1. SALEEM AKHTAR, J.--The applicants are manufacturers of milk, foods and medicines. They are drawing income from taxable units and also from such units which are exempt from payment of tax under section 15-BB. These units have been enumerated by the Tribunal as follows:--
(1) Milk-food Manufacturing Plant at Renala.
(2) Vitamin `A' manufacturing unit at Lahore.
(3) Starch and Glucose manufacturing unit at Lahore.
2. "Whether the Income-tax Appellate Tribunal was right in determining that the super tax rebate of 15% allowed by the applicable Finance Act on dividend d1stributed to shareholder was to be calculated only on dividend d1stributed out of taxable income and that such rebate is not liable to dividend paid out of profits of the Units exempt under section 15-BB of the Income-tax Act."
3. The rebate was claimed as provided by section 10(b) of the Finance Act 1967. The relevant portions of the Act are as follows:-- "10. Income-tax and super-tax. (1) Subject to the provisions of sub--sections (2), (3), (4) and (5), in making any assessm ent for the year beginning on the first day of July, 1967-- (a)
(b) the rates of super-tax shall, for the purposes of section 55 of the Income-tax Act, 1922 (XI of 1922), be those specified in Part II of the Fifth Schedule."
4. For the purposes of the present controversy the relevant part of Part II of the Vth Schedule is reproduced as follows:-- "
5. "Rates of super-tax Rates
(1) On the whole of the total in- come excluding income to which sub-paragraph (1) of paragraph B, of part I applies.30 per cent. of such total income.
6. 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 dividends payable out of such profits and for the deduction of tax from such dividends, and
(b) which is also a Banking or an Insurance Company;
(ii) a rebate of 15 per cent. 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 on so much of the income of such a company of the relevant year as has been d1stributed as dividend to its shareholders (including dividends on preference shares);
(iii) ...............................................................................................................................
(iv) ..............................................................................................................................
7. (v)------------------------------------------------------..
(vi) ..............................................................................................................................
(vii) ..............................................................................................................................
8. Under clauses (i) to (vii) seven types of rebates have been allowed to the company provided it satisfies the conditions prescribed for granting each type of rebate. The rebate claimed by the applicants falls under proviso (ii) to clause I of Para. A of Part II. According to this proviso a company, not a Banking or an Insurance Company which has made effective arrangements as prescribed by the Central Board of Revenue for declaration of dividend out of the profits liable to Tax under the Income-tax Act and also established that the dividends so declared are to be paid in Pakistan and tax from such dividends are to be deducted, becomes entitled to claim rebate of 15%.
9. The following part of proviso (ii) provides for a mechanism to calculate the amount of rebate to which the company is entitled. There is no dispute that the applicants are entitled to claim rebate.
10. According to the applicants they are entitled to 15% rebate on the amount of dividend declared in respect of the taxable income as well as on the exempted income. According to Mr. Wadood proviso (ii) does not impose any condition and allows 15% rebate of the income d1stributed as dividend irrespective of the fact whether tax is payable on it or not.
11. Mr. Shaikh Haider the learned counsel for the Department has contended that the rebate is provided in respect of assessm ent made under section 10 of the Income-tax Act which is completely separate and independent of section 15-BB.
12. Section 15BB is intended to grant tax-holiday for new industrial undertakings. They are exempt from Income-tax and Super Tax for a certain specified period. Such undertaking, their working, functioning, registration, paid up capital and declaration of dividends are regulated by various provisions of section 15BB. It provides for a built in mechanism with complete code for governing such companies. It is pertinent to note that according to section 16(I) the income from units exempted under section 15BB is not included in the Total Income of the Assessee.
13. Therefore, while making assessm ent under section 10 the income from units exempted under section 15BB is not taken into consideration. It is kept separately and treated differently. Thus the rebate provided in respect of income falling under section 10 cannot be extended to income accruing from units exempted under section 15BB and governed by this provision.
14. We therefore, answer the question in the affirmative.