1. SAEEDUZZAMAN SIDDIQUI, J.-- This application under section 136 (1) of the Income-tax Ordinance, 1979 raises the following question for our decision:-- "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the profit realised by the assessee on sale of Government securities is not capital gain exempt from tax?"
2. The facts of the case may be stated as follows: That in the return of income filed by the applicant for the year 1981-82 the applicant ha shown a profit of Rs. 4,90,000 on sale of some securities. It was contended by the applicant before the Income-tax Officer that the income arising on the sale of securities amounted to a capital gain while the Income-tax Officer treated the same as a revenue income and taxed it accordingly. In appeal filed before the Commissioner of Income-tax (Appeals) Karachi, against the order of Income-tax Officer the Appellate Authority relying on the decision of Income-tax Tribunal in ITAs.
3. No. 1036, 1037/KB of 1980-81 rejected the plea of the applicant that the income arising on sale of securities was a capital gain. In further appeal before the Income-tax Appellate Tribunal the view taken by the Income-tax Officer and the Commissioner of Income-tax (Appeals) was confirmed and the plea raised by the applicant was rejected on the basis of earlier decision of the Tribunal, which was stated to have been confirmed by the High Court in an Income-tax Reference. It appears that the applicant filed an application before the Tribunal pointing out that the decision of the Tribunal in I.T.R. No. 1036 and 1037/KB of 1980-81 was never confirmed by the High Court and that statement to that effect made by the Departmental Representative was based on some misapprehension. It was conceded in that proceedings before the Tribunal that the statement made by the departmental representative regarding confirmation of the Tribunal decision in the aforementioned ITAs by the High Court was not correct but in spite of that the Tribunal took the view that the aforesaid mistake had not influenced in any manner the decision of the Tribunal on merits. After we heard this Reference at some length we found that the basic question involved in the case namely, whether the income arising from the sale of securities in the assessment year 1981-82 was a revenue income or a capital gain in the circumstances of case has not been determined as a fact. Learned counsel for the Department very frankly submitted before us that although the income of Rs. 4,90,000 arising to the applicant in the assessment year 1981-82 from sale of securities was treated as a revenue income but there was no specific finding to the effect, whether these securities were in the nature of a capital investment or were stock in trade. Since the basic question involved in the case has not been decided by the Income-tax Authorities the question of law referred to us for decision cannot be conclusively decided in the absence of such finding of fact. We accordingly remit this case back to the Tribunal with the direction that before deciding the question, whether the income of Rs. 4,90,000 arising to applicant in the assessment year 1981-82 on the sale of the Government securities was a capital gain or a revenue income, the factual aspect of the case namely whether these securities were the stock in trade or were in the nature of a capital investment should be determined first. It will be open to Income-tax Appellate Tribunal either to determine this factual aspect of the case itself or remit the case to lower authorities in the hierarchy of department for such determination. There will be no order as to costs. The Reference stands disposed of accordingly.