2010 PLP (Trib (PTD)

These Appeals have been filed by Karachi Port Trust created under the Karachi Port Trust Act of 1886, to contest the orders of learned Commissioner of Inland Revenue (Appeals II) Karachi, bearing No.7 dated 14-5-2010 for the Tax year, 2008 and No. 57 dated 29-3-2010 for Tax year, 2009 passed in respect of orders under section 122(5A) of the Income Tax Ordinance, 2001, dated 16-3-2010 and 9-2-2010, respectively of Additional Commissioner Inland Revenue-A, Audit Division-IV, Regional Tax Office, Karachi.

2. Following grounds of appeals have been taken for the two Tax years i.e., 2008 and 2009, which also show common issues in both the Appeals:-- That the learned Commissioner Inland Revenue (Appeals-II) has erred not to accept KPT as a Federal Government in view of evidences presented before him, claiming tax exemption under section 49(1) instead he held KPT to fall under section 49(4) of the Income Tax Ordinance, 2001 merely following order of his predecessor in proceedings under section 162 of the Income Tax Ordinance, 2001. That the learned CIR(A) has erred in not quashing the order passed under section 122(5A) of the Ordinance on account of following legal infirmities. Jurisdiction of Additional Commissioner Inland Revenue-A (ACIR-A):-- That the learned ACIR-A also erred to assume jurisdiction to form view regarding 'erroneous and prejudicial to the interest of revenue' which is beyond his powers as same cannot be delegated by the Commissioner. That the learned ACIR-A erred to pass amended order under appeal which is beyond his jurisdiction because of deemed assessment order passed by Commissioner. That the learned ACIR-A erred to assume jurisdiction to pass order under section 122(5A) of the Ordinance, which is revisional in nature and cannot be exercised by officer below the rank of the Commissioner. That the learned CIR(Appeals-II) has erred to hold that the contents of subsection (2) of section 49 of the Income Tax Ordinance, 2001 are applicable to the appellant. That the learned CIR(Appeals-II) has erred to confirm the addition on account of provision for staff pension Fund. Whereas it is an ascertained liability to the Income of the appellant.

3. Apart from above in the tax year 2008 following further grounds have also been taken by the appellant: (i) That the learned CIR(A) has erred not to quash the order of Taxation Officer for the reason that amendment section 49(1) and (2) brought through the Finance Act, 2008 and Finance Act, 2009 which are applicable from tax years, 2009 and 2010 but not tax year, 2008. (ii) That the learned ACIR-A has erred not to allow tax depreciation to the income of the appellant which is a statutory allowance mandatory to be allowed by the tax department whether or not claimed as held in reported judgment. 2008 PTD (Trib.) 901. (iii) That the learned ACIR erred to tax income from rental under the head property management at the different slab rates substituted by the Finance Act, 2008 applicable for the tax year, 2009 instead of 5% under section 15(6) read with Division VI of Part I of First Schedule of the Income Tax Ordinance, 2001.

4. Since main issues agitated are common we shall decide appeals for both the years through this combined order.

5. Mr. Khaliq-ur-Rehman, FCA, the learned AR from Anjum Asim Shahid Rehman, Chartered Accountants argued on legal aspects of the case, first. He has vehemently contended that his client itself is Federal Government therefore, is not chargeable to tax in terms of section 49(1) of the Income Tax Ordinance, 2001 which provides that the Federal Government shall be exempt from tax. He has maintained that in the past the respondent Department against the expressed desire of the appellant treated it as "Local Authority". In this regard he has referred to the order under section 138 of the repealed Income Tax Ordinance, 1979 dated 16-4-1997 of the then Commissioner of Income Tax Companies Zone IV Karachi. According to him a perusal of this order shows that in view of a decision of the Economic Co-ordination Committee of the Cabinet not to subject the KPT to payment of Income Tax the F.B.R. has treated the KPT as a local authority on its own -- Thus KPT has been treated by the Department as local authority to suit their own bureaucratic purpose otherwise it was Federal Government. According to the learned AR another reason for treating KPT as a local authority could be that in the erstwhile Income Tax Act of 1922 and the repealed Income Tax Ordinance of 1979, there was no specific provision for exemption to the Federal Government, therefore the Department in its wisdom thought it best to treat the KPT as local government in terms of clause (88) of second schedule to the repealed Ordinance of 1979. However, since KPT is not a local authority but Federal Government, its income was neither chargeable to tax in tax years, 2008 nor 2009. The orders passed by the Additional Commissioner and confirmed by the learned Commissioner Inland Revenue Appeals in ignoring this factual and legal position are ab initio void and illegal hence are liable to be annulled on this ground alone. The learned AR in support of his contention has further referred to various provision of the KPT Act of 1886 such as ownership of land, income and expenditure, tariff related powers, fund raising and application and control of the Federal Government over the work of KPT. The learned AR of the appellant referred to the provisions of KPT Act of 1886 to show that KPT is merely an adjunct or a Department of Federal Government and since Federal Government is exempt from payment of Income Tax under section 49(1) of the Ordinance, KPT is also not liable to pay income tax. The learned AR also referred to the Constitutional Provisions, especially Article 172(2) and Article 274(1) and (2) and asserted that since the properties of KPT remain vested in Federal Government, KPT is a Federal Government. His arguments have been reproduced and discussed in detail in the impugned order of the learned Commissioner of Appeal hence are not reproduced here for the sake of brevity.

6. On the issue of jurisdiction of the Additional Commissioner to invoke provisions of section 122(5A) on an order treated to have been made by the Commissioner of Inland Revenue, it has been maintained by the learned AR that although KPT being Federal Government was exempt from payment of income tax and was not liable to file returns of income yet it filed returns under protest- As per the scheme of Income Tax Ordinance, 2001, the returns so filed became assessment order treated to have been made by the Commissioner within the meaning of section 120 of the Income Tax Ordinance, 2001. Therefore, Additional Commissioner being a subordinate Officer and lower in rank to the Commissioner was not competent to re-open the said deemed assessment by invoking the provision of section 122(5A). In support of his contention the learned AR has placed reliance on the following decisions of this Tribunal: (i) I.T.A. No. 306/LB of 2009 dated 8-8-2009 (Allied Bank Limited v. CIT LTU, Lahore.) (ii) I.T.A. No. 370/LB of 2009 dated 6-7-2009 (Bank of Punjab v. CIT LTU Lahore) (iii) I.T.As. No. 1210/LB/2006 and No, 1209/LB of 2006 dated 22-3-2007 (CIT Legal Division, LTU Lahore v. Messrs Rupafil Limited and Prime Commercial Bank Limited) and 2)07 PTD (Trib.) 1226. It has been argued by the learned AR that in the decisions cited at Serial Nos.(i) to (iii) above there is a general consensus among the members of learned Tribunal including the five member larger bench which decided I.T.As. Nos. 1209-1210/LB of 2006, that where deemed assessment order i.e. order under section 120 of the Ordinance, was passed by the Commissioner who is higher in hierarchy, invoking of provisions of section 122(5A) on such order by the Additional Commissioner who is lower in rank and hierarchy, is beyond his jurisdiction. The learned AR in this regard has specifically referred to the following extract from the I.T.A. No. 370/LB/09 dated 16-5-2009:-- "(6)... He further elaborated that section 211(1) says that even if order is passed by .the delegated authority, though in this case no delegation was made, it shall remain that of the Commissioner. He pleaded that since the LA had accepted that original order was that of the Commissioner, the impugned order was not maintainable under the law as per ratio laid down by the Tribunal in I.T.As. Nos. 1209 and 1210/LB/2006 dated 22-3-2007. [page 88]

7. We have gone through the rival arguments on the issue of amendment of order by the Additional Commissioner under section 122(5A) vis-a-vis judgments in I.T.As. Nos.1209 and 1210/LB of 2006 dated 22-3-2007. The observation at page 88 of the said judgment, quoted above, clearly says that if original order is passed by the Commissioner then the Additional Commissioner cannot amend the order under section 122(5A). Before the Commissioner of Appeals and us, the Department admitted that original order in the case was passed by the Commissioner under section 120 by command of law. This being the undisputed factual position leads us to declare the impugned order unlawful after pronouncement of the honourable High Court in PTR 540 of 2007. (8) after the hearing of the case we laid our hand on the verdict of the honourable Supreme Court of Pakistan in which order of the honourable Lahore High Court in PTR 540/2007, challenged by the Department, has also been upheld. The order of the Hon'ble Supreme Court is binding on all other courts in Pakistan under Article 189 of the .Constitution of Pakistan. The Hon'ble apex Court in its judgment dated 22-6-2009 re-Prime Commercial Bank Limited [CA 861/08 filed against order of the High Court in PTR 540/2007] dismissed the Departmental appeal. [see para. 64(4)] (9) In terms of Article 189 of the Constitution, it is imperative for us to follow the above decision of the Supreme Court. The Department in PTR 540 of 2007 posed a specific question of law (reproduced above) and its answer was given against it and in favour of the taxpayer by the High Court. On further appeal before the Supreme Court; the Department did not succeed; hence, the issue has attained finality it is incontrovertible fact in this case admitted by the Department as well that original order under section 120(1) was by the Commissioner, therefore, the Additional Commissioner could not exercise power under section 122(5A). We thus hold the order unlawful on this point alone. The learned AR has further stated that the learned Larger Bench of this Tribunal in its decision in Appeals Nos. 1209 and 1210/LB of 2006 has further held as under:-- "After considering all the legal position, we have come to the conclusion that the assessment order or the deemed assessment order as the case may be if any made by the TO having delegated authority of assessment, who may be ACIT or DCIT etc., then the order may be amended under section 122(5A) by the Additional Commissioner, but if the assessment has already been made by the Additional Commissioner, then it will be amended by this section only by the Commissioner and in the case where the assessment has been made by Commissioner himself then the higher authority to the Commissioner may pass order under section 122(5A) amending the assessment made by Commissioner 8(sic). The learned AR went on to argue that this issue was also thrashed out by the learned ITAT in its judgment reported as 2007 PTD 1226 in the following manner:-- "Delegation of power could not be in respect of order passed by the Commissioner of Income Tax himself or by Additional Commissioner as they could not revise/amend their own orders considering them erroneous as well as prejudicial to the revenue. If they do so they will sit on their own judgment and it will be against the rule of law as a person could not be a judge in his own cause, otherwise the very purpose of insertion of subsection (IA) in section 210 read with 122(5A) will become meaningless." "The power of Commissioner to invoke the provisions of section 122(5A) of the Ordinance was wholly, solely and exclusively dependent upon to consider by himself which must be formulated on objective basis and it was not possible to translate, transform and pass on the same consideration and thinking what he himself could do for amending the order as it acquired from continuous learning and experience which the Commissioner himself acquired in a period of time after the elevation and performing his duties as Commissioner as there is no substitute of knowledge and experience." It has been stated by the learned AR with emphasis that as per the ratio of decision in 2007 PTD 1226 (Trib.) only Commissioner had been vested with the jurisdiction to take action under section 122(5A) of the Income Tax Ordinance, 2001 on the basis of his personal examination and consideration of the case himself. Before the power under section 122(5A) of the Ordinance is exercised or delegated, the Commissioner must be satisfied on the materials on record that the order being erroneous, had caused prejudice to the interest of Revenue or was likely to cause prejudice. It has been alleged by learned AR that Commissioner had not examined and considered the case record to formulate an opinion of his own to invoke provisions of section 122(5A) of the Ordinance, hence notice issued under section 122(5A) was not sustainable in law and was without jurisdiction. Any subsequent proceedings under the said illegal notice shall be void and illegal. The Commissioner must give his own reasons for his being satisfied that order passed was prejudicial and erroneous to the interest of revenue even before delegation of powers. Reliance has also been placed by the learned AR on the ratios of few other decisions with a view to demonstrate that officer of a lower rank cannot revise the assessment order passed by an officer of higher rank. Therefore, according to him revisional jurisdiction exercised by the Additional Commissioner in the instant case on an assessment order passed by his Commissioner is void ab initio and illegal.

9. The learned AR has further contended that the learned Additional Commissioner has erred in assessing that income of the KPT in the purview of section 49(4) of the Income Tax Ordinance, 2001 inserted by Finance Act, 2007. i.e. Effective from July 1, 2007. According to the learned AR appellant's case fall in section 49(1). Provisions of section 49(4) in his client's case are not relevant. It has further been maintained that section 49(1) as amended by Finance Act, 2008 thereby replacing the word "local authority" with the word "local Government" in the tax year 2008, the learned AR has maintained that contention of the. learned Additional Commissioner that taxability of the Income of KPT is governed by the "provision of section 49(4) of the Ordinance substituted by Finance Act, 2007 and not by the provision of section 49(1) as substituted by Finance Act, 2008, which the TO has misconceived. According to him KPT is not a corporation, a company, a regulatory authority, a development authority, other body or institution as envisaged in subsection (4) of section 49, therefore, its income is not chargeable to tax w.e.f. tax year, 2008. According to the learned AR subject to his other submissions on legal and factual aspects of his client's case, income of KPT chargeable to tax, if any, would be so w.e.f tax year, 2009 not for the tax year, 2008. Action of the Additional Commissioner to tax the Income of KPT in tax year, 2008 is not in accordance with law as provisions of section 49(4) are not applicable in the KPT's case.

10. The learned AR has further assailed the order for the tax year, 2009 on the issue of proper opportunity of being heard and has contended that show-cause notice was issued on 27-1-2010 and assessment was amended on February 9, 2010 and there were five holidays in between. Thus reasonable time was not allowed to explain a very complicated issue related to exemption of income of appellant which it was enjoying since last 100 years. As such, the learned AR asserted, that injustice has been caused.

11. Regarding failure of the Additional Commissioner, to allow depreciation in tax year, 2008, it has been contended by the learned AR that depreciation was a statutory allowance. It should have been allowed irrespective of the deduction claimed by the taxpayer. Therefore, officer may be directed to allow the depreciation.

12. The learned AR has also agitated disallowance of provision for staff pension fund in both the Tax years.

13. Mr. Syed Riazuddin, Advocate, the learned counsel for the Department in his counter arguments, at the very outset, with the permission of this court, specifically asked the learned AR that since when KPT is Federal Government? The learned AR in response thereto stated in categorical terms that KPT is Federal Government since 1886, the year of its creation. The learned counsel for the Department however, has stated that this claim has been made by the KPT for the first time and appears to be an effort to defeat the purpose of section 49(4) inserted by Finance Act, 2007, whereby all corporations, companies, regulatory authorities, development authorities, other bodies or institutions established by or under a Federal Government law or a Provincial law or an existing law or controlled directly or indirectly by the Federal Government or the Provincial Government have been made to pay tax. The learned Counsel has further stated that never in "its history KPT claimed exemption as Federal Government or a Federal Government Department. In support of his contention the learned counsel has produced certain documents which show the following position so far as the status, claimed by KPT and assigned by the Department over the years, is concerned, as per the record available with the Department. S. No. Document Status claimed or assigned

1. NTN Certificate Trust

2. Exemption Certificate, dated 6-7-2007 Local Authority

3. Application, dated 31-1-2009 of KPT addressed to the Commissioner of Income Tax E & C Division IV, Karachi on its letter head for exemption Certificate in pursuance of Clause V of Paragraph 1 of S.R.O. 947(I)/2008, dated 5-9-2008 for tax year, 2009 Industrial undertaking

4. Application dated 2-2-2009 for exemption Certificate by Arshad Malik Advocate on behalf of KPT Charitable Institution under Clause (59) of Second Schedule to the Income Tax Ordinance, 2001

5. Return for tax year, 2008, prepared by appellant itself Company

6. Return for Tax year, 2009, prepared by appellant itself. Company

7. Challan for payment of income tax demand dated 1-December, 2009, prepared by appellant itself. Company

8. Order under section 122(5A), dated 16-3-2010 tax year, 2008, passed by the Department Company

9. Order under section 122(5A), dated 9-2-2010 for tax year, 2009, passed by the Department Company

10. Memo. (Forms) of appeals filed before the Commissioner of Inland Revenue (Appeals) Karachi for tax years, 2008 and 2009, prepared by appellant itself. Company Out of above documents the learned counsel has particularly drawn our attention to Application dated 31-1-2009 of KPT addressed to the Commissioner of Income Tax Enforcement and Collection Division IV, Karachi on its` letter head for exemption certificate in pursuance of Clause V of Paragraph 1 of S.R.O. 947(1)/2008 dated 5-9-2008 for Tax year, 2009 and stated that clause (i) of the S.R.O. is meant for exemption on account of being Federal Government but despite availability of this option the KPT decided to claim exemption specifically under clause (v) of the S.R.O. which is meant for industrial undertakings. This and perusal of all other documents clearly shows that claim of exemption for income of KPT is an afterthought. The learned Counsel has further drawn our attention towards order dated 16-4-1997 under section 138 of the repealed Ordinance of 1979 of the then Commissioner Income Tax treating the KPT as local authority and states that if KPT was Federal Government or a Federal Government Department, it should have challenged the assigning of status as a local authority then and there to keep the record straight. This was not done. On the contrary they themselves in their petitions before the Hon'ble Sindh High Court in C.Ps. Nos.1333-1339/1995 and 1285-1287/1995 filed against the orders of the Assessing Officer taxing its income for the assessment years 1991-92, 1992-93, 1993-94 and 1994-95 by treating it a Trust and a Company claimed that that they are local authority. The claim of exemption as Federal Government was not made before the Hon'ble Sindh High Court at that time. Besides, in their subsequent applications and correspondence with the Department, as demonstrated above, they themselves kept on changing their status at will to suit their needs and requirements. They came up with a variety of claims so far as the status is concerned and it included charitable institution, industrial undertaking and company but never the status of Federal Government. It has been maintained by the learned counsel that assigning of status of Company by the Department in orders under section 122(5A) and adopting the same by the KPT in its return and appeal memos and not a single ground taken before the appellate authorities against such status leaves no room for doubt so far as the status of KPT is concerned.

14. According to the learned counsel this not only establishes that claim of status as Federal Government is an afterthought but also that the facility of exemption from income tax has been misused by the appellant on various occasions by arbitrarily assuming the status which was not lawfully available to the appellant. The learned counsel has maintained that availing of exemption on wrong claims suggests that the appellant has not come before this Tribunal with clean hands and learned ITAT in its decision reported as 1998 PTD 789 has held that the courts should come to the rescue of only those who come to it with clean hands.

15. The learned counsel has further stated that the appellant has come up with a claim that they are Federal Government. This is a claim which was never made in the past therefore appellant was under obligation to bring an evidence to support it. No such evidence has been produced before the Assessing Officer, Commissioner Appeals or this Tribunal. On the contrary Department is in possession of evidence which shows that the Federal Government has already discarded and disowned the claim of exemption from income tax made by the KPT. The learned counsel has produced a copy of F.B.R's letter C.No.12(2) CF-1/08 dated 18-9-2008 which states as under: "The Hon'ble Minister for Finance has accorded his approval to the Board's view point. Hence exemption from Income tax to Messrs PQA and KPT has not been allowed by the competent authority." According to the learned counsel claim of KPT for exemption, has not been declined by the F.B.R. but the Federal Minister of Finance. Therefore, claim of appellant that it is exempt from income tax being Federal Government is not maintainable as the Federal Government itself has decided not to accede to their request for exemption. Request of Port Qasim Authority was also declined in the said letter.

16. Regarding contention of learned AR that there was no provision in the repealed Act' of 1922 and Ordinance of 1979 exempting Federal Government from income tax, therefore Department might have assigned the status of local authority to KPT through order under section 138 dated 16-4-1997, the learned Counsel argues that this contention is not correct. At the first place KPT itself claimed that it is local authority. This is evident from order under section 138 dated 16-4-1997 itself and the petitions before the Hon'ble Sindh High Court in C.Ps. Nos.1333-1339/1995 and 1285-1287/1995 filed by KPT. Secondly, although in the 1922, Act and 1979 Ordinance no express provision like section 49 (1) of the Income Tax Ordinance, 2001 was available for exemption of the income of Federal Government yet section 2(9) of the 1922 Act and section 2(32) of the 1979 Ordinance, which dealt with the definition of "Person" did not include "Federal Government" whereas the corresponding section 80(1) of present Income Tax Ordinance includes the Federal Government" in the definition of "person" but has exempted it from tax in section 49(1). According to the learned counsel if an entity is not included in the definition of "Person" it cannot be brought into the ambit of taxation. Therefore', the legislature by not including the "Federal Government" in the definition of "Person" in the repealed Act of 1922 and Ordinance of 1979 has expressly exempted it from income tax. Contention of learned AR that there was no exemption available to the Federal Government in the 1922 Act and 1979 Ordinance therefore, Department was compelled to treat KPT as local authority is misconceived. Rather against the express provisions of law as it was prevailing at the relevant time. It again suggests that claim of exemption on account of being Federal Government is an afterthought and an attempt to defeat the purpose of section 49(4) of the Income Tax Ordinance, 2001.

17. On the question of assumption of jurisdiction and invoking of section 122(5A) by the Additional Commissioner on an order treated to have been passed by the Commissioner under section 120 of the Income Tax Ordinance, 2001, the learned counsel for the Department has argued that this controversy has been. set at naught by the honourable Islamabad High Court in its judgment reported as 2010 PTD 1506 dated 16-7-2009 (Writ Petitions Nos. 517 and 518 of 2009 Messrs Pakistan Mobil Communications Ltd. v. CIT Audit and 5 others and Writ Petition No.653 of 2009 Messrs SME Bank Ltd. v. Additional Commissioner and 4 others) Hon'ble Islamabad High Court has been pleased to hold that where powers have been delegated by the Commissioner the Additional Commissioner can invoke the provisions of section 122(5A) on a deemed order, as the deemed order is not passed by the Commissioner. The Hon'ble High Court in Para-8 of its order has been pleased to hold as under: "(8) In Writ Petition No.653 of 2009. It is contended on behalf of the petitioner that power under section 122(5A) of the Ordinance possessed by the Commissioner is revisional power. The deeming assessment order under the law to be considered to have been passed by the Commissioner of Income Tax. The Additional Commissioner being subordinate to the Commissioner cannot exercise revisional power against order passed by his superior. It is general principle that the revisional power is exercised by a superior authority. (13) The argument of learned counsel for the petitioner in support of Writ Petition No. 653 of 2009 that since the order treated as issued under section 120 is deemed to have been passed by the Commissioner under the law, the Additional Commissioner cannot amend such an order under subsection (5A) is too technical to be accepted. As a matter of fact, said order is not passed by the Commissioner. It is only treated to have been passed by him. The law empowers the Commissioner to revise such order under subsection (5A) of section

122. Section 210(1) confers power on the Commissioner to delegate its powers subject to subsection (IA) to a Taxation Officer. The Commissioner has delegated his powers under section 122(5A) to Additional Commissioner. He was therefore, competent to issue notice to the petitioner in Writ Petition No. 653 of 2009. There is no force in the Writ Petition No. 653 of 2009."

18. According to the learned counsel above findings in petition No.653 of 2009 have not been challenged before the Hon'ble Supreme Court; therefore the same have attained finality. However, Civil Petitions Nos. 1664-1665 of 2009 was filed before the Hon'ble Supreme Court against the above judgment of Islamabad High Court in respect of Writ Petitions Nos. 517 and 518 of 2009, Among other things following grounds were taken: (i) Whether on the facts and circumstances of the case Islamabad High Court was justified to hold that an order passed by the Commissioner under section 120 was deemed order therefore, the same could be revised by an officer below in rank to the Commissioner and that too under delegation of powers. (ii) Whether on the facts and circumstances of the case the Hon'ble Division Bench of Islamabad 'High Court was justified to ignore the basic facts that even when the powers are delegated by the Commissioner yet the same are deemed to be exercised by the Commissioner under section 211 of the Ordinance and thus could the powers of revision be exercised by the Additional Commissioner or the Commissioner? (iii) That the respondent No.2 had no jurisdiction to issue a notice under section 122(5A) of the Ordinance, so as to revise the order passed by the Commissioner of Income Tax being a sub-ordinate authority. (iv) That the powers vested under section 122(5A) of the Ordinance are revisionary in nature, therefore, the order passed by a superior authority cannot be revised by an officer junior in rank. That the power vested under section 122(5A) of the Ordinance cannot be delegated to an authority who is lower in rank to the authority who had passed the order. Such powers are always original in nature. When the above Civil Petitions Nos.1664-1665 of 2009 (on appeal from the judgment dated 16-7-2009 passed by the Islamabad High Court in Writ Petitions Nos.517-518 of 2009, Messrs Pakistan Mobile Communication (Pvt.) Ltd. v. Commissioner of Income Tax, Audit Division, LTU, Islamabad and others came up for hearing before the Honourable Supreme Court on 11-9-2009, the counsel for the petitioner agreed for the disposal of the petitions with the observations of the Supreme Court that petitioner shall file reply to the show-cause notices before the Commissioner, Income Tax raising all legal objections available to him and the legal objections shall be disposed of preferably before proceeding on merit and thereafter if need be, merits of the case shall also be considered. In the presence of judgment of Hon'ble Islamabad High Court, the decision of the learned ITAT in I.T.As. Nos.1210/LB of 2006 and 1209/LB of 2006 dated 22-03-2007 cannot be followed. In fact I.T.As. Nos. 1210/LB of 2006 and 1209/LB of 2006 has lost its efficacy. The judgment of Hon'ble Islamabad High Court in 2010 PTD 1506 dated 16-7-2009 (Writ Petitions Nos. 517 and 518 of 2009 Messrs Pakistan Mobil Communications Ltd. v. CIT Audit and 5 Others and Writ Petition No.653 of 2009 Messrs SME Bank Ltd. v. Additional Commissioner and 4 others), followed by the withdrawal of petitions by the counsel of the petitioner from Supreme Court with the observations of the apex court, holds the field and shall prevail over any other judgment on the subject. Besides, the same is binding on the learned Tribunal. The exercise of jurisdiction by the Additional Commissioner in the light of the judgment of Hon'ble Islamabad High Court was lawful. No exception can be taken. The decision of learned Commissioner Inland Revenue Appeals may please be confirmed.

19. Regarding dismissal of PTR 540 of 2007 by the Hon'ble Lahore High Court and subsequently by the Hon'ble Supreme Court of Pakistan in its judgment dated 22-6-2009 reported as 2009 PTD 1392 = 100 Tax 81 [Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd.] the learned Counsel has emphatically stated that there is a misconception about the P.T.R. 540 of 2007. Mere dismissal of a petition without any finding on question of law does not set a precedent to be followed by the subordinate courts within the meaning of Article 189 of the Constitution of Pakistan. According to the learned counsel Article 189 provides that any decision of Supreme Court shall to the extent that it decides a question of law or is based upon or enunciate a principle of law will be binding on all other courts in Pakistan. Mere dismissal of PTR 540 of 2007 without deciding a question of. law or enunciating a principle of law does not constitute a binding precedent for this Tribunal. The learned counsel with the help of a copy of Department's Reference Application under section 133 of the Income Tax Ordinance, 2001 filed against this Tribunal's Larger Bench decision in I.T.A. No. 1209/LB/06 (Tax year, 2005) has shown to us that following question of law was referred to the Hon'ble Lahore High Court against the said decision of Larger Bench: "Whether the Commissioner of Income Tax can amend the assessment completed under section 122(5A) of the Income Tax Ordinance 2001, if the assessment has also been completed by the Commissioner himself without delegating his power to a sub-ordinate officer." The learned counsel contended that the question referred in 540/2007 was different from the issue at hand in the instant case which relates to the invoking of provision of section 122(5A) by a sub-ordinate officer on an order treated to have been made by the Commissioner, being an officer of senior rank. Whereas in PTR 540 of 2007 question referred was whether Commissioner can amend his own order without delegating powers to a subordinate officer. Therefore, PTR 540 of 2007 was entirely on different grounds hence distinguishable from the instant case.

20. Without prejudice to the above the learned counsel has further elaborated that PTR 540/2007 was not decided by the Hon'ble Lahore High Court separately. It was part of several other petitions which were decided through a combined judgment reported as 2008 PTD 1420 commonly known as Commissioner of Income Tax/Wealth Tax Zone `C' (Legal) Lahore v. Messer Idrees Cloth House, Lahore. The learned counsel has shown to us that although in PTR 540/2007 question referred was the one as indicated above yet after consultation with the legal advisors and counsel of respondents following questions were framed for disposal of the entire petition including PTR 540/2007: (i) Retrospectivity and application of S.R.O. 633(I)/2.002, dated 14-9-2002 and consequential cancellation of notice issued on the basis thereof in respect of the assessments finalized prior to the enforcement of the Income Tax Ordinance, 2001. (ii) Retrospectivity of the provisions of law inserted in terms of section 122(5A) in Income Tax Ordinance, 2001 by virtue of Finance Act, 2003. Whether the cases finalised under Income. Tax Ordinance, 1979 up to 30-6-2003 can be cancelled under the said provision or not. (iii) Retrospectivity of the section 122(5) before and after its amendment by Finance Act, 2003. According to the learned counsel thus original question framed by the Department in PTR 540/2007 duly reproduced above though distinguishable from the issue at hand did not even came up for hearing before the Lahore High Court in its combined judgment reported as 2008 PTD 1420 (CIT Zone 'C' v. Idrees Cloth House). The judgment was in respect of retrospective application of section 122 of the Income Tax Ordinance 2001. It has nothing to do with the invoking of section 122(5A) on an order treated to have been made by the Commissioner. Therefore dismissal of the relevant petitions by Lahore High Court or by the Hon'ble Supreme Court has no relevance to the instant case. Thus judgments of Hon'ble Lahore High Court in PTR 540/2007 and of the Hon'ble Supreme Court of Pakistan in 2009 PTD 1392= 100 Tax 81 [Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd.] are distinguishable from the instant case. Reliance by the learned AR is misplaced.

21. Regarding ITAT's decision reported as 2007 PTD 1226, relied upon by the AR, the learned counsel has maintained that the learned ITAT has held that it was not possible to translate, transform and pass on the same consideration and thinking what Commissioner himself could do for amending the order as it acquired from continuous learning and experience over a period of time after elevation to and performing his duties as Commissioner of Income Tax. The learned counsel is of the view that decision of learned ITAT in 2007 PTD 1226 is specifically in respect of mental faculties of a Commissioner of Income Tax acquired through years of experience and working in the Income Tax Department. This decision has lost it efficacy because impugned orders of Additional Commissioner have been framed under the Inland Revenue Service wherein Commissioner of Inland Revenue means not only Commissioner of Income Tax but an officer of equal seniority and rank of the Departments of Sales Tax and Central Excise Duty etc. as well who may not have the same mental faculties in terms of experience and knowledge in the field of income tax as a Commissioner of Income Tax might have to fulfil the requirement of reopening the case under section 122(5A) as envisaged in the said reported decision of ITAT, relied upon by the learned AR. Therefore, according to the learned counsel this decision is no more relevant- Regarding the contention of the learned AR that before delegation of powers the Commissioner has not examined and considered the case record to formulate an opinion of his own to invoke the provisions of section 122(5A), the learned counsel has produced a copy of letter bearing No Jud-I/CIR/Audit Division-IV/RTO/Kyc/9-10/1666 dated 27-1-2010 addressed to the Additional Commissioner to initiate action under section 122(5A) on the points mentioned therein. According to the learned counsel this letter of the Commissioner fulfills the requirements of the decision of learned ITAT set forth in 2007 PTD (Trio.) 1226 though it is no longer applicable.

22. Regarding amendment in section 49(1) and (2) brought about through Finance Act, 2008 to replace the word local authority with local Government the learned Counsel has maintained that this amendment is 4eclaratory or clarificatory in nature. It has simply changed the nomenclature from local authority to local Government. No substantive change has been brought about in section 49(1) and (2) by change of nomenclature. This has been explained by the F.B.R. in its Circular No.5 of 2008 dated July 5, 2008 which provides as under: "Section 49 of the Ordinance, exempts income of Federal Government, Provincial Government and Local Authority from income tax. The term "Local Authority" was not defined in the Ordinance, due to which some organizations like National Highway Authority, Port Qasim Authority etc. tried to stretch the definition given in the General Clause Act to avail exemption. The intention of the legislature was to provide exemption to a Municipal Committee, District and Tehsil Government etc. along with Federal Government, Provincial Government. 5.1. In order to bring clarity and avoid misinterpretation of the provision the relevant provisions of the Ordinance have been amended, substituting the term "Local Authority" by the term "Local Government" so that exemption is applicable as intended by the legislature. This would be in line with Article 165-A of the Constitution as already stated in subsection (4) of section 49." It has been asserted by the learned counsel that through above circular F.B.R. has not interpreted any provision of law. Instead, has simply, conveyed what legislature has meant by the use of nomenclature "local Government" or local authority" According to him the circular further clarifies that there has been no change in the intention of the legislature before and after substitution in sections 49(1) and (2) through Finance Act, 2008. Intention of legislature, both before and after the substitution, was to exempt Municipal Committees, District and Tehsil Governments from income tax and it has remained unchanged even after replacement of expression local authority by local government. KPT has claimed exemption as Federal Government not as local government or local authority. Therefore, substitution brought about in sections 49(1) and (2) through Finance Act, 2008 even otherwise are not relevant in their case. Besides, substitution of word Local Government in subsections (1) and (2) of section 49 is in line with Article 165A of the Constitution which is the binding force behind the provision of section 49(4) of the Ordinance. Therefore Circular No.5 of 2008 which is an explanatory Circular issued by the F.B.R., compliments and substantiates the change that has already been brought about by the legislature in subsection (4) of section 49 of the Ordinance for taxation of income of corporations, companies regulatory and development authorities, other bodies or institutions established by or under a Federal law or Provincial law or an existing law or a corporation, company a regulatory authority, a development authority or other body or institution set up owned and controlled, either directly or indirectly, by the Federal Government or a Provincial Government, regarding of the ultimate destination of such income as laid down in Article 165A of the Constitution of the Islamic Republic of Pakistan. The learned counsel went on to argue that original amendment regarding taxation of State owned entities/organization/institutions has been brought about by insertion of section (4) of section 49 through Finance Act, 2007, on the strength of Article 165A of the Constitution of Pakistan, therefore same is the main statute whereas substitution of the word "Local Government" in subsections (1) and (2) of section 49 simply manifests a change in the nomenclature to stop the State owned/run organization from misusing the expression "local authority". It is clarificatory and declaratory in nature and has to be applied retrospectively. Therefore, it is incorrect to suggest that KPT will be liable to tax for the tax year, 2009 onwards and not for the tax year, 2008.

23. The learned counsel has further drawn our attention to a Division Bench decision of Inland Revenue Tribunal Islamabad in I.T.As. Nos.758-762/LB of 2009 dated 3-5-2010 (tax years 2003 to 2007) and has explained that in this case Security and Exchange Commission of Pakistan (SECP), a Government controlled regulatory authority came up in. appeal with an identical claim of exemption on account of being Federal Government. It was asserted that the SECP is performing function of the Federal Government and is thus exempt from tax for being Government. According to the learned counsel, learned Tribunal after examining the Contention of SECP has been pleased to hold that SECP is not Federal Government and is not exempt being Government with the following observation:-- "(10) We have considered arguments of both the sides in the light of relevant material brought on record. Although S.E.C.P. is controlled by the federal government but it cannot claim the status of "government" it-self. We fully agree with the learned DR that there are many corporations, companies and regulatory authorities who work under the control of federal government but these authorities are not "government" in itself S.E.C.P. cannot claim the status of government because it is financially autonomous. It has it own Rules of Business. It was created through special legislation. It is engaged in business. Learned AR has unsuccessfully tried to stretch the definition of government for its application to S.E.C.P. Although S.E.C.P. is under the ultimate control of federal government but like many other corporations, companies and regulatory authorities it cannot be assigned the status of government. It has been created as regulatory authority for doing business. Hence Assessing Officer has rightly treated it so by assigning the status of public company. We are not impressed by learned AR's jargon aimed at proving that S.E.C.P. is a limb of government and is therefore not liable to tax. S.E.C.P. is a totally different entity than the government. Simple control of the government does not mean that S.E.C.P. itself has become "government" S.E.C.P. has its own status. It has its own rules of business. Its creation is through a specific legislation. It was created as a body corporate. It has its own salary structure. It has its own leave rules. It is free from financial control of AGPR. It was therefore rightly created as taxable entity in the status of a public company for being a body corporate. (11) Application of provision of section 49(4)

Learned AR contended that section 49(4) was introduced through Finance Act, 2007. It is therefore, applicable w.e.f. tax year, 2008. Its retrospective application in the case of this taxpayer is legally incorrect ..Provisions of section 49(4) cannot apply retrospectively introduction of provision of section 49(4) through Finance Act, 2007 is prospective in application (12) Learned D.R. Stated that through a direct decision of Hon'ble Islamabad High Court in case TR No. 160 of 2008 dated 18-5-2009, it was clearly held that provisions of section 49(4) are of clarificatory nature and thus apply retrospectively. Learned D.R. emphatically pressed that this judgment of Hon'ble Islamabad High Court is directly on the issue in hand and is still in field. In the presence of this judgment, no other opinion can be formed on this issue. (13) We are fully inclined to agree with learned DR that Hon'ble Islamabad High Court has decided the issue of retrospectivity or prospectivity of provisions of section 49(4) of the Income Tax Ordinance, 2001. Following findings of Hon'ble Islamabad High Court contained in the judgment dated 18-5-2009, in the case of PTA as referred supra, are cited to establish that section 49(4) is explanatory in nature and applicable retrospectively. "Subsection (4) of section 49 is also a declaratory legislation meant to achieve the purpose which has already been achieved by Article 165-A of the Constitution. In our view, there was no legal necessity to add subsection (4) of section 49 in the Income Tax Ordinance and has been added as an abundant caution. Subsection (4) is, therefore retrospective being a declaratory law." (14) Upshot of our aforementioned discussion and findings is that S.E.C.P. is not "government". It is not exempt from tax. Moreover section 49(4) is retrospectively applicable being a declaratory law S.E.C.P." According to the learned counsel claim of exemption and facts of the case of KPT are identical. Therefore above decision of ITAT Islamabad Bench is squarely applicable in the instant case and warrants dismissal of appeals of the appellant.

24. The learned counsel has also produced a copy of judgment of Islamabad High Court in T.R. No. 160 of 2008 Pakistan Telecommunication Authority v. Commissioner Income Tax, Companies Zone Islamabad announced on 18-5-2009. According to the learned counsel elaborate discussion has been made in the said judgment with reference to section 49 of the Ordinance and Article 165 A of the Constitution and it has been held that amendment in section 49(4) is declaratory in nature hence applicable retrospectively. The Hon'ble Islamabad High Court has been pleased to hold as under: "Section 49(1) of the Income Tax Ordinance, 2001 provided that the income of the Federal Government shall be exempt from tax under the Ordinance. Subsection (2) exempts the income of a provincial government and that of a local authority other than the income chargeable under the head income for business derived by a provincial government or a local authority from a business carried on outside its jurisdiction area. Subsection (4) was added in section 49 by Finance Act, 2007. (6) Through Article 165-A, it was declared that the income of a corporation, Company or other body or institution, established by or under a Federal or a Provincial law or an existing law or a corporation Company or other body or institution owned or controlled either directly or indirectly by the Federal Government or a Provincial Government, shall be liable to tax under any Act of the Parliament, regardless of the ultimate destination of such income. The purpose achieved through this Article was that any income of a corporation, company or other body or institution established by or under a Federal law or Provincial law or an existing law or a corporation, company or other body or institution owned or controlled wither directly or indirectly by the Federal Government or Provincial Government may not be taken to be exempt from levy and recovery of tax on the ground that ultimate destination of such income is the Federal consolidated fund or the Provincial consolidated fund. Subsection (4) of section 49 is also a declaratory legislation, meant to achieve the purpose which has already been achieved by Article 165-A of the Constitution. In our view, there was no legal necessity to add subsection (4) of section 49 in the Income Tax Ordinance and has been as an abundant caution. Subsection (4) is therefore, retrospective being a declaratory law. According to the learned counsel since subsection (4) of section 49 being declaratory in nature has been held by the Hon'ble High Court as retrospective. The clarificatory amendment brought about in subsections (1) and (2) of section 49 by Finance Act, 2008 is bound to be retrospective being subservient to it. Even otherwise in the presence of main provision of subsection (4) of section 49 change of nomenclature in subsections (1) and (2) of section 49 is hardly of any significance. Besides, it is an admitted position that KPT has claimed exemption as Federal Government not as local government or local authority, therefore, substitutions brought about in sections 49(1) and (2) through Finance Act, 2008 are even otherwise not relevant in their case.

25. The learned counsel further submitted that Hon'ble High Court in the same decision (Pakistan Telecommunication Authority v. Commissioner Income Tax, Companies Zone Islamabad) has dilated on the subject of definition of the phrase local authority now replaced with local government and has reached the conclusion that local authority essentially falls under the purview of a Provincial Government. According to the Hon'ble Court:-- "In case reported as the Deputy Managing Director, National Bank of Pakistan v. Atta-ul-Haq, (PLD 1965 Supreme Court 201), the Supreme Court examined whether National Bank of Pakistan is a local authority within the meaning of Article 199 of the Constitution of Pakistan. The Supreme Court came to the conclusion that National Bank of Pakistan is not a local authority. At page 206 of the report, the Hon'ble Supreme Court observed: "The conclusion that the National Bank of Pakistan is a "local authority "in East Pakistan is one with which speaking with respect, we find it entirely impossible to agree. The expression "local authority" has been used in statutory phraseology in the Indian sub-continent for a great many years and it always understood to mean an authority which is entrusted with the administration of a local fund. Local authorities are bodies exercising limited territories included in a province, powers which belong to the Province, but which by statute are delegated to the local authority. A local authority is ordinarily charged with functions of self-Government, and has power of making bye-laws of imposing taxation, and of maintaining and administering a local fund." "(8) Bracketing "Local Authority" with Provincial Government and using the phrase "outside its Jurisdictional area" makes the intention of the legislature clear that the local authorities, which exercise the governmental powers within its jurisdictional area have been exempt from income tax. We are therefore, of the confirmed opinion that the Pakistan Telecommunication Authority is not a local authority within the meaning of section 49(2) of the Ordinance" The Hon'ble Islamabad High Court has further been pleased to hold that in view of Article 165-A of the Constitution read with section 49(4) of the Income Tax Ordinance, the income of the Pakistan Telecommunication Authority cannot be said to be the income of the Federal Government and exemption cannot be claimed. It has been vehemently contended by the learned counsel that in view of findings of the Hon'ble Islamabad High Court in the cited case it is established beyond shadow of any doubt that a local authority (now local Government) is a Provincial subject. This contention is fortified by the newly introduced definition in section 2(31A) of Income Tax Ordinance, 2001 of a local Government (Previously local authority) which provides as under:-- "Local Government shall have the same meaning as in Punjab Local Government Ordinance, 2001 (XIII of 2001), the Sindh Local Government Ordinance, 2001 (XXVII of 2001) the N.-W.F.P. Local Government Ordinance, 2001 (XIV of 2001) and the Baluchistan Local Government Ordinance, 2001 (XVIII of 2001)"

26. According to the learned counsel whatever exemption has been availed 'by the appellant KPT as a local authority, was availed under a wrong premise, since they do not fall under a Provincial Government. Rather, admittedly are under the control of Federal Government they by no stretch of imagination could be treated a local authority as has been held by the superior courts in the decisions discussed supra. The learned counsel is of the view that income of KPT is chargeable to tax not only for the tax year, 2008 but also for the years prior to that, as according to him KPT, predominantly is a development and a regulatory authority. Apart from regulating port operations it is also engaged in development of projects which include projects for development of port and projects of commercial nature. The learned counsel has produced a list containing detailed description of projects being undertaken by KPT. The commercial projects include Port Tower which will be a multi-storey commercial and residential-cum-recreational centre. Food Street at Native's Jetty Bridge, Port Shopping District a complete state-of-the-art world class shopping mall spread over 20 acres of land. KPT Office and Commercial Tower: This will be also a multistorey officer tower to be built near KPT Office at an estimated cost of Rs.6 (B) and Twin Towers to be built adjacent KPT Head Office on an area of 25000 sq meters. The learned counsel has thus tried to show that KPT is engaged in large scale commercial activities aimed at earning business profits as an autonomous body which is liable to tax.

27. Regarding grievance of the appellant for not providing reasonable opportunity of being heard in tax year, 2009 the learned counsel has explained that the main issue involved in the proceeding under section 122(5A) was that of exemption. It has been shown to us by the learned counsel with the help of documentary evidence that exemption certificate issued to the KPT was cancelled by the concerned Commissioner in the month of June, 2009. After that Department initiated proceedings under section 162 of the Income Tax Ordinance, 2001 and as per order under section 162 dated 10-11-2009 as many as six letters concerning the same question of exemption were addressed by the Department to the appellant between May 7, 2009 to October 10, 2009. A few were replied by the appellant too. Therefore, contention of the learned AR that proper opportunity was not provided has no basis. The issue was in the knowledge of the appellant for the last eight months or so. It is therefore incorrect to suggest that appellant or its AR were caught by surprise by the notice under section 122(5A) seeking levy of tax on the income of appellant. Judgement

28. We have heard the learned representatives of both the sides, perused the impugned appellate and amended Assessment orders, case law relied upon by both sides and other documentary evidences produced in support of rival contentions. We understand that the prime question we are seized with, in this case, is the question of availability of Tax exemption of income of KPT. It has been shown to us that an attempt was earlier made by the Income Tax Department to Tax the income of KPT in the assessment years 1991-92, 1992-93, 1993-94 and 1994-95 by treating it a Trust and a Company within the meaning of section 2(6)(bb) of the repealed Income Tax Ordinance of 1979. KPT contested the status of Trust and a Company before the Assessing Officer and also filed a Writ Petition C.Ps. Nos. 1333-1339/1995 and 1285-1287/1995 before the Hon'ble Sindh High Court. It is noted that an order under section 138 of the repealed Ordinance of 1979, dated 16-4-1997 was passed by the then Commissioner of Income Tax Companies Zone IV, Karachi, to cancel the orders of Assessing Officer imposing tax on KPT. The said order clearly states that KPT in its writ petition before the Hon'ble Sindh High Court had maintained that it is a local authority and qualified for exemption from income tax under Clause (88) of Part I of Second Schedule of the repealed Ordinance of 1979. The said order under section 138 further states that during the pendency of its writ petition before the Hon'ble Sindh High Court, KPT approached the Federal Government for grant of exemption from income tax on its income. The Government acceded to its request through Economic Coordination Committee (ECC) of the Federal Cabinet and following decision of ECC to grant exemption to KPT, which has been reproduced in the order under section 138 as under: "Additional Agenda item No. IV: Case NO. ECC 133/11/95. Levy of Income Tax on Karachi Port Trust dated 26-6-1995. Decision: "The Economic Coordination Committee of the Cabinet decided that. Karachi Port Trust should not be subjected to the payment of tax". It is, as such noted that in pursuance of the decision of ECC, the C.B.R. issued instruction to the effect that function-wise KPT was analogous to a local authority and ECC's decision should be implemented by treating it as local authority in terms of clause (88) of part-I of the Second Schedule to the Income Tax Ordinance, 1979, as KPT has itself claimed in writ petition before Hon'ble High Court of Sindh. As a result orders for all the assessment years involving tax imposition on KPT by treating it as Trust and a Company in terms of section 2(6)(bb) of the repealed Income Tax Ordinance of 1979 were cancelled by the Commissioner Companies Zone IV, Karachi. The Hon'ble High Court was informed that the Department has accepted KPT's pleas regarding their status as local authority.' The Hon'ble Sindh High Court vide its order dated 21-4-1998 disposed of the petition filed by the KPT as having become infructuous.

29. We have noted that in the past too C.B.R. (now F.B.R.) did not treat income of KPT exempt on its own. But it implemented a decision of ECC of the Federal Cabinet. Further, the ECC in that decision did not declare KPT a local authority, but KPT itself desired to be treated as Local Authority at all forums right from the Assessing Officer to the Federal Government and the High Court. Now the stance of the KPT is a total shift with regard to its status in the present appeal: The learned AR of the Appellant (KPT) has vehemently contended before us that KPT is Federal Government since its inception. This stand is in complete disregard of the plea taken before the Income Tax Department, the Federal Government itself and the Hon'ble Sindh High Court in C.Ps. Nos. 1333-1339/1995 and 1285-1287/1995 disposed of on 21-4-1998 relating to assessment proceedings for the assessment years 1991-92 to 1994-95. In those C.Ps. KPT admittedly demanded a status of local authority, whereas now the learned AR. is claiming that KPT was never a local authority. On the other hand learned counsel for the Department has shown us with the help of documentary evidences that KPT not only availed exemption from income tax as a local authority but at times, as charitable institution, as industrial undertaking and as a Company. We have particularly noticed that clause (i) of S.R.O. 947(I)/2008 dated 5-9-2008 is specifically meant for exemption for the Federal Government. However in its application dated 31-1-2009 for exemption certificate KPT had chosen to declare itself an industrial undertaking covered in clause (v) of the S.R.O. instead of clause (i) meant for Federal Government. The learned AR has not been able to offer any explanation with regard to the anomalies pointed out by the learned counsel for the Department regarding claim of status nor he has answered to our question that, if KPT was Federal Government or a Federal Government Department why they kept on availing exemption as local authority, a company, trust, charitable institution or industrial undertaking or for that matter if they were allowed exemption under a wrong status why did not they point it out and got the record straight. This state of affairs strengthens our view that question of exemption for the income of KPT is more important than the question of status of KPT. It is a settled proposition now that superior courts have been very rigid on the question of grant of exemption from tax. Onus invariably in all cases relating to claim of exemption has been put on the taxpayer or the person claiming exemption. Besides, it has also been held that grant of exemption on one hand is the discretion and prerogative of the Competent Authority and it is for the person claiming exemption to show that he has been exempted. Hon'ble Supreme Court of Pakistan in its judgment reported as 1992 SC 1652 (Army Welfare Sugar Mills Limited v. Federation of Pakistan) has been pleased to hold as under: "There is no doubt that nobody can claim exemption from payment of Central Excise Duty or for that matter from payment of any tax. Indeed, grant of exemption, if any, is a discretionary matter." The Hon'ble Supreme Court has further been pleased to hold that:-- "it is true that the grant of exemption from payment of excise duty under section 12-A of the Act is a discretionary matter for the Government and that there are two basic principles of construing a provision of a status involving exemption from payment of a tax, namely, the first rule is that the burden of proof is on the person who claims exemption. The second rule is that a provision relating to grant of tax exemption is to be construed strictly against the person asserting and in favour of taxing officer. On the above first rule, reference may be to the case of Madras Provincial Cooperative Bank Limited v. Commissioner of Income Tax Madras AIR 1933 Madras 489 and the case of Commissioner of Income Tax-Madras v. S.L. Mathias AIR 139 PC.

1. In the above first case, a special Bench of the Madras High Court, While construing section 10 of the Income Tax Act, 1922, held that when an assessee is under a section of the Income Tax Act assessable to income tax it is for the person to show that he has been exempted whereas in the second case, the privy Counsel, while construction sections 2 and 4 of the income Tax Act, 1922 held that there can be no general presumption that exemption from the provision of a subsection is intended as complete exemption from tax and that the distinction is between exempting a class of income in some events and exempting in all events. Similarly in the case reported as 2008 PTD 1157 [CIT v. River Side Chemicals (Pvt.)] Ltd. the Hon'ble Supreme Court of Pakistan, has been pleased to hold that: "There is no cavil to the proposition that grant of concession in the nature of exemption from payment of duties must be given strict interpretation and the person getting such benefit must satisfy all conditions for such exemption"

30. Further, in the judgment reported as 2008 PTD 2019 (SC Pak) (Messrs Best Buy Computers v. Director Intelligence and Investigation Customs and Excise, Lahore) it has been held that:-- "One cannot be lost sight of the fact that cancellation of the exemption certificate was never challenged by the petitioner before any forum, rather it was accepted impliedly as neither any exemption thereafter, was claimed nor its revival or re-issuance was applied or sought for since the petitioners have themselves admitted that the imported goods were used in the assembling of computers which by no stretch of imagination can be termed or classified to be goods imported for setting up an industrial undertaking, nor it be categorized as plant, machinery, fixtures, fitting or any other equipment within the purview of clause (iv) of the said S.R.O. No 593(1)/91 dated 30-6-1991, therefore to us, the reasons weighed with the learned judges in the High Court in rejecting the appeals filed by the petitioners fully conform to the requirement of law and do not call for interference by this Court in exercise of its Constitutional Jurisdiction."

8. It is well settled that discretionary relief cannot be granted to help retention of ill-gotten gains by a party even if order of the Tribunal may be defective due to any technical reason; though nothing of the sort appears to have happened in the instant case. A chain of authorities right from the case of Runaq Ali v. Chief Settlement Commissioner (PLD 1973 SC 236) on the point is available. A few latest may advantageously be referred hereunder: (i) The Chief Settlement Commissioner, Lahore v. Raja Muhammad Fazil Khan and other (PLD 1975 SC 331) (ii) Province of the Punjab through Secretary Health Department v. Dr. S. Muhammad Zafar Bukhari (PLD 1997 SC 351) (iii) Ahmed Sher Khan and another v. Additional Commissioner (Revenue) Settlement Commissioner (Lands) Sargodha (1998 SCMR 408) (iv) Messrs Vulcan Company (Pvt.) Ltd. v. Collector of Customs Karachi and others (PLD 2000 SC 825) (v) Abdul Haque Indhar and others v. Province of Sindh through Secy. Forest Fisheries and Livestock Department, Karachi and others (2000 SCMR 907) (vi) Muhammad Sharif through L.Rs. and others v. Sultan Hamyun and others (2003 SCMR 1221) (vii) Muhammad Shoaib and others v. Government of N.-W.F.P. through the Collector, D.I.Khan and others (2005 SCMR 85) (viii) Executive District Officer School and Literacy District Dir Lower and others v. Qamar Dost Khan and others (2006 SCMR 1630) (9) Upshot of the above discussion is that these petitions, being misconceived, are hereby dismissed and level is refused."

31. Likewise in yet another Judgment reported as 1993 PTD 766 the Hon'ble apex Court held as under: "We may also observed that Mr. Fazale Ghani Khan has also pressed into service the Income Tax Department's practice obtaining during the last more than four decades during which period the amount of interest earned by the Insurance Companies on KDCs were treated as tax free for the purpose of income tax. Reliance was placed by him on the case Nazir Ahmed v. Pakistan and 11 others PLD 1970 SC 453 and the case of Asian Food Industries Limited and other v. Pakistan and others (1985 SCMR 1753) suffice it to observe that any alleged practice cannot negate the provision of Ordinance."

32. This, undisputed position so far as claim of exemption by a taxpayer is concerned when applied in the instant case we see that unlike the decision of ECC of Federal Cabinet in the past this time KPT has not been able to bring any evidence to support its claim of exemption as Federal Government or an adjunct or Department of the Federal Government. Thus onus to prove that it has been exempted has not been discharged by the appellant. The, Hon'ble Supreme Court put it in its judgment reported as 1992 SCMR 1652 (Army Welfare Sugar Mills Limited v. Federation) that when an Assessee is, under any section of the Income Tax Act assessable to income tax, it is for that person to show that he has been exempted. Not only that onus has not been discharged by the appellant but also the respondent Department on the contrary has brought incontrovertible evidence in the shape of letter C. No.12(2)CF-1/108 Dated 18-9-2008 conveying approval of Federal Finance Minister that KPT's request for tax exemption has not been acceded to. At this stage we feel no hesitation in agreeing with the learned counsel for the department that unlike the past practice this time the Federal Government has disowned and distanced itself from the claim of KPT for exemption from income tax. In the same letter PQA was also required to pay income tax and they are paying their taxes. Similarly Civil Aviation Authority (CAA) winch enjoys a position identical to KPT in regulating the operations of airports of the country under similar circumstances filed return of income in 1988-1989 without payment of tax on its income on account of being exempt and approached the High Court for exemption. The Hon'ble Sindh High Court in its decision reported 2002 PTD 388 dismissed the claim of exemption of CAA and CAA is paying taxes since then.

33. The learned Counsel for the Department has produced before us judgment of Islamabad Bench of this Tribunal in the case of SECP claiming exemption as Federal Government. SECP has tried to evolve almost the similar justification for its claim of exemption. Another State owned organization PTA's case decided by the Hon'ble Islamabad High Court has been has also been relied by the learned counsel for the Department. In all these cases, as also in the case of the Appellant, exemption from income tax has been claimed on account of being owned, controlled or working for the Government. However, this Tribunal and Islamabad High Court have not found this reasoning convincing enough for grant of exemption from tax.

34. It is worthwhile to mention here that wrong or right in the past KPT was treated exempt from income tax as a "local authority" a status which learned AR of the appellant has categorically refused to accept for its client in the present appeals before us, therefore, irrespective of the status of local authority claimed by the appellant or allowed by the Department substitution in subsections (1) and (2) of section 49 of the Ordinance concerning replacement of the expression "local authority" by local Government" become immaterial for KPT as it has been vehemently contended by the learned AR throughout present (amended) assessment and appeal proceeding that KPT is Federal Government 1 (or a Department of Federal Government) which, as has been shown by the learned Counsel for the Department with the help of provisions of section 2(9) of repealed Act of 1922 and 2(32) of repealed Ordinance of 1979 as well as section 49(1) of the present Income Tax Ordinance had always being exempt from income tax. Therefore, question of prospective application of the provisions of section 49(1) is not relevant in KPT's case as exemption for Federal Government was always there.

35. In view of above discussion and respectfully following the decisions of honourable Islamabad High Court in the case of PTA, Islamabad Tribunal in the case of SECP and other case law cited at Bar, we are convinced and accordingly hold that KPT is not Federal Government and not exempt from payment of income tax. Its income is chargeable to income tax within the meaning of subsection (4) of section 49 of the Income Tax Ordinance, 2001 like all other bodies, institutions, development and regulating authorities mentioned therein.

36. As regards the question of retrospective application of the provisions of section 49(4) respectfully following the judgments of Hon'ble Islamabad High Court in TR No 160/2000 (PTA v. CIT Islamabad) and learned ITAT Islamabad in I.T.A. Nos. 756-762/2009 dated 3-5-2010 (SECP v. CIT Audit LTU Islamabad) we also declare that provision of section 49(4) being declaratory in nature are applicable retrospectively. As a consequence the changes brought about in subsections (1) and (2) of section 49 being clarificatory in nature would also apply with retrospective effect.

37. With regards to the legal issue of Jurisdiction and invoking of provisions of section 122(5A) by an Additional Commissioner being lower in rank on an order treated to have been made by the Commissioner being the senior and higher authority, the matter has been decided by the Hon'ble Islamabad High Court in its judgment while deciding Writ Petition No. 653 of 2009 dated 16-7-2009 (SME Bank Limited v. Additional Commissioner Income Tax Audit and 4 others) reported as 2010 PTD 1506 relied upon by the learned counsel for the Department. Since no further appeal/reference was filed by the petitioner of Writ Petition No. 653 of 2009 against the judgment of Hon'ble Islamabad High Court we fully agree with the learned counsel for the Department that matter has attained finality. We accordingly hold that Additional Commissioner can invoke provisions of section 122(5A) under delegated authority on an order deemed to have been made by the Commissioner in terms bf section 120 of the Ordinance, as this order is not actually passed by the Commissioner but only treated to have been made by him.

38. As regards the controversy of dismissal of PTR 540 of 2007 by the Hon'ble High Court and ultimately by the Supreme Court, we have given serious consideration to the elaborate discussion made by the learned counsel for the Department in this regard and tend to agree with him that not only the original question referred by the Department to Hon'ble High Court in PTR 540 of 2007 was different than the question before us but also that question referred and decided in Commissioner of Income Tax v. Idrees Cloth House [(2008 PTD 1420 HC Lah.)] to which PTR 540/2007 was a part related to retrospective application of section 122(5A), therefore, question of invoking of section 122(SA) by Additional Commissioner on an order treated to have been passed by Commissioner was never referred nor came up for hearing before the Hon'ble Lahore High Court through PTR 540/2007 (Commissioner of Income Tax LTU Lahore v. Prime Commercial Bank Limited. Question of its dismissal by the Hon'ble Supreme Court in CIT v. Eli Lilly Pakistan Limited (2009 PTD 1392) does not arise which is otherwise clearly distinguishable from the question before us. This, in our view should settle the controversy once and for all.

39. The learned AR while placing reliance on a decision of this Tribunal reported as 2007 PTD 1226 has maintained that mental faculty cannot be transformed or delegated therefore Additional Commissioner lacked jurisdiction in the appellant's case. If this contention of learned AR is accepted then provisions of sections 210(1A) and 122(5A) would become redundant, which could not be the intention of legislature. Besides, in this case learned counsel for the Department has produced a copy of letter of the Commissioner which shows application of mind and personal examination of the case before delegation of powers under sections 210 of the Ordinance. We are of the considered opinion that requirements of decision of this Tribunal reported as 2007 PTD 1226 have duly been met in this case.

40. Regarding grievance of learned AR on reasonable opportunity of being heard the matter has been elaborately explained by the learned counsel for the Department. We are convinced that the main issue of exemption was well within the knowledge of appellant ever since the cancellation of its exemption certificate in June, 2009. Therefore, no haste has been noticed in finalization of assessment for 2009.

41. On the issue of non-allowance of depreciation it has been observed that Assessing Officer himself has stated in the order that it will be rectified on production of requisite documents. The appellant is advised to do the needful enabling the Assessing Officer to rectify the order and Department is directed to allow the statutory depreciation.

42. As regards disallowance of provision for staff pension fund' claimed as an ascertained liability, the matter is considered and remanded back to Taxation Officer to call for the relevant documents/ evidence and consider the claim in accordance with legal provisions.

41. In view of foregoing discussion, the orders of the Authorities below are confirmed to the extent discussed above and the appeals are decided in the manner indicated above. H.B.T./153/Tax (Trib.) Appeal dismissed.