2003 PLP (Trib (PTD)

These are the cases of individuals who were employees of O.M.V. Pakistan G.m.b.H exploration a non‑resident company. This company was engaged in the business of exploration and production of petroleum in Pakistan and had conducted its operations by employing foreign nationals. These foreign employees of the company claimed exemption on salary income under section 3B of the regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948 (hereinafter called regulation) read with clause (13) of the Schedule to the said regulation. However, the Assessing Officer vide order under section 62, dated 22‑6‑1998 did not accept the claim of exemption and the assessees went in appeal before the learned CIT(A) who through order, dated 21‑8‑1998 set aside the orders of the ALIT with the direction that the claim of the assessees be examined afresh. The Assessing Officer again vide an order dated 5‑6‑2000 rejected the claim of the assessees and a further appeal was filed before the learned CIT (A) who through the impugned order dated 19‑12-2000, allowed exemption to the assessees. Hence these appeals by the department.

2. A converse situation occurred in the assessment year 1996‑97 when the Assessing Officer allowed exemption. The learned IAC vide order, dated 20‑5‑2000 considered the assessment orders for the assessment year 1996‑97 to be erroneous as being prejudicial to the interest of Revenue and he accordingly set aside the assessments under section 66A directing the Assessing Officer to make fresh assessments. The assesses feel aggrieved and have filed appeals on the ground that exemption from tax was available to the assessees from levy of income tax and, therefore, the order of the learned IAC was against law and facts.

3. The only issue involved in these appeals can be framed as under: "Whether exemption from income tax is available to the foreign nationals employed by OMV (Pakistan) Exploration G.m.b.H. of exploration and production company on their salaries earned out of such employment, under section 38 of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948' read with clause (13) of the Schedule thereto."

4. The learned Legal Advisor of the Department maintained that section 3B of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948 deals with a company only which has been granted license by the Government and it has nothing to do with the foreign nationals, who are employed by the, said company/licensee. He contended that the Schedule attached to the regulation though provides in clause (13) a concession to foreign nationals yet it was an independent provision, which had no nexus with the Regulation and was subject to the provisions of the Income Tax Ordinance, 1979. He added that section 3B of the Regulation starts with a non‑obstante clause and it has an overriding effect over Ordinance but that section 3B (supra) is confined only to the cases of the company/licensees but clause (13) of the Schedule does not start with a non -obtante clause. Learned Legal Advisor while referring to clause (13) further maintained that clauses (7) and (8) of the Second Schedule to the Income Tax Ordinance, 1979 which formed part of clause (13) of Schedule to the Regulation stood omitted from 1991, therefore, clause (13) of the Schedule to the Regulation has become redundant and non‑operative, and no more invokable by any foreign national, employed by licensee. According to the learned Legal Advisor no concession in respect of exemption from taxation in respect of salaries of foreign nationals is now available. In respect of a case‑law reported as 1994 CLC 1721 = 1994 PTD 1370 the learned Legal Advisor maintained that this case which has been relied upon by the assessees is distinguishable inasmuch as it does not appreciate the distinction between the company and its employees.

5. As against that the learned A.R. vehemently contended that clause (13) of Schedule to the Regulation is not an independent provision but has to be read alongwith section 3B of the Regulation. It is quite a fallacious arguments on the part of the legal advisor of the department that clause (13) has become redundant. He added that it is as much operative as it has been before the omission of clauses (7) and (8) of the Second Schedule to the Income Tax Ordinance, 1979. He argued that section 3B of the Regulation being a non‑obstante clause overrides the provisions of the Ordinance and clause (13) of the Schedule being a part and parcel of the Regulation can be invoked by foreign nationals employed by the licensee in respect of claiming of exemption. According to the learned A.R. a harmonious interpretation is to be given to both section 3B and clause (13) of the Regulation. Learned A.R. relied on 1994 CLC 1721 = 1994 PTD 1370 and argued that this judgment is squarely applicable to the instant case which provides that foreign nationals being employed by a company, which is a licensee, are entitled to the exemptions. He concluded that the assessees are entitled to the concession of exemption in relation to taxation of their salaries.

6. We have heard the learned legal advisor and A.R. and have perused orders passed by the forums below. It is pertinent to mention here that OMV Pakistan is a company to whom license in respect of exploration of oil by the Government of Pakistan has been granted and had employed assessees being foreign nationals as employees for the business of exploration. These foreign employees of the company claimed exemption on salary income under section 3B of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948 (hereinafter called Regulation) read with clause (13) of the schedule to the said Regulation. However, during the assessment proceedings for the assessment year 1995‑96 the Assessing Officer did not accept the claim of exemption and the assessees went in appeal before the learned CIT(A) who through the order, dated 21‑8‑1998 set aside the orders of the ACIT with the direction to examine the claim of the assessees afresh. The Assessing Officer again vide an‑order, dated 5‑6‑2000 rejected the claim of the assessee and a further appeal was filed before the learned AAC who through the impugned order, dated 19‑12‑2000 allowed the exemption to the assessees. Assessments for the assessment year 1996‑97 were framed vide order, dated 30‑6‑1999 under section 62 whereby exemptions were allowed as claimed. These orders were set aside vide impugned orders under section 66A dated 20‑5‑2000 by the learned IAC, Range‑I, Islamabad who directed the Assessing Officer to frame fresh assessments as per law.

7. It seems useful to reproduce hereunder section 3B and clause (13) of Schedule to the Regulation: "Concessions to Petroleum exploration companies. ‑‑‑(1) Notwithstanding anything contained in any other law for the time being in force, every company whether incorporated in Pakistan or outside Pakistan to whom a license or a lease to explore prospect and mine petroleum is granted under this Act, nor being a company such as is referred to in subsection (1) of section 3A, shall be entitled to the concession specified in the Schedule in addition to any concessions for the time being admissible to it under any other law, or the rules made under this Act. (2) The Federal Government may, by notification in the official Gazette, amend the Schedule so as to add any concessions' thereto or to improve any concessions therein."

8. Incidentally both the above provisions came up for elaboration in case titled Flopetrol International v. Central Board of‑Revenue etc. as 1994 CLC 1721 = 1994 PTD 1370 Relevant extracts are reproduced as under:‑‑‑ "Two things must be noted while interpreting section 3B of the Act, firstly, it operates `notwithstanding anything contained in any law for the time being in force' and secondly, that the concessions being granted by this Act as specified in the Schedule are in addition to any other concession for the time being in force". "The contention of the learned. Standing Counsel that if the Schedule is in conflict with the provisions of the Act itself, the Schedule must yield to the main provision is correct, but on proper analysis of the Act and the Schedule it becomes apparent that there is no conflict between the two it is well‑established principle of law that various provisions in an enactment must be harmoniously construed with a view to avoid any repugnancy. It also cannot be disputed that the Schedule is as much a part of the enactment as any other provision. (see Bindra's Interpretation of Statutes. 7th Edition page 89). Reading the two provisions together, it becomes obvious that the concession mentioned in the Schedule is available not only to the licenses and lessees but also to its contractors. It would be appreciated that by allowing a concession in payment of income tax to the contractor of a licensee, the benefit is also conferred upon a licensee itself. Furthermore, if the exemption is not available to the employees of the Contractor and the liability to pay the tax falls on its employees, it would naturally add to the cost of exploration and thus affect the rights of the licensee itself." "Section 3B in unmistakable terms not only begins with a non- obstante clause but it also in unmistakable terms provides that the concession available in the Schedule shall be in addition to any concession for the time being admissible to it under any other law or rules made under this Act. This clearly spells out the intention of the Legislature that the concession being granted by section 3B which are specified in the Schedule are in addition to the concession available under any other law which would include he Income Tax Ordinance, 1979. It is, therefore, idle on the part of the learned Standing Counsel to contend that in order to avail of benefits under the Schedule the person concerned must also be eligible for grant of exemption under para. 7 of the Second Schedule to the Income, Tax Ordinance, 1979".

9. The cases of the assessees are identical with the one discussed in the above said reported judgment and the distinction sought to be created by the legal advisor in relation to the case of the employees of a licensee having not been covered by section 3B of the Regulation is not acceptable. It is clear from, the judgment that the employees of a licensee have been taken to be part and parcel of the company as any benefit made available to the employees is in its ultimate result and analysis a concession to the company for which different incentives are intended to be given.

10. So far as the contention of the learned legal advisor that clause (13) of the Schedule to the Regulation has become redundant and that even if that is taken as operative should be given a status having no nexus with section 3B of the Regulation are concerned, it is suffice to say that the aforesaid judgment also covers this contention, it goes without saying that one of the cardinal principles of interpretation of statutes is that no provision should be taken to have become redundant and redundancy must not be attributed to the Legislature. Each word used it statute is to be read as integral part thereof carrying the meaning. Interpretation shall have to be made that makes every part effective. However, if a Court comes across a case of redundancy, which is an exceptional eventuality, the Court shall have to interpret in a manner that give consistency and fulfills the object arid intention of the Legislature. Further Schedule to an Act is always part and parcel of the enactment. This part of the statute is significant in terms of providing details of the principles laid down in the form of sections in the enacting part. There may be a situation where a Schedule is violative of the enacting part but that is a rarity and in that case undoubtedly the section part prevails upon the Schedule. But in the instant case there is no such conflict and the Schedule appears to be in line with section 3B of the Regulation and provides details of the concessions laid down in the sections. The examination of paragraphs (9) to (13) and in particular part (13) of the Schedule to section 3B of the Regulation of Mines and Oil‑Fields and Mineral Development (Government Control) Act XXIV of 1948, as amended, would show that the reference to clauses (xii) and (xiii‑a) of subsection (3) of section 4 of the Income‑tax Act, 1922 were incorporated through the process of legislation by reference which was replaced by clause (7). of Part I of the Second Schedule to the Income Tax Ordinance, 1979, which was deleted w.e.f. July 1, 1991 by Notification S.R.O. 1136(I)/91, dated November 7, 1991 reveals that the exemption of taxation would be available to the foreign nationals employed by a company under section 3B of the Regulation of Mines and Oil Fields and Mineral Development (Government Control) Act, 1948, as amended by Act LXXXIII of 1976 irrespective of deletion of clause (7) of the Second Schedule to the Income Tax Ordinance, 1979. The said clause of the Ordinance only explained the procedure for claiming exemption.

11. The upshot of the above discussion is that the assessees being foreign nationals having been employed by OMV, Pakistan licensee are entitled to the exemption in relation to their salary being given by the licensee for the period claimed by them.

12. Accordingly the departmental appeals for the assessment year 1995‑96 fail. The assessees' appeals for the assessment year 1996‑97 succeed. The orders under section 66A for the assessment year 1996‑97 are cancelled and those of the Assessing Officer are restored. C.M.A./527/tax (Trib.) Order accordingly.