JUDGMENT: AJMAL MIAN, J.--1. The present Income-tax Reference pertains to the assessment year 1967-68 and raise the following question of law: "Having regard to the facts and circumstances of the case whether the Income-tax Tribunal was justified in holding that the employer's contribution to the recognized provident fund is covered by the term 'perquisites or other benefit' for the purpose of section 10(4)(d) of the Income-Tax Act?"
2. The brief facts leading to the filing of the above reference are that the Income-tax Officer while making assessm ent for the above assessment year included the applicant/assessee's contribution to the recognized provident fund maintained by it for the purpose of section 10(4)(d) of the Income-tax Act. The applicant/assessee being aggrieved by the order of the Income tax Officer, dated 21-6-1972 filed Income-tax Appeal No. 170 (K.B.) 1972-73, but the same was dismissed by the Income-tax Appellate Tribunal by its order, dated 16-1-1974. The applicant/assessee has, therefore, filed the present reference on 8-4-1974. It seems that by the Finance Act, 1975 explanation No. 3 to clause (d) of sub section (4) of section 10 of the Act was added to, which reads as follows:- "The expression "perquisites or other benefits" as used in this clause, does not include employer's contribution to a recognized provident fund or to an approved superannuation fund."
3. (a) In support of the above reference Mr. A. A. Sharif, learned counsel for the applicant/assessee has urged that addition to explanation 3 to clause (d) of sub section (4) of section 10 of the Income-tax Act (hereinafter referred to as the Act) does not constitute any addition or subtraction to the section 10 of the Act, but it is merely explanatory.
(b) On the other hand, Mr. Nasrullah Awan, has contended that explanation 3 was not on the statute book at the time of passing of the assessment order by the Income-tax Officer on 21-6-1972 or the appellate order by the Income-tax Appellate Tribunal dated 16-1-1974, and, therefore, the same could not have been taken into consideration.
4. Mr. A. A. Sharif, learned counsel for the applicant/assessee has referred to the following cases in support of his above contention.
(i) Balaji Singh v. Chakka Gangamma and another AIR 1927 Mad. 85 in which a learned Single Judge of the Madras High Court while construing certain provisions of the Transfer of Property (Amendment) Act pointed the distinction between a declaratory provision and a substantial provision in an Act. It was held that the amendment referred to in the above Transfer of Property (Amendment) Act was merely declaratory or explanatory.
(ii) Colony Sarhad Textile Mills Limited vs. Collector, Central Excise and Land Customs PLD 1969 Lah.
228 in which a Division Bench of the erstwhile High Court of West Pakistan, Lahore, while dealing with the above question has observed as follows: As regards the first contention that a jurisdiction for double levy of Excise Duty on the same Fabrics at two stages is being erroneously sought to be spelt out from Explanation 10, it may be straightaway observed that the contention is wholly mis-conceived. In the first instance we are not impressed by the argument that the difference in the phraseology employed in the subsequent Explanation 11 added by the Finance Act of 1967 to Item 15-A in contradistinction to that employed in Explanation 10 could be so construed as giving rise for the first time to the levy of double-duty in the former case. As a matter of fact, the object of adding an explanation to a statutory provision is only- to facilitate its proper interpretation and to remove any possible confusion or misunderstanding. It does not, per se create or extinguish a liability which is to be spelt out only from the main provision sought to be interpreted with the assistance of the Explanation. In other words, an Explanation is to be relied upon only as a useful guide or an aid to the construction of the main provision which in this case is the charging provision contained in section 3 of the Act read with item 15-A of the Schedule I. It is well- settled that an Explanation does not enlarge the scope of the original section that it is supposed to explain. It is, therefore, wrong to argue that Explanation 10 did not create liability whereas Explanation 11 had really done so. From the main provision contained in Item 15-A of the Third Schedule of the Finance Act of 1966, two broad categories of fabrics unprocessed and processed had been separately held leviable to Excise rates which have been specifically mentioned against each sub-category. It does not suggest that the two categories are leviable to Excise Duty in the alternative."
5. In our view, this explanation added to clause (d) of sub-section (4) of section 4 of the Act by Finance Act, 1975 (which came into force on 1-7-1975) was merely explanatory. It neither added to nor subtracted to any liability in the then existing provisions of section 10 of the Act. It was enacted with the object to clarify the existing provision of law for guidance. In other words, clause (d) of sub-section (4) of section 10 of the Act should have been construed even prior to the addition of the above provision, as to exclude an employer's contribution to a recognized provident fund as perquisites and other benefits for the purpose of section 10(4)(d) of the Act. The learned Counsel for the applicant/ assessee has also drawn our attention to two subsequent orders of the Income- tax Appellate Tribunal, in which the above explanation has been taken into consideration though the assessm ent years pertained to prior to 1975.
6. For the aforesaid reasons, our answer to the above question is in the negative.
There will be no order as to costs.