JUDGMENT: SALEEM AKHTAR, J.--1. For the assessm ent year 1978-79 the Income Tax Officer determined the respondent's total income at Rs, 21,122. He did not consider any part of income having been retained and thus calculated tax on the entire total income which worked out at Rs, 10,560. He further imposed surcharge payable @ 10% on the tax payable, which came to Rs, 1,056. This surcharge was imposed in view of section 4 of the Finance Ordinance 1977. In the assessment order no specific mention of retained income was mentioned but in the Income Tax Form XXX which is a part of assessm ent order the surcharge was worked out and had been imposed. The respondent filed appeal against this order and the Appellate Assistant Commissioner accepted it following the decision of the Income Tax Appellate Tribunal. The Appellate Assistant Commissioner thus deleted the surcharge against which the Department filed appeal. While upholding the order of the Appellate Assistant Commissioner the Tribunal observed as follows:-- "The order of the assessing officer regarding the levy of surcharge is also silent inasmuch as no reasons have been given as to why surcharge was imposed when the entire income was retained in both the years. In view of these facts, the learned Appellate Assistant Commissioner was justified in deleting the surcharge in both the years and his orders on this issue are accordingly upheld."
2. The Department filed an application under section 66(1) and the following question has been referred:-- "Whether on the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the entire income could be considered as retained income for purposes of levy of surcharge?"
From the question as framed the finding of facts have not been challenged. We have, therefore, to proceed on the premises that the facts as found by the Tribunal are correct.
3. Mr. Shaikh Haider the learned counsel for the Department has contended that in fact no finding on issue whether the income was retained or not has been given by the Income Tax Officer nor any other authority. We do not agree with this contention because although the ITO had not given any reason or specific finding for imposing surcharge he had imposed it which was set aside in appeal and the Appellate Assistant Commissioner found that no part of the income was retained. This finding has been confirmed by the Appellate Tribunal which has not been challenged. The surcharge was imposed by section 4 of the Finance Ordinance, 1977 which reads:-- 'Surcharge under Act XI of 922.--Surcharge under the Income-tax Act, 1922 (XI of 1922), shall be charged in respect of any assessm ent for the year beginning on the first day of July, 1977 at the rate specified in Part III of the First Schedule".
4. The rates were specified in the First Schedule, Part III, but by section 4 of Finance (Amendment)
Ordinance, 1978 Part III, was substituted as follows:-- "PART III, RATES OF SURCHARGE.
(a)In the case of every company....................
10 per cent of the income-tax and super-tax payable on total income as reduced by so much of the income as has been retained for the purpose of capitalization or for meeting working capital requirement: Provided that, if the income so retained is distributed in any subsequent years, the surcharge shall be payable on the income so distributed at the same rates in that year.
(b)In the case of every other person. 10 per cent of the income-tax and super-tax.
(c)In the ease of every person deriving income from the business of manufacture, purchase or sale of jewellery, including gold, silver, precious metals, stones and ornaments or other articles made thereof: Provided that, the surcharge shall not be payable by any person (not being a company) whose total income does not exceed Rs, 12,000.
In addition to any sum payable under clause (a) or (b), a further sum equal to 6 per cent of such income."
5. A perusal of these provisions will show that the surcharge is to be levied on the income-tax and super-tax payable on the total income after excluding the income retained for capitalisation or meeting working capital requirement. In the present case the finding of the learned Tribunal is that the entire income has been retained. Therefore, the question of imposing any surcharge does not arise. In this regard reference can be made to CIT v. Pakistan Tobacco Co. Ltd. 1988 PTD 66. We, therefore, answer the question in the affirmative.