ORDER:
1. These eight departmental appeals relating to the assessment years 1979-80 to 1986-87, contest the allowance of claim of exemption of the respondent under clause (83) of Second Schedule to the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) as also relief allowed in the claim of expenses against the royalty income of the respondent. As the facts are common in all the years under appeal, the same are being disposed of by one consolidated order.
2. Relevant facts giving rise to the present eight departmental appeals are that the respondent is presently an employee working as Imam/Khateeb at the mosque in the Presidency, Rawalpindi Proceedings, in the case of the respondent were originally filed by the I.T.O. on the basis of nil returns of income furnished before him. Later on an information was received that the respondent did earn royalty income from the P.T.V., P.B.C. and Shalimar Recording Company, Islamabad, in addition to the salary drawn from the President Secretariat as Imam/Khateeb in the mosque at the Presidency. Action was, therefore, taken under section 65 of the Ordinance. The respondent's claim that his receipts were covered by clause (83) of the Second Schedule to the Ordinance was not accepted and assessm ents for the 8 years under appeal were finalized. The claim of expenses against royalty income was rejected for the first 4 years, on account of the residential status of the respondent being that of a non-resident. However, in the charge year 1983-84 such claim was allowed in full being 33% of the royalty receipts, and in the next 3 years i.e. 1984-85, 1985-86 and- 1986-87, the claim was allowed at 40% of the royalty receipts.
3. Feeling- aggrieved by this dispensation, the respondent moved an appeal before the learned A.A.C., who accepted the claim of exemption on the ground that most of the time of the respondent was utilized in the performance of his job in the mosque at Presidency and since he could not be treated as a professional Qari, he was qualified to the claim of exemption under clause (83) of the Second Schedule to the Ordinance As regards the claim of expenses against the royalty income, the learned A.A.C. allowed expenses at Rs. 12,000 per year, in the .charge years 1979-80, 1981-82 and 1982-83. For the assessm ent years 1984-85 and 1985-86, the learned A.A.C. confirmed the treatment meted out by the I.TO, in restricting the claim of expenses against the royalty income to 40%. It would be of interest to note that after granting exemption to the income of the respondent, which clearly falls under section 30 of the Ordinance, being Income from other sources, no exceptions were allowable against the exempt income, as envisaged by section 31(2)(a) of the Ordinance. The learned A.A.C. has surprisingly flouted the provisions referred to above by allowing expenses against receipts treated exempt by him. It is in this background that the department has taken exception to the treatment meted cut by the learned A.A.C., and has come up in second appeals before the Tribunal.
3-A. Mr. Abdul Jalil, the learned Departmental Representative contended that Qari Khushi Muhammad the respondent in the present appeals is a well-known Qari in Pakistan who participates is Qirat competitions not only in this country but also in international competitions held, in various Muslim countries. Containing further, the learned D.R submitted that Qari Khushi Muhammad attended Al-Azhar University, Egypt just to study the recital of the Holy Quran and is known as Qari Khushi Muhammad Al-Azhari on account of that study and training. He may be a salaried employee in the Presidency but his basic qualification is that of a Qari, which is a profession by itself. It is in fact on that account as a professional Qari that the respondent in the present appeals has been employed by the Presidency. He, cannot, therefore, claim himself to be a non-professional so as to take the advantage of exemption available in clause (83) of the Second Schedule to the Ordinance. As regards the claim of expenses against the royalty income received by the respondent the learned Departmental Representative submitted that the I.T.O. had already extended a very lenient treatment to him by allowing him expenses at 40% of the claim in the assessm ent years 1' -85 and 1985-86. The learned A.A.C. could not have allowed the expenses over and above what was allowed by the Assessing Officer.
4. The respondent appeared in person and argued that his status was that of an Imam/Khateeti at the mosque at Presidency, Rawalpindi. He was not a professional Qari'so as to fall outside the purview of clause (83) of Second Schedule to the Ordinance, granting exemption to assessees other than professional writers, poets and artistes. Continuing further, he submitted that Qirat fell under the scope of an art. In other words, he could be called an Artiste and a non-professional. one. He vehemently urged that the learned A.A.C. had rightly accepted his claim for exemption which should not be disturbed. As regards, the claim of expenses against the royalty income, he pleaded that he required special diet to maintain his health so as to be able to perform his job in a satisfactory manner, as recital of the Holy Quran required strong lungs and healthy vocal cords to pronounce each word clearly, separately and loudly. Concluding his arguments, the respondent prayed that the order of the first appellate authority did not call for any interference and should be maintained.
5. After hearing both, the parties at the Bar and after perusal of the record, we feel that the respondent is a professional Qari and even if he be treated as an artiste, as claimed by him, still, in our opinion, he would remain a professional and fall outside the scope of exemption granted under clause (83) of. Second Schedule to the Ordinance. For facility of reference, the said clause is reproduced below:-- "Any payment not exceeding Rs. 25,000 received by an assessee not being a professional writ r, poet or an artiste, his remuneration or compensation for literary or artistic work."
6. As would appear from the perusal of clause (83), exemption is available to non-professional writers, poets or artistes. This has been done as an incentive to the amateurs to contribute to the literature and the field of art in the country.
7. The term "Profession" has been explained in the Black's Law Dictionary, Fifth Edition, Vol. I, at page 1089, as under:-- "A vocation or occupation requiring special, usually advanced, education and skill; e.g. law or medical profession. Also refers to whole body of each profession.
The labour and skill involved in a profession is predominantly mental or intellectual, rather than physical or manual.
The term originally contemplated only theology, law, and medicine, but as application of science and learning are extended to other departments of affairs, other vocations also re give the name, which implies professed attainments in special knowledge as distinguished from mere skill.
Act of professing; 'a public declaration respecting something. Profession of faith in a religion."
8. Art has/also been defined in the Black's Law Dictionary in the same Edition, Vol. I, at page 102, as under:-- "Systematic application of knowledge or skill in effecting a desired result; also an employment, occupation or business requiring such knowledge or skill a craft; as industrial art. In the law of patents, this term means a useful art or manufacture which is beneficial and _which is described with exactness in its mode of operation. Such an art can be protected only in the mode and to the extent thus, described. It is synonymous with process or method when used to produce a useful result, and may be either a force applied, a mode of application, or the specific treatment of a specific object, and must produce-physical effects."
9. A perusal of the term "Profession" and "Art", as explained in the Black's Law Dictionary, makes it crystal clear that Qirat is an Art and a Qari is without doubt an Artiste. The respondent in the present appeals is, no doubt, one of the topmost and renowned Qaris not only in Pakistan but also of international fame. In fact, the word "Qari" has come to be known as part and parcel of his name.
He has been educated and trained at Jamia Al-Azhar, Egypt, to be Qari and is known on that account as Qari Ithushi Muhammad Al-Azhari. The Holy Quran recited by him, is available in audio- cassettes in the market. We are, therefore, inclined to place him at the pedestal of an Artiste, as claimed by him. However, we have not been able to bring ourselves to his point of view that he is not a professional Qari because he performs his duty as an Imam/Khateeb in the Presidency Mosque at Rawalpindi. The very' name of the respondent "Qari Khushi Muhammad" suggests that he declares himself to be a Qari and that his appearance at the State functions to recite the Holy Quran makes it abundantly clear that he is a professional Qari. The respondent's claim that his main occupation is that of a salaried employee as an' Imam/Khateeb at the Presidency Mosque does not hold weight. In fact, we feel that his employment at the Presidency Mosque is primarily on account, of being a Qari par excellence, and so is the case with the P.T.V., P.B.C. and M/s. Shalimar Recording Company, wherefrom the respondent has received royalty income. We are, therefore, fortified in our opinion that the exemption under clause (83) is not available to the respondent and his been wrongly allowed by the first appellate authority.
10. As regards the'objection taken by the department that the claim of expenses against the royalty income has been allowed by the learned A.A.C. without any basis, ,and that the expenses claimed against the royalty income were, disallowed by the I.T.O. at the assessments stage on Elie ground that the respondent was a non-resident during 1979-80 to 1982-83, such objection cannot be sustained, as the residential status of the respondent was irrelevant to the allowance of expanses against royalty receipts. The royalty income falls under the "Head Income from Other Sources" classified under section 30 of the Ordinance and expenses allowable thereon are enumerated under section 31 of the Ordinance. For facility of reference, section 31 of the Ordinance is reproduced hereunder:-- "Section 31. Deduction.--(1) In computing the income under the head "Income from other sources the following allowances and deductions shall be made, namely.-- (a)in the case of dividends, any sum paid by way of commission to a banking company realising such dividends on behalf of the assessee; (b)any expenditure (not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purpose of earning such income; and (c)in the case of income to which clause (d) of sub-section (2) of section 30 applies, any allowance or deduction- computed in accordance with the provisions of clauses (iii), (iv) and (v) of sub-section (1) of section 23.
(2)Nothing contained in sub-section (1) shall apply-- (a)to any such sum paid or expenditure laid. out or expended which is allowable to any income exempt from tax under this Ordinance; (b)in computing the income by way of dividends in the case of an assessee, being a foreign company.
(3) The provisions of section 24 shall, so far as may be, apply to the allowances and deductions under this section as .they apply to the allowances and deductions in respect of income chargeable under the head "Income from business or profession".
(4) Notwithstanding anything contained in subsection (1) of sections -22 and 23, in the case of an assessee, being a foreign company, or a foreign association, the income by way of royalty received from a Pakistani concern in pursuance of any agreement made by the foreign company or the foreign association as the case may be, with the Pakistani concern shall be computed in such manner as may be prescribed."
11. From the perusal of section 31 of the Ordinance, it is clear that clause (b) of sub-section (1) itself would be relevant to the facts of the case which shows that "only those expenses (not being in the nature of capital expenditure or personal expenses of the assessee) are allowable which have been laid out or expended wholly and exclusively for the purpose of earning royalty income. Since the recordings on account of which the respondent received royalty were made before his departure from Pakistan and the expenses must have been incurred prior to the income year ending June, 1979, they could not be allowed by the I.T.O. during the period the respondent was out of Pakistan. Although the reason assigned by the I.T.O. for disallowing the claim of expenses for 1979-80 to 1982-83 is different, yet we uphold the disallowance for the reasons recorded hereinabove.
12.As regards the charge years 1983-84 to 1986-87, the learned A.A.C. has simply maintained the Order of the I.T.O. allowing expenses at 33%, 40%, 40% and 40% , respectively. There was no need to agitate this issue for the last four years in appeal.
13.The departmental appeals succeed as indicated hereinabove.