1. ' SAEEDUZZAMAN SIDDIQUI, J.--The petitioner has challenged in this petition the demand of Rs,48,839 by the Income-tax Officer Companies Circle B-3, Karachi, which is said to be the unrealized arrears of Income-tax dues of M/s. Mercantile Enterprises Ltd. For the assessment years '1964-65 and 1965-66: The above demand of Rs,48,839 is based on the ground that the petitioner holds shares of the value of more than 10% of the paid up capital of the above company and as such in view of section 43-B of the Income-tax Act which has been substituted by Finance Act of 1973, they were liable to pay the tax arrears of the company for all previous years which could not be realised from the company. The following is the text of section 43-B of the Income-tax Act 1922 which was substituted by Finance Act of 1973:- "43-B. Liability for payment of tax in the case of private companies.- -Notwithstanding any thing contained in the Companies Act, 1913 (VII of 1913),.Where any tax payable by a private company (including a private company which is wound up or has gone into liquidation) in respect of any income of any previous year (whether ending before or after the date of commencement of the winding up or liquidation proceedings) cannot be recovered, every person who is, or was, at anytime during that previous year a director of the company or a shareholder thereof owning not less than ten per cent of its paid up capital shall be jointly and severally liable for the payment of such tax: ' Provided that no proceedings under this section shall be initiated except with the prior approval of the Central Board of Revenue."
2. ' The contention of the learned counsel for the petitioner is that the above quoted section 43-B which was substituted in the Income-tax Act, 1922, by Finance Act of 1973, is not retrospective in its operation and as such the tax liability of the company for any period prior to the date of enforcement of Finance Act, 1973 could not be enforced against the petitioner. The contention of the learned counsel for the department on the other hand is that the newly substituted section 43- B of Income-tax Act, 1922 is clearly retrospective in its operation as is evident from its language and as such the demand of arrears of tax against the petitioner was fully justified. The learned counsel for the department laid much stress on the expression "any income of any previous year" used in the above quoted section 43-B, to contend that this expression clearly indicated that a new liability was created under section 43-B by the legislature on directors and persons holding shares of the value of more than 10% of the paid up capital of the company, in respect of taxes due against the company for any period prior to the enforcement of Finance Act, 1973 which could not be recovered from the company. It is accordingly contended by the learned counsel for the department that the tax arrears of the company for the assessment years 1964-65 and 1965-66 which could not be recovered from the company were validly demanded from the petitioner by respondent No,1. After hearing the learned counsel for the parties at length we are of the view that section 43-B substituted in the Income-tax Act, 1922, by Finance Act of 1973, is not retrospective in its operation and as such the demand of respondent No,1 against the petitioner in respect of tax arrears of M/s. Mercantile Enterprises Ltd., for the assessment years 1964-65 and 1965-66 was not valid. It is well settled rule of interpretation that statute creating new obligations or affecting existing rights and liabilities of subjects are presumed to be prospective in their operation unless they are specifically stated to be operative B from a date prior to their enforcement. The following passages from Maxwel (Twevfth Edition) on The Interpretation of Statutes may be quoted here on the point in issue: "Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication.
3. ' The statement of the law contained in the preceding paragraph has been "so frequently quoted with approval that it now itself enjoys almost judicial authority".
4. ' One of the most well-known statements of the rule regarding retrospectivity is contained in this passage from the judgment of R.S. Wright J. In Re Athlumney: Perhaps "no rule of construction is more firmly established than this that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only." The rule has, in fact, two aspects, for it "involves another and subordinate rule, to the effect that a statute is not to be construed so as to have a greater retrospective operation than its language renders necessary."
5. In the light of above mentioned rule of interpretation we will now examine whether section 43-B of Income-tax Act substituted by Finance Act of 1973 was retrospective or prospective in its operation.
6. The Finance Act of 1973 which substituted above-quoted section 43-B in the Income-tax Act of 1922 in place of the old section was promulgated on 30th June, 1973, The preamble of Finance Act, 1973 is as under:- "Whereas it is expedient to make provisions to give effect to the financial proposals of the Federal Government for the year beginning on the first day of July 1973, and to amend certain laws for the purposes hereinafter appearing."
7. ' The short title and extent of Act is stated in section 1 of the Finance Act as under:- "(1). Short title and extent.-- (1) This Act may be called the Finance Act, 1973.
(2) It extends to the whole of Pakistan."
8. By reading the preamble and short title and extent contained in section 1 of Finance Act, 1973 there can be no doubt that the amendments brought about in various Acts and Ordinance by Finance Act of 1973 were meant for giving effect to the financial proposal of Federal Government for the year beginning from 1-7-1973. This being so, there is nothing in the language of the Finance Act 1973, to indicate that the legislature intended to give retrospective effect to the amendments introduced in various laws by it. The learned counsel for the respondent, however, contended that the expression "any income of any previous year" used in newly added section 43-B clearly indicated an intention on the part of the legislature to give effect to the provision of law from a date prior to its enforcement. We are unable to agree with the learned counsel. Section 43-B as it originally stood in the Income-tax Act reads as follows:- "43-B.--Notwithstanding anything contained in the Companies Act, 1913 (VII of 1913), where any private company is wound up and any tax assessed on the company, whether before, or in the course of, or after its liquidation, in respect of any income of any previous year cannot be recovered, every person who was a director of the private company at any time during the relevant previous year shall be jointly and severally liable for the payment of such tax unless he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company."
9. It will thus be seen that insofar the phraseology "any income of any previous year" is concerned, it is same, both in the old as well as newly substituted section 43-B of Income-tax Act, and as such we are unable to agree with the learned counsel for the department that by the use of expression "any income of any previous year" in the newly substituted section 43-B the legislature intended to bring about any change in the scheme or scope of section 43-B. A comparison of the language of old and the substituted section 43-B of the Income-tax Act, 1922 makes it abundantly clear that the scope of the newly substituted section 43-B was enlarged by including certain other category of persons who were not liable under the old section in respect of unrealised tax liability of the company while the liabilities of the directors of the company which was subject to certain limitation under the old section 43-B was also enlarged under the newly substituted section 43-B by deleting those limitations. There is, however, no indication in the language of the substituted section 43-B that these changes in the scheme and scope of scheme were to he retrospective in their operation. The learned counsel for the department also contended that the expression "any previous year" be interpreted in its ordinary dictionary meaning in order to preserve the retrospective operation of newly substituted section 43-B of Income- F tax Act. We are unable to agree with the submission of the learned counsel. The expression "previous year" had a special meaning in the Income-tax Act, 1922. It was defined in section 2 (11) as follows: "previous year" means--
(i) in respect of any separate source of income, profits and gains--
(a) the twelve months ending on the 31st day of March next preceding the year for which the assessm ent is to be made, or, if the accounts of the assessee have been made up to a date within the said twelve months in respect of a year ending on any date other than the said 31st day of March, then at the option of the assessee, the year ending on the date to which his accounts have been so made up: ' Provided that where in respect of a particular source of income, profits and gains an assessee has once been assessed, or where in respect of a business, profession or vocation newly set up an assessee has exercised the option under sub-clause (c), he shall not in respect of that source or, as the case may be, business, profession or vocation exercise the option given by this sub-clause so as to vary the meaning of the expression previous year' as then applicable to him except with the consent of the Income-Tax Officer and upon such conditions as the Income-tax Officer may think fit to impose; or
(b) in the case of any person, business or company or class of person, business or company such period as may be determined by the Central Board of Revenue or by such authority as the Board may authorise in this behalf; or
(c) Where a business, profession or vocation has been newly set up in the financial year preceding the year for which assessm ent is to be made, the period from the date of the setting up of the business or profession or vocation to the 31st day of March next following or to the last day of the period determined under sub-clause (h) or if the accounts of the assesee are made up in respect of a period not exceeding twelve months from the date of the setting up of the business, profession or vocation and the case is not one for which a period has been determined under sub-clause (b), then, at the option of the assessee, the period from the date of the setting up of the business, profession or vocation to the date of which his accounts have been so made up: ' Provided that when the date to which the accounts have been so made up does not Fall between the setting up of the business, profession or vocation and the next following 31st day of March, inclusive, it shall be deemed that there is no previous year for the said assessment year and the previous year which would otherwise have been determined according to the option exercised by the assessee shall be deemed to be the previous year for the next succeeding assessment year;
(ii) in respect of the share of the income, profits and gains of a firm where the assessee is a partner in the firm and the firm has been assessed as such, the period as determined for the assessment of the income, profits and gains of the firm;"
10. It is a settled rule of interpretation that an expression defined in a statute carries the same meaning whenever used in that statute. There is nothing in the language of Finance Act; 1973 or in the substituted section 43-B of Income-tax Act, 1922 that the legislature used the expression "previous year" in a sense different from the meaning as given in section 2 (11) of the Income-tax Act.
11. ' For the aforesaid reasons we hold that section 43-B substituted in the Income-tax Act, 1922 by Finance Act of 1973 was prospective in its operation and as such the demand of tax arrears of the company M/s. Mercantile Enterprises Ltd. From the petitioner for the assessment years 1964-65 and 1965-66 is without lawful authority and of no legal effect. There will, however, be no order as to costs in the circumstances of the case.