1. MRS. JUSTICE IRSHAD QAISER.-(1) By this single judgment, we propose to dispose of S.A.O. No. 60 of 2001 and S.A.O. No. 61 of 2001 as common questions of law are involved therein.
2. The facts relevant for the disposal of these appeals are that appellant was an assessee of the Income Tax/Wealth Tax Department for the purpose of wealth tax and filed returns of wealth for the assessm ent years 1997-98 and 1998-99. The assessee had a foreign currency, Sterling Pound account, held with a bank in Switzerland which was not declared in the returns of wealth for the above mentioned assessm ent years. On 25-12-1998, the appellant in a press conference declared that he is maintaining a foreign currency account to the tune of 0.5 million sterling pounds in his name since 1996. The Assistant Commissioner Income Tax/Wealth Tax having lawful jurisdiction over the matter, issued a show cause notice under section 16(4) of the Wealth Tax Act. 1963 dated 5-1-1999 to the assessee requiring him to explain why the account was not declared and that why should it not be taxed for assessm ent years 1996-1997, 1997-1998 and 1998-1999. After proper legal proceedings the amount credited in the foreign currency account was taxed in the aforementioned assessm ent year the appellant filed appeals against the orders of the AC IT/WT before Commissioner (Appeals-II) Peshawar who vide Orders Nos. 836, 837, 838 dated 18-11-1999 set aside the assessm ent for 1996-97 and maintained the orders relating to assessment years 1997-98 and 1998-99 of the Assessing Officer with regard to taxation of the foreign currency account held with a bank in Switzerland. Being aggrieved the appellant filed appeals before the Income Tax Appellate Tribunal which vide order dated 31-5-2009 were rejected. Feeling aggrieved with the said. Order the appellant has filed these appeals with a prayer that the fiscal statute is to be interpreted liberally in favour of an assessee in terms of numerous judgments and the dictum laid down by the august Supreme Court of Pakistan and declaration made in wealth tax return specifically by an assessee relevant to cash, the assessment cannot be made by Wealth Tax Officer in terms of the Act.
2. 3.Leamed counsel appearing on behalf of the appellant contended that the appellant was an existing assessee of Income Tax Department for the purposes of wealth tax under GIR No. 1-A and was assessed to tax by the ACIT/WT, Circle-I, Peshawar and that the orders of the ACIT/WT Circle-I, Peshawar, CIT (Appeals- II) Peshawar and Income Tax Appellate Tribunal/ITAT, Peshawar, are illegal against the fact and law applicable to the matter; that the foreign currency account not only in Pakistan but outside as well is not only immune from the probe but also exempt from the levy of income tax and wealth tax; that the foreign currency account maintained by the appellant be held as exempt and the assessm ent made by the ACWT for assessment years 1997-1998 and 1998- 1999 be held illegal, without lawful authority, in excess of jurisdiction and liable to be cancelled.
3. 4.As against that, the learned counsel appearing on behalf of the respondent supported the impugned judgment and contended that the competent authority had rightly made the assessm ent in accordance with law.
5. We have gone through the record carefully and considered the submissions of the learned counsel for the parties.
4. 6.There is no doubt that the provisions of the Protection of Economic Reforms Act, 1992 (XII of 1992) have over riding effect notwithstanding anything contained in the Foreign Exchange Regulation Act, 1947 (VII of 1947), the Customs Act, 1969 (IV of 1969), the Income Tax Ordinance, 1979 (XXXI of 1979) or any other law for the time being in force. Immunities to foreign currency account has been given in section 5 sub-sections (1) and (2) of the Protection of Economic Reforms Act, 1992 (XII of 1992), subsection (2) of section 5 of Act No. XII of 1992 cannot be read independently of subsection
(1) for the reasons that both the subsections are integral parts of section 5 of the Protection of Economic Reforms Act, 1992 and if read independently that would amount to circumventing the law and would be against the legislative intent. Keeping in mind the cardinal principle of interpretation of a statute that a fiscal statute is to be construed liberally in favour of an assessee, in our view immunity against Wealth Tax Act, 1963 to foreign currency accounts held by all citizens of Pakistan, resident in Pakistan or outside Pakistan, and all other persons who held such accounts, was available provided these accounts were held in Pakistan. For ready reference the relevant portion of section 5 of the Protection of Economic Reforms Act, 1992 is reproduced as under:- "(5) Immunities to Foreign Currency Accounts.- (1) All citizens of Pakistan resident in Pakistan or outside Pakistan who hold foreign currency accounts in Pakistan and all other persons who hold such accounts shall continue to enjoy immunity against any inquiry from the Income Tax Department or any other taxation authority as to the source of financing, of the foreign currency accounts.
(2) The balances in the foreign currency accounts and income therefrom shall continue to remain exempted from the levy of wealth tax and income tax and compulsory deduction of Zakat at source."
5. 7.From the above it becomes crystal clear that for a foreign currency account to enjoy immunity against wealth tax, it had to be in Pakistan whereas the account held by the appellant was not in Pakistan therefore, it was not entitled to the aforesaid immunity. By enacting this subsection, the intention of the legislature was to attract more foreign currency account to the country in order to boost up the economic activities and if the exemption from income tax and wealth tax is also allowed to foreign currency accounts out side Pakistan, which play no role in the economic activities in Pakistan, then this will run contra to the purpose and thus should not be the intention of the legislature. This subsection also does not grant or allow any new exemption from income tax and wealth tax. On the income tax side, the exemption already granted is contained in clause 78-B of Part-1 of the Second Schedule of the Income Tax Ordinance. 1979 added vide S.R.O. No. 219(I)/91 dated 16-3-1991 and on the wealth side clause (8) of the 2nd Schedule to the Wealth Tax Act, 1963 introduced to it by S.R.O. 220(I)/91 dated 16-3-1991 exempted only those accounts which fulfilled such conditions as were laid therein. These clauses are also reproduced for ready reference "Clause (78-B) Any income derived from private foreign currency account held with an authorized bank in Pakistan, in accordance with the foreign currency account scheme introduced by the State Bank of Pakistan by a resident citizen in Pakistan." "Clause (8): Assets representing the amounts deposited in a private foreign currency account held with an authorized bank in Pakistan in accordance with the Foreign Currency Accounts Scheme introduced by the State Bank of Pakistan."
6. 8.Perusal of both the clauses clearly shows that balance only in foreign currency account maintained in Pakistan are exempt from the levy of income tax and wealth tax.
7. 9.The account held in Switzerland by the appellant fulfilled none of the conditions mentioned in the above referred clauses. As far as the taking of the Agreement for Avoidance of Double Taxation signed by the Governments of Pakistan and Switzerland in terms of S.R.O. 1377(K)/1960 dated 18-10- 1960, into consideration is concerned, these dilate upon tax on income not on assets (i.e. Wealth), hence are termed irrelevant. The relevant articles of the Agreement between the Government of Pakistan and the Swiss Federal Council are reproduced hereunder:- "ARTICLE 1 (1) 5 The taxes which are the subject of the present Convention (a) In Pakistan; The income tax super tax and the business profits tax (hereinafter referred to as "Pakistan tax") (b)
8. In Switzerland: The federal, cantonal and communal taxes 0n income (total income, earned income, income from capital, industrial and commercial profits etc., hereinafter referred to as "Swiss tax")
9. 10.Section 4 of the Protection of Economic Reforms Act, 1992 (XII of 1992) entitles all citizens of Pakistan resident in Pakistan or outside Pakistan and all other persons to bring hold sell transfer and take out foreign exchange within or out of Pakistan in any form and not be required to make a foreign currency declaration at any stage nor shall any one be questioned in regard to the same.
10. This section relates to free movement of foreign currency and not to the taxation of deposits in a foreign currency account. Moreover an asset/wealth which is not specifically exempted from declaration by any law being enforced and required by the Wealth Tax Act, 1963 to be declared is required to be declared and if found taxable, is to be taxed accordingly. The upshot of the above discussion is that the Income Tax Appellate Tribunal Peshawar, has rightly and lawfully rejected the appeals of the appellant vide W.T.As. Nos. 339-340(PB) of 1999-2000 and thus both the appeals being without any substance are here dismissed with no order as to costs.