Central Board of Revenue

Applicability of such Circulars/Notifications/ Instructions to substituted or re-enacted law with regard to same subject­-matter

Principles.

S.R.Os. were statutory rules and had its legal force, which could not be replaced through instructions or interpretation of Central Board of Revenue

Central Board of Revenue could not change the rulings unless conditions of S.R.O. were also changed in accordance with law

Question of prospective or retrospective application of S.R.O. was relevant while interpreting a law only and not the opinion of Central Board of Revenue which was merely a view held by an executive Authority having no force of law

Central Board of Revenue though was empowered to issue S.R.Os./Notifications in exercise of delegated authority under statute by way of Subordinate Legislation and so long it was not inconsistent with provisions of statute, would have the force of law, but Board had no authority to give interpretation of law as it fell exclusively within the domain of judicial functions

Board though occupied apex position in hierarchy of tax administration, but under the Scheme of law pertaining to direct and indirect taxation, it had no authority to give any judicial interpretation except in cases, where Board was empowered to exercise revisional jurisdiction

Barring said exception, Board was executive Authority primarily concerned with implementation of statutory provisions pertaining to direct and indirect federal taxes and in execution thereof was empowered under various statutes to issue S.R.Os./Notifications and frame rules in exercise of delegated authority by way of subordinate Legislation

Any view/opinion contained in any Circular or Letter issued by Board, was in the nature of an executive interpretation/opinion and could not be treated at par with judicial interpretation and it could not be held to be a rule as was understood in the common parlance of law.

Central Board of Revenue did not figure a forum in judicial hierarchy and the stand of Ministry of Production cannot become a pronouncement by a forum competent to adjudicate upon a legal question

One can give due respect to such stand if the same is not in contravention to the law, otherwise it has no binding effect on any judicial forum.

Any interpretation placed by the C.B.R. on a statutory provision cannot be treated as a pronouncement by a forum competent to adjudicate whether judicial or quasi judicial.

CBDT has power to admit applications or claim for any exemption, deduction, refund or any other relief after prescribed period

Power must be exercised judiciously to relieve genuine hardship

Rejection of application for refund after prescribed period without giving reasons

Not justified

Matter remanded to CBDT

Indian Income Tax Act, 1961, Ss. 119 & 237

Constitution of India, Art. 226.

Assessment under Self-Assessment Scheme was not accepted by the Income-tax Authorities and notice under S.61 of the Income Tax Ordinance, 1979, was issued to the assessee

Contention of the assessee was that his return filed under the Self-Assessment Scheme was immune from scrutiny-.

Income-tax Authorities did not accept the contention of the assessee and selection of case for process under normal law was maintained

Income-tax Tribunal allowed appeal filed by the assessee

Validity

Claim of the assessee that he was entitled to the benefit of immunity clause by returning 15% increase in the tax was not questioned by the Authorities either before the Appellate Authority or before the Tribunal

Assessing Officer as well as the Appellate Authority avoided to record any finding on the claim of immunity as preferred by the assessee

High Court expressed its distress on the conduct-of the Revenue to first hold out a promise and then to attempt circumventing the same after the assessee had completed/fulfilled the requirements for enjoying the declared concession

Whether a return had qualified or had not qualified for acceptance under Self-Assessment Scheme, generally would not give rise to a question of law

Appeal was dismissed in limine.

Ss.80DD [as inserted by Finance Act (IV of 999)] & Second Sched., Part I, Cl. (118-C), Part 1'I, Cl. (6-AA), Part IV, Cl. (58)

Central Board of Revenue Notification No.1283(1)/90

Protection of Economic Reforms Act (XII of 1992), S.6

Constitution of Pakistan (1973), Arts.2A, 8, 18, 25, 199 & Fourth Sched., Legislative List, Part I, Entry 47

Constitutional petition

Petitioner contended that S.80-DD of the Income Tax Ordinance, 1979 was discriminatory, thus, violative of Arts. 2A & 25 of the Constitution that petitioner dealing with import of RBD Palm Oil and Soya Bean Oil for manufacture of vegetable ghee and cooking oil was enjoying exemption under Notification No.1283(1)/90 as well as under Cl. (118-C) of Second Sched to the Income Tax Ordinance, 1979; that S.80-DD of the Ordinance had interfered with such exemption and put unwarranted restriction, on fundamental right of petitioner to conduct such business and that S.80-DD of the Income Tax Ordinance was ultra vires the Entry 47 of Fourth Sched to the Constitution

Validity

Section 80-DD of the Ordinance was in the nature of presumptive tax regime and was substantially of the same nature as S.80-D of the Ordinance, which had been found to be valid by Supreme Court in case of Elahi Cotton Mills (PLD 1997 SC 582)

Petitioner if enjoyed any protection/exemption under S.6 of Protection of Economic Reforms Act, 1992, then he could ,agitate -the same before Departmental Authorities in the light of the said judgment of the Supreme Court

Supreme Court had dealt with all such points raised in the present Constitutional petition, no fresh consideration thereof by High Court was required no fresh point of law requiring consideration by High Court having been raised, Constitutional petition was dismissed in limine.

Circulars/instructions by Central Board of Revenue of beneficial nature, are binding on the field officers.

Indian Income Tax Act, 1961, S. 119.

Decision of case on instructions issued by Central Board of Revenue instead of following the provisions of Customs Act, 1969

Goods were imported in personal baggage and the same were confiscated-by the Custom Authorities on the ground that the same were in commercial quantity and were not importable—Appeal against the order of confiscation was filed before Custom Authorities as well as before Customs, Central Excise and Sales Tax Appellate Tribunal

Both the appellate forums below had dismissed the appeals and the goods were not released

Order of confiscation was passed in view of instructions issued by Central Board of Revenue Letter No. 5(4)L&P/98, dated 16-2-1998

Validity

Custom Authorities under various provisions of Customs Act, 1969, had to dispose of the confiscated consignment through open auction

Goods/articles imported even unlawfully but confiscated ultimately had to flow sin the local market

Where the order was not passed by an independent application of mind and the authority was swayed by the instructions issued by the C.B.R. vide Letter No.5(4) L&P/98, dated 16-2-1998 such order suffered from infirmity and the same was not sustainable in law

Instructions issued by Central Board of Revenue vide Letter No. 5(4) L&P/98. dated 16-2-1998, had already been struck down by High Court and order of confiscation was passed contrary to the judgment of High Court

Order of confiscation was set aside by High Court and Custom Authorities were directed to release the confiscated goods on payment of 75% of redemption fine in addition to any duty and charges payable in respect of such imported goods.

Opinion or decision of Central Board of Revenue is not binding on the Income-tax Appellate Tribunal, Income-tax Commissioner (Appeals) or Appellate Additional Commissioner of Income-tax.

Exemption in relation to deduction of tax at source under S.50(4) of Income Tax Ordinance, 1979, has been extended by the C.B.R. Circular to all recipients who may enjoy exemption under any of the provisions of the Ordinance as such the same includes further exemption prescribed by S.80C(4) of Income Tax Ordinance, 1979.

Petitioner purchased land, building and machinery and did not deduct tax under S.50(4) of the Income Tax Ordinance, 1979 from payment made to the vendor

Assessing Officer treated petitioner as "assessee in default" for non-deduction of tax on the transaction and created demand alongwith additional tax

Validity Provision of S.50(4) of the Income Tax Ordinance, 1979 was not attracted to the transaction evidencing the sale of land, building and the fixed plant ,and, machinery sold as part of factory

Neither a "supply" nor its subject in the transaction matter was "goods"

Transaction was otherwise not liable to any incidence of income-tax under any heads given in S.15, Income Tax 'Ordinance, 1979

Order of Assessing Officer being beyond jurisdiction, Assessment order and additional tax imposed, was declared to be void ab initio by the High Court.

Local sales were declared in the return of income filed under S.55 and was assessed under. S.59(1) of the Income Tax Ordinance, 1979

Expenses claimed in Profit and Loss Account were not prorated to turnovers of import and local sales but a note was given that expenses claimed exclusively belonged to business income except import business

Inspecting Additional Commissioner assumed jurisdiction under S.66-A of the Income Tax Ordinance, 1979 and disallowed the expenses of Profit and Loss Account to be prorated to turnovers of import on the ground that expenses in the Profit and Loss Account made it obvious that those must have been incurred both in manufacturing (local sales) and commercial imports and should have been prorated, which had not been done

Validity-No basis 'existed for the Inspecting Additional Commissioner to consider the order passed by the Assessing Officer under S.59(1) of the Income Tax Ordinance, 1979 to be erroneous in so far as it was not prejudicial to the interest of Revenue

Assumption of jurisdiction under S.66-A of the Income Tax Ordinance, 1,979, thus, was ab initio void in law

Impugned order was annulled by the Tribunal.

C. B. R. and its officers were neither the only Authority to decide matters pertaining to 'fiscal . laws, nor the final adjudicators in such matters.

Board is not entitled to make any interpretation of legal provision.

Indian Income Tax Act, 1961, Ss.32-A, 32-AB, 119.

Indian Income Tax Act, 1961, S.119.

Status of Central Board of Revenue's interpretation of law.

Terms "Definite information", "material evidence" and "suspected gross understatement" occurring in para. 4 (ii) of C.B.R. Circular No. 22 of 1991

Connotation and effect.

Assessee a corporate body formed by or under any law for the time being in force has the status of a company for the purpose of assessment under the Income Tax Ordinance, 1979

Word `Government' as used in Sched. I, Para IV, B(2) of the Ordinance would cover the Provincial Government as well

Where 60% shares of a corporate body (Bank) were held by the Provincial Government that body being a `public company' within the meaning of para. B(2)(a) and Part IV, First Sched of the Ordinance was consequently liable to charge of tax at the rates prescribed in the First Schedule for a public company.

Partitioning of joint Khata in consolidation proceedings was subject to the consent of all co-sharers before issuance of Memo. dated 23-1-1990

Although partitioning of joint Khata in the case was effected before the Memo. Dated 23-1-1990 was issued, yet the fact that apparently all the parties had agreed and parties could not live amicably together, partitioning of joint Khata in the light of subsequent developments was deemed to be appropriate and proper

Additional Commissioner's order which undid the partitioning of joint Khata and ordered the same to be joint, was set aside and original scheme between parties was restored.

Contral Board of Revenue Circular No.2"of 1975-Releasing a part of receipts of a contractor from work in progress from levy of income-tax

Assessing Officer nowhere in the assessment order doubted book, of account and other registers that were produced before him

Assessment order showed that assessing officer summarily rejected books of accounts

Account books maintained by assessee not deviating from the method adopted in the past, proper trading account was maintained by assessee for work in progress; profit from, work in progress was disclosed year after year and only the incomplete projects where work even at 25% was not completed were not taken into consideration

Books of accounts of assessee were not examined to determine whether, assessee's profits were ascertainable on incomplete projects- -Assessing Officer, held, was not justified to reject trading results on incomplete projects but he was to accept the trading results on the basis of method of accounting employed by the assessee w

Directions issued by C. B. R. though are binding on its subordinate authorities, yet interpretation of certain provisions of law was not binding on the said authorities

Interpretations by C.B.R. have no relevancy so far as Income-tax Appellate Tribunal was concerned

Mere fact that C. B. R. had made certain interpretation of a particular law, would not debar the Tribunal to come to a different conclusion.

Central Board of Revenue Circular No. 10 of 1982, dated 2-8-1-982, 'Para. (b) (3) ((i)-Self-assessment scheme Immunity from detailed scrutiny-Assessee, a contractor and 'a no account case

Assessee filed return under self-assessment scheme and complied with all its requirements-Position that' assessee was not maintaining any account was admitted-Where income-tax return filed by assessee fulfilled all requirements of scheme, Assessing Officer, held, could not call upon assessee to 'produce copies of trading and profit and loss account and income and expenditure account unless it was found that return filed by. assessee did not disclose correct income

Assessing Officer, therefore, could not reject return and proceed to decide cases under detailed scrutiny-Action of Assessing Officer to assess assessee under detailed scrutiny was therefore not legal in circumstances.

Assesses arguing that Central Board of Revenue Circular, dated 4-12-1980 by which no tax was payable by assessee was to operate retrospectively

Article V(I) of Treaty Indicating that signatory countries had undertaken not to impose any form of taxation on dividend paid by a Company resident in that territory

Treaty was issued as S.R.O. on 9-1-1962, whereby tax rate was 101% and 158 and its provisions applied to all years thereafter-Order of Commissioner Income-tax (Appeals) deleting surcharge in all assessment years, which was imposed by Income-tax

- S. 65-Central Board of Revenue Circular No. 8 of 1979, dated 27-9-1979 and Circular No. 3 of 1979 dated 13-8-1979-Assessment-Detailed inquiry-Fact that last assessed income of assessee was below rupees one lac not controverted - Departmental representative admitting that prima facie no concealment of income made-Selection of case for detailed inquiry not made with prior approval of Commissioner of Income-tax-Case of assessee, held, could hot be reopened under S. 65 of Ordinance in circumstances.

Department purporting to act under para. 7(iii) of said circular, added certain sum on account of deemed income under S.12(7)

Held, Assessing Officer had acted beyond jurisdiction in adding deemed income under S.12(7) of Ordinance while framing assessment :Under S.59(1)- Return of assessee qualified to be processed under self-assessment scheme, only Income-tax Officer was .to frame assessment on -adding back inadmissible expenses claimed by assessee In profit and loss account

If assessee had failed to disclose income which was assessable under-S.12(7) of Ordinance XXXI of 1979, Department should have first completed assessment under

Rebate of 10$ allowable to companies deriving income from processing, freezing, preserving and canning of food, vegetables etc. "Processing" and "manufacturing"

Distinction

Assessee refused 10% rebate by department on ground that it was manufacturer of beverages-Appellate Assistant Commissioner, holding that beverages were food, modified assessing officer's order

Department challenged this finding before Tribunal

Held:

S. 59 (4), (5) read with S. 5(8) and Central Board of Revenue Circular No. 21 of 1941-Rule making powers-Circular of C. B. R. restricting provisions for keeping aside certain portion of premium income for an unexpired risk to 40 % or to 50% not shown to have been worked under any provision of Act or Rules framed thereunder-Held, cannot have any binding force on assessee.

S. 10 (2) (7) read with Insurance Act (IV of 1938), Ss. 15 (1), 21 & 22 and Central Board of Revenu Circular published in Income-tax Manual, Part II, 1958 Edn. page 264-Insurance

Revenue for unexpired risks-Board of Revenue Circular allowing 40% as fair and proper reserve for unexpired risks-Devoid of legal force-Annual accounts of Insurance Companies being annually sent to and checked by Controller of Insurance, balance of profits as disclosed by accounts submitted to Controller and accepted by him

Binding oil Income-tax Officer, subject however to disallowing expenditure not permissible under S. 10 (2)-Amount claimed by assessee insurance Company and Insurance held, cannot be questioned by income-tax Officer in absence of any statutory provision governing allowance of an amount as reserve for unexpired risks.

Ss. 10 & 12 read with Central Board of Revenue Circular No. 12 of 1978 and Central Government Notification No. S. R. O. 1076(K)/66Profit gained on Defence Saving Certificates-Neither liable to income-tax nor taken into account for determining rate of income-tax on total income-Proportionate amount of wealth tax liability on value of Defence Saving Certificates or similar investments, not liable to tax, if included in net wealth, held, would fall beyond purview of allowable expenses under S. 10 and for same reasons under similar provision of S. 12 wealth tax liability on such assets cannot be allowed.

Central Board of Revenue West Pakistan Rehabilitation Settlement Scheme read with Board of Revenue Memoranda dated 22-4-57 and 23-7-57 -Allotment of land under Memorandum of 22-4-57 entirely on temporary basis-Rehabilitation Authorities later interfering with such allotment in accordance with Departmental interpretation of Memorandum

Aggrieved party, held, not entitled to a declaration by High Court under Art. 98, Constitution of Pakistan (1962).

Practice-Limitation-Assessment of tax under Punjab Agricultural Income Tax Act (VII of 1950)Revision-Objection in respect of limitation-May be overruled if Board of Revenue is interested in considering important matter involved in revision suo moto.