JUDGMENT: AJMAL MIAN, J.-1. By this common judgment, we intend to dispose of the following 51 Income-tax References: Name of the parties Assessm ent _________________________________ year 1. 187 of 197A Commissioner of Income-tax (Investigation), Lahore ' VS. Mr. Soli M. Cawasjee 196A-65
2. 189 of 197A it n Mr. Ardeshir R. F. Cawasjee 196A-65
3. 190 of 197A 11 m Mr. Cyrus R. Cawasjee 1961-62 A. 193 of 197A 11 it Mr. Rustam F. Cawasjee 1965-66 5. 19A of 197A II n Mr. Rustam F. Cawasjee 1967-68
6. 195 of 197A 11 ii Mr. Cyrus R. Cawasjee 1966-67
7. 196 of 197A 11 it Mr. Cyrus R. Cawasjee 1970-71
8. 197 of 197A It ii Mr. Jamshed M. Cawasjee 196A-65
9. 198 of 197A tl ii Mr. Jamshed M. Cawasjee 1962-65
10. 199 of 197A II it Mr. Ardeshir R. F. Cawasjee 1968-69
11. 200 of 197A II ii Mr. Cawasjee R. F. Cawasjee 1968-69
12. 201 of 197A II ii Mr. Cyrus R. Cawasjee 1963-6A
13. 205 of 197A II It Mr. Cawasjee R. F. Cawasjee 1969-70 1A. 206 of 197A II It Mr. Cawasjee R. F. Cawasjee 1970-71
15. 208 of 197A It it Mr. Rustam S. Cawasjee 1961-62 S. No. .I.T.R. No. Name of the parties Assessment year 16. 209 of 1974 Commissioner of Income-tax (investigation), Lahore VS. Mr. Soli M. Cawasjee 1963-64
17. 220 of 1974 II II Mr. Rustam F. Cawasjee 1963-64
18. 221 of 1974 II II Mr. Ardeshir R. F. Cawasjee 1962-63
19. 222 of 1974 II II Mr. Cawasjee R. F. Cawasjee 1961-62
20. 223 of 1974 II II Mr. Cyrus R. Cawasjee 1969-70
21. 224 of 1974 II II Mr. Ardeshir R. F. Cawasjee 1961-62
22. 225 of 1974 II It Mr. Ardeshir R. F. Cawasjee 1963-64
23. 226 of 1974 II II Mr. Cyrus R. Cawasjee 1968-69
24. 227 of 1974 II II Mr. Jamshed M. Cawasjee 1966-67
23. 228 of 1974 II II Mr. Ardeshir R. F. Cawasjee 1966-67
26. 229 of 1974 II II Mr. Jamshed M. Cawasjee 1967-68
27. 230 of 1974 tl II Mr. Cyrus R. Cawasjee 1964-65
28. 231 of 1974 It If Mr. Jamshed M. Cawasjee 1963-64
29. 232 of 1974 II 11 Mr. Jamshed M. Cawasjee 1961-62
30. 233 of 1974 II II Mr. Rustam F. Cawasjee 1968-69
31. 234 of 1974 II II Mr. Cawasjee R. F. Cawasjee 1962-63
32. 235 of 1974 II It Mr. Soli M. Cawasjee 1962-63
33. 236 of 1974 II II Mr. Cawasjee F. R. Cawasjee 1964-65
34. 237 of 1974 II 11 Mr. Rustam F. Cawasjee 1962-63
35. 238 of 1974 II II Mr. Cyrus R. Cawasjee 1965-66
36. 239 of 1974 II II Mr. Cawasjee R. F. Cawasjee 1967-68
37. 240 of 1974- II II Mr. Cawasjee R. F. Cawasjee 1966-68
38. 241 of 1974 II It Mr. Soli M. Cawasjee 1961-62
39. 242 of 1974 It II Mr. Soli M. Cawasjee 1967-68
40. 243 of 1974 II II Mr. Ardeshir R. F. Cawasjee 1965-66
41. 244 of 1974 II II Mr. Jamshed M. Cawasjee 1968-69
42. 245 of 1974 II II Mr. Rustam S. Cawasjee 1966-67
43. 246 of 1974 II tl Mr. Jamshed M. Cawasjee 1965-66
44. 247 of 1974 II II Mr. Soli M. Cawasjee 1965-66
45. 248 of 1974 II It Mr. Cyrus M. Cawasjee 1962-63
46. 249 of 1974 n II Mr. Cawasjee R. F. Cawasjee 1963-64
47. 250 of 1974 it 11 Mr. Rustam F. Cawasjee 1965-66
48. 251 of 1974 it II Mr. Rustam F. Cawasjee 1964-65
49. 252 of 1974 it If Mr. Soli M. Cawasjee 1966-67
50. 253 of 1974 ii tl Mr. Soli M. Cawasjee 1968-69
51. 254 of 1974 it II Mr. Cyrus R. Cawasjee 1967-68 These are direct references under section 66 (1) of the Income Tax Act, 1922 (hereinafter referred to as the Act) and raise following question of law for the decision of this Court.
"Whether under the facts and circumstances of the case, the learned Tribunal was justified in holding that while working out proportionate share of the super-tax attributable to each partner the total super-tax should be allocated to the partners of the firm in the profit sharing capacity and not as laid down in section 16( 1 )(b) of the Income Tax Act, and whether in the event of partners having lower income or losses, the super-tax paid by the registered firm, can be reduced or refunded to the partners?"
2. The brief facts leading to the filing of the above references are that the respondents assessees are partners in various firms. Some of the firms had paid super-tax which was apportioned between the partners as per their respective shares after the payment of the same by the firms concerned. There was controversy as to the manner of the apportionment of the super-tax among the partners and on the question, whether the partners who had suffered losses and who were not liable to pay any tax could have claimed the refund of their respective share of super-tax paid by the firms and debited to them. Eventually the above questions were agitated before the learned Income-tax Tribunal and a number of appeals were filed by the department against the orders of Appellate Assistant Commissioner, who had directed that in the first place the proportionate share of super-tax should be allocated to the partners on the basis of total super-tax payable by the firm in their profit sharing capacity, and secondly in the event of there being losses in the hands of the partners and no tax having been found payable by them their respective shares of super-tax paid by the firm should be refunded. A few appeals were also filed by the respondents assessees, who were not given the above benefit. The learned Income-tax Tribunal by its orders of even date namely, 3rd January, 1974 has held that the above directions of the Appellate Assistant Commissioner were in consonance with law, consequently, it dismissed the appeals filed by the department but allowed the appeals filed by the respondents assessees. The department has, therefore, filed the present direct references and has solicited the opinion of this Court on the above quoted question.
3. In support of the above references Mr. Waheed Farooqi has contended that an assessee cannot claim refund of the super-tax on the ground that overall he has suffered loss in his business and that he was not liable to pay any income-tax because of those losses.
On the other hand it was contended by Mr. Ali Athar, learned counsel for the respondents assessees that by virtue of proviso (ii) of Part I of the Third Schedule to the Act [hereinafter referred to as proviso (ii)] read with section 48 of the Act the respondents assessees are entitled to claim refund of the super-tax paid by the firms concerned on their behalf if they were not liable to pay any income-tax on account of the overall losses sustained by them in the various business concerns.
4. In order to appreciate the respective contention of the learned counsel for the parties, it may be pertinent to refer to section 16(1)(b), section 48(1) and relevant portion of section 35 of the Act and proviso (ii), which read as follows:-- Section I6. Exemptions and exclusions in determining the total income.-
(1) (a) .................................
(b) When the assessee is a partner of a firm, then, whether the firm has made a profit or a Joss, his share (whether a net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable to him by the firm in respect of the previous year increased or decreased respectively by his share in the balance of the profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration payable to any partner in respect of the previous year and also, in the case of a registered firm or a firm treated as a registered firm under clause (b) of sub-section (3) of section 23, of the super-tax and surcharge payable by it: Provided that if his share so computed is a loss, such loss may be set of or carried forward and set of in accordance with the provisions of section 24.
Section 48. Refunds.-(1) If any individual, Hindu undivided family, company, local authority, firm or other association of persons, or any partner of a firm or Member of an association individually satisfied the Income Tax Officer or other authority appointed by the Central Government in this behalf that the amount of tax paid by him or on his behalf or treated as paid on his behalf for any year exceeds the amount with which he is properly chargeable under this Act for that year, he shall be entitled to a refund of any such excess.
Section 55. Charge of supertax.-(1) In addition to the income-tax charged for any year, there shall be charged, levied and paid for that year in respect of the total income of the previous year as the case may be, of any individual, Hindu undivided family, company, local authority, unregistered firm, registered firm or. Other association of persons or the partners of the firm or members of the association individually, an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that year by the Central Act: Provided that where under the provisions of clause (b) of sub-section (5) of section 23 an unregistered firm has been assessed in the manner applicable to a registered firm super-tax shall be payable by the firm and each partner of the firm individually on his share in the income, profits and gains of the firm.
Proviso (ii) of Part I of the Third Schedule to the Income-tax Act.-The income-tax payable shall in no case exceed (a) the amount by which the total income exceeds Rs. 6,000 or (b) the amount representing seventy-five per cent of the total income, whichever amount is the less, and, where such income includes any income from a share of the income, profits and gains of a firm to which paragraph C of Part II applies, such portion of the super-tax payable under the said paragraph bears to the total amount of such super-tax the same proportion as his share of income, profits and gains of the firm bears to the total income of the firm shall be added to the income-tax payable by such partner under this paragraph and, if the sum so arrived at exceeds seventy-five per cent of the total income of such partner (including his share of income, profits and gains of the firm) the amount of income-tax payable by him under this paragraph shall be reduced by the amount of such excess."
5. It may be noticed that sub-clause (b) of section 16(1) of the Act provides the manner of computing the income of a partner in a firm. It also provides that if the share of a partner computed in the manner provided in the above clause shows a loss such loss may be set of or carried forward in accordance with the provisions of section 24 of the Act. It may further be noticed that section 48 provides that if any individual, Hindu undivided family, company, local authority, firm or other association of persons or any partner of a firm, or member of an association individually satisfied the Income-tax Officer or other authority appointed by the Cental Government in this behalf that the amount of tax paid by him or on his behalf or treated as paid on his behalf for any year exceeds the amount with which he was chargeable under this Act for that year, he shall be entitled to a refund of any excess amount. It may also be pointed out that above- quoted section 55 is the charging section for the levy of recovery of super-tax inter alia from the firm. It may further be pointed out that proviso (ii) provides that the income-tax payable shall in no case exceed (a) the amount by which the total income exceeds Rs. 6,000 or (b) the amount representing seventy-five per cent of the total income whichever amount is the less. It further provides that where such income includes any income from share of the income profits and gains of a firm to which paragraph C of Part II applies such portion of the super-tax payable under the said paragraph bears to the total amount of such super-tax the same proportion as his share of income profits and gains of the firm bears to the total income of the firm shall be added to the income-tax payable by such partner under the above paragraph and if the sum so arrived at exceeds seventy-five per cent of the total income of such partner (including his share of income, profits and gains of the firm) the amount of income-tax payable by him under the above paragraph shall be reduced by the amount of such excess.
6. It has been contended by Mr. Waheed Farooqi that since section 16 (1)(b) of the Act does not provide that a partner can claim refund of the super-tax while computing his income under section 16(1)(b) of the Act, the respondents assessees have no legal right to claim the refund of the super-tax paid by the respective firms. It has been further contended by him that proviso (ii) can be pressed into service in case where the total liability of a partner to pay income-tax including super-tax exceeds seventy-five per cent of his income and not for the purpose of claiming refund in case of tosses.
On the other hand it was contended by Mr. Ali Athar that section 16(1)(b) of the Act has no relevancy to the point in issue as it pertains to the computation of income and. That the relevant provision is proviso (ii). It ha? Been further contended by him that in case where on account of various losses in the various firms a partner is not liable to pay any income tax, he is entitled to claim the refund of the super-tax paid on his behalf by the firm which had earned profits.
7. It is true that section 16(1)(b) provides the manner for computing the income of a partner for the purpose of payment of income-tax whereas proviso (ii) relates to the maximum liability of a partner to pay income-tax which includes super tax for the purpose of above proviso.
Mr. Ali Athar learned counsel for the respondents assessees has referred to a judgment of a Division Bench of this Court given in I.T.C. Nos. 90, 91 and 92 of 1969 (Commissioner of Income Tax (Central), Karachi vs. Seth Saifuddin Ghulam Hussain) delivered on 22nd March, 1978 on the interpretation of the above proviso (ii) of the Finance Act, in support of his above contention. It may be pertinent to reproduce hereinbelow paras 8 and 9 of the above judgment which read as follows:-
(8) As analysed, the above proviso provides inter alia, that (1) the income-tax shall in no case exceed 75 per cent of the total income of the assessee, and (2) if the total income includes a share of the profits of a registered firm, there is to be added to the income-tax payable by the partner under this paragraph, such portion of the super tax payable by the registered firm, as bears the same proportion as his share of the profits of the firm bears to the total income of the firm, and (3) if, after so adding the portion of the super-tax, the sum so arrived at exceeds 75% of the total income of such partner (including his share of the profits of the firm) the amount of income-tax payable by him under this paragraph shall-be reduced by the amount on such excess. The formula for calculating the portion of the super-tax of a partner under the said paragraph may conveniently be represented thus:- Portion of the total amount His share of the income, profits and gains of super-tax payable by the of the firm.
Firm _________________________________________ Total income of the firm.
The controversy in question relates to the number at or in the aforesaid fraction, viz his share of the income, profits and gains of the firm. According to the respondent's contention, which found favour with the Appellate Tribunal, the partner's share of the profits of the firm is to be taken to be the amount of his share before deduction of super-tax payable by the firm; whereas the contention of Mr. Mansoor Ahmad Khan for the Department is that it should be taken to be the amount after deduction of super-tax payable by the firm. Learned counsel relied on section 16(1 )(b) of the Act, which provides that in computing the total income of an assessee, who is a partner of a firm, his share of the net profit is to be determined after deducting the super-tax payable by the firm.
(9) In my opinion, section 16 (1)(b) is not relevant because that sub-section lays down the mode of computing the quantum of a partner's share in the profit (or loss) of the firm, whether registered or unregistered, for the purpose of determining the rate of income-tax applicable to his taxable income; whereas the subject-matter of the proviso under consideration is the computing of the maximum limit of the income-tax payable by a person who is a partner or a registered firm, which is to be determined by adding a proportionate portion of the super-tax to the income-tax payable by such partner under the paragraph and the question of rebate of an amount of income-tax, if the sum so added exceeds 75% of the total income of such partner. As rightly submitted by Mr. Ali Athar, learned counsel for the respondent, the proviso under consideration does not refer to the quantum of the share of the profits of a partner as determined under section 16 (1)(b) which, under that sub-section, is determined after deducting the super-tax payable by the firm. The total income of a firm is assessed under section 23, like that of an individual person and thereafter the super-tax payable by the firm is determined on the total income so assessed. In other words, the assessm ent or the total income of the firm is before deduction of super-tax payable by the firm, the share of the partner in the total income of the firm so assessed (before deduction of super-tax payable by the firm), is determined under section 23(5)(a). I am, therefore, in agreement with the view expressed by the Appellate Tribunal that the partner's share of super-tax payable by the registered firm under the proviso, is not to be apportioned with reference to the share of the partner as computed under section 16 (1)(b). It is, however, not necessary to consider the additional reason given by the Appellate Tribunal that if the Department's contention is accepted, it would patently create a lacuna inasmuch as a portion of the super-tax would remain unadjusted against the income of any of the partners."
8. It may be noticed that in the above case inter alia it was held that the assessment of the total income of the firm for the purpose of payment of super-tax is before the deduction of super-tax payable by the firm. It was further held that the partner's share of super-tax payable by the registered firm under the proviso is not to be apportioned with reference to the share of the partner's income as computed under section 16(1)(b). The above case has no direct bearing on the question of claiming of refund of super-tax by an assessee partner on the ground that overall his business result was in loss for the relevant year.
It may be appropriate to refer to certain portion of the chart annexed to the order passed by the learned Income-tax Appellate Tribunal in the case of Assessee vs. Department reported in 1968, XVII Taxation S3 relevant at 57, (which order was upheld by the judgment of the Division Bench of this Court in the above-unreported case), which reads as follows- "Where income of the partner including exemption allowable under section 158 of the In Rs. 2,30,708 Add: Income from other sources It is more than 75% of the total income and as such restricted to 75% of the total income. It will come to: In terms of proviso to para I of Part I of the 3rd Schedule is the Finance Ordinance, 1960, super-tax paid by the firm is deducted out of the tax demanded. Rs. 56,592 Net tax payable by the assessee.
Rs. 1,16,439"
It may be noticed that in the above case the income of the partner is Rs. 2,30,708. The income-tax payable on the above amount comes to Rs.1,48,474, whereas the super-tax paid by the firm on account of the above partner is Rs. 56,592 thus making a total of Rs. 2,05,066. Since proviso (ii) provides that income-tax which includes super-tax shall not exceed 75% of the total income of an assessee, and as the above sum of Rs. 2,05,066 exceeds the above maximum limit of 75% of the income, the assessee's liability to pay tax has been reduced to the maximum limit of 75% of his income, which words out to Rs. 1,73,031. In the above-quoted example the aforesaid sum of super- tax namely Rs. 56,592 has been deducted from the above sum of Rs. 1,73,031 for the reason that this sum was already paid by the' firm on behalf of the assessee partner and therefore he was allowed to pay Rs. 1,73,031 minus Rs. 56,592 equivalent to Rs. 1,16,439. The above example contained in the above-quoted chart succinctly, explains the effect of proviso (ii).
We may quote another example in order to highlight the contention of Mr. Ali Athar in proper perspective.
Example:- An assessee who is a partner in various firms overall suffers loss amounting to Rs.
1,00,000 in the relevant assessm ent year. Ore of the firms in which he is a partner has paid certain amount as super-tax in the said relevant assessment year, out of which Rs. 75,000 were debited to the aforesaid partner as his share of super-tax in proportion of his share of the profits in the said firm. According to Mr. Ali Athar, the aforesaid partner by virtue of proviso (ii) is entitled to claim refund of Rs. 75,000 under section 48 of the Act, paid by the firm on his account as super-tax as he has suffered overall loss of Rs. 1,00,000 in the relevant assessment year.
We are unable to agree with the above contention of Mr. Ali Athar and with the view found favour with the learned income-tax TrIbunal. In our view, the proviso provides maximum limit of the liability of a tax-payer by providing that his total liability of income-tax which will include super-tax shall not exceed 75%. It does not provide that an assessee will be entitled to the refund of the super-tax in case over ail he suffers loss in a particular assessment year. It may be pointed out that section 24 of the Act provides the cases where an assessee can claim set of or carry forward the loss of one assessm ent year to the subsequent assessment year. The above section does not admit the claim of refund of super-tax on the ground the.. The assessee partner has suffered overall loss in a particular year. We are also inclined to hold that section 48 of the Act has no application to the present case as under the above section any individual, Hindu undivided family, company, local authority, firm or other association or persons or any partner of a firm or member of an association may claim the refund if the amount of tax paid by him or on his behalf or treated as paid on his behalf for any year exceeds the amount with which he is properly chargeable under the Act. In the present case it is not disputed that the firm was charged with the proper super-tax on the basis of computation of the income of the firm concerned and that there was no mistake in the calculation or otherwise. The claim for the refund is not made because the firm concerned was not liable to pay the super-tax charged from it but for the reason that the partner overall had suffered loss in the particular assessment year and, therefore, was entitled to claim the refund of the super-tax paid by the firm concerned on his behalf, It may be pertinent to observe that the liability to pay super-tax is of the firm thought the amount of super-tax paid by the firm is apportioned among the partners in proportion of their profits sharing capacity. In our view, section 48 has no application to the present cases.
Mr. Waheed Farooqi has referred to the case of Commissioner of Income-tax vs. Messrs Philips Holzman A. G. Ameejee Valeejee & Sons, Karachi (PLD 1968 Kar. 95) wherein a Division Bench of the erstwhile High Court of West Pakistan, Karachi Bench quoted with approval the observations of Rowaltt, J in the case of Cape Brandy Syndicate vs. Inland Revenue Commissioner [(1921) 1KB 64] that: "In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment.
There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The above-quoted observations are applicable to the present cases as if we were to accept the contention of Mr. Ali Athar, learned counsel for the respondents assessee and the view of the Tribunal, in fact it will amount to reading of something into the proviso for the purpose of granting the refund of super-tax to the respondents assessees.
9. We are in respectful agreement with the view of the aforesaid Division Bench in the above unreported judgment dated 22nd March, 1978 (Commissioner of income Tax (Central) Karachi vs. Seth Saifuddin Ghulam Hussain that section 16(l)(b) of the Act has no relevancy for the purpose of computing a partner's share of super-tax but the same is ascertained on the basis of a partner's share in the profit in the firm concerned which has paid super-tax.
10. For the foregoing reasons, our answer to the first part of above-quoted question is that the Tribunal was justified in holding that while working out proportionate share of the super-tax attributable to each partner, super-tax should be allocated to the partners of the firm in the profit sharing capacity and not with reference to section 16(1)(b) of the Act. However, our answer to the second part of the above question is that under the proviso a partner can claim refund of the tax amount (which includes income-tax and super-tax) in excess of 75% or in excess of any other specified maximum percentage in the Finance Act of the relevant assessment year, of the income, for bringing down his total liability maximum to 75% or other specified percentage but he cannot claim the refund of the super-tax on the ground that his overall income was low or that overall he has suffered loss.