1. SALEEM AKHTAR, J.-The respondent is a private limited Company which manufactures 7-Up and Vegetable Ghee. During assessm ent year 1970-71 (accounting year ending on 30-6-1971) the respondent's income from Beverages Division was computed at Rs. 3,24,924 and was declared exempt under section 15-BB. Exemption from tax for six years was also granted to income from manufacture of Vegetable Ghee. During the accounting year ending on 30-6-1970, the first year of working, the respondent showed a net loss of Rs. 1,35,048 in Ghee Division. The Income-tax Officer did not allow to carry forward the loss to assessment year 1971-72 as according to him tax holiday expired within the assessm ent year 1970-71 as provided by section 15-BB (4-C). The respondent filed an appeal before the Tribunal which was accepted.
2. The Department has filed this reference application raising the following question.
3. (1)"Whether on the facts and in the circumstances of the case, the Tribunal was justified in directing the Income-tax Officer to carry forward the loss to the assessment year 1971-727"
(2) Whether the Tribunal was justified in not taking judicial notice of the provisions of the Finance Ordinance, 1972?"
4. By consent question No. 2 has been refrained as follows :--.
5. "Whether section 15-BB (4-C) as introduced by Finance Ordinance, 1972 was applicable to the case.?"
6. The respondent was admittedly entitled to a tax holiday during the accounting year and the subsequent year. It was, therefore, entitled to carry forward its losses to the assessment year 1971-
72. Mr. Shaikh Harder they learned counsel for the Department contended that in view of section 15- BB (4-C) the respondent was not entitled to carry forward the losses. Sub--section 15-BB was substituted by section 11 of Finance Ordinance, 1972 in the following manner :-
(ii) in section 15-BB,-
(a) .........
(b) for subsection (4-C), the following shall be substituted and shall be deemed to have been so substituted on the first day of July, 1971, namely "(4-C) (a) Nothing contained in this section shall apply to the income, profits and gains of any previous year ending at any time after the thirtieth day of June, 1970; and such income, profits or gains shall be computed and subjected to tax in accordance with the other provisions of this Act;
(c) Nothing contained in this section or any other law for the time being in force shall be deemed to revive, maintain or continue any notification or orders made or any approval or exemption granted by or under the provisions of this section;
(d) Without prejudice to the generality or clauses (a) and (b)-
(i) no loss sustained by an industrial undertaking to which this section applies prior to the previous year for the assessm ent year beginning on the first day of July, 1971, shall be carried forward and set off against the income, profits or gains of the said previous year, and any subsequent previous year, and
(ii) any tax paid by any such undertaking before the first day of July, 1972, in respect of the assessm ent for the year ending on the thirtieth day of June, 1972 shall be adjusted against the tax payable under this subsection."
7. Subsection (4-C) has been given retrospective effect from 1-7-1971. Subsection (4-C) (c) (i) prohibits an assessee to carry forward the loss substained prior to the previous year for the assessm ent year beginning on 1-7-1971. Plainly speaking the respondent is hit by this provision.
8. However, the learned counsel for the respondent has contended that the Finance Ordinance, 1972 could not be given retrospective effect. This question with reference to section 15-BB as amended by Finance Ordinance, 1972 came under consideration in 1982 PTD 130 where it was held that the Ordinance could be effective from 20-12-1971. The relevant observation is reproduced as follows :- "13-A. In our view, it is not necessary for us to hold that the Finance Ordinance XXI of 1972 as a whole is ultra vires and power of the President container in Article 279 of the Interim Constitution 1972 as for the purpose of disposal of the above references/cases, it will suffice to hold that by virtue of the President's Order 5 of 1972 purporting to keep alive or to re-enact the above Ordinance subsection (4-AA) inserted in section 15-BB of the Income-tax Act could not have been given retrospective effect from a date prior to 20-12-1971.
14. In view of the above discussions our answer to the question framed in the references is that the assessm ent orders relating to a period prior to 20th December, 1971 including the dividends received by the assessee from the Companies' covered under section 15-BB as a part of the income were not validated by the Finance Ordinance XXI of 1972 during the pendency of the present references/cases and on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that the dividends received by the assessee on the shares of the Companies enjoying the benefit of section 15-BB of the Income-tax Act are exempt from tax and not liable .To be included in the total income of the share-holders."
9. We are in respectful agreement with the above observation. Consequently 15-BB (4-C) (i) is not applicable to respondent's case and it is entitled to the benefits granted under section 15-BB.
10. We answer Question No. 1 in the affirmative and Question No. -2 in the" negative.