I.T.AS. NOS. 423, 424, 425 AND 426/KB OF 1982-83, DECIDED ON 10TH SEPTEMBER, 1985. Versus I.T.AS. NOS. 423, 424, 425 AND 426/KB OF 1982-83, DECIDED ON 10TH SEPTEMBER, 1985.
ORDER
FARHAT ALI KHAN (MEMBER) .‑‑The respondent, a non‑resident, derived its income from dividend in Pakistan from M/s. L.B. (Pakistan) Ltd., and L (Pakistan) Ltd., and offered it for Pakistan tax. The Income‑tax Officer framed the assessment and did not levy any surcharge. However, subsequently, by rectifying his order under section 35 of the repealed Income‑tax Act, he levied surcharge also in all the four assessment years involved, namely, 1977‑78, 1978‑79, 1979‑80 and 1980‑81. The respondent felt aggrieved and went up in appeal. Before learned Commissioner 'of Income‑tax (Appeals) reliance was placed on a Circular of Central Board of Revenue bearing No. CI. No. 13(30)IT‑1/80, dated 4th December, 1980. It was urged that in view of Article VI(2) of Avoidance of Double Taxation Treaty entered into between Pakistan and United Kingdom, the prescribed tax rate was 10 and 15$, therefore, in view of the Circular mentioned above no surcharge could be levied. As is obvious from the date of the Circular, it was issued on 4th December, 1980. The question, therefore, arose whether it should operate retrospectively to cover those years, which were involved in the appeals. The respondent answered aforesaid question in the affirmative and in support of their contention relied upon (1976) 106 1 T R 743, and a decision of this Tribunal recorded in I.T.A. No. 452/KB Of 1974‑75, dated 5th July, 1976. The learned Commissioner of Income‑tax (Appeals) by his consolidated order, dated 9th August, 1982, recorded in Income‑tax Appeal No. CIT/Z‑1/653, 873, 434, 480/79 accepted all the contentions of the respondent and deleted surcharge in all the assessment years. This time the department felt aggrieved and has come up in appeal.
2. Mr. Muhammad Farid, the learned Departmental Representative, relying upon a decision of this Tribunal reported in (1979) 40 Tax 47 (Trib.), argued that the learned Commissioner of Income‑tax (Appeals) erred in ordering deletion thereof. Mr. K. Salahuddin, the learned counsel for respondent, on the contrary, not only relied upon aforesaid Circular and the relevant Article of Avoidance of Double Taxation Treaty but also cited two decisions of this Tribunal recorded in ITA No. 363/KB of 1980‑81 on 18th January, 1983 and in ITA No. 914/KB of 1980‑81 on 17th July, 1983 in support of his argument.
3. We have heard both the learned Departmental Representative and as well as the learned counsel for the respondent and have also gone through not only the impugned but also the assessment order, In our judgment the submission of learned counsel for the respondent has considerable force. As far as the Circular relied upon by him is concerned, its paragraph 2 deals with the issue in quite unmistakeable and unambiguous terms. It reads:
"A question has arisen as to whether or not surcharge is leviable over and above the prescribed rate of withholding tax. The matter has been considered in the Board and it is held that no surcharge is leviable under such circumstances and that the rate of withholding as provided in the bilateral tax treaty should to deemed to be the final tax liability."
However, the question whether aforesaid Circular is retrospective in its operation or not appears to be of academic interest as far as this Tribunal is concerned. If we look to Article VIM of Avoidance of Double Taxation Treaty, it becomes quite clear that the signatory countries have undertaken not to impose any form of taxation on dividend; paid by a company resident in that country to persons not resident in that territory. It is reproduced herein below:‑‑
"(1) Where a company which is a resident of one of the territories, derives profits or income from sources within the other territory, there shad not be imposed in that other territory any form of taxation on dividends paid by the company of persons not resident in that other territory, or any form 4 taxation chargeable in connection with or in lieu of the taxation of dividends or say tax in the nature of an undistributed profit tax on undistributed profits of the company, whether or not those dividends or distributed profits represent, in whole or in part profits or income so derived-------".
Since aforesaid Avoidance of Double Taxation Treaty was issued as S.R.O. 56(K)/62 on 9th January, 1962, therefore, its aforesaid provision applied in all the years thereafter. Let us mention here that its sub‑article (2) has itself laid down the rate of super‑tax to be imposed on dividends. As such neither the decision reported as (1977) 106 ITR 743 nor I.T.A. No. 452/KB of 1974‑75 remained relevant. Similarly, the other cases relied upon by learned counsel for the respondent are also not relevant. I.T.A. No. 914 deals with Double Taxation Treaty entered into with Swiss Federation and its Article VIA is couched in different language. As far as, the decision of the Tribunal recorded in I. T. A. No. 363/ K B of 1980‑81 is concerned, which has been relied upon by learned Departmental Representative 1t is also besides the issue involved in the instant case. There the issue was whether the learned Appellate Assistant Commissioner was right in directing the Income‑tax Officer to follow the decision of this Tribunal reported as (1979) 40 Tax 47 and it was held that the impugned order wag incorrect because he applied aforesaid decision of the Tribunal "without ascertaining whether the facts are identical or not".
4. In view of discussion made above, we think that the impugned order is sustainable in law. We, therefore, find these departmental) appeals devoid of any merit and reject them accordingly.
M. Y. H. Appeals dismissed.