax under, section 66 of the Income‑tax Act and the following question has been referred: ‑ "Whether on the facts and in the circumstances of the case the non resident assesses, liable to tax at 30% on the whole of the total income under paragraph A of Part I of the 4th Schedule to the Finance Act, 1965 is entitled to investment allowance under section 15‑C of the Income‑tax Act, 1922?" At the very outset it may be cleared and Mr. Naim Pasha has made a statement at the Bar in this regard that the syllable 'A' after the word "paragraph" and before the words "of part I "in the question referred is really syllable 'B'. Mr. Waheed Farooqui for the Department conceded it that it was the correct position. We also find that in the statement of the case in para. 4 it is mentioned that the maximum rate is prescribed in para. 'B' of Part I of the 4th Schedule to the Finance Act. 1965. We would therefore, construe that reference is in respect of a person who is liable to tax at 30 % on the whole of the total income under paragraph 'B' of Part I of the 4th Schedule to the Finance Act, 1965 as to whether he is entitled to investment allowance under section 15‑C of the Income‑tax Act, 1922. Mr. Waheed Farooqui for the applicant had submitted that the respon dents were admittedly non‑resident persons and their case was governed by section 17(a) of the Income‑tax Act and, therefore, they would not be entitled to any investment allowance under section 15‑C of the Income‑tax Act. In Explanation of para. 'A' of Part I of the 4th Schedule to Finance Act. 1965, the expression "taxable income" as used in this paragraph means :‑‑(a) in the case of an assesses to which subsection (3) of section 12 or clause (a) of subsection (1) of section 17 of the Income‑tax Act, 1922 applies the total income. He, therefore, contended that since total income has been made taxable in such case, therefore, no exemption from income would be allowed and hence investment allowance would not be allowable in the case of the respondents . . . . . It is correct that section 17(1) is applicable to non‑residents and it ' further correct that if the case of a non‑resident is covered by the sliding scale of tax provided in para. A of Part I of 4th Schedule of Finance Act, 1965, then his whole income would be treated as taxable income without allowing' any allowance of any sort. But it would not be so if the case is not covered by para. 'A' and the, present case appears to he clearly not covered by para. 'A'. Mr. Iqbal Naseem Pasha on the other hand, contended that the statement of the case as submitted by the Tribunal itself shows that although the respondents are non‑resident persons but at the same time the same statement of fact further shows that they are taxable at the maximum rate and therefore, it is para. B of Part I of the 4th Schedule to the Finance Act, 1965 which is applicable in this case. He further submitted that opening words of paragraph A of Part I of the same Schedule make it clear that para. A could be applicable only to those cases which are not governed by paragraph B, Hence those cases which are governed by paragraph B would not be covered by paragraph A. The submission of Mr. Iqbal appears to be correct‑‑because paragraph A of Part I of the 4th Schedule states as under :‑‑ "In the case of every individual, unregistered firm, an association of persons, Hindu undivided family and every artificial juridical person referred to in clause (9) of section 2 of the Income‑tax Act, 1922, not being a case to which paragraph B of this part applies." Sliding scales of income and rates of tax are specified in this para. 'A', and the same para includes the explanation where the expression "taxable income" as used in this paragraph is explained in clause (a) of this explanation to "total income". Therefore, the explanation of taxable income as mean ing total income with‑ut any exemption is to be restricted to only those case which are covered by paragraph A and hence this expression does not control the provisions of paragraph B which has to be construed independently, it is, therefore, obvious that in case alt assesses is covered by paragraph B then he will not be covered by paragraph A of the said Part I of the 4th Schedule and consequently the expression "taxable income" is explained in the first Schedule of this Part I will not be applicable to such a person. On the other hand, para. B of Part I of 4th Schedule of Finance Act, 1965 provides as under :‑ "B". In the case of any company and local authority and in every case which, under the provision of Income‑tax Act, 1922 income‑tax is to be charged at maximum rate :‑ (1) . (2) On the balance of the total income 30 Y. of such income. Provided etc . The case of the respondents is obviously covered by clause (2) of paragraph B of Part I of the 4th Schedule of Finance Act. 1965 as shown in the question referred to us. We find that in this paragraph B there is no mention that the income-tax investment allowance will not be allowed to a person who is to be charged 30% rate of tax on such income. In fact the question raised before us has already presupposed that the respondents are liable to tax at 30% on whole of the total income under paragraph B of Part I of the 4th Schedule the Finance Act, 1965. Paragraphs A and B of Part I of 4th Schedule are mutually exclusive of each other. Para. A prescribes sliding scales of rates of tax while para. B prescribes a fixed rate of 30% of the balance of the total income. It is, therefore, apparent that paragraph A of Part I of the 4th Schedule is not applicable to the respondent's case and, therefore, their taxable income will not be the total income without exemption of the investment allowance. In fact the provisions of section 15‑C of the Income‑tax Act are applicable to ail and do not exclude the non‑resident persons from their ambit compairing section 15‑C with section 15‑A of the Income‑tax Act we find that the proviso to section 15‑A of Income‑tax Act as brought about by the Finance Act, 1965 shows that the benefit of section 15‑A in respect of exemption of portion of earned income has been excluded specifically from an assesses who is not residing in Pakistan unless the tax payable by him is determined with reference to his total world income under the first proviso to subsection (1) of section

17. But the same type of exclusion has not been provided under section 15‑C of the Income‑tax Act and, therefore, the intention of the Legislature is clear that it is only the benefit of section 15‑A which has been taken away by the proviso from the non‑resident persons, while the benefit of section 15‑C in respect of exemption from tax on account of investment is not taken away from the non‑resident persons. Mr. Iqbal Pasha referred to us (1980) 41 Taxation 73 (76) and (77) which though not exactly of force with this case but is relevant to this extent that before the introduction of proviso to section 15‑A in 1965, which has taken away the benefit of earned income allowance from the non‑residents, it was held in that case that the benefit of section. 15‑A was available to the non resident persons. Similarly the benefit of section 15‑C should be available to non‑resident persons except when it is taken away specifically or impliedly by any other provision of law. Consequently we answer the question referred to us in the affirmative. M.Z.M. Question answered in affirmative.