COMMISSIONER OF INCOME-TAX, ZONE-B, LAHORE vs SARDAR MUHAMMAD

MANSOOR AHMAD, J.---At the instance of the Commissioner of Income Tax, Zone-B, Lahore the Income Tax Appellate Tribunal has stated the case and referred the under noted question of law in reference application filed by the Revenue under section 136(1) of Income Tax Ordinance, 1979. The question was referred by the Income Tax Appellate Tribunal. The question arises out of the order of the Tribunal, dated 6-11-1999 passed in respect of Income Tax Appeal No. 3334/LB of 1991-92 for the assessm ent year 1987-88. Referred question for our opinion is--- "Whether on the facts and in the circumstances of the case, the learned I.T.A.T. Was justified to delete the addition made on account of rental income under section 19 of the Income Tax Ordinance, 1979 of the property leased to the Bank by the assessee and which was provided by the Bank to him as rent free unfurnished accommodation?"

2. The facts lie in a narrow compass which are that the assessment was originally completed under sections 62/132 by the Assessing Officer vide his order, dated 31-6-1990. Assessee filed an appeal before the Commissioner of Income Tax (Appeals), Zone-3, Lahore. The appeal was accepted partly inter alia holding that in view of provision of section 19(3) of Income Tax Ordinance, 1979 the addition as rental income of Rs.21,238 made by the I.T.O. Was against law. The controversy was lifted to Income Tax Appellate Tribunal by preferring an appeal by Revenue against the order of Commissioner Income Tax (Appeals). The Tribunal upheld the order of CIT (Appeals). Reference application was filed by Revenue, the Tribunal stated case and referred the above noted question.

3. Assessee an employee of National Bank of Pakistan leased out his self-owned and self-occupied property No. XXIX-31-15, Ahmad Street No.2, Shah Faisal Road, Bank Colony, Samanabad Lahore to National Bank of Pakistan at Rs.2,190 per month for a period commencing from 1-1-1996 up to 31-12- 1986 and at Rs.2,280 per month for the period commencing from 1-1-1987 to 31-12-1987. This accommodation was provided to assessee as rent free unfurnished accommodation by the Bank after getting it from him on rent. The rent received by the Assessee was taken by the Assessing Officer as property income chargeable under section 19 of Income tax Ordinance, 1979.

4. We have heard Mr. Muhammad Ilyas Khan, learned counsel for the Revenue. No one appeared on behalf of the respondent/assessee.

5. Learned counsel for the Revenue supported the reference application and submitted that question may be answered in favour of the Department. He submitted that provision of section 19(3) of Income Tax Ordinance, 1979 was not properly construed by the Appellate Tribunal and, the legal provisions now stand clarified through an explanation which was added to sub-clause (3) of section 19 vide Finance Act, 1996.

6. After insertion of explanation section 19(3) read as under:--- "19. Income from house property:- (1) .(2)

(3) Nothing contained in this section shall apply in the case of any such property which is in the occupation of the owner for purposes of his own residence.

Explanation.---For the purpose of this section, any property, the owner of which is in receipt of any rent, whether in cash or otherwise, whether from employer or otherwise, shall not be taken to be in occupation of such owner for the purpose of his own residence."

The explanation to sub-clause (3) of section 19 was added through Finance Act, 1996 and section 13(2) of the Finance Act provides as under:- "13(2). In section 19, after subsection (3), the following Explanation shall be added and shall be deemed always to have been so added, namely:--- Explanation.---For the purpose of this section any property, the owner of which is in receipt of any rent, whether in cash or otherwise, whether from employer or otherwise, shall not be taken to be in the occupation of such owner for the purpose of his own residence. "

7: It is well-settled rule of construction of statute that when a statute amends existing statute by adding, omitting or substituting any provision in the existing statute and the amending statute specifically provides that the addition, omission and substitution shall be deemed always to have been so made, the addition, omission or substitution shall take effect from the date when the original provision was enacted. As it has been specifically provided by the amending Act Explanation shall always be deemed to have been so added therefore, the Explanation so added would, be read as part of section 19(3), as enacted originally.

8. As a general principle the Explanation is clarificatory and declaratory in nature, therefore, it operates retrospectively. It reflects the true B intent of the legislature. Reference and reliance is made to the cases which are--- Muhammad Hussain Patel v. Habib Wali Muhammad PLD 1981 SC 1; Colony Sarhad Textile Mills v.

Collector, CE&LC PLD 1969 Lah. 228; Messrs Rijaz (Pvt.) Ltd. v. The Wealth Tax Officer 1996 PTD (Trib.)

489.

The object of Explanation in a statute is to remove any ambiguity and bring about clarification relating thereto. The process of interpretation is geared in finding out the true intent of the legislature. Therefore, after insertion of the explanation any ambiguity which surfaced in interpreting the provision of section 19(3) has been done away with. Language of the Explanation is plain and simple. It admits no doubt or ambiguity. Any property the owner of which is in receipt of any rent whether from employer or otherwise shall not be taken to be in occupation of such owner for the purpose of his own residence. This Explanation to section 19(3) clearly entails that the rent received by the owner in respect -of the property which is in his occupation would be rental income from property and would be charged to income tax and as the Explanation is retrospective in its nature and operation, therefore, the deletion of the rental income by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal was not correctly made. Therefore, the question referred to this Court is answered in negative.

9. A copy of this decision and the judgment is sent to the Income Tax Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to such judgment. .