Commissioner Of Income Tax, Companies-IV, Karachi And Others vs M/S.
This matter concerns a petition for leave to appeal against a judgment of the Sindh High Court, which had allowed an income tax appeal and set aside an order of the Income Tax Appellate Tribunal (ITAT). The respondent, a private limited company, had declared a capital gain from the sale of industrial plots and construction, which the tax authorities treated as income from business by way of an adventure in the nature of trade. After the ITAT dismissed the respondent's appeal, the respondent unsuccessfully sought rectification under the Income Tax Ordinance, 1979. Subsequently, the respondent filed an appeal before the High Court. The Supreme Court granted leave to appeal to examine critical procedural and legal issues, specifically whether the appeal filed before the High Court against the original ITAT order was time-barred and maintainable, whether the High Court erred in ignoring statutory provisions and relevant Supreme Court precedents, and whether the impugned judgment is sustainable in law given the specific facts of the case.
- Whether an income tax appeal filed against an original order of the Income Tax Appellate Tribunal is time-barred when filed long after the original order?
- Can an appeal be maintained before the High Court if the statutory remedy of reference was not pursued?
- Whether the High Court is required to consider statutory provisions and binding precedents when deciding an income tax appeal?
- Section 156, Income Tax Ordinance 1979
- Section 2(11), Income Tax Ordinance 1979
- Section 136, Income Tax Ordinance 1979
- Rule 20, Income Tax Appellate Rules 1981
ORDER
RANA BHAGWANDAS, J-- Leave to appeal is sought against the judgment of a Division Bench of the Sindh High Court dated 3.1.2000 allowing Income Tax Appeal No. 158 of 1998 and setting aside the order passed by Income Tax Appellate Tribunal (hereinafter referred to as the ITAT) on an application under Section 156 of the Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance).
2. Respondent is a private limited company incorporated in 1963 with, an authorized capital of. Rs.
10 million (Rs. 1,00,00,000/-) with the main object of manufacturing electric fittings. For raising the factory the company acquired four adjoining industrial plots in Korangi Industrial Area in the sum of Rs. 2,42,069.27. Expenditure, on construction work in the assessment year 1966-67 was Rs.
30,495/-, in the assessm ent year 1966-67 was Rs. 30,495/- in the assessment year 1967-68 it was Rs. 36,698/-, in the assessm ent year 1969-70 it was Rs. 90,366/- and in the assessment year 1970-71 it was Rs. ,37,877/-. Boundary wall was constructed by appending a sum of Rs. 59,911/- while water connection was acquired by spending a sum of Rs. 950/-. in 1997-98, respondentb proposed to transfer the plots and construction raised thereon , to Hyesons Concrete Products Limited and agreement was signed between the parties transferring the plots to the latter company against the shares. The transaction was approved by the Controller of Capital Issues in June, 1977 but the same was withdrawn in July, 1979. The plots and construction were thus restored to the respondent - company who by its sale on 25.2.1987 acquired a capital gain of Rs. 98,74,360/-. This income was declared in the annual return for the assessment year 1988- 89 on which income tax in the sum of Rs. 48,87,808/- was levied as income from business by way of adventure in the nature of trade in terms of Section 2(11) of the Ordinance.
3. After unsuccessful appeal before the Commissioner of Income Tax (Appeals), a second appeal bearing No. 641/KB of 1988-89 was filed before the If AT which was dismissed on 5.5.1996. Petitioner did not impugn, this order by way of Income Tax Reference in terms of Section 136 of the Ordinance as it then stood. However, respondent made an application under Rule 20 of the Income Tax Appellate Rules, 1981, which was dismissed by ITA vide order dated 20.5.1997. Respondent instead of seeking remedy against this order before proper forum moved another application for rectification of the order dated 5.5.1996 in terms of Section 156 of the Ordinance which was rejected on 14.3.1998.
4. Finding no redress before the tax authorities as well as the ITAT respondent preferred Income Tax Appeal No. 158 of 1998 before the learned High Court of Sindh in which serious preliminary objections were raise as to the maintainability of the appeal and the bar of limitation but the learned members of the Division Bench proceeded to repeal the same and allowed the appeal by the impugned judgment, hence this petition.
5. After hearing Mr. Shaikh Haider, learned counsel for the petitioner we are inclined to grant leave to appeal to consider, inter alia, the following questions:--
(1) Whether the Income Tax Appeal filed on 16.6.1998 against the original order dated 5.5.1996 was time-barred and could be lawfully maintained?
(2) Whether the learned High Court failed to take into consideration various provisions of the statute and the judgments rendered by this Court on the questions of law involved? And
(3) Whether the impugned judgment can be sustained in law in the peculiar facts and circumstances of the case?
6. Order accordingly.