1976 P Cr (PLP)

H. A. Rahmani for Applicant. A. R. Kazi for the State. Date of hearing : 18th June 1974. The petitioner, Masood Sultan, is a Director of Feroz Sultan Indu stries Ltd. The said company has its registered office at Karachi and is ordinarily engaged in the manufacture and processing of yarn. cloth etc. For the assessment year 1969‑70 the said company filed income‑tax returns in two parts, the first part pertaining to the period from 1‑1‑1968 to 30‑4‑1968 and the other pertaining to the period from 1‑5‑1968 to 31‑12‑1968. It is stated that the necessity for filing the returns in two separate parts arose on account of the expiry, during the aforesaid assessment year, of the exemption granted to the said Company under section 15‑BB of the Income -tax Act, 1922, hereinafter referred to as the Act. In the said returns, the petitioner declared net profits of the assessee‑Company as Rs. 3,21,218/ claiming the same to be exempt from taxation under section 15‑BB of the Act. Apparently the Income‑tax Authorities were not satisfied with the said returns and accordingly served the petitioners with notice, under sections 23 (2) and 22 (4) of the Act. In response to this notice, the petitioner appeared before the Income‑tax Authorities and produced certain books, etc., from which it appeared that the assessee‑Company was carrying on two separate types of business, one being the purchase of raw cotton and manufacturing the same into yarn, and the second being the purchase of yarn from other Mills and selling the same after bleaching and possibly some processing. The Income‑tax Authorities took the view that though the assessee‑Company had been granted exemption under section 15‑BB of the Act, the exemption covered only the first type of business carried on by the assessee‑Company, that is purchasing raw cotton and manufacturing the same into yarn, and did not extend to the second activity of the assessee‑Company, which consisted in processing and bleaching yarn purchased from other Mills. The Income‑tax Officer concerned, after obtaining the requisite approval from the Commissioner of Income- tax, filed complaint against the petitioner under sections 51 (2) and 52 of the Act, alleging that the petitioner had falsely verified the returns for the assessment year 1969‑70, in that the particulars of the income of the assessee‑Company from the business of bleaching and processing yarn purchased from other Mills had been deliberately and dishonestly concealed. Proceedings on the basis of the above complaint were instituted in the Court of the Special Judge (Central), Karachi, before whom an application was filed on behalf of the petitioner, praying for adjournment of the case and stay of the proceedings. The ground taken in support of this appli cation was that the petitioner had preferred an appeal against the order of the Income‑tax Officer to the Income‑tax Appellate Tribunal and if the Tribunal held that there was in fact no concealment of income or that correct returns had been filed on behalf of the assessee‑Company, there would be no basis for proceeding against the petitioner on the complaint by the Income‑tax Officer. The application, however, was rejected by the learned Special Judge by his order dated 10‑11‑1973. The learned Special Judge took the view, on the basis of the provisions of section 53 (1) (a) of the Act that any decision which may be reached by the Income- tax Appellate Tribunal on the appeal of the assessee‑Company. would have no material effect on the criminal proceedings before him. It is against this order, refusing to adjourn or stay the proceedings till the disposal of the appeal by the Income‑tax Appellate Tribunal, that the petitioner has filed the present revision application. Mr. H. A. Rehmani, the learned counsel for the petitioner, has contended that inasmuch as the Notification granting exemption to the assessee- Company under section 15‑BB of the Act is couched in wide language and is not restricted to the business of the assessee‑Company of manufacturing yarn from cotton, the said exemption would also cover the activities of the assessee‑Company in processing or bleaching yarn purchased from other Mills. Mr. A. R. Kazi. the learned counsel for the State, has on the other hand contended that the Notification granting exemption must not only be read in conjunction with the application submitted by the assessee Company for exemption, but further is subject to the provisions of subsection (2) of section 15‑BB of the Act. Mr. A. R. Kazi has produced for my inspection a copy of the application which the assessee‑Company had made to the Central Board of Revenue for grant of exemption under section 15‑BB of the Act. In clause (xii) of that application, it is specifically stated that the assessee‑Company is engaged in the manufacture of hosiery yarn. Furthermore, in clauses (xiii) and (xiv) of that application it is stated that only cotton will be used for the manufacture of hosiery yarn, such cotton being produced in Pakistan. Although I would not like to express any firm opinion on the matter, it prima facie appears that. though the application undoubtedly was for a limited exemption, the Notification granting exemption to the assessee‑Company is not so limited and possibly be construed as being applicable to all activities properly carried on by the assessee‑Company. The contention of Mr. A. R. Kazi that any exemption granted under section 15‑BB of the Act is subject to the conditions and limitations specified in subsection (2) of that section is undoubtedly sound, for the exemption being under the said section, it must be subject to any conditions or limitations provided therein. Clause (b) of subs‑,ction (2) of the said section clearly stipulates that the exemption will only be applicable to7 such undertakings as use wholly or mainly raw material produced in Pakistan. Mr. A. R. Kazi frankly conceded that the complaint does no specifically state whether the raw material, including the yarn which was bleached or processed by the assessee‑Company was wholly or mainly; produced in Pakistan. According to him, and this submission of his is supported also by Mr. H. A. Rahmani, this question has to be determined by the Income‑tax Appellate Tribunal. In the circumstances, Mr. A. R. Kazi states, and in my opinion rightly so, that he does not oppose the allowing of this petition. Since the very fact, which is the foundation of the criminal proceedings before the learned Special Judge, is the subject for consideration by the Tribunal in the appeal filed by the assessee Company, it is but appropriate that the proceedings before the learned Special Judge be stayed till the disposal of the appeal by the Tribunal. I would accordingly so order. This will also dispose of Miscellaneous Application No. 22/1974 which was for passing an interim order. Revision allowed.