I.T.AS. NOS. 678 TO 687/KB OF 1982-83, DECIDED ON 6TH OCTOBER, 1985. Versus I.T.AS. NOS. 678 TO 687/KB OF 1982-83, DECIDED ON 6TH OCTOBER, 1985.
ORDER
FARHAT ALI KHAN (MEMBER) .‑‑The three sets of appeals are directed against the order of the learned Commissioner of Income‑‑tax (Appeals) recorded by him on 29th September, 1982, relating to assessment years 1976‑77, 1977‑78, 1978‑79 and 1979‑80. All the three appellants are partners of M/s. Haji Latif & Co. and their assessments for assessment year 1976‑77 were firstly made on 19th February, 1977 but the assessment was subsequently revised on 16‑5‑1977. However, on the directions of DIT, Central Board of Revenue, Karachi, the Income‑tax Officer after rectifying his order on 17‑3‑1981 imposed additional tax. Haji Abdul Latif and Tajuddin, hereinafter referred to as appellant No. 1 and 2 respectively, challenged the imposition of this additional tax before the learned Commissioner of Income‑tax (Appeals). It was canvassed before the learned Commissioner of Income‑tax (Appeals) that since the last completed assessment on the relevant date, on basis of which they were made liable to pay advance tax, was for assessment year 1974‑75 and that too was showing toss, the Income‑tax Officer could not have imposed any‑ additional tax. The learned Commissioner of Income‑tax (A) accepted the aforesaid contention but after setting aside the relevant order sent the matter back to Income‑tax Officer for fresh assessment. Both appellants No.l up, 2 have felt, aggrieved and have come up in appeal before us. Mr. Butler, appearing for both the appellants reiterated their contention before us According to the learned Authorised Representative there was no justification for learned Commissioner of Income‑tax (Appeals) for sending the matter back to the Income‑tax Officer for de novo assessment. Mr. Farid, the learned Departmental Representative, however, firstly pointed out that the assessment for 1975‑76 was the latest assessment to the assessment years 1976‑77 but when his attention was invited to the fact that it was completed on 15‑11‑1976 4e did not make any more submissions.
2. We have heard both the learned Authorised Representative as well as the learned Departmental Representative. It is true that both the appellants had to pay advance tax on 11‑9‑1975, 15‑12‑1975, 15‑3‑1978 and 15‑6‑1976. Thus, on these dates "the latest completed assessment was of the assessment year 1974‑75. The assessment for 1975‑76 was completed on 6‑11‑1976 when the date for payment of advance tax had already expired. Mr. Butler pointed out that by his letter, dated 6‑6‑1980 the Income‑tax Officer was informed about this legal position yet by his order, dated 17‑‑3‑1981 he imposed additional tax. In our judgment these submissions of learned Authorised Representative are unexceptionally sound. Section 18 (a) of the repealed Income‑tax Act requires advance payment of tax "on so much income as is included in his total income of the latest previous year in respect of which he has been assessed under section 23 or where no assessment under section 2:f has been made under section 23 (B), as the case may be, If the total income exceeded Rs.25,000. "Since the latest previous order was for assessment year 1974‑75 and since the income assessment in the year was net loss therefore, no advance 'tax was required to be paid by the appellant. In these circumstances we do not think that the learned Commissioner of Income‑tax (Appeals) was justified in sending back this matter to Income‑tax Officer. We, therefore, allow the appeals regarding assessment year 1976‑77 and order the deletion of additional tax levied on both appellant; Nos. 1 and 2. This disposes of ITA. Nos. 673 and 682/XB of 1982‑83.
3. The other appeals for 1977‑78, 1978‑79 and 1979‑80 have been filed by respondents Nos. 1 and 2, Mr. Razzak, yet another partner of the aforesaid firm and hereinafter referred to as appellant No.3, has filed appeals for assessment years 1978‑79 and 1979‑80 only.
4. In these three sets of appeals of appellants Nos. 1, 2 and 3 common point of law is involved. From perusal of the assessment year 1977‑78 and 1978‑79, the Income‑tax Officer excluded the amount of surcharge on the super tax of aforesaid firm while computing the tax payable by the appellants at the rate of 50% in respect of their respective total income. Similarly, in assessment year, 1979‑80 he again excluded the amount of surcharge on the Super‑tax of the firm while computing the tax payable by the appellants at the rate of 60% of their respective total income. The appellants Nos. 1, 2 and 3 felt aggrieved and went up in appeal. It was contended before the learned Commissioner of Income-tax (Appeals) that in view of combined reading of section 16(1)(b) and para 3 of 1st Schedule both surcharge and Super‑tax should have been included while computing the tax payable by the appellant for assessment year 1979‑80. The learned Commissioner of Income‑tax (Appeals) again allowed the appeal and ordered de novo assessment by Income‑tax Officer after giving due consideration to the submissions reproduced above. The appellants Nos. 1 and 2 have impugned the order of the learned Commissioner of Income‑tax (Appeals) relating to assessment years 1977‑78, 1978‑79 and 1979‑80 whereas the appellant No. 3 has challenged his order regarding assessment year 1978‑79 4:nd 1979‑80
5. Mr. Butler appearing for all three appellants argued before us that as far as the assessments for 1977‑78 and 1978‑79 were concerned, a Division Bench of this Tribunal had considered the issue involved and held that both surcharge and Super‑tax were to be deducted. According to him, the decision has been reported as 1977 P T D (Trib.) 43 So far as 1979‑80 is concerned the learned Authorised Representative submitted that the word "TAX" has been used in claim (a) of subsection (4) of section 69 as defined by clause 43 of section 2 and included both Super tax as well as surcharge within its folds. He again submitted that by his letter, dated 6‑6‑1980, he had invited the attention of Income‑tax Officer to aforesaid legal position yet he ignored it. He concluded that since the issue involved was purely legal nature the learned Commissioner of Income‑tax (Appeals) erred in sending it back to Income‑tax Officer to be reconsidered by him. Mr. M. Farid, the learned Departmental Representative on the other hand submitted that in pars. (iii) of First Schedule, the word used was Super‑tax only hence the Income‑tax Officer was right in his orders for assessment years 1977‑78 and 1978‑79. Similarly, referring to para. (e) to proviso to clause A of Part 1 of the First Schedule, the learned Departmental Representative again submitted that here again the word surcharge was conspicuous by Its absence as the word super‑tax only was used here again. He argued that the Income‑tax officer was right in his conclusion.
6. We have heard both the learned Authorised Representative for the three appellants as well as the learned Departmental Representative. Since the relevant clause B of section 16(1) of the repealed Income‑tax Act and para. (iii) of clause A to Para of First Schedule are involved, it would therefore, be advantageous if both the provisions are reproduced herein below:‑‑
16. Exemptions and exclusions in determining the total income. In computing the total income of an assesses:‑‑
"(a) ---------------------------------------------------------------------------------
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(b) When the assessee is a partner of a firm, then whether the firm has made a profit or a loss, his share (whether a net profit or a loss) shall be taken to be any salary, interest, commission or other remuneration payable to him by the firm in respect of the previous year increased or decreased respectively by his share in the balance of profit or loss of the firm, if any, and of any interest, salary, commission or other remuneration payable to any partner in respect of the previous year and also, in the case of a registered firm under clause (b) of subsection (5) of section 23 of the super‑tax and surcharge payable by It."
Similarly, subsection (4) of section 69, subsection (43) of section 2 and para. (e) of clause A of the para. F are also Involved. They are also reproduced here for case of reference.
"(4) For the purposes of this section, the share of a partner in the income of any firm means the aggregate of:‑‑
(a) the proportionate share in the total income of the firm as reduced by the tax, if any, payable by the firm and any bum referred to in clause (b), and
(b) any salary, brokerage, interest or commission receivable by the partner from the firm.
Under subsection (43) of section 2 "TAX" means income‑ tax, super‑tax surcharge and additional tax chargeable or payable under this Ordinance, and includes any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance."
Now, if we peruse the relevant provisions of the repealed Income‑tax Act and the Ordinance it appears that in subsections 16(l)(b) and 69(4)(a) both the words "super‑tax" and "surcharge" have been included. In the Act the words super‑tax and surcharge have been used in the relevant clause, whereas in the Ordinance both super‑tax and surcharge of subsection (4) of section 69 are to be read with section 2(43) as contained in the Ordinance. However, in the schedule of both the repealed Act as well as the Ordinance the words "super‑tax" only have been used. Apparently, the point involved has already been considered by a Full Bench of this Tribunal and the decision is reported as 1977 P T D (Trib.)
43. The majority of this Full Bench has held that in view of section 16(1)(b) the entire super‑tax and surcharge, payable by the firm should be allowed as deduction in the hands of a partner should be restricted to 70 per cent of his total income. The majority view is based on a decision of a Division Bench of this Tribunal vide its order recorded in I. T. A. No. 2603 1971‑72 which dealt with the same point. Thus, the consensus of the opinion, as for as the Tribunal is concerned, appears to be that the amount of surcharge paid by the registered firm is also to be included in the total amount of tax paid by the firm while determining the proportionate share of the partners of the firm with which we respectfully agree. It is true that the Full Bench was dealing with assessment year 1973‑74 but; thereafter the law has remained the same. As far as the Income‑taxi Ordinance is concerned, in our judgment, aforesaid Full Bench case of this Tribunal will apply with force. We think that the relevant provision of Income‑tax Ordinance are almost the same. In any case, the substantial, provisions of law of the Ordinance .is section 69(4)(a) and if it is read with section 2(43) of the Income‑tax Ordinance, it yields the same) result as does section 16(1)(b) of the repealed Income‑tax Act.
7: As such, in view of the discussion made above, we allow these appeals for all the three relevant assessment years, and hold that since the appeals could be disposed of on interpretation of law with due respect, the learned Commissioner of Income‑tax (Appeals) was not justified in sending the appeals back for de novo assessment.
8. Thus all the appeals stand disposed of to the extent and in the manner as indicated above.
M. Y. H. Appeals disposed of.