' WAJIHUDDIN AHMED, J.--Petitioner herein challenges imposition of Capital Gains Tax on an assignment, dated 8-4-1982, whereby industrial plot bearing No,D/84, situated at Sindh Industrial Trading Estate Limited, (SITE), Karachi was assigned in favour of Messrs Arbi Industries. The case of the petitioner is that such assignment was made by Messrs Abdul Majeed, Muhammad Iqbal, Muhammad Farooq and Mst. Zubeda, acting on behalf of the petitioner Company, in favour of the referred Arbi Industries, the partnership firm of the same parties and having its Registered office at the same place as that of the petitioner and, further, that such assignment was made, in anticipation of liquidation of the petitioner Company, in such manner that there was no real transfer but a mere change of name the property remaining, all the time, vested in the same persons. In support is cited, a letter dated 28-1-1982 whereby SITE recorded its consent to the change of the Unit in the new name. Liquidation of the Company, through a Special Resolution dated 22-1-1983 was, subsequently, brought about, as reflected in the Gazette of Pakistan, dated 9- 2-1983. In the meantime, however, per order, dated 1-4-1982, the Excise and Taxation Officer, L- Division, Karachi had assessed Capital Gains Tax in the sum of Rs,53,312. Appeal before the Director, Excise and Taxation, Karachi, failed on 30-3-1983, that officer observing that the appeal was preferred on 21-4-1982 whereas liquidation of the petitioner Company came about subsequently, indicating an afterthought and disentitling the petitioner to any relief on account of such liquidation. Revision against such order before the Director General, Excise and Taxation, Sindh, also, failed on 23-4-1985. This petition was preferred on 4-11-1985, that is, within around 6 months of the order impugned in the proceedings which, by practice, as evolved, is the approximate period of time, within the perimeters whereof, Constitutional remedies should, normally, be resorted to.
2. Capital Gains Tax was introduced through the West Pakistan Finance Capital Gains Tax was introduced through the West Pakistan Finance Act, 1963, and resulted upon Section 16 of that Act.
Such Taxation measure has, since, been repealed and the element of revenue thus lost seems to have been covered by enhanced stamp duty on transfers etc. Still the rights and obligations of the parties under section 4 of the W.P. General Clauses Act, 1956 are to be determined on the basis of the law, as it prevailed at the time of the transaction and passing of incidental orders, for such transactions are governed by the substantive law, as in force at the time the same were concluded and, pending proceedings while substantiate law undergoes repeal or amendment, are to be decided, in accordance with the un-repealed or un-amended law, as those proceedings, carry their own law, until brought to conclusion under such law.
3. Accordingly, it would be proper to reproduce herein relevant portions of section 16 of the West Pakistan Finance Act, 1963, in order to appreciate the implications, incidence and effect of such provision:-- "16. Capital gains tax.---(1) A capital gains tax shall be levied on any profits or gains arising from the sale, exchange or transfer of immovable property effected after the 30th day of June 1963, within urban areas specified by Government under section 3 of the West Pakistan Urban Immovable Property Tax Act, 1958 (West Pakistan Act No,V of 1958): ' Provided that the tax shall not be levied on the transfer of immovable property in consequence of the compulsory acquisition thereof under any law for the time being in force relating to compulsory acquisition of property for public purpose or the distribution of immovable property on the total or partial partition of a Hindu undivided family or the distribution of such property on the dissolution of a firm or other association of persons or on the liquidation of a company or under a deed of gift, bequest, will or transfer on irrevocable trust."
' Mr. Abdul Latif A. Shakoor relies on the proviso to section 16(1) above to contend that the assignment in question here was not a transfer, as contemplated by section 16(1), and, in any case, the transaction, being in the nature of distribution of property on liquidation, was immune from the levy of Capital Gains Tax.
4. The petitioner alleges and it has not, effectively, been countered that the only directors/share- holders in the petitioner Company were the persons named above, who alone became partners in the firm of Messrs Arbi Industries. Indeed, no Counter Affidavit has been filed to question these averments. The contention of the petitioner is that the assignment was no more than a mere change of name and not a transfer strict sensu, incidental whereto the same individuals, acting for the Company, are shown to have assigned their rights and entitlements in their own favour though, in so acting they have used different characters. The concept of a firm, under the Partnership Act, 1932, is not that of a legal entity but of a mere combination of persons, who join hands to carry on business with a view to share in profits and to contribute in losses, if any, resulting upon the carrying on of such business. Thus, as regards a firm there is no particular difference between the assumed firm name and those who combine to acquire such name. Difficulty, however, arises in relation to a company, registered under the Companies Act, 1913, which was the statute thin.
Applicable or of such registration, under the present dispensation, which is governed by the Companies Ordinance, 1984. Such a company is a legal entity and a legal person different, and distinct from its share-holders. While a company can sue and be sued in its own name in much the same way as a registered firm, the difference, between the two concepts, lies in the location and incidence of the respective laities and obligations in relation to a company and a firm. A Limited Company is itself liable for its debts and obligations and share-holders cannot be reached except to the extent of their share contributions or holdings or of the moneys that may be due towards the shares acquired by them or, in case of a company, limited by guarantee, to the extent of the amounts guaranteed by the contributories to the company. On the other hand, the liability of partners in a firm is co-extensive with that of the firm itself and is unlimited, so much so that, any of the partners can be made to pay all the liabilities of the firm, irrespective of his capital contribution in such firm or even the proportion in which he is liable to contribution in losses and this may happen in complete disregard of the liability of the other partners who, of course, may ultimately be made to contribute by the partner, actually, taken recourse to, to make good the liability of the firm.
5. Since the claim of the petitioner before the Taxation authorities was that there was no actual transfer but a mere change of name, we are called upon to examine the real character of the assignment and this we can do by delving and penetrating into the relevant documents with a view to see, as to who constituted the petitioner company. As observed above, while a company, by fiction of law, is a juristic person and an entity, in appropriate cases, in order to assess its true import and character, the veil of incorporation can be lifted. Reference on the point may be made to Bacus S.R.L. v. S. Servico National Del Trigo 1953 1 QB 438, Commissioner of Income Tax v. E.V. Miller PLD 1959 SC 219, President v. Mr. Justice Shaukat Ali PLD 1971 SC 585, West Pakistan Road Transport Board v. The Commissioner of Income Tax PLD 1974 Note 9 at p. 39, Sindh Industrial Trading Estate Limited v. Central Board of Revenue PLD 1975 Kar. 128 and Central Board of Revenue v. S.I.T.E. PLD 1985 SC 97. Resorting to this dicta and examining the relevant entity of the petitioner, we find that the petitioner, as incorporated, represented the same individuals/persons to whom the disputed assignment was made and, therefore, in reality there was no transfer, so as to attract the levy of Capital Gains Tax in the context of the assignment under the reference.
6. Taking up the question of liquidation of the petitioner and disregard of such development by the Director, Excise and Taxation, in appeal, the sole ground which carried weight with that learned officer was the factum of the liquidation taking shape at the stage when the appeal, against the levy of the Capital Gains Talc was pending. In relation to such aspect of the matter, it may, relevantly be pointed out that the deed of Assignment in question was concluded on 8-41982 and admitted to registration on 10-4-1982. However, the Excise and Taxation Officer had already imposed the levy vide his order dated 1-4-1982. It would, therefore, seem that the Taxmen themselves did not wait for the Assignment to come about and conclude and patently acted not only in haste but even prematurely. The subsequent liquidation could, therefore, be an event, which came about at an enforced leisurely pace largely, perhaps, as the petitioner found itself in the Tax Web, before it had even taken the leap. On this preemptive perspective alone the subsequent event of liquidation of the petitioner company should have been viewed, even though that occurred after the appeal had been filed, since the petitioner, in all appearances, was not allowed due chance to take follow up action concomitant upon the Assignment.
7. As to the observation of the Director, that the liquidation was an afterthought all that can be said is that no Assignment could conveniently be made unless the petitioner Company was a subsisting entity and it was, evidently, thus that first, the Assignment and then liquidation was gone into. It is settled law that supervening facts, events and developments occurring during the course of proceedings can be looked into and considered, so as to give effect to the realities of the situation as it prevails, at the time when effective orders are to be passed. Nonetheless in cases where the subsequent developments are engineered and wrought with a view to commit fraud the same are to be looked at with suspicion and even decried. However, looking to the substance of what had transpired it has to be determined whether the Director was right in taking the view that such liquidation, as aforesaid, was a mere afterthought. It was manifestly a development in consonance with a scheme of folding up of the petitioner Company and transferring its assets to the constituents. Matters in liquidation take time to finalise and it was, apparently, with this view that the Assignment was made in anticipation of liquidation but the transaction was hardly a transfer in view of the what has been observed above. The subsequent liquidation was, therefore, clearly an event of which proper notice should have taken and given effect to.
8. A bare perusal of the proviso to section 16(1) the W.P. Finance Act, 1963, makes it clear that devolution of property, on liquidation, of a company is not be subjected to Capital Gains Tax. Since the petitioner company was actually liquidated and no different result was brought about by taking recourse 'to .The Assignment, there does not seem to have been any justification to visit the levy of Capital Gains Tax in the context of the disposition in dispute.
9. The orders questioned herein are grounded on exceeding the jurisdiction conferred by law and are thus, illegal and without lawful authority, In the result, this Petition has to be allowed. Such impugned orders are quashed. There will, however, be no orders as to costs.