CH. MUHAMMAD ARIF, J.---As the questions of law and facts are common in all the above petitions, therefore, the same are being disposed of through this common judgment.
2. These petitions have arisen in the background of the facts that the assessment of the petitioners, who were engaged in manufacturing and sale of various commodities, in the years 1994-95, 1995- 96, 1996-97 and 1997-98, was finalized under section 62 of the Income Tax Ordinance,1979 (XXXI of 1979), hereinafter referred to as the Ordinance. Subsequently, show-cause notices were issued to them under section 66-A of the Ordinance on the point that introduction of "share deposit money" over and above the authorized capital otherwise than by crossed cheques was against the provisions of section 12(18) of the Ordinance. The Inspecting Additional Commissioner considered the above amounts as "loans" from Directors under the garb of "share deposit money" and cancelled the orders under section 62 of the Ordinance considering the same to be erroneous and prejudicial to the interest of the Revenue. The assessees challenged the orders of the Inspecting Additional Commissioner before the Income Tax Appellate Tribunal, but without any success.
However, Income' Tax Appeals Nos.191 of 2000, 192 of 2000, 677 of 1999 and 321 of 2000 filed by them under section 136(1) of the Ordinance were allowed by a learned Division Bench of the Lahore High Court, Lahore with, among others, the following observations:--- "9. It will be seen that in all the cases before us ultimately ma only the authorized capital of the appellants were increased ;Art also shares were issued against the deposits to the respective applicants . The findings of this Court in re: CIT v. Crescent Textile Mills Ltd. (supra) support the claim of the applicants that the amounts deposited by shareholders were proper share capital and that issuance of share certificates to existing shareholders was not necessary.
10. We are also in agreement with the contentions of the appellants that at the relevant time the express mention of the word `loan' excluded all other similar or equivalent terms, transactions, or nature of the receipts. According to the findings of this Court re: Chairman, Evacuee Trust Property v. Muhammad Din and another (supra) no maxim of law was of more general and uniform application than 'expressio unius est exclusio alterius'. According to their Lordships whenever a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative, viz., that the thing shall not be done otherwise. Therefore, in our view both the I.A.Cs. Stretched their powers under section 66-A unnecessarily to hook the appellants before us. They even acted in disregard of the Circular No.6/87, dated July 5, 1987 which explained the provisions of section 12(18) when these were introduced. That being the first reaction of the revenue and its interpretation of the provision, it had to be given serious thought at least by the Revenue Officers.
11. Learned counsel for the appellants also appear correct in suggesting that the purpose of introduction of the provisions of section 12(18) at the relevant time was to check fictitious loans and it was after quite some time that it was realized that the scope of the provisions needed to be expanded: It is also our opinion that no addition of the kind could possibly be made nor the defence taken by the appellants rejected without recording a finding of fact that these sums were injected in the business and were used as capital, circulating or otherwise. In other words the defence of the appellants/assessees could have been demolished only by recording a finding of fact that the alleged share deposit moneys were factually used in the business and, therefore, could be taken as 'loan' taken for catering the capital needs of the companies. Such an exercise is absent in the case of the appellant before us. Therefore, the findings of this Court in re: Prime Commercial Bank and others v. Assistant Commissioner of Income-tax 1997 PTD 605 are relevant.
In that case a Single Bench of this Court on the authority of an earlier view held in K.G. Old, Principal, Christian Technical Training Centre, Gujranwala v. Presiding Officer, Punjab Labour Court, Northern Zone and 6 others (PLD 1976 Lahore 1097) found it to be a settled proposition that generally an amendment is brought to bring out a change in the state of law unless the amendment was clarificatory or declaratory, in nature. In the present case there is nothing to show that the amendment in section 12(18) by Finance Act, 1998 was brought about to clarify the earlier provision and not to bring a change in it. All the more so when the amendment was not given retrospective effect as normally clarificatory or declaratory amendments are given.
12. Lastly we will also agree that the settled principle of taxing statutes that where two interpretations are equally possible then the one favourable to the subject is to be adopted is attracted in this case. The principle can also at times be extended to factual situations warranting application of deeming provisions. It means where the transaction can equally be placed within or outside the dividing taxing line, the one falling outside should be preferred against the one falling inside.
13. Since we have found that the provisions of section 12(18) at the relevant time were not applicable the exercise of revisional jurisdiction as a consequence thereof is also found to be illegal as the original amendments were neither erroneous nor prejudicial to the interest of Revenue.
14. Accordingly we are of the view that the questions Nos.1 to 5 raised in I.T.A. No. 492 of 2000 which are representative of the legal controversy involved in all appeals need to be answered in the negative. The appeals are accepted in terms thereof with the effect that exercise of power under section 66-A and additions of the sums received by the appellant-Companies and shown as share deposit money are set aside. Question No.6 as to the vires of section 12(18) in our opinion cannot be gone into inasmuch as this issue was' never raised before the Tribunal."
3. Mr. M. Ilyas Khan, learned counsel for the petitioners Department, contended that the amount received over and above the authorized capital was rightly deemed to be income within the contemplation of section 12(18) of the Ordinance and High Court had fallen in error by holding that the "share deposit money" could not be deemed to be income and provisions of section 12(18) of the Ordinance were not applicable.
4. Messrs Ibrar Hussain Naqvi and Ibrar Majal, learned Advocates Supreme Court, appearing for the respondents, have supported the impugned judgment. Mr. Majal has also contended that the deeming provisions would come into play only when the amount is either claimed or shown by the assessee. According to him, it is the discretion of the assessee which is the beginning point for the purposes of bringing the deeming clause to bear upon the facts of a given case for treating the same as "income/loan". Here no such thing happened through the assessees. It was also contended that the loan treated as 'income' was, in fact an advance raised in anticipation of increase of capital through resolutions which were passed shortly after the termination of assessm ent years in the form of "share deposit money". It was finally argued by both the learned counsel for the respondents that the expression "advance" added by the Finance Act, 1998 which became effective from 1-7-1998 was not attracted in respect of any of the assessees as the assessm ents had been finalized such before the aforesaid amendment.
5. We have considered the arguments addressed at the Bar and have also gone through the available material. The observations made by the High Court in the impugned judgment to the effect that in all the cases not only authorized capital of the respondents was increased but in fact shares were also issued against the deposits made by the applicants. This situation has not been controverted by Mr. Ilyas Khan, learned Advocate Supreme Court appearing for the petitioners Department. So, is the position with regard to judgment of the High Court in CIT v. Crescent Textile Mills Ltd. (1974) 29 Tax 242). We are convinced that the amounts in question were "share deposit money" .And not "loan" for the simple reason that shortly after the termination of the assessment years share capital was increased through resolutions in that regard. As mentioned earlier, the expression "advance" was added to section 12(18) of the Ordinance by the Finance Act, 1998 which became effective from 1-7-1998, therefore, even if these amounts were deemed to be advances, the same cannot be treated as 'income' on account of non-applicability of the aforesaid amendment.
6. Before parting with these matters, it may be observed that all concerned are one on the point that when two interpretations are possible in relation to any provisions in the discipline of taxation, the one favourable to the assessee is to prevail. The learned Members of the Division Bench of the High Court were quite right in reiterating the above principle of law in paragraph 12, already reproduced above, of the impugned judgment.
7. Resultantly, these petitions fail and are hereby dismissed. .