YAHYA AFRIDI, J.---By this single judgment, we shall decide the two appeals (SAO No,17/2000 and SAO No,18/2000) both preferred by M/s. AGE Industries (Pvt.) Limited under section 136 of the Income Tax Ordinance 1979 assailing the consolidated judgment of Income Tax Appellate tribunal dated 30-11-1999, as common questions of law and facts are involved in both the appeals.
2. The appellant has raised the following questions of law for decision of this court. By this single judgment, we shall decide the two appeals (S.A.O. No,17/2000 and S.A.O. No,18/2000), both preferred by M/s. A.G.E. Industries (Pvt.) Limited assailing the consolidated judgment of Income Tax Appellate Tribunal dated 30-11-1999, as common questions of law and facts are involved in both the appeals.
3. The appellant has through the instant appeals filed under section 136 of the Income Tax Ordinance, 1979 ("Ordinance") sought the opinion of this court on the following questions of law:-
(1) Whether under the circumstances of the case where the appellant, a corporate body who maintained proper audited account under the Companies Ordinance, 1984 and who derive income both from manufacture and sales of wires and cables in the open market, through various other modes and how had been filing returns under section 55 ibid for composite income arising out of multiple income generation activities was liable to file declaration under clause-9 part-VI of 'the Second Schedule to the Ordinance for exclusion from the presumptive tax regime under section 80-C which exclusively death with income of the person who solely derive income either from Imports or contract supplies.
(II) Whether under the circumstances the appellant who has filed a proper return under section 55 ibid and finalized under section 62 and have a multiple source of income can be assessed under section 80. Tax on income of certain contractors and importers the presumptive tax regime.
(III) That without prejudice to the above, the appellantsdeclaration dated 27-3-1993 of exclusion from section 80-C is not a valid declaration as required by Clause (9) and its rejection on mere grounds that it has not been filed with the returns for the assessment years 1993-94 is not frivolous and mala fide and whether mere on the basis of the procedural lapse, exposing the appellant to undue liability is justified.
(IV) Whether reopening of the appellant case under section 66A is not mala fide to frustrate the legitimate Refund Claim of the appellant.
(V) Whether under the circumstances and provisos to Clauses (9) where admittedly the appellant filed a final and irrevocable declaration dated 27-3-1993 under Clause (9) Part-IV of second Schedule for the assessm ent year 1993-94 for exclusion from the presumptive tax regime is effective for the subsequent years, hence, the demand that option of exclusion should be filed every year is not misconceived one.
(VI) Whether the reopening of the assessment under section 66 is not tantamount to bifurcate of the income of appellant made its income subject to criteria i,e, under section 62 and section 80-C and allowable by the provisions of the Income Tax Ordinance 1979.
(VII) That without prejudice to the all other questions whether the amendment brought in Clause-9 part IV to the Second Schedule by way of replacing the phrase "who opts out of" by the phrase "unless he opts for" is not correcting the mischief in clearing the ambiguity existing to save the assessm ent who maintains proper account.
(VIII) Whether under the circumstances of the case, the order under section 66-A is not illegal, where the original assessm ent completed under section 62 with the approval and consultation of the Inspecting Assistant Commissioner Respondent-I.
(IX) Whether the respondents have not acted contrary to the spirit and soul of Income Tax Ordinance 1979 in bringing the Company/assessee who is maintaining proper account and dragging them to the non-account record presumptive tax regime under 80-C which was only introduced to bring the income of those assesses who are not maintaining a proper account and books, hence the implementation of 80C is not misconceived one."
4. The brief and essential facts, which from the background and led to the present appeals, are that the appellant company is a body corporate registered under the Companies Laws of Pakistan and is engaged in the manufacture and sale of wires and cables. The company derives its income from sale of wires and cables for which it has set up its manufacturing unit at Peshawar. The appellant company has since its incorporation been filing its income tax returns within the normal procedure based on audited account as provided under section 55 of the Ordinance. The said returns filed were assessed under section 62 of the Ordinance and on scrutiny and finalization, the assessm ent have been duly complied with by the appellant company.
4-A. The Inspecting Additional Commissioner Income Tax/Wealth Tax, Peshawar exercising his authority under section 66-A of the Ordinance, served a notice dated 5-10-1998 upon the appellant company for revising the assessm ent orders for the year 1994-95 and 1995-96. The reason stated for the said notice was that during the relevant period, the appellant had made supplies to various Government Departments for which taxes had been deducted under section 50(4) of the Ordinance. Thus it came within the presumptive tax regime under section 80-C of the Ordinance.
The option to remain outside the scope of the presumptive tax regime was the requirement to submit a written option with the returns for the said year as provided under Clause (9) of Part-IV of the Second Schedule of the Ordinance ("Clause 9"), which appellant company had failed to submit as per requirement of law.
The record reveals that the assessm ent orders for the years 1993-94 to 1996-97 were scrutinized.
The assessm ent orders for the years prior to 1994-95 were kept intact due to the period of limitation and for the years subsequent to 1995-96 were not disturbed or interfered with because of the amendment in Clause (9), Part-IV in Schedule 2 of the Ordinance entertained by the Finance Act, 1996.
The appellant company in response to the said notice, resisted the claim of the Revenue and insisted that they had never opted for the said presumptive regime and in fact had rendered a written option to the Revenue to remain out of the presumptive tax regime.
The Inspecting Additional Commissioner Income Tax did not agree with the stance taken by the present appellant company and ordered the revision of the assessment orders of the appellant company for the years 1994-95 and 1995-96.
Accordingly, after the fresh assessm ent, the appellant company was assessed under section 80-C of the Ordinance. The particulars of the income tax assessed under the two regimes are as follows: Assessment years Under Section 62 Under Section 80-C 1994-95 Rs. 1.773 million Rs. 1.931 million 1995-96 Rs. 3.180 million Rs. 3.668 million The present appellant being aggrieved of the revised assessment carried out in pursuance of notices under section 66- A of the Ordinance, impugned the same. The said appeal finally came up to the Income Tax Appellate Tribunal and was dismissed vide impugned order dated 30-11-1999.
Hence, the present appeals.
5. The learned counsel representing the Revenue raised a preliminary objection regarding the questions of law raised by the present appellant in the appeals. He contended that as the said questions of law have not been taken by the appellant as grounds of appeal before the Income Tax Appellate tribunal, this Court could not entertain the same in its advisory jurisdiction under section 136 of Ordinance. The learned counsel relied upon Commissioner of Income Tax v. Maqbool Ahmad Gill (2007 PTD 1757), Mountain States Mineral Enterprises v. Commissioner of Income Tax (2008 PTD 1087), Hirgina and Co. v. Commissioner Sales Tax (1970 SCM R 128), The Lunglatea Co. v.
Commissioner of Income Tax (1970 SCM R 872).
6. The learned counsel for the appellant contended that the jurisdiction of this court under section 136 of the Ordinance was extensive and it could decide any question of law, which arose from the order of the Income Tax Appellate Tribunal, even if the same had not been dealt with by the Tribunal. Reliance was placed on Amin Spinning Mills v. Deputy Collector Central Excise (2004 PTD 2479), Commissioner of Income Tax v. National Refinery Ltd. (2003 PTD 2020).
7. Before we move on the merits of the case, it would be appropriate to resolve this preliminary issue. The august Supreme Court of Pakistan in Ahmad Karachi Halwa Marchant v. The Commissioner of Income Tax (1982 SCM R 489) while discussing the expression "rising out of such order" as provided in section 66 (1), of the Income Tax Act, 1992 stated that the said expression Li .Does not include within its concept a question of law which was not raised, argued or decided by the Tribunal. This court in PLD 1959 SC (PAK) 202 has not given any wider import to the expression and has confined it to a question of law, which is dealt with by the Tribunal. This in our view would not include a question of law which was neither raised nor dealt with by the Tribunal."
This view has been reaffirmed, by the august Supreme Court in M/s. Madar-I-Millat Pakistan Ltd. v.
Commissioner of Income Tax (2006 SCM R 526), Mst. Nisar Bibi v. Muhammad Shafique Ahmad (2007 SCM R 977).
In view of the above pronouncement of the Supreme Court, we would agree with the submission of the learned counsel representing the Revenue, and hold that we shall under our advisory jurisdiction under section 136 of Ordinance only consider the questions of law taken by the appellant as grounds of appeal, argued or discussed by the Income Tax Appellate Tribunal.
8. It would be pertinent to note that the grounds of appeal, which were raised by the present appellant before the Income Tax Appellate Tribunal were the following:-
(1) That the order cancelled and re-assessed by the L/IAC is unlawful, unjustified and uncalled for.
(2) As per Clause-9 of Part-IV of Second Schedule irrevocable option was to be givenif the assessee intends to exclude the supplies out of tax regime of section 80-C.
(3) Option for exclusion of tax regime under section 80-C as per Clause-9 Part-IV of Second Schedule was given vide letter dated 27-2-1993 and which is available on record, Even if such option was not exercised. The tax deducted at source could not be treated as final tax liability as per Clasue-9 of Part-IV of Second Schedule.
(4) That order under section 66-A is illegal because original assessment was completed under section 62 with the approval/ consultation of the IAC.
9. Now keeping the aforementioned principle of law enunciated by the august Supreme Court and the grounds taken by the appellants in their appeals before the Income Tax Appellate Tribunal, our opinion on questions of law is as under: Questions of law Nos. I, II, III, IV, V, VI, IX This court considers that the aforementioned questions of law were not raised by the appellant before the Income Tax Appellate Tribunal and hence we are constrained not to render our opinion on the said questions of law.
10. Whereas, regarding questions of law raised, argued and discussed by the Income Tax Appellate Tribunal our decision on the same is as follows:- Question of law No,VII That without prejudice to the all other questions whether the amendment brought in Clause-9 Part-IV to the Second Schedule by way of replacing the phrase "who opts out of" by the phrase "unless he opts for" is not correcting the mischief in clearing the ambiguity existing to save the assessm ent who maintains proper account.
Section 80 (c) of the Ordinance provides:--- "80-C. Tax on income of certain contractors and importers:-
(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where any amount referred to in subsection (2) is received by or accrues or arises or is deemed to accrue or arise to any person, the hole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rate specified in the First Schedule.
(2) The amount referred to in subsection (1) shall be the following namely: -
(a) Where the person is a resident,-
(i) the amount representing payment on which tax is deductible under subsection (4) of section 50, other than payments on account of services rendered.
(ii) the amount as computed for the purpose of collection of tax under subsection (5) of section 50 in respect of goods imported, not being goods imported by an Industrial undertaking as raw material for its own consumption; and
(iii) the amount on which tax is deductible under subsection (7-A) of section 50 in respect of lease of right to collect octroi duties, tools, fees or other levies, by whatever named called; and;
(b) Where the person is a non-resident, the amount representing payments on account of execution of a contract for construction, assembly or like project in Pakistan on which tax is deductible under subsection (4) of section 50.
(3) Nothing contained in- this Ordinance shall be construed as .To authorize any allowance or deduction against the income as determined under subsection (1) or any refund of a deducted or collected under section 50 set off of any loss under any provision of this Ordinance.
(4) Where the assessee has, no income other than the income referred to in subsection (1) in respect of which tax has been deducted or collected the tax deducted or collected under section 50 shall be deemed to be the final discharge of his tax liability under this Ordinance and he shall not be required to file the return of total income under section 55; Clause-9 Part-IV of 2nd Schedule of the Ordinance as it originally stood prior to the amendment brought in the said clause through the Finance Act of 1996 read as follows:- "Clause (9), Part-IV of the Second Schedule The provisions of section 80-C insofar as they relate to payment on account of the supply of goods on which tax is deductible under subsection (4) of section 50 shall not apply in respect of any person, being a manufacturer of such goods, who opts out of the presumptive tax regime: Provided that a declaration of final and irrevocable option is furnished in writing alongwith the return of total income under section 55: Provided further that nothing contained in this clause shall apply to any manufacturer of goods for which special rate of deduction of tax are specified under clause (c) of sub section (4) of section 50."
The Finance Act of 1995 amended the said clause by replacing the words "opts out of" with the words "opts for". Thus with the said amendment the said clause read as: "Clause (9), Part-IV of the Second Schedule The provisions of section 80-C insofar as they relate to payment on account of the supply of goods on which tax is deductible under subsection (4) of section 50 shall not apply in respect of any person, being a manufacturer of such goods, who opts for the presumptive tax regime: Provided that a declaration of final and irrevocable option is furnished in writing alongwith the return of total income under section 55: Provided further that nothing contained in this clause shall apply to any manufacturer of goods for which special rate of deduction of tax are specified under clause (c) of subsection (4) of section 50."
The learned counsel for the appellant-company contended that the amendment introduced in Clause (9), through Finance Act 1996 was declaratory or remedial in nature and hence would have retrospective C effect. He added that the presumptive tax regime would only apply to those persons who have opted for being assessed under the said regime as provided under section 80 of the Ordinance.
The assertion of the learned counsel for the appellant company that the amendment is declaratory or remedial in nature requires some elaboration.
A declaratory statute is described in Cranes on Statute Law is an "Act to remove doubts existing as to the meaning or effect of statute and it is also stated that the usual reason for passing a declaratory Act is set aside Parliament deems to have been a judicial error."
We are afraid that we do not agree with the submission of the learned counsel for the appellant that the amendment is a declaratory statute. There is no evidence or any supporting material to suggest that there was a corrective measure to be taken, which resulted in this particular amendment being introduced through Finance Act 1996.
Now to the contention of the learned counsel that the said amendment was remedial in nature as the intent of the legislation was to remedy the confusion caused because of the words "opt out of" used in the original Clause (9). By replacing the said words with "opt for" by the said amendment, the then prevailing confusion had been remedied.
Remedial legislation is described in N.S. Bindras Interpretation of Statutes (9th Edition page 1382) states that the main purpose of remedial legislation; "...Is to keep pace with views of the society. They served to keep our society or system of jurisprudence up to date and in harmony with new ideas or conceptions of what constitute and just proper human conduct. There legitimate purpose is to advance human rights and relationship.
Unless they do this they are not entitled to be known as remedial legislation nor to be liberally construed."
"Statutory Construction" by Sutherland, observes that the term "remedial" has a limited meaning in two respects. They are usually used in connection with legislation, which is not penal or criminal in nature, in that such laws do not impose criminal or other harsh penalties and secondly the said term is often implied to describe legislation, which is procedural in nature in that it does not effect substantive rights.
Corpus Juris Secundum, Vol.82 (paragraph 388), which, inter alia, is to the following effect: "In construing remedial statutes, regard should be had to the forms law, the defects or evils to be cured or abolished, the mischief to be remedied, and the remedy provided, and they should be interpreted liberally to embrace all cases within their scope so as to accomplish the object of the legislature and to give effect to the purpose of the statute by suppressing the mischief and advancing the remedy provided it can be done by reasonable construction in furtherance of the object."
In view of the true import of the benevolent and remedial legislation as discussed hereinabove, we are afraid we do not agree with the submissions of the learned counsel for the appellant company that the amendment introduced in Clause (9) is strictly remedial in nature.
We feel that the amendment in Clause (9) is simply a change in the mode of assessment, thus procedural in nature. Under the original provision of Clause (9), the assessee was required to file written declaration to opt out or remain out side the scope of presumptive tax regime provided under section 80-C of the Ordinance. Whereas, after the amendment, the assessee would only be assessed under the presumptive tax regime of section 80-C of the Ordinance when it gave a written option to that effect. What the amendment has actually done is to change the mode, which is procedural. No substantive right of the appellant has been affected, no new tax has been imposed and only the mode of assessment has been altered.
The procedural law, if altered and that too for the benefit of the assessee then in such a case, the amendment would be retrospective and applicable to cases, which are pending before a forum prescribed by law. We are fortified in our views on this issue by the judgments of the superior Courts in particular Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (1992 SCM R 1652) and Commissioner of Income Tax v. Shah Nawaz Ltd. (1993 SCM R 73), M/s. Dreamland Cinema v.
Commissioner of Income Tax Lahore (PLD 77 Lah. 292), Commissioner of Income Tax v. J.D. Sugar Mills (2009 PTD 481).
Question of law No,VIII VIII. Whether under the circumstances of the case, the order under section 66-A is not illegal, where the original assessm ent completed under section 62 with the approval and consultation of the Inspecting Assistant Commissioner Respondent-I.
Section 66-A is a comprehensive power, vested in an Inspecting Additional Commissioner to reconsider any decision passed by Deputy Commissioner, which is erroneous and prejudicial to the interest of revenue. This discretion has to be exercised reasonably and on valid grounds. The decision of the said authority can only be made after providing an opportunity to the assessee in whose favour an order has been passed and is the subject of scrutiny. We, therefore, feel that there is no illegality in exercising powers under section 66-A, even if the assessment orders were under section 62 of the Ordinance. The only rider to the said opinion is that the conditions precedent provided in section 66-A of the Ordinance have to be complied with.
11. In view of the above reasons, the decisions of this court on the questions of law are that:- Question of law No,VII.
The amendment introduced through Finance Act, 1996 in Clause (9) Part-IV of the Second Schedule of the Ordinance would have retrospective effect upon the cases of the present appellants. The assessm ent orders passed under the normal mode of assessment under section 62 of the Ordinance were valid and the presumptive tax regime provided under section 80-C of the Ordinance would not apply to the assessments of the present appellant-company.
Question of law No,VIII The Inspecting Additional Commissioner was competent to exercise his authority under section 66-A of the Ordinance to serve notices upon the appellant company even when the assessment orders were passed under section 62 of the Ordinance.
The Registrar of this Court, therefore, shall send a copy of this judgment to the Income Tax Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to this judgment.
Accordingly, the impugned orders are set aside and the appeals are disposed of in the above terms.