1985 PLP (Trib (PTD)

FARHAT ALI KHAN (MEMBER).‑Messrs F. A. P ...are a registered firm having 3 partners, namely Mrs. Messrs F ..B ..and .Messrs .F .A and .N ..Ali ..It appears that the aforesaid registered firm is engaged in export business. In the assessment year 1978‑79 the aforesaid firm was allowed export rebate as provided by section 3, clause (4) of the Finance Ordinance for 1978. However, the partners of the aforesaid firm have not been satisfied by the benefit of export rebate giver, to the firm and individually clamed the same benefit in their individual assessments. The Income‑tax Officer, needless to say, did not give them the benefit as claimed. They, therefore, went up in appeal. The appeal of every partner was registered separately and the learned Appellate Assistant Commissioner, by his separate orders, record ed in separate appeals an 18th March, 1981, rejected there individual appeals. In all the three orders the learned Appellate Assistant Com missioner took the view that since the benefit of export rebate was allowed to their firm, as such, the question of allowing any further benefit to individual partners did not arise. He was also of the view that there was no such legal provision to support the claim of the partners. Now all the three partners have come up before us by filing three separate appeals.

2. Mr. I. N. P. . . . alongwith. Mr. J. . . . e . . . A . . . appeared for all three partners, hereinafter referred to as the appellants. Mr. M. . . . A . . S . . . appeared for the Department.

3. Mr. P.... who addressed us, firstly invited our attention to sub section (4) of section 3 of the Finance Ordinance, 15,

78. It reads as under : "(4) (a) In making any assessment for the year beginning on the first day of July, 1978, where the total income of an assessee includes any profits and gains derived from export of goods manu factured in Pakistan, income‑tax and super‑tax, if any, payable in respect of such profits and gains shall, subject to the provisions of clauses (b), (c) and (d), be reduced by an amount equal to half the amount of income‑tax and super‑tax, if any, attributable to sale proceeds of such goods ; Provided that in the case of a registered firm, super‑tax payable by it under paragraph C of Part 11 of the Schedule shall be reduced under this clause by so much of such amount calculated on the basis of the income‑tax payable on its total income under para graph A of Part I as if it were the total income of an unregistered firm as does not exceed the said super‑tax. . . . . . . Mr. P ... ... then took us to the clause (i) of subsection (5) of section z of Indian Finance Act, 1963. It is as follows : (i) an assessee being an Indian Company or any other company which has made the prescribed arrangements for the declaration and payment of dividends within India or an assessee (other than a company) whose total income includes any profits and gains derived from the export of any goods or merchandise out of India, shall be entitled to a deduction, from the amount of income‑tax and super‑tax with which lie is chargeable of an amount equal to the `income‑tax and super‑tax calculated respectively at one‑tenth of the average rate of income‑tax and of the average rate of super -tax on the amount of such profits and gains included in the total income ;" The learned counsel for the appellants then submitted before us that the provisions of paragraph 4 of section 3 of the Finance Ordinance of 1918 were in pari materia with clause (i) of subsection (5) of section 2 of the Indian Finance Act, 1963. Developing his arguments further the learned counsel drew our attention to C.I.T. v. Indo‑Marine Agencies, (1973) 87‑ I T R‑41) wherein the above‑quoted provision of Indian Finance Act has been considered under almost similar circumstances. He then invited us to interpret the above‑quoted provision of Finance Ordinance of 1978, in the same manner and thus thereby allow the appeal by granting the benefit of export rebate to appellants as well.

4. Mr. ... M ...S..., the learned Departmental Representative how ever, vehemently opposed the submission of Mr. P . . the learned counsel for the appellant. He submitted that if the benefit of export rebate was once given to the firm, it was not available to the individual partners thereof. He further argued that in case of registered firm the proviso appended to subsection (4) of section 3 of the Finance Ordi nance, laid down that the super‑tax payable by a registered firm was to be reduced by so much amount which was calculated on, the basis of Income‑tax payable as if the registered firm was an unregistered firm pro vided that such amount of income‑tax did not exceed the am6unt of super‑tax. The learned Departmental Representative contended that if the argument of Mr. P...... is upheld, the appellant would be taking double advantage which, according to the learned Departmental Represen tative, was not available to them if the relevant provision is truly and properly construed.

5. We have heard both the learned representatives Fat length and we have also perused the cited case and the relevant provisions of the Finance Act and Finance Ordinance. To start with, let us be very clear about the nature and relationship of a partnership firm and its partners. Unlike a company incorporated under Companies Act, a partnership firm carries no juristic personality. However, for the ‑purposes of Income‑tax a registered firm has been given a special status of a legal entity and has been included within definition of "Person" and "assessee". Let us also mention at this juncture that there are three distinct stages in assessment proceedings, namely, computation of the taxable income, determination of the tax payable, and demand for the tax so far due. As far as the registration o a firm is concerned, it makes no difference for the purposes of computation of the taxable income but it is very material as far as the determination of the tax payable and demand for the tax found due are concerned. It is also very pertinent that under the relevant Income‑tax law a partnership firm was liable to, pay super‑tax only ; whereas Income‑tax was payable by its partners.

6. With this background let us now turn to paragraph (a) of sub section (4) of section 3 of Finance Ordinance, `1978. The benefit provided by this provision of law is for an assessee whose total income includes any profits and gains derived from export of goods manufactured in Pakistan. The argument of Mr. P . the learned counsel for the appellant is that the appellants are such assessees inasmuch as the total income in their hands includes profits and gains derived from export of goods manufactured in Pakistan. His contention is that the expression "an assessee" does not exclude the partners of a registered firm. His further contention is that if the plain meaning of the relevant provision ,of law has given some advantage to the appellants, it cannot be taken away by reading something in the text of the provision of law which is not there. To fortify his submissions he has relied upon the Indo‑Marine Agencies case (supra). In this case the question before the learned Division Bench of Kerala High Court was as to whether both the partners as well as, the firm are entitled to the deductions under section 2 (5) (i) of the Indian Finance Act, 1963. Their Lordships after analysing the above‑quoted provision of law and the nature of the registered firm as well as the other provision of Indian Income‑tax Act, answered the above question in the affirmative. In the case before Their Lordships the benefit of export rebate was firstly claimed by the partners and subsequently by the firm. In this context, Their Lordships made the following observation "On a plain reading of the section of the Finance Act, there can be no doubt that the registered firm is entitled to the benefit of the section. The doubt, as we said earlier, has arisen as a result of the benefit having been conferred on the partners of the registered firm. The benefit conferred by the section is the deduction from the tax computed after the determination of the total income. The total income so determined will have to be divided among the partners according to proportion in which the profits are to be shared by the members of the firm. So, the share of the partner will include the profits or gains from export. According to the wording of the section, if the income of in assessee included the profits and gains from export, the assessee is entitled to the deduction provided by the section ......... :

7. Now reverting to the submissions of Mr. P ., the learned counsel for the appellant it appears that he is very much fortified by the authority quoted above. It is true that the proviso to clause (a) sub section (4) of section 3 of the Finance Ordinance, 1978 speaks of a registered firm. It is also true that in the provision of Indian Finance Act there is no such parallel provision. But we think that the plain meaning given to the expression "an assessee" would include both a registered firm and a partner thereof. The simple reason is that clause (a) of subsection (4) of section 3 of Finance Ordinance, 1978 has given an advantage to an assessee by virtue of which the Income‑tax and Super‑tax, if any, are reduced by an amount equal to half thereof. On the other hand, the proviso has laid down mode of calculation of super‑tax payable by a registered firm. Thus, if an assessee has to pay super‑tax in case of a registered firm it would be calculated according to proviso but where the assessee is other than a registered firm it would pay half of it under clause (a). We, therefore, are of the view that plain meaning of expression "assessee" would include both a registered firm as well as its partners as for the purposes of Income‑tax both are assessee whose income is inclu ding profits and gains from export of good manufactured in Pakistan. It is important to note that clause (a) of subsection (4) of section 3 of the Finance Ordinance 1978 does not lay down that profits and gains should be derived by an assessee exporting goods himself or itself. Thus, the registered firm would get the benefit if any, only with regard to the super‑tax, whereas the partners would get the benefit of export rebate regarding payment of Income‑tax. As is obvious the intention of the legislature is to encourage the export so that as much foreign exchange is earned as could possibly be done. It is with this intention that benefit of export rebate appears to have been provided to both the registered part nership firm as well as its partners. Had it been the intention of the legislature to give the benefit of the export rebate only to the registered firm, the clause would have been worded as follows. "In making of any assessment for the year beginning on the 1st day of July, 1978 where the total income of an assessee other than the Partners of a Registered firm includes any profits and gains derived from export of goods manufactured in Pakistan............" It is important to note that the omission of the words "other than partners of a registered firm" from paragraph (a) is very significant whop it is looked a‑t in the context of the proviso appended to aforesaid clause which specifically deals with the case of a Registered Firm.

8. The upshot of the entire discussion, therefore, is that the submission of Mr. P .. that the word "An Assessee" which finds place in clause (a) of subsection (4) of section 3 of Finance Ordinance, 1978, includes both a registered firm as well as its partners in its fold. His submission is also fortified by Indo‑Marine Agencies case (supra) which applies an all fours of these appeals. We, therefore, allow all the three appeals after setting aside impugned orders of the learned Appel late Assistant Commissioner and send the case back to Income‑tax Officer with the direction that the benefit export rebate be given to all the three appellant according to the proportion of their share in the registered firm regarding the value of export.

9. All the three appeals are disposed of accordingly by this con solidated order. M. B. A. Appeals allowed.