1999 PLP (Trib (PTD)

It may be pertinent to state that Preamble of Act XII of 1992 provides as under:-- Whereas it is necessary to create a liberal environment for savings and investment, and other matters relating thereto. And whereas a number of economic reforms have been introduced and are in the process of being introduced to achieve the aforesaid objectives; And whereas it is necessary to provide legal protection to these reforms in order to create confidence in the establishment and continuity of the liberal economic environment created thereby.' It may further be observed that section 6 thereof lays down that fiscal incentives for investment provided by the Government to the statutory orders listed in the Schedule or otherwise notified shall continue in force for the terms specified therein and shall not be altered to the disadvantage of the investor. The above Schedule referred to in section 6 reads as follows:-- 'THE SCHEDULE (See section (6) (1) Notification No. SRO 1283(1)/90, dated the 13th December, 1990, issued under subsection (2) of section 14 of the Income Tax Ordinance, 1979 (XXXI of 1979) (2) Notification No. SRO 1284(1)/90, dated 13th December, 1990 issued under section 19 of the Custom Act, 1969 (IV of 1969).' 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 80-D 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 Act XII of 1992, are entitled to the protection. The question as to whether a particular assessee fulfils the conditions of the above notification is a question of fact which will have to be determined by the hierarchy provided under the Ordinance and not by this Court. However, in order to eliminate multiplicity of litigation 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. "

5. On the basis of principle laid down by the Hon'ble Supreme Court of Pakistan he has submitted that under the provisions of, Protection of Economic Reforms Act, 1992 protection is available to the exemption allowed vide Notification No. SRO 1283(1)/90, dated the 13th December, 1990 and not to other exemptions allowed under the notifications other than Notification No. SRO 1283(1)/1990. The learned D.R. has submitted that clause (118A) under which exemption was allowed to the respondent in this case was inserted in the Second Schedule by Finance Act, 1988 and was deleted by Notification No. SRO 1136(1)/1991, dated November 7, 1991 w.e.f. July I, 1991, with the proviso that the existing beneficiaries and operative contracts to which the aforesaid clause applied shall continue to get the benefit to exemption until the period stipulated therein has expired. The respondent was entitled for exemption for a period of eight years under the deleted clause (118A), therefore, exemption under Second Schedule was allowed but it will not have the effect of overriding the provisions contained in section 80--D for the reason that section 80-D is subsequent in time as compared to clause (118A). The attention of learned D. R. was drawn to the provisions contained in section 6 of the Protection of Economic Reforms Act. 1992 which reads as follows:-- "Protection of fiscal incentives for setting up of industries:

The fiscal incentives for investment provided by the Government through the statutory orders listed in the Schedule or otherwise notified shall continue in force for the term specified therein and shall not be altered to the disadvantage of the investors."

6. The learned D.R. was called upon the show as to why the same protection should not be allowed to the exemption available under deleted clause (118A) as is available to the exemption 'allowed under SRO No.1283(I)/90 listed in Schedule to the Protection of Economic Reforms Act, 1992 by which exemption was allowed under clauses (118C), (118D) and (118E) for the reason that fiscal incentives for investment provided by the Government were given protection which were allowed through the statutory orders listed in the Schedule or otherwise notified, which were to continue in force for the term specified therein and not to be altered so the disadvantage of the investors, the learned D..R. has submitted that the Hon'ble Supreme- Court of Pakistan in the case of Ellahi Cotton Mills Ltd. has held that the protection is available to the fiscal incentives for investment provided by the Government and were given protection under the Protection of Economic Reforms Act, 1992. The Hon'ble Supreme Court of Pakistan has observed that, '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.' In order to ascertain the purpose and intention of legislature in promulgating Protection of Economic Reforms, Act, 1992 (hereinafter referred to Act XII of 1992) the Preamble has been reproduced and referred in the judgment of Ellahi Cotton Mills Limited. According to the contents of Preamble a number of economic reforms were introduced to create a liberal environment for savings and investments and legal protection to these reforms was provided. In section 2(i)(b) the economic reforms have been defined as follows:-- "(b) economic reforms, means economic policies and programmes, laws and regulations announced, promulgated or implemented by the Government on and after the seventh day of November, 1990 relating to privatization of public sector enterprises, and nationalised banks, promotion of savings and investments, introduction of fiscal incentives for industrialization and deregulation of investment, banking, finance, exchange and payments systems, holding and transfer of currencies. "

7. A perusal of the above definition showes that the economic reforms to which protection has been given mean-the economic policies, programmes, laws and regulations announced, promulgated or implemented by the Government on or after the seventh day of November, 1990. When the provisions contained in section 6 of Act XII of 1992 are read with the provisions contained in section 2(i)(b) of the said Act, it appears that the laws and regulations for promoting savings and investments and introduction of fiscal investment for industrialization, enjoy protection which have been promulgated on or after the seventh day of November, 1990 and not prior so this date.

8. We have carefully considered the contentions raised by the learned representative .for the department and have gone through the various provisions contained in Act XII of 1992 referred' to by him. We have carefully perused the principles laid down by the Hon'ble Supreme Court of Pakistan in the case of Ellahi Cotton Mills Limited, the judgment of Hon'ble Lahore High Court in the case of Ravi Spinning Mills Limited v. C.B.R. 1998 PTD 3947 and the judgment of this Tribunal in the case of Gulf Edible oils reported as 1998 PTD (Trib) 3866. We are persuaded to agree with the contentions raised by the learned D.R. that all the three judgments referred to above are not attracted to the facts of the present case because in all those cases, exemptions available to the assessee were covered by notification mentioned in Schedule of section 6 of Protection of Economic Reforms Act, 1992. In the present case the exemption available under clause (118A) of the Second Schedule to the Income-tax Ordinance, 1979 is neither covered under the notification listed in the Schedule to section 6 of Act XII of 1992 nor it is covered by the notification relating to fiscal incentives for investment in respect of economic reforms as defined in section 2(i)(b) of Act XII of 1992. We are persuaded to agree with the submission of learned D. R. that clause (118A) of the Second Schedule to the Income-tax Ordinance, 1979 under which the respondent enjoyed exemption was inserted by Finance Act, 1988 and was deleted by SRO 1136(1)/90, dated 6-11-1991 w.e.f. 1-7-1991 and thus it enjoys no protection under the Protection of Economic Reforms Act, 1992. The Hon'ble Supreme Court of Pakistan in the case of Ellahi Cotton Mills Limited has held that the provision 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 80-D of the Ordinance, which was enacted through Finance Act, 1992. As already discussed the legislature has provided protection to the fiscal incentives for investment in respect of the 1 statutory orders listed in the Schedule to the Protection of Economic Reforms Act, 1992 or otherwise notified after the seventh day of November, 1990, while clause (118A) was inserted by Finance Act, 1988 to which no protection is provided under any law, therefore, section 80-D being subsequent to insertion of clause (118A) shall override and prevail over clause (118A). We have not been able to lay hand on any law under which the kind of protection provided in section 6 of Apt XII of 1992 has been provided to all the assessees enjoying exemption under Second Schedule to the Income-tax Ordinance, 1979. It is therefore, held that the ratio of Hon'ble Supreme Court of Pakistan judgment in the case of Ellahi Cotton Mill Limited is applicable to only such Laws and Regulations promulgated or implemented by the Government to which protection is provided under Act XII of 1992 and not to all the exemptions available in Second Schedule to the Income-tax Ordinance, 1979.

9. In view of our above findings it is held that the case of respondent enjoying exemption in terms of clause (118A) of the Second Schedule to the Ordinance is not entitled to the protection provided in Act XII of 1992 and the ratio of Hon'ble Supreme Court of Pakistan in the case of Ellahi Cotton Mills Limited v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 is not available to the respondent. It is further held that notwithstanding the exemption available to the respondent under clause (118A) of the Second Schedule to the Income Tax Ordinance, 1979, the minimum tax under section 80-D is to be charged by virtue of explanation to section 80-D of the Income Tax Ordinance, 1979. The impugned direction of learned CIT(A) is, therefore, vacated and the treatment given by the Assessing Officer is hereby restored. The appeal at the instance of department is allowed accordingly. C. M. A. /M. A.K./77/Tax(Trib.) Appeal allowed.