ZAFFAR HUSSAIN MIRZA, J. -By this application under section 66 (2) of the Income-tax Act, 1922 (hereinafter referred to as the Act), the applicant Commissioner of Income-tax (Central), Karachi sought a direction to the Income-tax Appellate Tribunal to refer the questions of law stated in the application to this Court for consideration and decision. It has been pointed out to us that since the making of the application the law has undergone a change by amendment in section 66 of the Income-tax Ac: whereby, it is not longer necessary for the High Court to require the appellate Tribunal to state the case and refer it. Now under subsection (2) of the amended section 66 upon an application under subsection (1) if the High Court is not satisfied with the correctness of the decision of the appellate tribunal refusing to state the case on the ground that no question of law arises, the High Court can without requiring the Tribunal to frame the question of law proceed to hear the case. Both counsel agree that in the facts and circumstances of this case questions of law do arise which ought to have been referred to this Court. We have therefore, proceeded to examine the case for decision of the question hereinafter mentioned.
2. The brief facts of the case are that the respondent assessee is a partner in the firm of Messrs A. F.
Ferguson and was a non-resident dur--ing the assessment year 1963-64. Since the assessee did not exercise the option provided for under the provisos to section 17 (1) of the Act, he was taxed at the maximum rate without allowing him the benefit of the Earned Income Relief under section 15-A for the said assessm ent year by the Income-tax Officer by his order dated 30-11-1964. Aggrieved by this order the assessee filed an appeal before the Income-tax Appellate Tribunal on the said issue alongwith other matters which are not relevant for the present purposes. The learned Tribunal by the order dated 10-4-1967 de--cided the other matters raised in the appeal but did not advert to the question of disallowance of the Earned Income Relief to the assessee which remained undecided. Consequently the assessee filed a miscellaneous applica--tion under section 36 of the Act before the Tribunal. The learned Tribunal thereupon by its further order dated 13-6-1967 accepted the clam of the assessee and directed that the assessee shall have the benefit of Earned Income Relief. In doing so the Tribunal followed its previous view expressed in earlier decided cases.
According to this view Earned In--come Relief was available in terms of section 15-A to an "assessee" without making any distinction between a resident or non-resident assessee and there- -fore, a non-resident assessee was as much entitled to it as a resident assessee.
3. In the aforesaid facts the applicant submits in the application that the following two questions of law arise out of the last mentioned order of appellate Tribunal: Question No. 1.-Whether on the facts and circumstances of the case a non-resident assessee liable to tax on his total income at the maximum rate of 30 % is entitled to Earned Income Relief under section 15-A of the Income-tax Act in spite of the clear provision of section 16 (1) of the Act.
Question No. 2.-Whether on the facts and in the circumstances of the case the Tribunal was competent to pass an order under section 35 of the Income-tax Act.
4. Before us, however, Mr. Mansoor Ahmad Khan, learned counsel for the applicant has only pressed question No. 1. Mr. Ali Athar, learned counsel for the assessee as observed above, has raised no objection to the present application for consideration of the question raised. We have, therefore, beard counsel for the parties as to the first question which only requires to be answered.
5. Challenging the view of the Tribunal, learned counsel for the applicant mainly contended that section 17 of the Act which specifically deals with the determination of tax payable by a non- resident by pro--viding that the tax shall be payable on his total income at the maximum rate excluded the relief on earned income envisaged under section 15-A of the Act. It was argued that the provisions contained in section 17 are in the nature of special law, whereas section 15-A contains a general provision and therefore, the former section would prevail as against the latter.
Counsel further supported the submission with the rule that exemptions are to be strictly construed against the assessee and contend--ed that section 17 embodies the subsequent mind of the Legislature as compared to section 15-A and would therefore, impliedly repeal the letter provision.
6. We find no force in these submissions. When analysed the scheme of the Income-tax Act shows that section 3 and section 55 are the main charging section. Section 3 charges the "total income" of an assessee to Income-tax. By section 2 (1) the expression "total in--come" has been defined to mean total amount of income, profits and gains referred to in subsection (1) of section 4 computed in the manner laid down in the Act. Section (1) defines total income in terms of residence. A non- resident's income comprises only the income which acrues or is received or is deemed to accrue or to be received in Pakistan while a resident's total income comprises income accruing in any part of the world. After determining the question of the assessee's residence, therefore, the categories to be included in his total income are required to be ascertained with reference to section 4 U) and in terms of its defini--tion as mentioned above, the total income of the assessor must then be computed in the manner laid down in the Act. The Act makes various provisions particularly in sections 7 to 12 (B) providing for the allowances and deductions for different heads of income. It, therefore, follows that the income of an assessee which can be subjected to tax has to be determined fn accordance with the manner provided for each head of income under the relevant section, the effect of which would be to take into account the permissible allowances and deduction. Thus the computation of the total income of assessee without allowing the allow-- ances and deductions would be totally derogatory, unwarranted and contrary to the statutory provisions.
7. We are unable to read in the language of section 17 of the Act any meaning as is being attributed to it on behalf of the applicant. It would be advantageous to refer to the wording of the relevant part of section 17 which reads as under: "(1) Where a person not being a company, is not resident in Pakis--tan, the tax, including super tax payable by him or in his behalf on his total income shall be an amount equal to --
(a) income-tax which would be payable on his total income at the maximum rate---."
The expression "total income" used in the aforesaid provisions will necessarily carry the meaning assigned to it in the definition clause of the Act, which as discussed above can only be computed in the manner provided by the Act, that is to say, after giving full effect to the pro--visions of the Act which allow deductions and allowances. It cannot therefore be contended .That section 17 overrides section 15-A as in order to determine the total income of the assessee full effect has to be given to section 15-A and in any case viewed in this manner, there is in our opinion, no repugnancy between two sections. Therefore, the question of implied repeal of earlier provision by later provision of the statute does not arise. That in computing , the total income of an assessee sums exempted from taxation under section 15-A cannot be excluded is out of question in view of the clear provisions of section 16 which enjoins the inclusion of such exempted sums while computing the total income of an assessee. If, therefore, argument on behalf of the applicant is accepted even a resident assessee would be deprived of the benefit of section I5-A as in such a case also the tax will have to be levied on the total income including the exemption under section 15-A. This would be so, having regard to the provisions of section 3 whicti subjects the total income of an assessee without distinction of residence, to tax. But the Legislature could not have intended to take away by another hand what it gave by one hand.
8. However, the sheet anchor of the contention on behalf of the applicant seems to be that the quantum of tax is determinable with reference to the total income. This in our view is a wholiy unsustain--able proposition. The Bombay High Court in Commissioner of Income--tax, Central, Bombay v. N. M. Raiji ((1) (1949) 17 1 T R 180) while construing the effect of section 16 made the following observations: "Now, the scheme of the Indian Income-tax Act is that income, profits and gains of an assessee are liable to tax subject to certain exemptions and exceptions Although certain sums may be exempted from taxation, still they may form part of the total income of an . Assessee in order to determine the rate at which income, tax is payable. Therefore it follows that the total income of an assessee is not necessarily wholly subject to tax. Portions of it may be computed for the. Purpose of determining the rate at which tax is payable."
Kanga and Palkhivala on Income-tax (4th Edition) at p. 486 have made the following observations.
"The effect of including exempted income in the assessee's total income is mainly two-fold. First, the tax payable by the assessee is determined with reference to the total income and therefore exempted income which is included in the total income would affect the rate of tax applicable to the chargeable portion of the total income. Secondly, in several cases reliefs are given or calculations made with reference to the total income."
We are in entire agreement with the enunciation of law as stated above. In this view of the matter we further agree that in the matter of exemp--tion available under section 15-A the law makes no distinction between a resident and a non-resident assessee. All that section 17 seems to C provide is that in the case of a non-resident who does not make a declaration under the proviso as he would be liable to income tax at the maximum rate on the whole of his total income, without the benefit of the slab system or initial margin of exemption (see page 588, Kanga and Palkhivala on Income-tax).
9. We have accordingly reached the conclusion that the non-resi--dent assessee in this case is entitled to Earned Income Relief under section 15-A of the Income-tax Act in spite of the provisions of sec--tion lb (1) of the Act. We would, therefore, answer question No. 1 in the affirmative.
I. MAHMUD, J.-I agree.