' KHILJI ARIF HUSSAIN, J.---The petitioner has impugned letter, dated 18-10-1994, issued by the respondent No,3, Assistant Commissioner of Income Tax Circle 19, Zone 'F' Karachi, calling upon the petitioner to deduct and deposit with-holding tax under section 50(7A) of the Income Tax Ordinance, 1979, on auction sales.
2. The facts leading to this petition are that the petitioner was registered as a Private Limited Company under the Companies Act, 1913, in the year 1966. The entire paid- up capital of the company is fully subscribed and paid by the Government of Pakistan. Under Article 3 of the Articles of Association of the company, invitation of public subscription or debentures of debenture stock of the corporation is prohibited.
3. The petitioner is being assessed to income tax from its incorporation in the status of Private Limited Company. However, for the purpose of rate, the petitioner is being given the status of Public Limited Company in accordance with First Schedule to the Income Tax Ordinance only, in pursuance of Clause 2(B) of Part-IV of the First Schedule to Income Tax Ordinance, 1979.
4. In May, 1985, the petitioner invited bids through advertisement in newspapers for sale of imported butter oil. On going through this advertisement, the Special Officer Circle-5 Karachi, issued letter, dated 22-4-1985, asking the petitioner to collect the income tax @ 3% of the sale price realized and deposit the same in the State Bank of Pakistan or any authorized bank in Pakistan in pursuance of provisions contained in subsection (7A) of section 50 of the Income Tax Ordinance, 1979.
5. Again on 19-61986, the same officer issued notice calling upon the petitioner to deduct the tax under section 50(7A) of the Income Tax Ordinance, 1979, and deposit the same in the Government treasury, State Bank or authorized branch of the National Bank of Pakistan, and to file the statement in this behalf failing which the petitioner shall be treated as assessee in default under section 52 of the Income Tax Ordinance, 1979. The petitioner informed that it was neither a Government Department nor a local authority or a Public Company, but was a Private Limited Company, therefore, the provisions contained in section 50(7A) of the Income Tax Ordinance, 1979, was not applicable. The same officer again issued a similar notice/letter on 16-10-1986. Similar reply as earlier was sent on 4-11-1986. In reply to the letter, dated 4-11-1986, sent by the petitioner, the said officer informed vide letter, dated 10-11-1986, that he was not in agreement with the contention of the petitioner that it is a Private Limited Company, for the following reasons:-- "(1) That the majority of shares of TCP are held by the Federal Government and
(2) That a company in which not less than 50% of the shares are held by the Government is a 'Public Company' as defined in Clause 2(B), Part-IV of the First Schedule to the Income Tax Ordinance, 1979."
6. He stated that in view of legal position explained above, TCP is a 'Public Company' and therefore, provisions of section 50(7A) of the Income Tax Ordinance, 1979, are applicable.
7. The legal position was again explained by the petitioner through its letter, dated 30-11-1986 as follows:-- "(2) The averments contained in your letter referred to above do not explain the correct legal position. First Schedule to the Income Tax Ordinance, 1979 has been framed in order to provide the rate of tax to be charged under sections 9 and 10 of the Income Tax Ordinance and to deduct at source the tax under section 50 provided in the First Schedule. The doubt whether the definition of "Public Company" as given in Para. B(2) of Part-IV of the First Schedule would be applicable to the expression "Public Company" used elsewhere in the statutes was clarified by the Central Board of Revenue vide Circular-6 of 1981, dated 17th March, 1981. It provides that "it is clarified that term, "Public Company", as used in the said Ordinance except for the First Schedule thereto, would have the same meaning as has been given in the Companies Act, 1913 unless the text or wording of relevant provision of the said Ordinance requires otherwise".
(3) It will thus be clarified from the above that the special meaning assigned to the expression "Public Company" in para. B(2) Part-IV of the First Schedule is confined to the First Schedule and not to statutes."
8. Even after the legal position as explained above a notice under section 144(c) of the Income Tax Ordinance, 1979, was issued on 20-7-1994, seeking information in respect of the deduction of tax under section 50(7A) of the Income Tax Ordinance, 1979. It was replied vide letter, dated 11-8-1994, again explaining that the petitioner was Private Limited Company and therefore, provisions under section 50(7A) of the Income Tax Ordinance, 1979, were not applicable to it. The respondent No,3, Assistant Commissioner of Income Tax, thereafter issued a letter on 1-9-1994, calling upon the petitioner to file Memorandum of Articles of Association and sought further clarification as to why the tax slabs of public limited company have been applied while determining the income tax liability of the petitioner. Another letter, dated 2-10-1994 was issued by the respondent No,3, which reads as follows:-- "This office letter No,14, dated 2-8-1994 was written to you for giving details of information regarding auction sales. In response to the said letter you replied vide your Letter No,5335/T-128, dated 11-8-1994 wherein you provided the list of auction sales, however, in the remarks columns you stated that:- "TCP is neither a Government Department nor a local authority or a public limited company but a Private limited company as understood under the Companies Act, 1913 and now the Companies Ordinance, 1984. As such section 50(7A) of the I.T.O., 1979 is not applicable in the present case."
' From your reply it appears that you have not deducted tax under section 50(7A) of the Income Tax Ordinance, 1979, by taking cover under the above explanation.
' In this it is brought to your notice that the definition of the company has been given in the section 2(16) of the Income Tax Ordinance, 1979 wherein the following categories have been included:--
(a) company as defined in the Companies Act, 1913
(b) A body corporate formed by or under any law for the time being in force..
' It is quite clear that you are a company under the Income Tax Ordinance and also a Public Limited Company as defined in Part 4 of the First Schedule Para. B(2), which reads as follows:-- "Public company means
(a) a company in which not less than fifty per cent. Of the shares are held by the Government;
(b) a company whose shares are subject of dealing in a registered stock exchange in Pakistan at any time during the income year and remained listed on the stock exchange till the close of that year; or
(c) a trust formed by or under any law for the time being in force; ' It is apparently clear from the above definition that you have the status of public co. And you were required under section 50(7A) of the Income Tax Ordinance, 1979 to deduct tax from the auction sales."
9. In reply to the above letter, the petitioner explained its position again vide letter, dated 9-10-1994, which is reproduced below:-- "(2) It appears from your above letter that the demand has been made on TCP in respect of Soyabean Oil sold by auction. We have examined the question of our liability for deduction of advance tax under the captioned provision of the Income Tax Ordinance at the time of auction of the goods. Section 50(7A) enjoins the duty on a person, who sells by public auction any property belonging to the Government, a local authority, and a public company etc., to collect advance tax computed on the basis of sale price of such property and at the rate specified in the first schedule to the Ordinance. This is to be collected from any person to whom such property is sold. Since TCP is a private limited company registered under the Companies Act, 1913 (Now Companies Ordinance 1984) and is neither a Government Department nor a local authority and nor a public limited company, the provisions of section 50(7A) of the Income Tax Ordinance, 1979 are not applicable in the present case.
(3) Further in your letter No, AC/ZF/CIR-19/94-95-34, dated 1-9-1994 you have questioned the contention of TCP that it is a Private Limited Company on the ground that tax slab of Public Limited Company has been applied in determining our Income Tax liability. There seems to be some misunderstanding as to the applicability of the relevant provision of the Income Tax Ordinance and its Schedule.
(4) Part-I of the First Schedule relates to the Rate of Income Tax Part-II prescribes the rate of the/super tax. Part-III prescribes the rate of surcharge. Part-IV is mainly concerned with the exemption and reliefs. Part-B of Part-IV is the definition of the Schedule and it starts as under:-- B. "As used in this schedule,-- "(5) It is clause 2 of this para. Which defines "Public Company" and stipulates that if the Government has not less than fifty per cent. Of shares in a company it shall be treated "a Public Company". This definition is restricted only for the purposes of First Schedule of the Ordinance as Para-B starts with the above sentence. This definition does not control the words "Public Company" occurring at various places in the Ordinance itself.
(6) This is further confirmed by circular No,6 of 1981, dated March 17, 1981 issued by the Central Board of Revenue, reproduced as under:- "The term "Public Company" also appears in a number of other sections of the Income Tax Ordinance, such as in section 41, section 106, the Second Schedule etc. A question has arisen whether this term as used in the said sections would have the same meaning as is assigned to it in the First Schedule. For the removal of any doubt in this regard, it is clarified that the term "Public Company" as used in the said Ordinance, except for the First Schedule, thereto, would have the same meaning as have been given in the Companies Act, 1913 unless the context or wording of the relevant provision of the said Ordinance requires otherwise."
(7) The above would show that the definition of the words "Public Company" in para-B of the Part- IV of the First Schedule is confined only to the First -Schedule for the purposes of application of the Income Tax rate and the term "Public Company" as used in the sections of the Ordinance, is to have the same meaning as has been given in the Companies Act, 1913. Therefore, as per Memorandum and Articles of. Association of TCP (copy enclosed) and the definition of the words "Public Company" in the Companies Ordinance, 1984 it is quite clear that TCP is a private limited company and is not covered by section 50(7A) of the Income Tax Ordinance, 1979.
(8) It is, therefore, clear that as far as applicability of rate is concerned, TCP is to be treated as public company as per First Schedule. It is also expedient that the definition of "Public Company" as given in the First Schedule is confined only to the First Schedule to the Income Tax Ordinance as does not carry the same meaning when used in the Ordinance itself."
10. The respondent No,3, however, did not accept the above legal position and again issued letter, dated 18-10-1994, calling upon the petitioner to comply with the provisions contained in section 50(7A ) and deduct the tax on auction sale and deposit the same in the bank. The petitioner thereafter filed this petition on the grounds that the respondent failed to appreciate that the provisions of section 50(7A) of the Income Tax Ordinance, 1979 are applicable to a public company while the petitioner is a Private Limited Company, within the meaning of Companies Ordinance, 1984. Reliance has been placed on C.B.R. Circular No,6 of 1981, which reads as follows:-- "Circular No,6 of 1981 (Income Tax)
Sub: Definition of "Public Company" Income Tax Ordinance ' For the purposes of First Schedule to the Income Tax Ordinance, 1979, the expression "Public Company" has been defined as under:-- "Public Company" means a company---
(i) in which not less than fifty per cent. Of the shares held by the Government; or
(ii) whose shares were the subject of dealing in a registered stock exchange in Pakistan at any time during the income year and remained listed on the stock exchange till the close of that year."
(Clause (2) of paragraph B of Part-IV of the First Schedule.)
(2) The term "Public Company" also appears in a number of other sections of the Income Tax Ordinance, such as in section 41, section 106, the Second Schedule etc. A question has arisen whether this term as used in the said sections would have the same meaning as is assigned to it in the First Schedule. For the removal of any doubt in this regard, it is clarified that the term "Public Company" as used in the said Ordinance, except for the First Schedule, thereto, would have the same meaning as have been given in the Companies Act, 1913 unless the context or wording of the relevant provision of the said Ordinance requires otherwise."
11. The petitioner has further contended that the circular issued by the C.B.R. Is binding on the subordinate officials including the respondent No,3, by virtue of the provisions contained in section 8 of the Income Tax Ordinance, 1979. It is reiterated that the definition of `Public Company' as contained in para-B(2) of part-IV of the First Schedule is restricted only for the purpose of First Schedule, to the Income Tax Ordinance and not for any other purpose, as has been specifically clarified by the Central Board of Revenue in its Circular No,6 of 1981. It is further contended that the definition in the Schedule would not control the interpretation of the words/terms/expressions appearing in the sections in the Ordinance and shall be confined for the purpose of First Schedule only, while for the purposes of any other provision in the Ordinance, the definitions as given in section shall be applicable.
12. The petitioner has sought declaration that it is a Private Limited Company for the purpose of the provisions contained in the Income Tax Ordinance, other than the First Schedule and therefore, section 50(7A) is not applicable to it. The petitioner has further sought declaration that the direction by the respondent No,3, to the petitioner to deduct and deposit tax under section 50(7A) are unlawful and without jurisdiction and the same are liable to be set aside.
13. We have heard Mr. Mansoor-ul-Arfin, learned counsel for the petitioner and Mr. Aqeel Ahmed Abbasi, learned counsel for the respondent.
14. Mr. Mansoor-ul-Arfin, has reiterated the contentions narrated above, and has contended that the petitioner being incorporated as the Private Company Limited, is entitled to for the status as such for the purposes of provisions contained in the Income Tax Ordinance 1979, including section 50(7A) and at the same time is entitled to be treated as Public Company for the purpose of First Schedule only. In this regard, he has placed reliance on Section 2(16) of the Income Tax Ordinance, 1979, which contains that:-- ' In this Ordinance, unless the context otherwise requires, "company means--
(a) company as defined in the Companies Act, 1913 (VII of 1913); or
(b) a body corporate formed by or under any law for the time being in force; or
(bb) a trust formed by or under any law for the time being in force; or
(c) a body corporate incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; or
(cc) a modaraba as defined in the Modaraba Companies and Modarabas (Flotation and Control)
Ordinance, 1980 (XXXI of 1980);
(d) the Government of a Province;
(e) a foreign association, whether incorporated or not, which the Central Board of Revenue may, by general or special order, declare to be company for the purposes of this Ordinance for such assessm ent year or years (whether commencing before, on or after the first day of July, 1979) as may be specified in the said order"
15. He has further referred to the definition clause as contained in clause B(2), part-IV of the First Schedule, which reads as follows:-- "(B) As used in this Schedule,-- (2) "Public company means-
(a) a company in which not less than fifty per cent. Of the shares are held by the Government;
(b) a company whose shares are subject of dealing in a registered stock exchange in Pakistan at any time during the income year and remained listed on the stock exchange till the close of that year; or
(c) "a trust formed by or under any law for the time being in force;"
16. In short he submitted that a company can be assigned status of Private Limited Company for the purpose of the provisions contained in the Income Tax Ordinance, 1979 other than First Schedule and the status of Public Company for the purpose of rate of tax to be charged under First.
Schedule to the Income Tax Ordinance, at one and same time.
17. On the other hand, Mr. Aqeel Ahmed Abbasi, learned counsel for the respondents contended that Clause B(2), Part-IV to the First Schedule of the Income Tax Ordinance, 1979, defines Public Company to mean company in which not less than 50% shares are held by the Government. He has submitted that admittedly entire shareholding of the petitioner company is owned by the Federal Government and accordingly respondent No,3 has rightly called upon the petitioner to deduct tax and deposit the same as required under section 50(7A) of the Income Tax Ordinance.
He urged that definition of section in the First Schedule to the Income Tax Ordinance, is applicable for all intents and purpose and in respect of any other provision contained in the main body of the Ordinance.
18. The question for consideration is whether the petitioner can be treated as Private Limited Company for the purpose of the main statute and a Public Company for the purpose of First Schedule to the Income Tax Ordinance, 1979, at one and the same time.
19. It is admitted position that the petitioner was incorporated as a Private Limited Company, under the Companies Act, 1913 (Now the Companies Ordinance, 1984) and was being assessed in such status as is evident from the copy of assessment order for the assessment year 1992-93. Thus, the petitioner is a Private Limited Company in terms of the definition contained in section 2(16) of the Income Tax Ordinance, read with section 2(28) of the Companies Ordinance, 1984. It is also admitted position that the entire shareholding of the petitioner company is owned and controlled by the Federal Government. We therefore, need not to dilate on these points.
20. A perusal of the provisions contained in section 2 of the Income Tax Ordinance, 1979, shows that the definitions given therein are to be applied while dealing with the provisions contained in the Ordinance, unless the context otherwise requires. It means that there is a general definition contained in section 2, which is normally to be applied to the terms/words/expressions used in the Ordinance, except where the context otherwise requires. The definition given in para. B of part-IV of the First Schedule starts with the words "As used in this Schedule", meaning thereby that these definitions fall within the purview of special provisions. The definition contained in this provision is therefore, in the nature of special provision, while the definition contained in section 2 is in the nature of general provision, therefore, in the context of special provisions contained in First Schedule, the special definition shall exclude the general provision and shall be applicable, but it will not override or exclude the general definition in the context of application of general provision contained in the main body of the Ordinance. We find that the expression public company has been used in First Schedule which deals with the rate of Income Tax. Part-V of the First Schedule contains the rate of income tax for companies, while Part-IV of the First Schedule contains certain reliefs and concessions. Thus, in the case of company the rate of tax is to be applied in accordance with the provisions contained in Part-V read with Part-IV of the First Schedule. The expression 'Public Company' has been used in sections 41 and 106 of the Income Tax Ordinance, as well. The C.B.R. In its Circular No,6/81 considered in this context, the question, whether this term as used in section 41 and section 106 shall have the same meaning as is assigned to it in the first schedule.
The C.B.R. Was of the view that the term 'Public Company' used in the Income Tax Ordinance, except for the First Schedule thereto would have the same meaning as has been assigned in the Companies Act, 1913, unless the context or wording of the provision requires otherwise. This circular was issued on 13-3-1981 'while subsection (7A) of section 50 was inserted by Finance Ordinance, 1981. This provision was not on the statute book on 17-3-1981 otherwise in the C.B.R. Circular section 59(7A) would also had find place leaving no ambiguity for the Assessing Officer. We are persuaded to agree with the view of C.B.R. That same term used at different places in the Income Tax Ordinance, shall have different meanings, if such different meanings have been assigned to the term by the Legislature at different places. A reading of the general definition of the term 'Company' contained in section 2 and the special definition contained in Para-B(2) of Part-IV of the First Schedule shows that the earlier is for the entire Ordinance and the other is for the purposes of First Schedule only. The result is that the general definition contained in section 2 shall be applicable to the term company wherever used in the Ordinance, except where the context otherwise requires, while the definition given in the First Schedule shall be confined for the purposes of tax rate only.
21. Assigning of 2 different meanings to same term for different purposes is not peculiar to the term 'Public Company' only. We have found that in Para-B, Part-IV of the First Schedule the term Industrial Undertaking has also been defined for the purpose of First Schedule. This term has been defined in section 106(7) explanation 'B', and section 107(7) also. The definition of the term "Industrial Under taking" contained in para. B(1), Part-IV of the First Schedule starts with the words, "As used in this Schedule", while in subsection (7) of section 106, it starts with the words, "As used in this subsection" and in subsection (7) of section 107, the definition starts with the words, "As used in this section". Thus, the definition of term "Industrial Undertaking" in section 106 is confined to subsection (7) only. The definition of the same term in section 107(7) is for the whole section 107 only, while the definition contained in para-B, part-IV of the First Schedule is meant for the said schedule only.
22. The principle of interpretation of statutes is that a word, defined in a particular statute is to be given the meaning as given in the statute though it may be contrary or not in conformity with the definition of said term in the dictionaries in any other statute, and secondly, the definition given in the general clause in the statute is to be employed wherever the said terms appears, unless the context requires otherwise. If there is any special provision for the purpose of any specific section.
Chapter or Part of a statute then the said special definition is to be confined to the extent of that special section, chapter or part only. If general and special provisions both are to be applied to a person governed under the statute then such person shall be treated in accordance with the term used with reference to the provisions in the statute without encroachment by one provision over the other. The words take their meaning, complexion and colour from the context in which they are used. If a term is used in the assessment order at one place in the context of general provisions then general definition shall be applicable and if at another place in same assessment order the same term is used in different context the definition shall be applicable with reference to the context.
23. Consequent to the above discussion, we are of the considered opinion that the C.B.R. Has rightly opined and Mr. Mansoorul Arfin, has rightly argued that the definition of term "Public Company" contained in para-B(2), Part-IV of the First Schedule to the Income Tax Ordinance, 1979, shall be applicable for the purpose of rate of tax only and for any other purposes/provisions of the Income Tax Ordinance, the term shall be assigned the meaning given in section 2(16) of the Income Tax Ordinance, 1979, read with the definition contained in section 2 of the Companies Ordinance, 1984.
It is held that the petitioner is liable to be treated as Private Limited Company, in the context of all the provisions of Income Tax Ordinance, 1979, except for the purpose of First Schedule, for which purpose it shall be treated as 'Public Company'.
24. For the foregoing reasons, the impugned notice calling upon the petitioner to deduct and deposit the tax under section, 50(7A) is not sustainable in law. It is declared that the petitioner is a Private Limited Company for the provisions contained in Income Tax Ordinance, other than the First Schedule and is a Public Limited Company for the purpose of First Schedule. It is further declared that the provisions contained in section 50(7A) Income Tax Ordinance, 1979, is not applicable to the petition and therefore, a direction given by the respondent No,3 to the petitioner to deduct and deposit tax under section 50(7A) is unlawful which is hereby set aside.
25. The petition is allowed as above.
' After hearing the learned Advocates for the parties, on 10-8-2005, the petition was allowed by a short order. These are the detailed reasons in support thereof. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.