1. SALEEM AKHTAR, J.--The respondent is a private limited company. Under Article 43 of Articles of Association restrictions were imposed on the transfer of shares and they could not be freely transferred to other members of public. In view of this restriction respondent's claim that it was a company in which public were substentially interested within the meaning of Explanation I of section 23(A)(1) of, Income-tax Act and entitled to 10% rebate in Super Tax was not accepted upto the assessm ent year 1966-67. During the assessment year 1967-68 the respondent amended its Articles of Association by special resolution passed on 21-12-1966 whereby Article 43 was deleted.
2. The effect of this amendment was that restriction on free transferability of the shares was removed and the company's shares were freely transferable. The respondent then claimed its status as a company in which public were substentially interested as stated above. The Income-tax Officer accepted the contention but did not grant relief for the whole of the relevant previous year but allowed it only for six days before the close of the year. The respondent challenged this order in appeal before the Tribunal, which allowed it and the Income-tax Officer was directed to allow rebate of 10% on the income of the respondent company for the whole of the year. The department f-pled an application under section 06(1) of the Income-tax Act and following question has been referred for our opinion:-- "Whether on the facts and circumstances of the case the appellate Tribunal was justified in holding that the company was entitled to rebate of 10% in super tax on its income for the whole of the year, being a company in which public are substantially interested within the meaning of section 23-A of the Income-tax Act "
3. The claim relates to rebate of 10% in the super tax on the income of the company for the whole assessm ent year 1967-68. From the facts stated above it is clear that from 26-12-1966 the restrictions on free transferability of share; were removed. Once such restrictions were removed there is no dispute that the respondent became entitled to 10% rebate in super tax. The only question, which remains disputed, is whether rebate should be granted for the whole of the previous year or only to that period during which restriction on transferability was not in existence.
4. The answer to this query calls for interpretation of Explanation of subsection (1) of Section 23-A of the Income-tax Act, which reads as follows:-- Explanation 1.--- ------(1) For the purposes of this subsection, a company shall be deemed to be a company in which the public are substantially, interested.
(a) If it is a company owned by the Government or in which not less than forty per cent of the shares are held by the Government; or
(b) If it is not a private company as defined in the Companies Act, 1913 (VII of 1913),and
(i) Its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting pourer have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, the Government or a corporation established by a Central, or Provincial Act or the National Investment (Unit) Trust or the public (not being a director or a company to which this paragraph does not apply);
(ii) The said shares were at any time during the relevant previous year the subject of dealing in any recognised stock exchange in Pakistan or were freely transferable by the holder to other members of the public; and (iii)---------------. ---
(2) .........................
(a) ..........................
5. (b)------------------.
6. (c)------------------ (3)------------------ The applicability of this provision arose while calculating the super tax as provided by Finance Act 1972. In part II of Schedule V of the Finance Act 1967 the relevant provisions were as follows:-- PART II Rates of Super-tax Rates (1)"A" In the case of the total income including income to which sub-paragraph (1) of Applies30 per cent of such total income: Provided that--
(i) A rebate of 5 per cent shall be allowed to a company:
(a) Which, in respect of the profits liable to tax under the Income-tax Act, 1922 (XI of 1922), has made such effective arrangements as may be prescribed by the Central Board of Revenue in this behalf for the declaration and payment in Pakistan of dividends payable out of such profits and for the deduction of tax from such dividends; and
(b) Which is also banking or an Insurance Company;
(ii) A rebate of 15 percent. Shall be allowed, in the case of every company to which sub-clause (a) of clause (i) applies but sub-clause (b) of clause (i) does not apply to so much of the income of such a company of the relevant year as has been distributed as dividend to its shareholders (including dividends on preference shares);.
(iii) A rebate of 10 percent. Shall be allowed in the case of every company to which sub-clause (a) of clause (i) applies if it is a company in which the public are substantially interested within the meaning of Explanation 1 to subsection (1) of Section 23-A of the Income-tax Act, 1922 (XI of 1922);
(iv) ---------------.
(v) ---------------.
(vi) ---------------
(vii) --------------- A perusal of these provisions will show that in order to claim 10% rebate the company should satisfy that sub-clause (a) of clause (i) quoted above applies and the public are substantially interested in it within the meaning of the Explanation 1 to subsection (1) of the Section 23-A. Therefore, for the purposes of the present case the entire claim for rebate rested on whether the respondent company falls within the Explanation or not. The company has been held to have satisfied all these conditions. As discussed above the only question for consideration is for which period the rebate could be granted According to Mr. Shaikh Haider the Explanation is in two conjunctive parts In the first part if the shares were at any time during the relevant periods quoted in any recognized stock exchange in Pakistan then 10% rebate could be allowed. But where the shares were freely transferable to other members of public then as the words at any time' in the opening part of this Explanation do not cover the later part, a time limit should be fixed and rebate can be allowed for the period the transfer of shares became freely transferable to other public. According to Mr. Iqbal Naim Pasha the words `at any time' should cover both the parts of the explanation. The Tribunal also seems to be of the same view. Be that as it may, the case is to be governed by the later part of the explanation which does not place any time limit for its applicability. A close scrutiny of the Explanation will show that the later part dealing with transferability of shares has not been subjected to any time frame. As no limit for making the shares transferable during the previous year has been fixed, the transferability may occur in any part of the previous year. It is well -- recognised principle of interpretation of fiscal statutes that if there is any ambiguity in such statute then a reasonable interpretation favourable to the subject shall be accepted. The reasonable interpretation seems to be, that where a company claims rebate of 10% on the basis of free transferability of its shares to other members of the public then it is not possible to introduce that such transferability should have existed for the whole year or that entitlement will be restricted for the period during which transferability was available. By placing such restriction, it will amount to introducing words of limitation, which have not been placed by the legislature. In view of the above discussion we answer the question in the affirmative.