ORDER FARHAT ALI KHAN, MEMBER.-1. This appeal is directed against the order of learned Commissioner of Income Tax (Appeals) recorded by him, on 18th September, 1982 in so far it confirms the charge of interest under section 12(7) of the Income Tax Ordinance, 1979, hereinafter referred to as the Ordinance, on outstanding balance of Rs. 47,717. The brief facts giving rise to this appeal are that the appellant, a private limited company filed its return for 1979-80 declaring a loss of Rs. 24,732. During the course of assessment the Income Tax Officer discovered that inter alia a sum of Rs. 46,224 was due from Messrs S.W.L. Since he was of the view that aforesaid amount fell within the mischief of section 12(7) of the Ordinance he, therefore, levied interest at the rate of 2% above bank rate and added it to the total income of the appellant. On appeal, the order of Income Tax Officer was maintained. The appellant still felt aggrieved and has come up in second appeal before us.
2. Mr. Iqbal Naeem Pasha, the learned counsel for the appellant, submitted that the appellant, engaged in manufacturing of canvas, sold some spare-parts of machinery to Messrs S.W.L., which were worth Rs. 41,000. According to him there were certain other dues also amounting to Rs. 5,224 and Rs. 1,000 payable by some other persons. Mr. Pasha contended that as far as the amount of Rs. 41,000 was concerned it did not fall within the mischief of section 12(7) of the Ordinance as it was unpaid sale price of the spare-parts hence neither was a loan nor an advance as contemplated by sub-section (7) of section 12 of the Ordinance. For the rest of amount he conceded that the interest was rightly added by Income Tax Officer. Mr. Muhammad Farid, the learned Departmental Representative, on the other hand, argued that loan or advance included even unpaid sale price.
3. We have heard both the learned counsels for the appellant as well as the learned Departmental Representative and have perused both the assessment as well as the impugned orders. The Income Tax Officer added the interest on the entire amount of Rs. 47,717 with the following observation: "No interest was charged on the advances due from the concerned persons as discussed above. Therefore, these advances attract interest under section 12(7) of the Income Tax Ordinance, 1979 at 2% above the bank rate. The bank rate for the period under review is 10%". It is clear from this observation that he did not consider at all directly or indirectly the point involved in this appeal namely whether unpaid sale price could be called advance/loan within the meaning of section 12(7) of the Ordinance? The learned Commissioner of Income Tax (Appeals) on the other hand, considered this issue but has confirmed the order of the Income Tax Officer with the following observation: "The contention of the learned counsel is unacceptable because sale of machinery and spare-parts by the appellant is not of trading nature because it does not deal in these items. It is the sale of capital nature. The charge of interest under section 12(7) against the outstanding balance of Rs. 47,717 is, therefore, confirmed."
4. Mr. Iqbal Naeem Pasha, the learned counsel for the appellant has argued before us that since the learned Commissioner of Income Tax (Appeals) has admitted that the appellant had sold capital goods, the unpaid sale price could not be termed as loan. The learned counsel relied upon the following two decisions:- Bombay Steam shipping Company vs. Commissioner of Income Tax (1965) 56 ITR 521 SC and Ramsden vs. Commission of Inland Revenue 37 TC 619. We think that the submission of the learned counsel for the appellant carries much force. We are of the view that the word advance or loan as used in sub- section (7) of section 12 of the Ordinance means and implies a loan or advance made in terms of money for specific purposes. We are of the view that it would not include within its fold the unpaid sale price of capital goods. We have arrived at , this interpretation in view of various S.R.Os. Issued by Central Board of Revenue from time to time. The first S.R.O, which we would like to refer is S.R.O.
No. 960(I)/76, dated 29th September, 1976 as amended by S.R.O. 260(I)/77, dated 28th March, 1977.
Its clause (iii) is relevant for our purposes and it reads as under:- "(iii) companies registered under the Companies Act, 1913 (VII of 1913), and bodies corporate formed under any law for the time being inforce, in which the Federal Government participates, either directly by investment in share capital or indirectly by grant of loans, and which are engaged in the acquisition and holding of investment in stocks, shares of debentures of other companies and in providing credit to industrial enterprises in Pakistan." Let us mention here that these notifications were issued in pursuance of explanation 8 of sub-section (1) of section 4 of the repealed Income Tax Act. Turning to other S.R.Os. Issued under section 12(7) of the Ordinance we find clause (c) of S.R.O. 750(I)/79, dated 23rd August, 1979 as amended by S.R.O. 197(I)/81, dated 7th March, 1981 and S.R.O. 830(I)/83, dated 16th March, 1983. It reads as under: "(c) any person making a loan or an advance to another person where the said another person has not used, directly or indirectly, such loan or advance for purposes of any business or profession carried on by him, or for investment in securities, stocks and shares, debentures, or deposit certificates, issued by, or accounts maintained with banks (including Cooperative Banks, Post Offices Saving Banks, National Savings Centres, and investment, credit holding or financial institutions or funds)." Similar S.R.O. 197(I)/81, dated 7th March, 1981 amended by S.R.O. No. 750(I)/81, dated 23rd August, 1979 could also be referred to although it was substituted by the clause reproduced above. It reads:- "(c) any other person not being a person carrying on any business or profession by whom the loan or advance is used directly or indirectly for purposes of such business or profession or for investment in securities, stocks and shares, debentures, deposit certificates issued by, or accounts maintained with banks (including cooperative banks, post office savings banks, national savings centres, and investment, credit holding or financial institutions or funds)." In this connection reference may also be made to Circular No. 14 of 1979, dated 7th November, 1979, the relevant part whereof is as under:- "....... Clause (c) excluded loans by reference to the borrower. It excludes loans made to: (a) all person not carrying on any business or professions; (b) all persons carrying on a business or profession provided such persons do not utilize the loans directly or indirectly in business or for investment in securities, share etc."
5. Now if we read the clauses reproduced above, it becomes immediately obvious that the Central Board of Revenue have interpreted the term loan or advance as used either in Explanation 8 of section 4(1) of the Repealed Income Tax Act or in section 12(7) of the Ordinance to mean and imply the loan or advance made in terms of cash for certain purposes namely for investment in securities, stocks, shares etc. With due respect we are of the view that the meaning ascribed by the Central Board of Revenue to fiscal statutes if not otherwise in conflict with principles of interpretation of statutes can easily be taken by the Courts as a basis for interpreting a particular word used in a particular fiscal statute. Surely no one can better appreciate connotation of a word used in fiscal laws than Central Board of Revenue.
6. Thus, in our judgment the unpaid sale price of capital goods reflected in the balance sheet of an assessee would not fall within the mischiefs of section 12(7) of the Ordinance.
We, therefore, allow this appeal and order that no interest should be calculated on Rs. 41,000. The appeal, therefore, stands disposed of as indicated above. But let us mention here that in view of the connotation given to the words advance or loan by the department itself we have refrained from referring to the dictionary meaning of both the words. Similarly before parting with this appeal let us also point out that we have refrained ourselves from making any discussion on the rulings relied upon by the learned counsel for the appellant. In fact every case revolves round its own facts and both the cases are no exception to this general rule.