' AJMAL MIAN, J.---Leave to appeal was granted from a judgment dated 27-2-1975 passed by a Division Bench of the Lahore High Court in T.R. No, 20 of 1973 (P.T.R. No, 387 of 1972) upon an application filed by the respondent. The Commissioner of Income-tax, Rawalpindi Zone, Rawalpindi, directly to the High Court under section 66(1) of the Income-tax Act, 1922, hereinafter referred to as the Act, to consider the question, whether the interpretation placed by the High Court on the expression "unless he is himself liable to pay any income-tax and super-tax thereon as an agent" employed in subsection (3-B) of section 18 of the Act is in accordance with law though another interpretation was possible.
2. The facts to be noted are that the appellant purchased certain heavy machinery for installing a sugar mill from M/s. Mitsubishi Heavy Industries Limited, Japan, hereinafter referred to as the foreign supplier, under an agreement dated 1-4-1960, hereinafter referred to as the agreement.
One of the terms of the agreement was that the foreign supplier would provide supervisory engineers to erect the machinery in consideration of payment on the basis of the formula provided therein, namely, Rs, 226 per day for each erector. It was also provided in the agreement that the tax liability on account of the above payment was of the appellant. It appears that in the assessment year 1966-67 the foreign supplier received a sum of Rs, 36,700 and in the following assessment year 1967-68 a sum of Rs, 3,94,000 as a remuneration for the aforesaid engineers under the agreement from the appellant. It further seems that the Income-tax Officer by his letter dated 3-7-1967 addressed to the appellant notified his intention to appoint them as the agent of the foreign supplier. This was reiterated by the Income-tax Officer by his letter dated 20-7-1967. This was again re-asserted by the Income-tax Officer by his letter dated 4-9-1969 addressed to the appellant in which it was stated that "since it has already been notified to you that you are being treated as agent of the technicians under section 43 and you have to file return on their behalf, legal action will be taken for the default of the said notices". This was followed by the Income-tax Officer's letter dated 10-1-1970 wherein the appellant were again required to file a return on behalf of the foreign supplier. However, notwithstanding the above facts the Income-tax Officer, Circle B, Sargodha, on 27-3-1970 completed the assessm ent directly against the foreign supplier for the assessment years 1966-67 and 1967-68 under section 23(4) for default of notices issued under sections 34 and 22(4) of the Act. After completing the above assessment on 1-4-1970, the Income-tax Officer passed an order holding the appellant to be an assessee in default under section 18(7) read with section 18(3-B) of the Act for the income-tax demand of Rs, 7,32,030 allegedly due from the foreign supplier assessee in respect of the above two assessment years. The Income-tax Officer also imposed penal interest at the rate of 2% per month amounting to Rs, 5,51,402 on the above alleged due sum on the appellant. Thereupon, the appellant filed three appeals before the Income-tax Appellate Tribunal, two against the aforesaid assessment orders made against the foreign supplier for the aforesaid two assessm ent years which were held to be incompetent on the ground that the appellant had no locus standi, and the third appeal (A.C. No, 353/Circle B, Lyallpur) against the order of the Income-tax Officer passed under section 18(7) of the Act read with section 18(3-B) imposing the above amount of penal interest of Rs, 5,51,402. The above appeal was accepted by the Income-tax Appellate Tribunal by its order dated 14-9-1972. The operative portion of the order reads as follows:-- ' The admitted position as already stated above being that the appellant had become an agent of the non-resident it was liable to pay taxes itself and could not be treated as having defaulted in deducting these taxes, in view of the clear words of the above provisions underlined. The appellant's liability under section 18(3-B) having ceased, the question of treating the appellant as a defaulter within the meaning of section 18(3B) would not arise as it was neither under obligation to deduct any taxes nor had it 'failed to pay the taxes after deducting the same' within any of the provisions of section 18. The order passed by the Income Tax Officer in these circumstances treating the appellant as a defaulter within the meaning of section 18(7) is without jurisdiction and void."
3. Against the above order, the respondent filed a direct application under section 66(1) of the Act to solicit the High Court's opinion on the following question:- "Whether in facts and in the circumstances of the case the Tribunal was legally justified to cancel the Income Tax Officer's order under section 18(7) of the Income Tax Act, in spite of the fact that the Tribunal itself did not admit M/s. Noon Sugar Mills Limited as an Agent of M/s. Mitsubishi Heavy Industries Limited of Japan in their order in respect of the Income Tax Assessment?"
' A Division Bench of the Lahore High Court by the judgment under appeal accepted the respondent's above reference and recorded its finding on the above-referred question in the negative for the following reasons:- " The mere fact the Income Tax Officer has appointed a statutory agent in Pakistan of a person residing outside it in accordance with section 43 of the Act does not necessarily mean that that agent is "himself' liable to pay any income-tax due from the non-resident. His liability to himself and personally pay the tax due from the non-resident arises only after the assessment has been completed in his name as an agent and he is relegated to the position of an assessee in his own name in respect of the tax due from the non-resident. In our opinion until the completion of this assessm ent in the name of the agent, he is charged with a continuing duty enjoined upon him under subsection (3-B) of section 18 of the Act to deduct the tax at the source from the payments due to the person who is not resident in Pakistan. If he fails to do so, he shall without prejudice to any other consequence, be deemed to be an assessed in default in respect of the tax as laid down in sub-section (7) of section 18 of the Act. In addition to the tax he is also liable to pay an amount at the rate of 2% per month of such tax."
' After that the appellant after filing a petition for leave, obtained leave of this Court for considering the above question.
4. In support of the above appeal Mr.Muhammad Amin Butt, learned A.S.C. Appearing for the appellant, has pointed out that the question as was framed by the respondent was factually incorrect as the Tribunal had held that the appellant were agent of the foreign supplier. His further submission was that as the Income Tax Officer, the Income Tax Appellate Tribunal and the High Court have held that the appellant were the agent of the foreign supplier, the High Court could not have answered the referred question in the negative.
' On the other hand, Mr.A.H.Najfi, learned A.S.C. Appearing for the respondent, has contended that since the appellant was not assessed as an agent for the foreign supplier, they were under obligation to have deducted the income-tax under subsection (3-B) of section 18 of the Act and since it was not done, the High Court was justified in recording its finding on the referred petition in the negative.
5. Before dilating upon the above contentions of the learned A.S.C., it may be pertinent to point out that the Income Tax Appellate Tribunal in its order had held that the appellant were the agent of the foreign supplier which is evident from the portion of the order quoted here in above in para 2 wherein the Income Tax Appellate Tribunal has observed that "the admitted position as already stated above being that of the appellant had become an agent of the non-resident". The High Court, in our view, is not right in observing that the Income Tax Appellate Tribunal has not held the appellant as the agent for the foreign supplier. The factum that the Income Tax Appellate Tribunal has rejected two of the appeals filed in the name of the foreign supplier against the two assessm ent orders passed against the foreign supplier, does not negate the above finding of fact recorded by the Income Tax Appellate Tribunal at more than one place in the order. The reason for the rejection of the aforesaid two appeals filed by the appellant in the name of the foreign supplier was that the said assessm ent orders were not framed against the appellant and, therefore, they had no locus standi to file the aforesaid appeals. The above finding of fact that the appellant were the agent of the foreign supplier has been concurred with by the High Court in the following words: "9. In the instant case the Income Tax Officer by his repeated letters addressed to the respondent has sufficiently indicated his intention of treating the respondent as the agent of the non-resident company in accordance with the requirements of section 43 of the Act. In our opinion there can be no escape from the proposition that the respondent was appointed and must be deemed to be the statutory agent of the non- resident company for the purposes of this Act The petitioner cannot, therefore resile out of this situation created by the Income Tax Officer."
6. Having dealt with the factual aspect, we may now revert to the legal aspect involved in the instant case. In order to appreciate the contentions of the learned A.S.C. For the parties, it may be pertinent to reproduce sections 42, 43, subsections (3-B) and (7) of section 18 of the Act, which have direct bearing and which read as follows:-- ' Section 42 of the Act: "42.--(1) All income, profits or gains accruing or arising, whether directly or indirectly through or from any business connection in Pakistan or through or from any property in Pakistan or through or from any asset or source of income brought into Pakistan in cash or in kind, or through or from the sale, exchange or transfer of a capital asset in Pakistan shall be deemed to be income accruing or arising within Pakistan and where the person entitled to the income, profits or gains is not resident in Pakistan he shall be chargeable to income-tax either in his name or in the name of his agent, and in the latter case such agent shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax: ' Provided that where the person entitled to the income, profits or gains is not resident in Pakistan the income-tax so chargeable may be recovered by deduction under any of the provisions of section 18 and that any arrears of tax may be recovered also in accordance with the provisions of this Act from any assets of the non-resident person which are, or may at any time come within Pakistan: ' Provided further that any such agent, or any person who apprehends that he may be assessed as such an agent, may retain out of any money payable by him to such non-resident person a sum equal to his estimated liability under this subsection, and in the event of any disagreement between the non-resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income-Tax Officer a certificate stating the amount to be so retained pending final settlement of the liability, and the certificate so obtained shall be his warrant for retaining that amount: ' Provided further that the amount recoverable from such agent or person at the time of final settlement shall not exceed the amount specified in such certificate except to the extent to which such agent or person may at such time have in his hands additional assets of such non-resident person.
(2) Where a person not resident or not ordinarily resident in Pakistan carries on business with a person resident in Pakistan and it appears to the Income-tax Officer that owing to the close connection between such persons the course of business is so arranged that the business done by the resident person with the person non-resident or not ordinarily resident produces to the resident either no profits or less than the ordinary profits which might be expected to arise in that business, the profits derived therefrom, or which may reasonably be deemed to have been derived therefrom shall be chargeable to income-tax in the name of the resident person who shall be deemed to be, for all the purposes of this Act, the assessee in respect of such income-tax,
(3) In the case of a business of which all the operations are not carried out in Pakistan the profits and gains of the business deemed under this section to accrue or arise in Pakistan shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in Pakistan.
' Section 43 of the Act:
43. Any person employed by or on behalf of a person residing out of Pakistan or having any business connection with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income-tax Officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent: ' Provided that where transactions are carried on in the ordinary course of business through a broker in Pakistan in such circumstances that the broker does not in respect of such transactions deal directly with or on behalf of a non-resident principal but deals with or through a nonresident broker who is carrying on such transactions in the ordinary course of his business and not as a principal such first mentioned broker shall not be deemed to be an agent under this section in respect of such transaction: ' Provided further that no person shall be deemed to be the agent of a non-resident person, unless he has had an opportunity of being heard by the Income-tax Officer as to his liability.
' Explanation.---A person, whether residing in or out of Pakistan who acquires, after the 28th day of February, 1947 whether by sale, exchange or transfer, a capital asset in Pakistan from a person residing out of Pakistan shall, for the purposes of charging to tax the capital gain arising from such sale, exchange or transfer, be deemed to have a business connection, within the meaning of this section, with such person residing out of Pakistan.
Subsection (3-B) of section 18 of the Act: "(3-B) Any person responsible for paying to a person not resident in Pakistan any sum not being "interest on Securities" chargeable under the provisions of this Act shall, at the time of payment, unless he is himself liable to pay any income-tax or super-tax thereon as an agent, deduct in the case of a company, income-tax at the maximum rate and super-tax at the rate applicable to a company and, in other cases, tax, in accordance with the provisions of subsection (1) of section 17: ' Provided that the proviso to subsection (2-B) shall apply to the deduction of tax under this subsection as it applies to the deduction of tax under subsection (2-B) except that, in the case of a company, the certificate or order shall not be issued or made without the prior approval of the Commissioner: ' Provided further that nothing in this section shall apply to any payment made in the course of transactions in respect of which a person responsible for the payment is deemed under the first Proviso to section 43 not to be an agent of the payee."
' Subsection (7) of section 18 of the Act: "(7) If any such person does not deduct or after deducting fails to pay the tax as required by or under this section, he, and in the cases specified in subsection (3-C) the company of which he is the principal officer shall, without prejudice to any other consequences which he or it may incur, be deemed to be as assessee in default in respect of the tax and shall, in addition to such tax pay an amount at the rate of two per cent per month of such tax, for the period commencing on the date following the expiry of the prescribed time referred to in subsection (6) and ending on the date of the actual payment of the tax."
7. A perusal of the above-quoted section 42 indicates that it inter alia contemplates charging of income-tax on the income, profits or gains accruing or arising whether directly or indirectly from any business connection in Pakistan or through or from any property in Pakistan or through or from any asset or source of income in Pakistan or through or from any money brought into Pakistan in cash or in kind or through or from the sale, exchange or transfer of a capital asset in Pakistan either in the name of non-resident or in the name of agent. It also provides that any such agent or any person who apprehends that he may be assessed as such as agent may retain out of any money payable by him to such non-resident person a sum equal to his estimated liability under subsection (1) and in the event of any disagreement between non-resident person and such agent or person as to the amount to be so retained, such agent or person may secure from the Income Tax Officer a certificate stating the amount to be so retained pending fmal settlement of the liability and the certificate so obtained shall be his warrant for retaining that amount.
Whereas Section 43 empowers an Income Tax Officer to cause the service of a notice of his intention of treating any person employed by or on behalf of a person residing out of Pakistan or having any business connection with such person or through whom such person is in receipt of any income, profit or gain intimating about his intention of treating him as the agent of the nonresident and upon service of such a notice the person for the purposes of the Act be deemed to be such agent. The second proviso to the above section lays down that no person shall be deemed to be the agent of a non-resident person unless he has had an opportunity of being heard by the Income Tax Officer as to his liability. It may also be observed that the explanation to the second proviso provides 28-2-1947 as terminus a quo for the purpose of determining the liability to tax the capital gain in respect of the transactions referred to therein.
It may also be noticed that subsection (3-B) of section 18 imposes an obligation upon any person responsible for paying to a person non-resident in Pakistan (in sum not being interest or securities) chargeable under the provisions of the Act to deduct at the time of making payment, income-tax at the maximum rate and super-tax at the rate applicable to a company and in other cases tax in accordance with the provision of section 17 "unless he is himself liable to pay any income-tax and super-tax thereon as an agent".
It may further be noticed that above subsection (7) of section 18 provides that if any person does not deduct or after deducting fails to pay the tax as required by or under this section he and in the cases specified in subsection (3-C) the company of which he is the principal officer shall without prejudice to any other consequences which he or it may incur be deemed to be an assessee in default in respect of the tax and shall in addition to such tax pay an amount at the rate of 2 per cent per month on such tax for the period commencing on the date following the expiry of the prescribed time referred to in subsection (6) and ending on the date of the actual payment of the tax.
8. From the above quoted provision of subsection (3-B) of section 18 it is evident that any person dealing with a non-resident is liable to deduct income-tax and super tax etc. At the time of making payment "unless he is himself liable to pay any income-tax and super-tax thereon as an agent". It may further be noticed that if such a person does not deduct in terms of above subsection (3-B) of section 18 the consequences are provided for in above-quoted subsection (7) of section 18 which inter alia provides of treating him as the assessee in default and apart from the recovery of taxes also to recover interest at the rate of 2 per cent per month on the amount of tax involved. The High Court in the instant case while construing the above expression "unless he is himself liable to pay any income-tax and super-tax thereon as an agent" employed in above-quoted subsection (3-B) of section 18 has held that "His liability to himself and personally pay the tax due from the non- resident arises only after the assessme nt has been completed in his name as an agent and he is relegated to the position of an assessee in his own name in respect of the tax due from the non- resident. In our opinion until the completion of this assessment in the name of the agent, he is charged with a continuing duty enjoined upon him under subsection (3-B) of section 18 of the Act to deduct the tax at the source from the payments due to the person who is not resident in Pakistan."
9. The crux of the matter is that, whether the High Court has placed proper construction on the word "liable" used in subsection (3-B) of section 18. Though the High Court has referred in its judgment the following two cases of English jurisdiction but distinguished the same on the ground that while construing a particular statute the definitions given in the other statutes cannot be imported. In our view, the above two cases are directly applicable to the present case.They do not deal with the definitions of the word "liable" given in the statutes which were the subject-matter of construction in, the above two cases but they deal with the ordinary meaning of the above word. At this juncture it may be pertinent to refer to the above cases, namely:--
(i) Littlewood v. George Wimpey & Co., Ltd. British Overseas Airways Corporation (1953 (2) All England Law Reports 915); In the above-cited case the subsection (1) of section 6 of the Law Reform (Married Women and Tortfeasors) Act, 1935, which reads as follows was the subject-matter of the interpretation:- "Where damage is suffered by any person as a result of a tort
(c) any tortfeasor liable in respect of, that damage may recover contribution from any other tortfeasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought."
' Denning L.J. While construing the word "liable" used in the above-quoted section has observed as follows:- "What is the meaning of the word "liable"? There are two rival views.. One is that "liable" means "held liable". According to this view a person is not liable for the damage unless and until he has had judgment entered against him. The other view is that "liable" means "responsible in law". According to this view, a person may be liable for the damage even though he has not been sued to judgment. In my opinion, the ordinary meaning of the word "liable" in a legal context is to denote the fact that a person is responsible at law. Thus, when it is said (as Lord Chelmsford, L.C., once said (3 Macq. 306) in a leading case, Bartonshill Coal Co. v. McGuire (7) that a master is liable for the wrongdoing of his servant, that means that he is responsible for it in a Court of law. It does not mean that -he has actually been sued for it. Furthermore, a man may be "liable" in this sense even though the remedy against him is suspended or barred for some reason or other."
(ii) Roberts v. Roberts (1962 (2) All England Law Reports 967).
' In the above case the subject-matter of the construction was subsection (5) of section 2 of Matrimonial Proceedings (Magistrates' Courts) Act, 1960, which reads as follows:-- "In considering whether any, and if so what, provision should be included in a matrimonial order for payments by one of the parties in respect of a child who is not a child of that party, the Court shall have regard to the extent, if any, to which that party had, on or after the acceptance of the child as one of the family, assumed responsibility for the child's maintenance, and to the liability of any person other than a party to the marriage to maintain the child."
' The appellate Court while exercising jurisdiction Probate, Divorce and Admiralty Divisions, observed as follows as to the meaning of the word "liability":-- "We do not consider that procedural considerations compel us to put a restrictive interpretation on the word "liability" in section 2(5), of the Act. Nor do we think that such an interpretation is consonant either with the intention of the enactment or the ordinary sense of the words. The subsection is concerned with circumstances such as where an illegitimate child of the wife, or her child by a former marriage which has terminated in divorce, has been accepted by the husband as one of his family. Where a Court order is in existence providing for the maintenance of such a child the Court would probably have to take it into account as part of the income of the wife or the child quite apart from subsection (5). The provisions of the subsection are particularly necessary to do equity between the husband and the father of the child in those cases where there is no order of a Court in favour of the child at the start of the proceedings under the Matrimonial Proceedings (Magistrates' Courts) Act,1960.
' This does not involve any strained use of the language of the Act. On the contrary, it is in a primary sense that "liable" is used as equivalent to "answerable for" or "legally amenable to":"
From the above-referred judgments, it is evident that the ordinary meaning of the word "liable" in a legal context is to denote the factum that the person concerned is answerable at law and it is not necessary that his liability should have been determined by a competent forum.
' At this juncture, it will be pertinent to refer to the definition of the word "liable" given in Chambers 20th Century Dictionary page 726, Oxford English Dictionary 1933 Edition page 234, Black's Law Dictionary Fifth Edition page 824, as follows:- Chambers 20th Centry Dictionary page 726. "liable" adj. Subject to an obligation: exposed to a possibility or risk: subject (Shak): responsible (for): tending (usually with to): apt: sitting, suitable (Shak): likely (to).-n. Liability state of being liable: that for which one is liable, a debt, etc. Employers' liability, responsibility of employers to their servants for the negligence of those to whom they have delegated their authority; limited liability, a principle of modern statute law which limits the responsibilities of shareholders in a partnership, joint stock company, etc., by the extent of their, personal interest therein.(App. Fr.Lier L. Ligare, to bind)."
The Oxford English Dictionary 1933 Edition page 234. "Liable, a. Also 67 lyable (7 layable) (Plausibly explained as a. AF. Liable = med. L. Ligabilis that can be bound, f. Ligare, F. Lier to bind; but if this be the origm,it is strange that the word is not known in AF. Or Law Latin).
1. Law. Bound or obliged by law or equity, or in accordance with a rule or convention; answerable (for, also const. To which the same sense); legally subject or amenable to."
Black's Law Dictionary Fifth Edition page 824. Liable. Bound or obliged in law or equity; responsible; chargeable; answerable; compellable to make satisfaction, compensation, or restitution. Homan v.
Employers Reinsurance Corporation, 345 No, 650, 136 S.W.2d 289, 298. Obligated; accountable for or chargeable with. Condition of being bound to respond because a wrong has occurred. Condition out of which a legal liability might arise. Pacific Fire Ins. Co. v. Murdoch Cotton Co., 193 Ark. 327, 99 S.W.2d 233, 235. Justly or legally responsible or answerable.
' Exposed or subject to a given contingency, risk, or casualty, which is more or less probable. Pacific Fire Ins. Co. v. Murdoch Cotton Co., 193 Ark. 327, 99 S.W.2d 233, 235. Exposed, as to damage, penalty, expense, burden, or anything unpleasant or dangerous. See also Liability.
' Future possible or probable happening which may not actually occur, and relates to an occurrence within the range of possibility."
' Reference may also be made to Corpus Juris Secundum Volume 53, which treats the above word as follows:-- "Liable. The term "liable" is given many shades of meaning and definition. It is a word with a common and ordinary signification, but is used in a legal sense as well as in an academic sense.
The term is not restricted to denote an absolute legal and fixed liability. In fact, as most frequently used, the word does not necessarily exclude the idea of a contingency, but may refer to a condition out of which a legal liability might arise; a future possible or probable happening which may not actually occur; signifying something that might happen without importing reasonable certainty that it will happen. In this sense, when the word is employed to denote possibility it does not indicate probability, but has the meaning expressed by the phrase "within the range of possibility".
"Liable" has been variously defined as meaning bound or obliged in law or equity; answerable; likely or probable; obligated; responsible,; accountable for, or chargeable with; justly or legally responsible; bound or obliged; qualified; responsible, answerable, or compellable to make satisfaction, compensation, or restitution.
' Expressing the idea of contingency, the word has been defined as meaning exposed to a certain contingency or casualty, more or less probable; exposed, as to damage, penalty, expense, burden or anything unpleasant and dangerous; bound, in the present, to pay, in the future, certainly, or on contingency; financially responsible, to be obliged to pay, at least, on a contingency.
"Liable" has been held to be synonymous with "likely" and "probable" each dealing with resonable probability, not with possibility. It has also been said that "liable" is a synonym of "subject," and that it is equivalent to "in all probability" see 42, CJ.S. p.476 note 73.1.
It has been compared with, or distinguished from, "possibly," "qualified", "responsible," and "subject."
The above-quoted definitions of the word "liable" indicate that it inter alia carries the meaning as "subject to an obligation", "that for which one is liable", a debt, 'bound or obliged in law or equity", "responsible", chargeable", "answerable legally subject or amenable to, "compellable to make satisfaction, compensation or restitution".It is also evident that the meaning of the word "liable" is not restricted to denote an absolute and fixed liability, but has the meaning expressed by phrase "within the range of possibility".
10. The rule of interpretation of statutes referred to in the above two cases of English jurisdiction has been consistently pressed into service by the superior Courts in Pakistan. In this behalf reference to the following judgments of this Court will not be out of context:--
(i) Mehar Khan v. Yaqub Khan and another 1981 SCMR 267; in which this Court while construing the word "inquiry" used in Sections 190(1)(3) and 344(1) Cr.P.C.
Inter alia observed as follows:- "No doubt the elementary rule of construction is that the words used in a Statute should be construed literally but according to what is termed as the 'Golden Rule of Interpretation' by Maxwell, the ordinary meaning of a word need not be adhered to if a construction based on it, would be at variance with the intention of the Legislature as collected from the Statute itself or if it leads to an absurdity. In such cases the language may be varied or modified so as to avoid such absurdity or inconvenience Beck v. Smith (1836) 2 M W 191). While interpreting the statutes like the one before us, the proper mode of interpretation or discovering the true intention of the Legislature would be to consider as to what was the state of law before the statute or its provision was given its present form and as to what was the mischief or difficulty which was sought to be suppressed and remedy which the Legislature had intended to advance. Ref: Abdul Majid Khan v. Chief Settlement and Rehabilitation Commissioner PLD 1968 SC 154; Division Superintendent, P.W.R. v. Bashir Ahmad PLD 1973 SC 589; and Rabnawaz v. Jahana PLD 1974 SC 210 and Maxwell on the Intepretation of Statutes, 12th Edn. At p.40."
' Hirjan Salt Chemicals (Pak) Ltd. v. Union Council and others 1982 SCM R 522; in which this Court made the following observation on the question in issue:-- ' It is now a well-established principle of interpretation of Statutes that Rules which are merely subordinate legislation, cannot override or prevail upon the provisions of the parent statute and whenever there is an inconsistency between a Rule and the Statute, the latter must prevail. This, however, envisages that all efforts to reconcile the inconsistency must first be made and the provisions of the parent statute prevail only if the conflict is incapable of being resolved. We also do not have any cavil with the proposition that when construing any word used in a Statute which has not been defined therein, it should be understood to have been used in its dictionary meaning or even its ordinary or popularly understood meaning.....
(iii) Messrs Rafhan Maize Products Co. Ltd v. Pakistan Food and Agriculture Committee and another 1986 SCM R 1114.
In the above case the principle of interpretation enunciated in the above two cited cases, was reiterated in the following words:-- "It is urged by the learned counsel for the appellant that as the oilseeds are not defined in the Act, they should mean as understood in the commercial parlance, that is, they should be predominantly oil bearing. If this meaning was to be given then it would not be its plain grammatical meaning according to the settled rule of interpretation. The principle is that when this meaning is contrary to, or inconsistent with the expressed, intention of the word or involves any absurdity, repugnance, or inconsistency, it is only then that the grammatical sense is modified, extended, or abridged so as to avoid any ambiguity, but no further. Here this is not the case. In the Statute, clause (e) merely refers to oilseeds with the exception of coconuts. Obviously, the word "oilseeds" is used in totality to include all oil yielding seeds irrespective of their oil contents, which, in our view, is the expressed intention of the word."
(iv) Reference may also be made to para 189 from the. Construction of Statutes by Earl T. Crawford 1940 Edition, which reads as follows:- "189. General and Special Words or Terms.-It is also a basic rule of construction that general words should be given a general construction; that is, they should be given their full and natural meaning, unless the statute in some manner reveals that the legislative intent was otherwise. Such a contrary intent may be found in the purpose and subject-matter, or context of the statute, so that as a result the general terms may be qualified or restrained"
11. In our view, the conclusion arrived by the High Court that the expression "unless he is himself liable to pay any income-tax and super-tax thereon as an agent" will cover a person who has been already assessed as an agent of nonresident, is not in consonance with the above subsection (3- B) of section 18 or the Rules of Interpretation of Statutes. We are inclined to hold that the word "liable" employed in above subsection (3-B) of section 18 does not mean that the liability should have been determined by framing an assessment order in the name of an agent on behalf of a non-resident. At this juncture, it may be pertinent to refer to the famous observation of Lord Dunedin in the case of Whitney v. Inland Revenue Commissioners (1926 A.C. 37) relevant at page 52 which reads as follows:-- "My Lords, I shall now permit myself a general observation. Once that it is fixed that there is liability, it is antecedently highly improbable that the statute should not go on to make that liability effective. A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable. Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessm ent. Liability does not depend on assessment. That, ex hypothesis has already been fixed. But assessm ent particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."
' The above observations were quoted with approval by Hamoodur Rahman, J in the case of Lt.- Col.Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan, Karachi,and another PLD 1962 SC 335, as follows:-- "Mr.Brohi, nevertheless, maintained that the Court had omitted to take into account the fact that by reason of the change introduced by the late Constitution the Controller of Estate Duty, who was an officer of the Central Government, would not be competent after the coming into force of the late Constitution to continue to collect estate duty in respect of agricultural lands, even though it may have accrued due before the coming into force of the late Constitution, for, the executive authority of the Federation extended only to matters with respect to which it could make laws. This argument, though attractive, cannot, in my opinion, be accepted, for, it fails to take into account the distinction between the charging and the machinery provisions of a taxing statute. The liability to pay the tax, arises by virtue of the charging sections alone, though quantification of the amount payable may be postponed. As observed by Lord Dunedin at page 110 in the case of Whitney v. The Commissioner of Inland Revenue (10 T C (HL) 88), "there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessm ent. That ex hypothesi has already been fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay.
12. It is by now a well-settled principle that the liability to pay tax is created by the Income Tax Act but payability and the quantification of tax depend on the passing and application of Annual Finance Act. In this regard, reference may be made to the case of Wallace Brothers and Co. Ltd. v.
Commissioner of Income-Tax, Bombay City and Bombay Suburban District (1948 (16) ITR 240) and the case of Chatturam Horilram Ltd. v. Commissioner of Income-Tax, Bihar and Orissa (1955 (27) ITR 709). In the above first case the Privy Council and in the second case the Indian Supreme Court has dilated upon the above aspect succinctly.
13. In our view, the effect of the above-quoted sections 42 and 43 read with section 18(3-B) of the Act is that it contains a declaration of liability of an agent assessee to pay taxes for a non-resident with whom he has or had business dealings or transactions of the nature referred to inter alia in section 42 of the Act. In the instant case the above declaration of liability was manifested upon service of more than one notice under section 43 of the Act upon the appellant. The palpability and the quantification of taxes were to be determined under the relevant Finance Acts upon their enactment. But this was not done in the present case. Instead of framing assessment orders of the relevant assessm ent years in the name of the appellant as the agent of the foreign supplier, the assessm ent orders were made in the name of the foreign supplier but the appellant were penalized under subsection (7) of section 18 of the Act for having failed to deduct the taxes under subsection (3-B) of above section 18 at the time of making payments to the foreign supplier. Since the appellant were liable to pay taxes as an agent for the foreign supplier, they were not obliged to deduct taxes under the above provision and, therefore, subsection (7) of section 18 of the Act for imposing penal interest upon the appellant could not have been pressed into service as was rightly held by the Income-tax Appellate Tribunal. The High Court fell into error of law by taking a different view.
' The appeal is, therefore, allowed and the High Court judgment is set aside and the referred question is answered that the Income-tax Appellate Tribunal was legally justified to cancel the Income-tax Officer's order passed under section 18(7) of the Act. However, there will be no order as to costs.