' NASIM SIKANDAR, J.-In these four further appeals under section 136 of the late Income Tax Ordinance, 1979 the Revenue claims that following common question of law has arisen out of the consolidated impugned order of the Tribunal, dated 14-1-1998:-- "Whether under the circumstances and facts of the case, the learned ITAT was justified in holding that the dividend income of an Insurance Company was to be taxed separately on lower rate at 5% instead of General rate of tax in the presence of Rule 5 of Fourth Schedule to the Income Tax Ordinance, 1979 read with section 26(a) of the said Ordinance."
2. The respondent is a public limited company and during the period relevant to the assessment years 1993-94 to 1996-97 derived income from General Insurance dividend and capital gain on sale of shares. In all these years it was, inter alia, aggrieved of the charge of tax on dividend income at the rate and its treatment as income from General Insurance. The learned Members of the Tribunal on the basis of the ratio settled by the Hon'ble Sindh High Court, Karachi as well as Hon'ble Supreme Court of Pakistan in re: Adamjee Insurance Co. Ltd. And others v. Income Tax Officer and others 1995 PTD 761, re: Messrs E.F.U. General Insurance Co. Limited v. The Federation of Pakistan and others PLD 1997 SC 700 = 1997 PTD 1693 re: General Insurance Company v. C.B.R. (1993 SCM R 1232) allowed the contention of the company that the computation of income profits and gains from insurance business and the tax payable thereupon were two different concepts altogether.
3. Learned counsel for the respondent, Dr. Ikram-ul-Haq, Advocate, states and we will agree that the issue in hand having already been finally decided by the Hon'ble Supreme Court of Pakistan, the department should not have filed an appeal unless they could establish a distinction between the case of the respondent company and the facts falling for consideration by the Hon'ble Supreme Court of Pakistan in the cases of E.F.U. General Insurance Co. Ltd., (Supra) and General Insurance Company (Supra).
4. Also points out that in the very case of the respondent-Company for early years a Division Bench of this Court, in which I was also a member, the principle laid down by the Hon'ble Supreme Court was reiterated, followed and the appeals filed by the company were accepted. In that judgment we also benefited from the observations of the Apex Court in the aforesaid two judgments. The relevant part of the judgment now reported as re: Muslim Insurance Co. Ltd. Lahore v.
Commissioner of Income-tax 2002 PTD 557 reads as under:- "(6) The issue in hand has too facets. Firstly if the dividend income or for that matter any other income derived by an Insurance Company is to be computed under the special provisions as provided for in section 26 of the Ordinance read with the Fourth Schedule thereto. Secondly, if while computing the income of an Insurance Company it is entitled to any concessional rate of taxation as provided for in the Second Schedule to the Income Tax Ordinance, 1979. In re. Central Insurance Company (Supra), their Lordships of the Supreme Court maintained the view that income from interest on Khas Deposit Certificate/ Defence Savings Certificates earned by an Insurance Company being part of the profits and gains of Insurance business were liable to tax. That view was reaffirmed by their Lordships in the case of Messrs E.F.U. (Supra). However, the second question was never an issue before the Hon'ble Supreme Court in the case of Central Insurance Company (Supra). Accordingly their Lordships in the course of their judgment in re: Messrs E.F.U. (Supra) observed that there being no provision in the Ordinance or the Schedule that any one part of the first Schedule shall not apply in the case of General Insurance Companies the Beneficial rate of tax available under the First Schedule could not be denied except by the suitably amending the law.
Their Lordships while interpreting the provisions of section 26(a) of the Ordinance read with the provision of Fourth Schedule expressed that the rules in the Fourth Schedule contain special provisions for computation of income from general insurance business but there was no provision at all in them for computation of tax on such income. Their Lordships while interpreting all the relevant provisions including those contained in the First Schedule providing for computation of tax on income from business came to the conclusion that if any benefit in the rate of tax was provided on any kind of income in the Insurance Companies could not be deprived of such benefits.
According to the Hon'ble Judges, in absence of any provision that such benefit shall not be extended to income or general Insurance Companies, the benefit of a lower tax rate could not be denied to them.
5. In view of the ratio settled by the Hon'ble Supreme Court of Pakistan in the aforesaid judgments particularly in the case of Messrs E.F.U. General Insurance Co. (Supra) our answer to the aforesaid question is in the affirmative that the learned Tribunal was correct in law by holding that the dividend income of the appellant-Company was to be taxed separately on lower rate.
6. All four department appeals shall, therefore, be dismissed. This order shall also govern I.T.As. Nos.
141, 142 and 143 of 1998.