1990 PLP (Trib (PTD)

ALVI ABDUR RAHIM, ACCOUNTANT MEMBER.‑‑The late Mr. Fazlur Rehman, hereinafter referred to as the appellant, was partner in a registered firm. Appeal has been filed for assessment year 1981‑

82. At the time of hearing Mr. Jan‑e‑Alam, the learned counsel for the appellant pressed only the following point: The I.T.O. and the learned CIT (A) have erred in holding that the penalty imposed under section 111 of the Income‑tax Ordinance on the registered firm is not deductible from income of the firm vide section 69(4) for the purpose of computing share of the appellant in the profits and gains of the registered firm.

2. The case of the appellant is as follows: "The cumulative effect of provisions of section 2(43) and section 69(4)(a) is that the amount of penalty levied on the firm should be deducted from the income earned by the firm in the same manner as super‑tax is deducted therefrom. The balance should then be allocated among the partners. This is for the reason that section 2(43) defines the word "tax" to mean super‑tax as well as any penalty imposed under the Ordinance. On the other hand the I.T.O. and the learned CIT (A) have deducted the amount of super‑tax only from the amount of income earned by the firm. In this way they have held that penalty imposed under section 111 is not an item of "tax" imposed on the registered firm".

3. Before we proceed further we may quote the relevant parts of the sections, which need our interpretation: "2(43) `tax' means income‑tax, super‑tax, surcharge and additional tax chargeable or payable under this Ordinance, and includes any penalty, fee or other charge or any sum of amount leviable or payable under this Ordinance." "

69. Assessments of firms and partners. (1) .. (2) .. (3) .............................. (4) For the purposes of this section, the share of a partner in the income of any firm means the aggregate of‑ (a) the proportionate share in the total income of the firm as reduced by the tax, if any, payable by the firm and any sum referred to in clause (b); and (b) any salary, brokerage, interest or commission receivable by the partner from the firm." Now we have to see if the amount of penalty levied under section 111 is to be deducted from the amount of income earned by the registered firm.

4. The provisions of the Income‑tax Ordinance, 1979 are contained in 14 chapters of the Ordinance and seven Schedules to this Ordinance. Chapter‑III of the Ordinance deals with "Charge of Tax" as is apparent from the heading of this chapter. This chapter comprises of six sections; Section Nos. Section Headings 09 Charge of Income‑tax 10 Charge of super‑tax 11 Scope of total income 12 Income deemed to accrue in Pakistan 13 Unexplained investment etc. 14 Exemptions The "tax" chargeable as per Chapter III is of three types, Income‑tax, Super tax and Surcharge. They are mentioned in sections 9 and

10. The income‑tax, super‑tax and surcharge are to be levied at the rates specified in the First Schedule. Whereas Chapter III deals with charge of tax, Chapters IX, XI and XII deal with Recovery of tax, Penalties and Offences and Prosecution respectively. While providing for enforcement of tax demand and for checking activities like concealment of income and other offences these chapters have made provisions for recovery of additional tax, penalties and prosecution fees. Now we have to see if the additional tax and penalties for which provisions have been made in Chapters IX. XI and XII, are taxes on income or something different. The additional tax is nothing but payment to be made by an assessee for using government money in the period in which he commits a default in making payment. Penalties on the other hand are levied if an assessee fails without reasonable cause to comply with the provisions of Income Tax Law. The composition fee is similarly recovered when an offence, that can be prosecuted, is compounded. Now all these types of payments whether mentioned in Chapter Ill or in Chapters IX, XI and XII are listed as items of tax by section 2(43). Though all these types of payments are listed as items of "tax", it does not mean that all these payments are "tax" as such. What is levied by section 9 and section 10 is the amount of tax. The other types of payments are to be made by a defaulter assessee who does not comply with the provisions of income tax law. Thus the distinction between payments under sections 9 and 10 and payments under other sections of Chapters IX, XI and XI1 is that payments under sections 9 and 10 have to be made by every person who earns taxable income, on the other hand the payments listed in Chapters IX, XI and XII have to be made by those tax‑ I payers who do not comply with provisions of law. In other words payments under these three chapters are made by defaulters only whereas payments under sections 9 and 10 are made by every assessee, whether a defaulter or a non defaulter. We can say that levies imposed by sections 9 and 10 are tax simpliciter while the charges laid down by section 111 etc. are penalties for infringement of tax law.

5. The definitions given in various clauses of subsection (1) of section 2 are of general nature and are not to be adopted at all the places at which the words, defined therein, are used. It is for this reason that section 2 begins with the following words: "In this Ordinance, unless the context otherwise requires."

6. We may now examine definition of the word `tax' given is section 2(43) to note the difference in tax simpliciter and other charges listed by section 2(43). Until 1958 the Income Tax Act, 1922 did not contain any definition of the word' `tax'. In 1958, the word "tax" was defined to mean -- ‑‑the tax payable under this Act and includes any penalty, interest, fee or other charge leviable under this Act. In 1974 this definition was substituted and was deemed always to have been so substituted. The substituted definition is as under: `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 charge leviable or payable under this Act. The above definition is similar to the one contained in section 2(43) of the Income Tax Ordinance, 1979. In Circular 4 of 1974 (Income‑tax), dated 2nd July, 1974 the amendment has been described as under: "

4. Section 2, clause (14). Definition of Tax‑‑The definition of tax has been widened to include income‑tax, super‑tax, surcharge and additional tax, interest, penalty, fee and any sum or other charge or amount chargeable or payable under this Act. This has been done with retrospective effect to remove all doubts and controversies," In the July‑August 1974 issue of TAXATION the following comments were made on this amendment: "NOTES ON AMENDMENTS IN THE INCOME TAX ACT BY THE FINANCE ACT, 1974 Definition of `Tax' section 2(14). Ever since the enactment of section 45‑A of the Income Tax Act in 1963 (substituted in 1966) these has been difference of judicial opinion on the point as to whether the levy of additional tax for delayed payments has the sanctity of law. The Dacca High Court in the case, reported as Zeenat Textile Mills Ltd. v. Commissioner of Income Tax (1969) 20 Taxation 44 took the view that `the levy of additional tax under section 45‑A is not legal and effective'. The decision has already been challenged by the Department before the Supreme Court of Pakistan and stay of the operation of High Court's judgment has been obtained. The Supreme Court's authoritative decision, is yet awaited. In the meantime a number of writ petitions have been filed in the High Courts by‑the assessees, challenging the legality of the levy of additional income‑tax. Without waiting for the Supreme Court's decision, an attempt has been made to put an end to the controversy by substituting subsection (14) of the Section 2 of the Act, which deals with the definition of "Tax", under the substituted subsection (14) the definition of "Tax" has been widened to include income‑tax, super‑tax, surcharge, additional tax, interest, penalty, fee and any sum or other charge or amount chargeable or payable under the Act. It is to be seen as to how far the substituted subsection (14) is going to meet the desired end, specially when the charging sections 3 and 55 have not been amended. The Dacca High Court in the aforementioned case of Zeenat Textile Mills Ltd., holding that the levy of additional amount of tax under section 45‑A was without any legal authority or any legal basis, observed as under: "Now, therefore, if the authorising sections, namely, sections 3 and 55, do not permit levy of tax on anything other than total income and that the rate must be referable to the total income alone, then the tax which has no bearing nor connection with the total income must be held to be a tax levied or sought to be levied without any legal authority whatsoever." It may be reiterated that the Finance Act, 1974, while substituting subsection (14) of section 2, has not amended section 3 or 55 of the Act, to legalise the levy of additional tax." These comments appear on pages 1 and 2 of the Editorial Notes portion of (1974) 30 Tax. These comments give background of the amended definitions of the word `tax' and also highlight that tax simpliciter was levied only by sections 3 and 55 of the repealed Income Tax Act, 1922 and not by other sections dealing with penalties etc. The corresponding sections in the now operative Income Tax Ordinance, 1979 are sections 9 and

10. It is evident from the history, of amendments in law, described in the preceding paras, that the legislature had no intention of treating charges other than those levied under sections 9 and 10 as tax simpliciter.

7. In connection with this discussion about meaning of the word "tax" we may also refer to the following cases of the Hon'ble Dacca High Court and the Honourable Lahore High Court: (i) Zeenat Textile Mills case 1969 P T D 405. (ii) Shakeel Saigol case P L D (1976) Lah.

616. The issue in these two cases pertained to validity of section 45‑A dealing with additional tax to be levied for delay in making tax payments. In the first case it was held as under: "(i) the definition clause 2(14) is of no assistance to interpret the provisions of section 45‑A `an additional amount of tax equal to 6 per cent of the amount of tax due' to mean either a penalty or an interest payable by a defaulting assessee on the tax due; and (ii) the `additional amount of tax equal to six per cent, per annum of the amount of tax due' is a tax which is sought to be levied on the already computed tax due from the assessee on his total income for the assessment year within any support from the authorising sections 3 and

55. On the language used in section 45‑A the additional amount of tax levied on the tax due from the petitioner for the assessment year 1960‑61 is without any lawful authority or any legal basis." In the later case the learned judges of the Lahore High Court held that the legislature did have an authority to enact section 45‑A. While deciding the issue before them the learned judges discussed in detail the nature of tax levied as per the charging sections and other amounts like additional tax, penalty fee etc. Which are due under the income tax law. The relevant part of the decision of Hon'ble Dacca High Court is as under: "...We are also unable to accept the interpretation sought to be given by Mr. Afzalul Haque to the provisions of section 45‑A depending on the definition clause 2(14) of the Act, because section 2(14) speaks of two things while defining `tax'. In our opinion the first part of section 2(14) refers to the tax payable under this Act which has been defined in sections 3 and 55, and the second part of section 2(14) beginning with the words `and includes' to `this Act' only refers to penalty, interest, fee or other charge leviable under this Act to be a tax not as `tax' as mentioned in sections 3 and 55 but for the purposes of realisation of penalty, interest, fee or other charge leviable under this Income Tax Act as if it was a tax due. Or, in other words, the tax mentioned in the first part of section 2(14) is the tax simpliciter relatable to the total income of the assessee as mentioned in sections 3 and 55 whereas penalty, interest, fee or other charge leviable under this Act have been construed to be `tax' but not in relation to the total income and as such cannot be said to be either income‑tax or super‑tax as the case may be." In this passage the learned Judges have brought out distinction between tax simpliciter levied through charging sections and other payments due vide different sections of the Income Tax Ordinance.

8. After examining definition of the word "tax" we are of the view that the word "tax" used in section 69(4)(a) refers to tax levied vide sections 9 and 10 of the Income Tax Ordinance; and it does not cover penalty levied under section

9. The appeal is rejected. MUHAMMAD MUJIBULLAH SIDDIQUI, JUDICIAL MEMBER.‑‑I have had the privilege of going through the order written by my learned brother, Mr. Alvi Abdul Rahim, Accountant Member. With due deference to my learned brother I am not persuaded to agree with the interpretation of term "TAX" as arrived at by him in the context of the provisions contained in section 69(4) of the Income‑tax Ordinance, 1979.

2. The facts giving rise to the controversy in question are very simple and for the sake of convenience I will recapitulate them. The appellant is a partner in the registered firm and his share of income from the registered firm has been determined by the I.T.O. in accordance with the provisions contained in section 69(4) of the Income‑tax Ordinance, 1979 which reads as under "69(4), For the purposes of this section the share of a partner in the income of any firm means the aggregate of, (a) the proportionate share in the total income of the firm as reduced by the tax, if any, payable by the firm and any sum referred to in clause (b); and (b) any salary, brokerage, interest or commission receivable by the partner from the firm."

3. However, while computing the share of appellant's income in the firm the I.T.O. worked out the aggregate by taking the proportionate share in the total income of the firm as reduced by the super‑tax payable by the firm. A penalty was also imposed on the registered firm under section 111 of the Income‑tax Ordinance and the amount of penalty was not deducted by the I.T.O. from the total income of the firm for arriving at the proportionate share of the appellant. In doing so the Assessing Officer was of the view that the term "tax" as used in section 69(4)(a) connotes the super‑tax only and does not include the penalty paid by the firm. On the other hand the contention of appellant was that the term "tax" used in section 69(4) carries the same connotation as contained in section 2(43) of the Income‑tax Ordinance, 1979 whereby the legislature has defined the term "tax" which reads as under "2(43). "tax" means income‑tax, super‑tax, surcharge and additional tax chargeable or payable under this Ordinance, and includes any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance."

4. According to above definition the penalty is included in the term "tax" and, therefore, the appellant contended that his proportionate share in the income should be worked out after deducting the super‑tax and penalty paid by the firm from the total income of the firm. This contention of appellant was repelled. The appellant agitated the issue before there learned C.I.T.(A) without any success. The contention raised by the appellant before the learned C.I.T.(A) and the finding therein is as follows: "As regards the share income it has been argued by the learned counsel that the same has not been correctly computed by the I.T.O. Actually on the firm penalty amounting to Rs.2,23,358 was also imposed under section 111 read with section 116 for concealment of income. According to the provision of section 69(4) while computing the share of income of the appellant the amount of penalty was also to be deducted alongwith the super‑tax. The contention of the appellant is not found to be correct. The I.T.O. has correctly computed the share income of the appellant. No relief is allowed on this point." Being still dissatisfied the appellant has preferred this appeal before us.

5. My learned brother, the Accountant Member after examining the legislative history and the entire scheme contained in Chapters III, IX, X and XII of the Income‑tax Ordinance, 1979 dealing with the charge of tax, recovery of tax, penalties and offences and the prosecution, has drawn a distinction between the payments made under sections 9 and 10 of the Income‑tax Ordinance and the payments made under other sections of Chapters IX, X and XII. He has categorised the payments made under sections 9 and 10 of Chapter III of the Income‑tax Ordinance, 1979 and the other payments made under Chapters IX, XI and XII of the Income‑tax Ordinance in the "tax simpliciter" and "other payments" respectively. According to my learned brother the `tax simpliciter' denotes the payments made under the Ordinance by every person who earns taxable income while "other payments " are to be made for the infringement of the various provisions of Income‑tax Ordinance and, therefore, they are levied on defaulters and delinquents only. In the final analysis my learned brother has drawn conclusion that the word "tax" used in section 69(4) refers to tax levied vide sections 9 and 10 of the Income‑tax Ordinance and it does not cover the other payments imposed on the defaulters under various provisions of the Income‑tax Ordinance including the penalties levied under section 111.

6. Before embarking on the exercise of interpreting the term "tax" used by the legislature in section 69(4) of the Income‑tax Order, 1979 it would be appropriate to keep in view the rules of the statutory constructions and the interpretation of statutes. The expression "construction" includes two things, first the meaning of the words and secondly, the effect which is to be given to them. A history of the modern legislation shows that the art of drafting of statutes has developed slowly and gradually with the passage of time. Originally the statutes and more particularly in Great Britain from where we have inherited the present legal and judicial system, enacted by the parliament used to be very brief and concise. The statutes contained the will of legislature and the function of Courts was to interpret that document according to intent of them that made it. The enactments made by the parliament ultimately came to be classified as consolidating statutes and codifying statutes. According to Maxwell (Interpretation of Statutes Twelfth Edition, page 20) "A consolidating statute is one which collects the statutory provisions relating to a particular topic, and embodies them in a single Act of Parliament, making only minor amendments and improvements". On the other hand, "a codifying statute is one which purports to state exhaustively the whole of the law upon a particular subject the draftsmen attempting to subsume in his code both the pre‑exiting statutory provisions (as in a consolidation Act) and also the common law rules relating to the matter." (Maxwell on Interpretation of Statutes, page 25). The old statutes did not use to contain interpretation clause and the definitions of the main terms used in the statute. Consequently while interpreting the various terms used in statutes the Courts used to refer dictionaries and other treatises on the subject in order to consider the meanings thereof. However, the modern statutes contain, in the form of an interpretation clause a little dictionary of its own, in which it endeavours to define often arbitrarily, the chief terms used. It is observed in Craies on Statute Law, 7th Edition, page 212, that: "In most modern Acts of Parliament, there is an `interpretation clause' enacting that certain words when found in the Act are to be understood as regards that Act in a certain sense, or are to include certain things which, but for the interpretation clause, they would not include. Thus, in Cother v. Midland Ry. the word `railway' was interpreted by section 3 of the Railways Clauses Consolidation Act, 1845 to mean `the Railway and works by the special Act authorised to be constructed', and it was held by Lord Cottenham that, by virtue of this interpretation clause, the company had power to take land compulsorily under the Act for the purpose of building a Railway station."

7. Initially interpretation clauses contained in the Acts of Parliament fell under severe judicial criticism. In R. V. Commissioners under the Boilers Explosion Act, 1882, Lord Esher M.R. said: "The draftsman has gone upon what, in my mind, is a dangerous method of drawing Acts of Parliament. He has put in a section, which says that a boiler shall mean something which is in reality not a boiler. This third section of the Act is a peculiarly bad specimen of the method of drafting which enacts that a word shall mean something which in fact it does not mean." Again in the case of Bradley v. Baylis the same Judge observed that: "It seems to me that nothing could be more difficult, nothing more involved, than these statutes, and that that difficulty arises from the fact of Parliament insisting upon saying that things are what they are not." These judgments were given in late nineteenth century but ultimately it has been settled that the interpretation clause declares what may be comprehended within the term where the circumstances require that it should be so comprehended. The position occupied by the definition sections has been summarised in the Maxwell Interpretation of Statutes on pages 270, 271 as follows: It is common for a statute to contain a provision that certain words and phrases shall, when used in the statute, bear particular meanings. Sometimes, it is provided that a word shall `mean' what the definition section says it shall mean: in the case, the word is restricted to the scope indicated in the definition section. Sometimes, however, the word `include' is used `in order to enlarge the meaning of words or phrases occurring in the body of the statute and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include.' In other words, the word in respect of which `includes' is used bears both its extended statutory meaning and `its ordinary, popular, and natural sense whenever that would be properly applicable'." Thus by section 10(1) of the Income‑tax Ordinance of Trinidad and Tobago: `For the purpose of ascertaining the chargeable income of any person, there shall be deducted all outgoings and expenses wholly and exclusively incurred during the year preceding the year of assessment by such person in the production of the income, including‑‑...(f) annuities or other annual payments whether payable within or out of the colony. "The Judicial Committee held that an annual payment might be deducted under paragraph (f) notwithstanding that it was not an expense incurred in the production of income, the effect of `including' being to comprehend in `outgoings and expenses incurred in the production of income' payments which would not fall within the natural meaning of those words. By section 74(1) of the Shops Act 1950: "`retail trade or business' includes the business of a barber or hair‑dresser, the sale of refreshments or intoxicating liquors, the business of lending books or periodicals when carried on for purposes of gain, and retail sales by auction, but does not include the sale of programmes and catalogues and other similar sales at theatres and places of amusement." "I think it is plain,' said Somervell L.J., "that the words which follow `includes' describe activities about which, at any rate, there might have been disputes whether they came within the words `retail trade or business'. "The words therefore comprehended both what they naturally meant (primarily, because of the word `retail', the supply of goods rather than services) and those activities specially mentioned in the definition section."

8. After examining the position occupied by the definition and interpretation clauses in the modern codified statutes such as the Income‑tax Ordinance, 1979 we come to the general principles of interpretation. The cardinal rule for the construction of Acts of Parliament is that they should be construed according to the intention expressed in the Acts themselves. "Where the language of an Act is clear and explicit, we must give effect to it, whatever may be the consequences, for in that case the words of the statute speak the intention of the legislature."

9. The above principle has been enunciated by the great jurists like Tindal C.J., Lord Esher MR, Lindley L.J., Lord Watson and Lord Birkenhead (See Craies on Statute Law, page 65). Lord Watson said in the case of Salomon v. A. Salomon & Co. Ltd. that: "Intention of the legislature is a common but very slippery phrase, which, popularly understood, may signify anything from intention embodied in positive enactment to speculative opinion as to what the legislature probably would have meant, although there has been an omission to enact it. In a Court of law or equity, what the legislature intended to be done or not to be done can only be legitimately ascertained from what it has chosen to enact, either in express words or by reasonable and necessary implication."

10. While interpreting statutes there are certain limitations on the Courts. One of the significant limitations is that even though a Court is satisfied that the legislature did not contemplate the consequences of an enactment, a Court is bound to give effect to its clear language. Diplock L.J., Lord Parker C.J. and Lord Morris while explaining the above dictum held that: "It is well accepted that the beliefs and assumptions of those who frame Act of Parliament cannot make the law."

11. Thus, even if an expression contains a hard and narrow view of law or a liberal and extended connotation it has to be acted upon because a legislature has thought it expedient to require that such view may be taken and it is not for any Court to decline to give effect to a clear expressed statute because it may lead to apparent hardship or to the consequences which are not desired. Lord Coleridge C.J. said in R. V. Manse Jones that: "It was the business of the Courts to see what Parliament has said, instead of reading into an Act what ought to have been said. This involves the assumption that the Act in question is intelligible. But the consequences of any other mode of construction would be to defeat the purpose of the legislature." Lord Coleridge C.J. further observed in Coxhead v. Mullis that: "The tendency of my own mind

always is to suppose that Parliament meant what Parliament has clearly said, and not to limit plain words in an Act of Parliament by considerations of policy, if it be policy, as to which minds may differ and as to which decisions may vary."

12. Explaining the plain meanings of the words of statute it is observed in the Craies on Statute Law page 99 as follows:‑‑ "With regard to what is meant by the expression, `the plain meaning of the words of a statute,' it is necessary on all occasions to give the legislature credit for employing those words which will express 'its meaning more clearly than any other words; so that if in any particular instance it can be shown that there are two expressions which might have been used to convey a certain intention, but one of those expressions will convey that intention more clearly than the other, it is proper to conclude that, if the legislature used that one of the two expressions which would convey the intention less clearly, it does not intend to convey that intention at all, and in that event it becomes necessary to try to discover what intention it did intend to convey."

13. Another established principle of statute is that nothing is to be added unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said: "'it is a strong thing to read into an Act of Parliament words which are not there, and in the absence of clear necessity it is a wrong thing to do. We are not entitled,' said Lord Lorcburn L.C., `to read words into an Act of Parliament unless clear reason, for it is to be found within the four corners of the Act itself.' A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omission appears in consequence to have been unintentional."

14. Now coming specifically to the principles applicable for interpreting fiscal statutes and the Act imposing a tax or charge we find that the expressed and unambiguous language appears to be absolutely indispensable in statutes passed J for the imposing of tax and charges. I may quote with benefit the words of Rowlatt Judge: "in a taxing Act one has to look at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.

15. Lord Halsbury said in Lord Advocate v. Fleming: "I am only reiterating what has been said over and over again in dealing with taxing Acts, when I say we have no governing principle of the Act to look at; we have simply to go on the Act itself, to see whether the duty claimed is that which the legislature has enacted." In the case of Tennat v. Smity, he said: "In a taxing Act it is impossible, I believe, to assume any intention am governing purpose in the Act except to take such tax as the statute imposes...cases, therefor, under the taxing Act always resolve themselves into the question whether or not the words of the Act have reached the alleged subject of taxation."

16. The dictum, laid down by Rowlatt Judge and by Lord Halsbury cited above have been agreed upon by the Supreme Court of Pakistan in the case of commissioner of Agricultural Income Tax v. BM.M. Abdur Rehman, (1974) 29 tax 212 (SC). Honourable justice Cornelius speaking for the Supreme Court said that: "But indeed, in determining whether or not a particular matter comes within a taxing statute, it is only the letter of law which must be looked into. There is ample authority for the proposition that in a fiscal case form is of primary importance, the principle being that if the person sought to be taxed comes within the letter of law, he must be taxed, however great a hardship may thereby be involved but on the other hand if the Crown cannot bring the subject within the letter of the law he is free, however apparent it ma\ he that his case comes within what might be called the spirit of the law. Lord Hanworth M.R said: "Either in the clear words of a taxing statute the subject is liable or if he is not within the words, he is not liable." Lord Summer said "The Crown does not tax by analogy but by statute." Lord Parker held that "The Finance Act is a taxing statute and if the Crown claims a duty thereunder it must show that such a duty is imposed by clear and unambiguous words.' `It is not the function of a Court of law to give to words a strained and unnatural meaning.' said Lord Simonds, `because only thus will a taxing section apply to a transaction which, had the legislature thought of it, would have been covered by appropriate word, In I.R.C. v. Saunders Lord Reid said: 'it is sometimes said that we should apply the spirit and not the letter of the law so as to bring in cases which, though not within the letter of the law, are within the mischief at which the law is aimed. But it has long been recognized that it Courts cannot so apply (axing Acts." Two tax cases decided by the House of Lords provide further illustrations of the reluctance of the Courts to write in words. Section ,(2) of the Finance (1909‑10) Act 1910 refers to gifts made in consideration of marriage.' In I.R.C. v. Rennell, the House, by a bare majority , refused to interpret this as meaning gifts made on the occasion of marriage to parties within the marriage consideration. The read them as the Revenue would have them read, said Lord Guest (at p. 208) , is not construction , but judicial paraphrase., In I.R.C. v. Saxone, Lilley and Skinner (Holdings), Ltd., the House had to consider 271(1)(d)(iii) of the Income‑tax Act 1952 which defines an industrial building as, inter alia, one used for the purposes of a trade which consists in the storage of goods which, having been manufactured, have not yet been delivered to any purchaser. The Crown submitted that `in use for the purposes of a trade' meant wholly or mainly in use for such purposes. `But that', said Lord Reid (at P. 504) `involves writing in words which are not there and I can see nothing in the context to make that necessary.'"

18. It is also trite law that while interpreting fiscal statutes if any word or provision admits of different meanings that would be allowed to be adopted which would be more favourable to the interest of public.

19. Applying the above principles of the interpretation of statutes to the point in issue, under consideration in this appeal we find that the legislature has clearly provided in section 69(4) of the Income‑tax Ordinance, 1979 that the share of a partner in the income of a firm means the aggregate of the proportionate share in the total income of the firm as reduced by the tax, if any, payable by the firm ..The word "tax" has been defined by the legislature itself in section 2(43) to mean income‑tax super‑tax, surcharge and additional tax chargeable or payable under the Ordinance and including any penalty, fee or other charge or any sum or amount leviable or payable under the Ordinance. 20: My learned Brother, the Accountant Member has observed that the definitions given in various clauses of subsection (1) of the section 2 are of general nature and are not to be adopted at all the places at which the words, defined therein, are used. According to him section 2 begins with the words, "In this Ordinance unless the context otherwise requires". After tracing out the history of definition of the word tax by the legislature, the learned Accountant Member has held that it is evident from the history of amendment in law described in the preceding paras that the legislature has no intention of treating charges other than those levied under sections 9 and 10 as tax simpliciter.

21. I am not able to concur with the above views of my learned brother because the legislature has defined the word "tax" which is inclusive of all the charges created under the Income‑tax Ordinance, 1979 to the extent that in addition to the specific charges any sum or amount leviable or payable under the Ordinance has been included in the definition of word "tax". I agree with my learned brother that the definitions given in section 2 of the Income‑tax Ordinance, 1979 do not apply necessarily to the words defined, used everywhere in the Ordinance and that the definition may vary if the context otherwise requires, but according to my humble opinion there is nothing in section 69 to suggest that the word "tax" used by the legislature has been used in any other context or has the restrictive connotation as compared to the definition contained in section 2(43) of the Ordinance. According to my learned brother the charge created under sections 9 and 10 of the Income‑tax Ordinance amounts to tax while the other charges created and the payments imposed under Chapters IX, XI and XII of the Income‑tax Ordinance are other than tax. This view is not in consonance with the principles of interpretation of statutes discussed elaborately in the earlier part of this judgment. This interpretation cannot he accepted without violating several principles of the interpretation of statutes, first, that the definition of the word tax given by legislature in section 2(43) does not convey the intention of legislature although the definition is couched in the clear and plain language; secondly, sections 9 and 10 of the Income‑tax Ordinance provide for creating a charge of income‑tax and additional duty of income‑tax. In section 9 this duty is termed as income‑tax while in section 10 this duty is described as super‑tax and surcharge. If it is held that the word "tax" defined in section 2(43) of the Income‑tax Ordinance means income‑tax, super‑tax and surcharge only, it would impliedly mean that the words "an additional tax chargeable or payable under this Ordinance and includes any penalty, fee or other charge or any sum of amount leviable or payable under this Ordinance" used in the definition of word "tax" are superfluous and redundant. It is cardinal principle of interpretation of statutes that while interpreting any provision of the statute no superfluity or redundancies is to be attributed to the legislature; thirdly it impliedly means that the legislature actually intended to reduce the income‑tax, super‑tax and surcharge only from the income of the firm for computing the income of partner under section 69(4) of the Income‑tax Ordinance but instead used the word "tax". I am afraid the Courts are not allowed to do so because while interpreting the statutes it has to be presumed that the legislature has used every word in the statute with full consciousness and knowing the connotation of each word and more particularly when a word has been defined by the legislature itself in the interpretation clause; fourthly, the interpretation sought to be placed by my learned brother amounts to supplying omission to the statute which is not permissible. No omissions are to be inferred on the part of the legislature and no words are to be read into an Act of parliament. Fifthly, the legislature has not made any distinction while defining the word "tax" and if by any process of interpretation a distinction is made by categorising the same in tax simpliciter and other payments it would amount in the words of Lord Guest to be "not construction but judicial paraphrase;" Sixthly, the definition will militate against the principle that if the legislature defines any word then the Courts are bound to accept it whether they like it or not and whether actually the word carries the same meaning ordinarily or not. The reason being that the legislature can assign an artificial meaning also to a particular word or term and the concept of fiction of law is not alien particularly to fiscal statutes. Seventhly, the interpretation sought to be placed by my learned brother violates another cardinal principle of interpretation of fiscal statutes that a tax is to be imposed in very clear words and not by any process of interpretation. If the legislature could use particular words or terms for bringing a subject into tax and those words or terms have not been h used then it would be deemed that the legislature never intended to use those words or if the legislature has used same words or terms in a particular sense it would be deemed particularly in a fiscal statute that the legislature intended to use that word or term in that particular sense and none else. Eighty, if any provision of a fiscal statute admits of two meanings the more beneficial to the assessee/public is to be adopted. The doubt, if any, is always to be resolved in favour of subject and not in favour of the State because of the penal nature of the tax. Thus, if the word "tax" has been so defined by the legislature which includes a penalty also in very clear and plain words and there is nothing to the contrary in the context of section 69(4) which provides the manner of computing the income I of partner from the total income of the firm it would not be permissible to deny the benefit to the assessee by a long drawn process of argument. The inferences cannot be drawn for denying a benefit to the assessee accruing to him by' resorting to the plain words used by the legislature. Although I am of the view that there is no ambiguity in interpreting the word "lax" used in section 69(4) and without any scintilla of doubt in my mind 1 can say that the word "tax" has been used having the same connotation as defined in section 2(43) of the Ordinance, but even if there would have been any ambiguity it ought to have been resolved in favour of the assessee and not the Department. The context in which the word "tax" has been used in section 69(4) of the Income‑tax Ordinance is intrinsically embodied in the very section itself. A perusal of section 69(4) clearly manifests the intention of legislature that only that income should be subjected to tax in the hands of a partner of a firm which has actually reached his coffer. For this reason alone the legislature has provided that, "for the purposes of this section the share of a partner in the income of any firm means the aggregate of the proportionate share in the total income of the firm as reduced by the tax if any, payable by the firm." In this provision, three words require special consideration. They are, "income", "total income" and "lax". When these three terms are examined in the totality of purpose, sought to be achieved by the legislature, the context in which the word tax is used becomes evident. If the word tax is examined in isolation and without keeping the purpose of provision under consideration in perspective, the real context is bound to remain in obscurity. The words, "income" and "total income" are also defined in section 2 of the Income‑tax Ordinance, 1979. The two words carry distinct connotations which are not discussed here in detail, for the sake of brevity. For our purposes in the present appeal it would suffice to observe that the term "income" has much wider scope than the term "total income". The legislature with full consciousness of the scope and implications of the two terms provided that share of the partner in the income of firm means aggregate of the proportionate share in the total income of the firm, as reduced by the tax, if any, payable by the firm (underlines provided for emphasis). The purpose of computing proportionate income of the partner from total income of the firm is to crystallize the real and actual income coining in the hands of a partner. This part of the statute is in the nature of beneficial legislation aiming at saving a partner of a firm from unnecessary hardship which will be caused by subjecting to tax an income which he never received in fact. The real income reaching in the hands of a partner can only be worked out by reducing the total amount of taxes paid by the Firm from the total income. If I have correctly expounded the purpose of enacting section 69(4)(a) of the Income‑tax Ordinance, then in my humble open it cannot be achieved by giving restrictive meaning to the term "tax" as propounded by my learned brother, the Accountant Member. The real income reaching in the hands of a partner can be worked out only if the word "tax" is given the same connotation as contained in section 2(43) of the Ordinance. If a firm has paid penalty or any other charge created under the Ordinance other than super‑tax, income‑tax and surcharge, as in the present appeal and the income of the partner is worked out by reducing the super‑tax, income‑tax and surcharge only as held by my learned brother, the income so computed shall not be the real income. It will include an income which the partner has never received and shall never receive, and still he would be liable to pay income‑tax thereon. Such connotation of the word "tax" would be in total disregard of the context in which it has been used by the legislature. The restrictive connotation of the word "tax" as proposed by my learned brother does not only ignore the plain words of the statute but militates against the very intention and spirit of the beneficial legislation enacted by the legislature as well.

22. For the foregoing reasons it is held that the word "tax' used in section 69(4)(a) has been used in the same sense as defined in section 2(43) of the Ordinance which means income‑tax, super‑tax, surcharge and additional tax chargeable or payable under the Ordinance inclusive of penalty, fee or other charge or any sum or amount leviable or payable under the Ordinance. Having held so it is further held that the learned two officers below have misdirected in I.R deducting super-tax only from the total income of the firm for determining the share of appellant in the total income of the firm any partner. The I.T.O. is, therefore, directed to determine the proportionate share of the appellant in the, total income of the firm after reducing the super‑tax as well as penalty payable bye the Firm from its total income. The appeal is allowed in the manner as indicated above. In view of difference of opinion the appeal may be placed before the learned Chairman for referring the same to third Member for resolving the following question: "Whether the word `tax' used in section 69(4)(a) of the Income‑tax Ordinance, 1979 has been used in the same sense as defined in section 2(43) of the Income‑tax Ordinance, 1979 or has been used in restrictive sense referring to the charges created under sections 9 and 10 of the Income‑tax Ordinance only." FARHAT ALI KHAN, (CHAIRMAN).‑‑This appeal has been placed before me to answer the following question:‑‑ "Whether the word `tax' used in Section 69(4)(a) of the Income‑tax Ordinance, 1979, has been used in the same sense as defined in section 2(43) of the Income‑tax Ordinance, 1979, or has been used in restrictive sense referring to the charges created under sections 9 and 10 of the Income‑tax Ordinance only." It appears from perusal of the record that the appeal was originally heard by a Bench consisting or Mr. Mujeebullah Siddiqui and Mr. Alvi Abdul Rahim, the learned Judicial and Accountant Members respectively of this Tribunal. It further appears that the appellant sought deduction of the amount of penalty also from the total income of the Firm before computing the share of the partners of the appellant, a Registered Firm, but both the officers below held that the amount of penalty was not deductible from the amount of total income of a Registered Firm under section 69(4) of the Income‑tax Ordinance, just like income‑tax, super‑tax or surcharge. Mr. Alvi Abdul Rahim, the learned AM, has upheld the finding of both the officers below but Mr. Mujeebullah Siddiqui, the learned JM, has arrived at the conclusion that the claim of the appellant is sustainable in law. Mr. Alvi Abdul Rahim has fortified his conclusion by putting his reliance on the opening part of the definition of the word `Tax' as contained in Section 2(43) of the Income‑tax Ordinance. In other words his Finding is that since the context in which the word `Tax' has been used in section 69(4) of the Income‑tax Ordinance does not admit the applicability of the definition of Tax, the penalty could not be deducted from the total income of a Registered Firm before apportioning the share of its partners. In this connection Mr. AM Abdul Rahim has also referred to the cases of Zeenat Textile Mills and Shakil Saigal reported as 1909 P T D 405 and P L D 1976 Lah.

616. The learned JM on the other hand, after profusely reproducing paragraphs after paragraphs from various text books on Interpretation of Statutes, has come to the conclusion that if the interpretation of the learned AM is upheld as many as 8 violations of the Rules of interpretation of Statutes would be committed.

2. I have given my serious consideration to the orders proposed by both my learned brothers and I think, with due respect to both the learned Members, that the issue requires approach from altogether a different angle. I, therefore, start my discussion with the question as to on what point of time in assessment proceedings the penalty under section 111 is imposed? If I peruse the Income‑tax Ordinance I find that no specific period has been fixed for an ITO to determine the penalty under section 111 of the Income‑tax Ordinance. The position was same under the repealed Income‑tax Act also and it was because of this omission that CBR were constrained to issue Circular No. Ill of 1977 on July 21, 1977, which was to the following effect: "Circular No. 10 of 1977 Subject: AVOIDING DELAY IN THE LEVY OF PENALTY. In a recent Court judgment, it has been held that although no time limit has been prescribed in the Act, yet a penalty imposed after an inordinate delay is not sustainable in laws Similarly the C.B.R. had again to intervene to full in the gap by issuing Circular No. IT‑JT1‑1(135)/85, dated August 25, 1985, which is as under:‑‑ "Subject: Completion of penalty proceeding within a reasonable time limit‑‑Instructions regarding. 116.4 Time limits for the completion of penalty proceedings, initiated for various defects, have not been prescribed under the Income‑tax Ordinance, 1979. This, however, does not imply that such proceedings can be left pending indefinitely and completed at will by the. Assessing officers. (2) Courts have held that inordinate delay in completing such proceeding is improper. Penalties must he imposed within a reasonable time after the issuance of show‑cause notice intimating the tax‑payers the intention of the assessing officer for taking penal action. Orders of the assessing officers, imposing penalties, passed after a lapse of few years from the date of issuance of show‑cause notices were quashed by the Courts. This not only enabled the tax‑payers to escape penal action but also resulted in loss of revenue to the department. (3) Instructions had been issued earlier vide Board's Circular No. 10 of 1977, dated 21st July, 1977 (copy enclosed) regarding avoiding delay in levy of penalty. It appears that these have not been kept in view as recently in some cases penalty orders have been vacated by the Tribunal on the same grounds. (4) The Regional Commissioners may instruct all assessing officers under their control that penalty proceedings initiated under various sections of the Income‑tax Ordinance may be completed within a reasonable time Any lapse, without genuine reasons for delay, in completing such proceedings may invariably be reported in the inspection report of the circle by the inspecting officers. Such reports may he looked into and proper action initiated against the persons found responsible: In India before promulgation of Income‑tax Act of 1961 no time limit was allowed for initiating penalty proceedings but it was laid down by a chain of authorities that it should be taken within reasonable time and in this connection several cases beginning with 46 ITR 452, MOHAMMAD ATIQUE V. I.T.O. could be referred to. However, Section 275 of the Indian Income‑tax Act of 1961 has prescribed the period of limitation regarding imposition of penalty. In our country, on the other hand, an assessee and the ITO both have to he guided by CBR Circulars and the issue as to whether the notice has been issued within a reasonable time has been left to the discretion of the appellate hierarchy of administration of tax justice. In any case, neither in India nor in Pakistan an ITO is required by law to complete the penalty proceedings for concealment before determining the tax on total income of an assessee and even for that purpose he is not under legal obligation even for issuing notice under section 116 of the Income‑tax Ordinance for showing cause as to why he should not impose penalty under section 111 though in practice generally a direction is issued for issuance of notice under section 116 while completing the assessment order.

3. Now, with this background if we turn to Section 69(4) of the Income‑tax Ordinance it become quite obvious that the expression "Tax, if any, payable" may not appear to mean and imply the amount of penalty also which is determined subsequent to the deduction of `Tax from the total income of the firm while apportioning the share of its partners for a particular assessment year Thus, by throwing a cursory glance the emphasis Of the learned AM on the context in which the word `Tax' has been used in Clause (a) of subsection (4) of section 69 may appear to be well‑placed. However, after thorough study and deep analysis, I feel that the conclusion arrived at by the learned AM does not reflect the true and correct interpretation of subsection (4) of section 69 of the Income‑tax Ordinance. The learned JM, on the other hand, has also elaborately dealt with various principles of interpretation of statutes and when approach the issue under discussion in their light, I think that the solution of the problem lies somewhere else. I, therefore, examine the question referred to me in rather a wider perspective and on a broader canvas.

4. If we read subsection(1) of section t,9 it appears that it starts with the determination of the total income of a Registered Firm under sections 59, 59‑A, 60, 62, 63 and 65 of the income‑tax Ordinance and when I peruse these sections it appears to me that all of them lay down that an assessing officer is required to determine the total income and the tax payable thereon while framing assessment orders under each of the sections mentioned above. However, it is important to keep in mind that this subsection not only starts with words "Notwithstanding anything contained in this Ordinance" but its clauses (a) and (b) also make it in cumbent on an I.T.O. to determine the amount of tax payable. Thus, it is clear that an I.T.O. has not to determine the tax on total income of a firm under sections 59, 59‑A, 60, fit, 63 and 65 of the Income‑tax Ordinance. The question, therefore, arises as to what connotation should be given to the word `tax' as used in Clauses (a) and (b) of subsection 111 of section 69 keeping into consideration the context of its use, which, of course, has rightly been highlighted by the learned AM. However, before answering aforesaid question I would like to start the discussion with the question as to whether the expression "Notwithstanding anything contained in the Ordinance" which has been used in subsection (1) of section 69, excludes the definitions laid down by section 2, including its subsection (43) ?

5. If I read Section 2 of the Income‑tax Ordinance 1 find that it begins with the words "In this Ordinance unless the context otherwise requires". It is, therefore, clear that the definitions which arc contained in Section 2 apply to the entire Ordinance without any exception and they emphasis has been laid on the context in which a particular word defined in Section 2 is used in other, sections of this Ordinance. It is thus, clear that subsection (l) of Section 69 being a part of the Ordinance is to be governed by the definitions as contained in Section 2 of the Income‑tax Ordinance. Let me also' mention here that the word 'Tax' is used at various places in subsections of Section 69 and if definition clause is not applied the word `Tax' would not necessarily mean and imply `super‑tax' and `surcharge' which are surely included within the definition under Section 2(43). But, on the other hand, the forced interpretation of this word would lead to hair splitting arguments culminating in more conflict amongst various provisions of the Income‑tax Ordinance. In my humble opinion the expression "Notwithstanding anything contained in this Ordinance" has been used by the legislature so as to avoid the conflict amongst various provisions of the Income -tax Ordinance regarding computation of total income of a firm as well as its partners for the simple reason that it wanted to make a departure in such cases as against provisions regarding computation of total income of individuals, Hindu undivided family and corporate bodies etc. etc. I am therefore, clear in my mind that the expression "Notwithstanding anything contained in this Ordinance" does not exclude the definition of `Tax' as contained in Section 2(43) of the Income‑tax Ordinance. However, before reverting to the original issue let me explain one more aspect, which would be helpful in disposing of the main controversy. Suppose an I.T.O. while framing assessment order on December 1, 1987, comes to the conclusion that he should also issue a notice of show cause under section 116 for imposing penalty under section 111 of the Income‑tax Ordinance and he acts accordingly. Further, suppose that the I.T.O. records an order for imposing penalty under section 111 on June 25, 1988. Under these circumstances I would have to advert to three questions namely:‑‑ (i) Whether the amount of penalty determined on June, 25, 1988, should be allowed to be deducted in case of a Registered Firm after re‑opening assessment order completed on Dec. 1, 1987, relating to assessment year 1986‑87? (ii) Whether the amount of penalty should be allowed to be deducted in assessment year 1987‑88 as the order imposing it is recorded on June 25, 1988 ? (iii) Whether the amount of penalty determined on June 25, 1988, should at all be allowed to be deducted or not ?

6. Now starting with the 3rd question my answer to it would be that in view of the definition of `Tax' as given in Section 2(43) of the Income‑tax Ordinance, the amount of penalty should be allowed to be deducted from the total income of a firm under subsection (4) of Section 69 of the Income‑tax Ordinance if the context in which this word has been used in this subsection does not appear to be repugnant to it and I shall examine this issue subsequently.

7. As far as the first question is concerned, I think that the I.T.O. has been given the power under section 156 of the Income‑tax Ordinance to rectify mistakes apparent from the record more so a mistake which arises because of his own volition as he could have imposed it, had he so wished before framing the assessment order. But as I have discussed earlier, the I.T.O. is not required by law to determine the amount of penalty before determining the amount of total income. However, if it is held that the word `Tax' used in subsection (4) of Section 69 means and includes an amount of penalty also, the I.T.O. would inevitably be required to deduct it from the amount of total income of a firm for the purposes of apportioning the share of its partners. However, if he has already deducted the amount of tax from the total income of a firm for the purposes of apportioning the share of its partners at the time of framing of the assessment and he subsequently determines the amount of penalty the subsequent deduction thereof from the total income of a firm for the purposes off apportioning the share of its partners would amount to a mistake apparent from the record and would be, in my humble opinion, rectifiable under section 156 of the Income‑tax Ordinance. I am, therefore, of the view that in such case the I.T.O. would rectify it by deducting the amount of penalty also together with amount of other taxes from the total income of the firm and would not only re apportion the share of its partners but would also re‑determine their total income and the tax payable thereon. I would, therefore, answer the first question in the affirmative.

8. Now as far as the second question is concerned, I am of the view that the deduction of the amount of penalty would not be allowable in assessment year 1987‑88 as it would not fit in the general pattern of the Income‑tax Ordinance. It is important to note that the amount of penalty is to be deducted from the total income of a particular year and not in subsequent assessment year. I would therefore, answer this question in the negative. Now, this discussion leads me to the question regarding the context in which the word "Tax" has been used at various places of subsections of section fig.

9. From perusal of subsection (4) it appears that the legislature has laid down that for the purposes of section 69, the share of a partner in the income of any firm would consist of the proportionate share in the total income of a firm as reduced by the tax, if any, payable by the firm. However, Clauses (a) and (b) of subsection (1) of section 69 lay down that to start with the computation of tax of a partner of a firm the ITO would firstly determine the amount of tax payable by the firm. Now, if we peruse the definition of the word `tax' as contained in Section 2(43) it appears that it would not apply in its entirety in the case of a firm. As is clear from the‑ provisions of the Income‑tax Ordinance a firm has not to pay income‑tax. As such the context in which the word `tax' is used in clauses (a) and (b) of subsection (1) of section 69 would not mean and include income‑tax within the definition of `tax'. However, a firm has to pay super‑tax, surcharge and additional tax payable under the Income‑tax Ordinance. Therefore, the word `tax' as used in aforesaid Clauses would mean and include super‑tax, surcharge and additional tax as used in these clauses: Similarly, a firm may also be made liable to penalty, fee or other charge or any sum or amount leviable or payable under the Income‑tax Ordinance. In my humble opinion the word `Tax' as used in both these clauses would also include penalty, fee and other charges or any sum or amount leviable or payable under the Income‑tax Ordinance within its fold. However, it has one distinctive feature. The super‑tax, surcharge and additional tax are determined at the time of framing of the assessment. Rule 190 of the Income‑tax Rules which lays down the prescribed form of the return of total income has specifically mentioned that both unregistered as well as registered firms would add surcharge and additional tax, if payable. However, there is no provision for adding penalty, fee or other charge or any sum or amount leviable or payable under the Income‑tax Ordinance. I think that this omission is because of the fact that super‑tax, surcharge and additional tax are determined at the time of framing of the assessment but the amount of penalty, fee or other charge or any sum or amount leviable or payable under the Income‑tax Ordinance is generally determined after framing of the assessment. However, I do not think that this omission creates any problem for us. The reason is that the provisions of the statute i.e. the Income‑tax Ordinance would override the Income‑tax Rules being subordinate legislation. But on the other hand if the penalty, fee or other charge or any sum or amount leviable or payable under the Income‑tax Ordinance is taken out of the definition of the word `Tax' as defined in section 2(43) of the Income‑tax Ordinance, the assessing officer would not be in position to invoke section 111 for the simple reason that subsection (1) of section 69 is starting with 'Notwithstanding anything contained in this Ordinance', However, I have held earlier that section 2(43) has not been excluded by these words and I have given elaborate reasons for it in earlier part of this order. Thus, I would hold that the word `Tax' as used in Clauses (a) and (b) of subsection (1) of section 69 would mean and include the penalty, fee or other charge or any sum or amount leviable or payable under the Income‑tax Ordinance and, the ITO would be entitled to levy not only super‑tax, surcharge and additional tax but also penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance excluding income‑tax. To my mind for our purposes the emphasis on the context in which a definition is used means and implies only the chargeability or liveability of any of the items mentioned in section 2(43) of the Income‑tax Ordinance. In other words, since the income‑tax is not chargeable in the case of a firm, the definition of word `Tax', therefore, would not mean and include it for the simple reason that the context in which the word Tax' as used in both the clauses of subsection (1) of section 69 would not admit it but it would mean and include the amount of penalty.

10. Now, the, word `Tax' has been used in subsection (2) of section 69 also. Here again it would mean and include what has been laid down in section 2(43) and, thus, the ITO would notify not only the amount of super‑tax, surcharge and additional tax payable by a firm but also the amount of penalty, if any.

11. Now finally I turn to subsection (4) of section 69, the interpretation of which has given rise to the issue referred to me. However, after dealing with the definition of tax as contained in Clauses (a) and (b) of subsections (1) and (2) of section 69; I do not think that much is left for further discussion. Since, I have come to the conclusion that the word `Tax' as used in aforesaid 2 clauses of subsections (1) and (2) of section fig means and includes the penalty, within its fold, I can safely conclude that the `Tax' which is to be reduced from the total income of a firm under subsection (4) of section fig carries the same connotation which has been ascribed to it by me for the simple reason that only that `Tax' would be reduced from the total income of a firm before apportioning the share of its partners which has been determined under Clause (a) or (b) of subsection (1) or which has been notified under subsection(2) of section 69 and, thus, agreeing with learned JM for my own reasons as given above, I hold that the word `Tax' as used in Section 69(4)(a) of the Income‑tax Ordinance has been used in the same sense as defined in section 2(43) of the Income‑tax Ordinance subject to the discussion made above.

12. However, before parting with this appeal I would like to deal though summarily with the cases referred to by the learned AM in his order. As far as the case of Zeenat Textile Mills (supra) is concerned, it remains no more good law for the simple reason that the definition of word `Tax' which was discussed before their Lordships of Dacca High Court was amended in 1974 which has been referred to by the learned A.M.

13. Now as far as the case of M. Shakil Saigal (supra) is concerned, it fortifies my aforesaid conclusion and following observation of their Lordships quite fruitfully be reproduced:‑‑ "The whole argument accepted by their Lordships of the Dacca High Court is, therefore, based upon a basic error of completely ignoring the right of the legislature to clothe specific words of the language with meaning not ordinarily attributable to them but which are necessary for the purposes of achieving an object before it. Their Lordships have not found that the word `Tax' has been used in the sense of penalty or interest in any other section or Act and it would, therefore, be a direct redundancy to the legislature, if it were to be said that although it went to the trouble of adding special connotations to the existing meaning of the word `Tax' it did not have the intention of using the word in the extended sense." In my humble opinion aforesaid paragraph is very much supporting the conclusion which I have arrived at.

14. The second point which I want to emphasise before parting with this appeal is my respectful‑ agreement with the learned JM regarding the application of various principles of interpretation of statutes to the interpretation of Tax Laws and I may mention here that I have kept them into consideration while interpreting the provisions of subsection (4) of section 69 of the Income‑tax Ordinance. In my humble opinion the word `Tax' as used in subsection (4) of section 69 of the Income‑tax Ordinance means and includes the amount of I penalty also, therefore, it is to be deducted from the total income of a firm before apportioning the share of its partners. To my mind the legislative intent to this effect is very clear and it should be given effect to. I have also dealt with the aspect of deduction of the amount of penalty after framing of the assessment order. To my mind the assessment order would remain a provisional assessment order till the amount of penalty is also deducted from the total income of a firm for the purposes of re‑apportioning the shares of its partners and their total income and the tax to be paid thereon is recomputed.

15. Since I have agreed with the learned JM, the appeal is allowed and the I.T.O. is directed to deduct it under section 69(4) of the Income‑tax Ordinance before computing the share of the appellant in the total income of the firm of the appellant. M.B.A./713/T Appeal allowed.