Proshika Manobki Unnayan Kendro Vs. Commissioner of Tax 2016 (2) LNJ 337

Case No: I.T. Ref: Application No. 383 of 2004

Judge: A. F. M. Abdur Rahman,

Court: High Court Division,,

Advocate: Mr. Sarder Jinnat Ali,Ms. Kazi Zinat Hoque,Mr. Ashraful Hadi,Ms. Nurun Nahar,Mr. Shaikat Basu,,

Citation: 2016 (2) LNJ 337

Case Year: 2016

Appellant: Proshika Manobki Unnayan Kendro

Respondent: Commissioner of Tax

Subject: Income Tax,

Delivery Date: 2015-07-06

Proshika Manobki Unnayan Kendro Vs. Commissioner of Tax 2016 (2) LNJ 337
 
HIGH COURT DIVISION
(SPECIAL ORIGINAL JURISDICTION)
A. F. M. Abdur Rahman, J
And
Md. Shohrowardi, J.
Judgment on
24.06.2015 & 06.07.2015
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Proshika Manobik Unnayan Kendra,
a charitable society registered under the Societies Registration Act 1860 of Proshika Bhaban, 1/1GA, section 2, Mirpur, Dhaka represented by its President Quazi Faruque Ahmed.
....Assessee-Applicant.
Versus
Commissioner of Taxes, Inspecting Range-2, Taxes Zone-05, Dhaka

Income Tax Ordinance (XXXVI of 1984)
Section 152O(6)
The Income Tax Reference proceeding shall be kept stayed  in this court till a report from the facilitator as to the conclusion of the ADR proceeding is being filed by the facilitator pursuant to the provision of section 152O(6) of the Income Tax Ordinance 1984, so far the dispute resolution is a unsuccessful one.        . . . (23)

Income Tax Ordinance (XXXVI of 1984)
Section 152F
It appears the issues left out to be resolved in ADR, clearly involves the issue of laws. An issue of law is the subject of court or the tribunal to be resolved in accordance with the provision of law. No agreement inter vivos can be made on the issue of law and even it is done the same will be a nullity. The proceeding of ADR only allow the parties to come to an agreement in the presence of facilitator, who must be present in the proceeding of negotiation of the parties, but has nothing to do and to remain present as on looker, only to issue a certificate whether the ADR is a success or failure. In the ADR procedure the parties may only come to an agreement so far the factual aspects are concerned and the law has not allowed the parties to make an agreement, derogatory to the provision of law.                                               . . . (25)

Income Tax Ordinance (XXXVI of 1984)
Sections 152F and 160
Any question involving legal issue cannot be resolved in Alternative Dispute Resolution procedure. The entire Income Tax Reference jurisdiction requires the expression of opinion by the court on legal issue as has been provided in section 160 of the Income Tax Ordinance 1984. Therefore, the question which was un-resolved in the Alternative Dispute Resolution Procedure can well be taken into consideration by this court for expressing opinion on the same.                                                . . . (26)

Constitution of Bangladesh, 1972
Article 103(3)
Income Tax Ordinance (XXXVI of 1984)
Section 152Q
Although the procedure of appeal has been provided in section 152Q of the Income Tax Ordinance 1984, but the word “may” as used in the said provision makes it an optional provision for the Assessee-applicant to prefer the appeal before appellate authorities of this court, meaning thereby that any issue upon which the parties fail to come to an agreement, shall be the subject of Appeal before the Appellate Division of the Supreme Court of Bangladesh as of right, without resorting to the provision of Article 103(3) of the Constitution, if the party aggrieved intends to opt for the Appeal.          . . .(28)

Income Tax Ordinance (XXXVI of 1984)
Section 152Q
Failing to resolve on any point and leaving aside any point unresolve, are not the same and as such the assessee applicant is not liable to opt for preferring Appeal in the instant case against the unresolved issues.  . . . (29)

Income Tax Ordinance (XXXVI of 1984)
Sixth Schedule Part A, Paragraph-1(i)
Explanation
Since admittedly the Assessee-applicant is a charitable organization having no dividend to be paid to its sponsor directors and the whole income is being applied for the charitable purpose. Therefore, the issue appears to have been wrongly considered by the IACT concern, who found that due to the deletion of the ‘Explanation’ from the provision of Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984, the charitable organization became taxable under the said provision.        . . . (34)

S. Sundaram Pillai Vs. V.R. Patabiraman, reported in AIR (1985) SCJ 82 ref.
I.T. Ref: Application No. 383 of 2004

Mr. Sarder Jinnat Ali, Adv. with
Mr. Ashraful Hadi, Adv.
...For the Assessee-applicant.
Ms. Kazi Zinat Haque DAG with
Ms. Nurun Nahar, AAG and
Mr. Shaikat Basu, AAG
...For I.T. Department.
 
JUDGMENT

A.F.M. Abdur Rahman,J:
The Assessee-applicant Proshika Manabik Unnayan Kendro preferred the instant Income Tax Reference Application, under the provision of section 160(1) of the Income Tax Ordinance 1984, with the formulated question, as has been reformulated in the supplementary-affidavit, dated 08.1.2015, which reads as follows;
“Whether in fact and on the circumstances, the Tribunal under Section 44(1)/Sixth Schedule, Part-A, para 1(1) of the Income Tax Ordinance 1984, was justified in holding the opinion that by virtue of amendment by way of omitting “Explanation”, the income of the applicant, a charitable institution, turned into taxable income?”
Facts of the case of the Assessee applicant:
  1. It has been asserted in the Income Tax Reference Application that the Assessee-applicant is a charitable society and a Non-Government Organization (NGO), established in the year 1976 and registered under the Societies Registration Act 1860 and also duly registered with the NGO Affairs Bureau, under the Prime Ministers Secretariat. The Assessee-Applicant is engaged in charity activity as mentioned in the bi-laws and derives its income from various sources, including from the foreign donation of various country, namely the Canadian International Development Agency (CIDA), the Department For International Development (DFID), the European Commission    (EC), NOVIV, the Swedish International Development Agency (SIDA). The assessee-applicant also derives income from the business activity of its different project. All these income are wholly applied to charitable purpose.
  2. The Assessee-applicant being a charitable and income generating organization, is an assessee of income tax under the TIN 191-100-5800, the exempted under the provision of section 44(1) read with 6th Schedule, Part-A, Paragraph-1(1) of the Income Tax Ordinance 1984 and accordingly the Assessee-applicant was allowed the said exemption on its income for every assessment years from its establishment up to the assessment year 1998-1999 and the DCT concern disposes the tax return, under the provision of section 83(2) of the Income Tax Ordinance 1984, as filed by the Assessee-applicant holding that the Assessee-applicant’s income is not taxable under the said provision, the income being used wholly for the charitable purpose.
  3. But later, dispute arises when the Assessee-applicant submitted its income tax return for the assessment year 2001-2002 on 23.9.2001, showing a total loss of Tk. 49,04,52,476.00 and pursuant to the notice under section 83(1) and 79 of the Income Tax Ordinance 1984, the authorized representative of the Assessee-applicant, conducted the hearing before the Assessing Officer, IACT, who did not consider that the Assessee-applicant is entitled to the exemption of the provision of section 44(1) of the Income Tax Ordinance 1984, rather assessed the income of the Assessee-applicant at an amount of Tk. 11,43,28,606.00, turning the loss of Tk. 49,04,52,476.00 into income and made its assessment order under the provision of section 83(2) of the Income Tax Ordinance 1984, imposing tax liability upon the Assessee-applicant, treating the income of the Assessee-applicant as derived from project activities as taxable business income and also the bank interest accruing from foreign donation, as received by the Assessee-applicant, is a taxable income.
  4. Being aggrieved with and highly dissatisfied by the said assessment order, the Assessee-applicant preferred appeal before the first appellate authority, being আয়কর আপীলপত্র নং- ৪০১/সা-৫১/কঃঅঃ-৫/২০০৩-২০০৪, with six grounds of objection. But since the same failed, the Assessee-applicant preferred further appeal before the Taxes Appellate Tribunal, being ITA No. 3162 of 2003-2004, which also having been failed against its nine grounds, the Assessee-applicant preferred the instant Income Tax Reference Application with the formulated questions as aforementioned.
  5. During the pendency of the instant Income Tax Reference Application the Assessee-applicant obtained a permission from this court on 4.6.2014, in respect of availing ‘Alternative Dispute Resolution Procedure’, as provided under section 152I of the Income Tax Ordinance 1984 and also an order of stay of the proceeding of the instant Income Tax Reference application till disposal of the ADR proceeding. Thereafter, the Assessee-applicant, by filing a supplementary-affidavit on 8.1.2015, informed this court that pursuant to the ADR procedure, the parties agreed on the factual issues, but failed to reach an agreement on the issues involving question of law, and thereby disagreement followed on the question of law which has been mentioned in the certificate issued by the facilitator. Accordingly, the Assessee-applicant reformulated the question raised for determination in the instant Income Tax Reference Application, by way of supplementary affidavit, dated 8.01.2015, as aforementioned.
         Claim of the Taxes department:
  1. Upon service of the notice, the Taxes Department appeared through the then learned Deputy Attorney General Mr. Kazi Waliul Islam, who submitted the affidavit-in-reply, wherein it has been asserted that the IACT lawfully excluded the Assessee-applicant’s income from exemption, as provided under section 44(1) read with 6th Schedule, Part-A, Paragraph-1(1) of the Income Tax Ordinance 1984, since the said provision was limited to inter-alia income from house property and not extended to the business income. Since the Assessee-applicant’s runs business under the name and style of its subsidiary project Proshika Fabrics, Sericulture project, demonstration project, Integrated agriculture firm, Proshika Computer system and general business and deals in disaster management fund commercially, all of these activities are commercial in nature and do not run for the purpose of religious and charitable purpose and hence exemption cannot be allowed as per Paragraph-1 and 2 of the Sixth Schedule, as claimed by the Assessee-applicant since the said exemption can only be extended to any income derives from property under trust or other legal obligation, applied wholly for religious or charitable purpose. The IACT computed lawfully the taxable income of the Assessee-applicant as per amendment of the Finance Act 1999 upon which the ‘explanation’ remaining in the paragraph No. 1(1) of the Part A of the Schedule was omitted.
  2. It has been further asserted that the IACT’s further decision not to extend the exemption to such income shown under the head of bank interest was correct. Because, the claim of the Assessee-applicant  that the tax deducted at source, under section 53F of the Income Tax Ordinance 1984 from interest of saving deposit and fixed deposit is to be the final settlement under section 82C of the Income Tax Ordinance 1984 is not correct. The assessment order was confirmed by the two appellate authorities, since the IACT’s assessment order excluding the Assessee-applicant from the exemption under section 44(1), read with Sixth Schedule, Part-A, Paragraph-1(1) of the Income Tax Ordinance 1984 was correct and lawful. The IACT made the assessment and computed taxable income and issued demand notice of Challan, imposing simple interest as per amendment made by the Finance Act 1999 and assessed the income of the Assessee-applicant under section 83(2)/44(1)/94A/10 of the Income Tax Ordinance 1984 being lawful and correct, the same was correctly confirmed by the Taxes Appellate Tribunal. Therefore, the question as has been formulated in the instant Income Tax Reference Application, not being proper questions and lawful is not required to be answered in negative and in favour of the Assessee-applicant.
  3. By a supplementary-affidavit-in-reply the respondent asserted that on 14.7.2014 the Assessee-applicant itself resorted to the Alternative Dispute Resolution (ADR) as per the provision of section 152I of the Income Tax Ordinance 1984 and বিকল্প বিরোধ নিস্পত্তি (পদ্ধতি) বিধিমালা ২০১২, which was concluded on several points, save & accept one, involving issue of law and the facilitator has issued the certificate to that extent. Therefore, since the Assessee-applicant itself voluntarily resorted to ADR, it is devoured from raising the same before this court under the provision of section 152P of the Income Tax Ordinance 1984 on the reasoning that one cannot aprobate and reprobate at the same time. 
  4. The learned Advocate Mr. Sarder Jinnat Ali along with the learned Advocate Mr. Ashraful Hadi, represented the Assessee-applicant, while the learned current Deputy Attorney General Ms. Kazi Zinat Haque, argued on behalf of the Taxes Department at the time of hearing of the instant Income Tax Reference Application.
Argument of the Assessee-applicant:
  1. The learned Advocate Mr. Sarder Jinnat Ali, appearing on behalf of the Assessee-applicant, while taken this court to the fact that an attempt was made by the Assessee-applicant to avail the opportunity of ADR, as provided under section 152I of the Income Tax Ordinance 1984 and the same having been successful on some points based on factual aspects, but let the issues unresolved so far the question of law is concerned, as certified by the facilitator, which has been submitted before this court as Annexure-D, wherefrom it appears that the issue involve in this reference case centers round the question of law, whether the Taxes Appellate Tribunal correctly and lawfully interpreted the meaning of section 44(1) read with Sixth Schedule, Part-A Paragraph-1(i) of the Income Tax Ordinance 1984, since the Taxes Appellate Tribunal expressed an opinion that by virtue of amendment made by the Finance Act 1999, by way of omitting the word “explanation” from the provision of paragraph No. 1(1) of the 6th Schedule, Part-A, the income of the Assessee-applicant, a charitable organization, became taxable income.
  2. The learned Advocate Mr. Sarder Jinnat Ali strenuously argued that the IACT while acting under the empowerment of section 10 of the Income Tax Ordinance 1984 as assessing officer, committed error in interpreting the omission of ‘explanation’ from the provision of paragraph No. 1(1) of Pat A of Sixth Schedule as has made the income of the assessee applicant as taxable, in as much as, the IACT did not notice that by its constitution the assessee applicant is a ‘charitable organization’ whose all sorts of income, derived either from donation or from its business activities are applied wholly and actually for the charitable purpose and as such, despite such omission of the provision ‘Explanation’ cannot be treated as changed the constitutional status of the Assessee Applicant. The assessee applicant although further registered under the NGO Bureau affairs, nevertheless its primary registration as charitable organization under the Societies Registration Act 1860 shall not be change, which will make the assessee applicant as entitled to the provision of exemption, even after its amendment through the Finance Act 1999, by omission of the ‘Explanation’.
  3. The learned Advocate Mr. Sarder Jinnat Ali finally argued that such a serious question of law was negligently and mechanically considered by the two lower appellate authorities and as such the question formulated herein is required to be answered in negative and in favour of the Assessee applicant.
  4. The learned Advocate Mr. Sarder Jinnat Ali in support of his argument relied on the case of S. Sundaram Pillai –vs- V.R. Patabiraman, reported in AIR (1985) SCJ 82 and the case reported in 36DLR(AD) 166 and 51 DLR 152.
  5. On the other hand the learned Deputy Attorney General Kazi Zinat Hoque while taken this court through the 6th Schedule Part A of the Income Tax Ordinance 1984 argued that earlier the income of the assessee applicant, derived from the business activity, was not taxable, but so far the amendment of the said provision is concerned, the IACT correctly treated the same and found that the income derived from the business activity are no move remaining within the purview of exemption and as such correctly assessed the return of the Assessee applicant.
  6. The learned Deputy Attorney General further argued that the instant Income Tax Reference case become infractuous in as much as the matter was referred to the ADR procedure and upon such procedure the parties have come to agreement on the subject matter of the ADR and accordingly the facilitator issued the certificate and as such the provision of section 152P of the Income Tax Ordinance 1984 came into play making the assessee applicant liable for preferring Appeal, under the provision of section 152Q of the Income Tax Ordinance 1984, against the  issues which were left unresolved. The Assessee applicant, therefore not entitled to resumption of the proceeding of this income tax reference application and bound to prefer Appeal to get decision upon the issues which were left unresolved.
         Deliberation of the court:
  1. In the instant Income Tax Reference Application the Assessee-applicant earlier formulated as many as four questions out of which question Nos. (a) & (b) were related to the issue of denial of the IACT concern, as well as the two appellate authorities for taking into consideration as to the legal provision, that the Assessee-applicant, being a charitable organization, is exempted from the liability of income tax, under the provision of section 44(1) read with Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984.
  2. During the pendency of the instant Income Tax Reference Application the Assessee-applicant obtained a permission from this court on 04.6.2014, to avail the ‘Alternative Dispute Resolution (ADR) Procedure’ as provided under the provision of chapter XVIIIB of the Income Tax Ordinance 1984 and accordingly this court not only accorded the permission but also stayed the instant proceeding invoking the power available under section 152II of the Income Tax Ordinance 1984. Thereafter the ADR was held in the presence of the facilitator Md. Tariq Haider. Later, the Assessee-applicant submitted a supplementary-affidavit before this court, on 8.1.2015 praying for resumption of the instant proceeding informing this court that the facilitator has issued a certificate along with the written agreement of the parties, arrived at in the ADR proceeding, for the assessment year 2001-2002, wherein the Issue No. 2.1, 2.3 & 2.5 were left un-resolved, since the said issues involved the question of law as to the applicability of the provision of section 44(1) read with Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984, in the case of the Assessee-applicant. The assessee-applicant upon such filing of the agreement along with the certificate of the facilitator, reformulated its question of law, directing the same only to the issue as to the applicability of the provision of section 44(1) read with Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984 in its case.
  3. As against the supplementary-affidavit the Taxes department submitted supplementary-affidavit-in-reply, wherein it has been seriously asserted that since the Assessee-applicant voluntarily resorted to the ADR proceeding, as provided under section 152I of the Income Tax Ordinance 1984, the Assesssee-applicant is debarred from the resumption of this proceeding and raising any further question before this court, as the provision of section 152P of the Income Tax Ordinance 1984 barred the same and liable the assessee-applicant to prefer Appeal for obtaining decision on the unresolved issue and as such the instant proceeding became infractuous.
  4. Upon such contentious approach it has now become imperative upon this court to decide the question, at the very outset, as to revival of the instant Income Tax Reference Application, after the conclusion of the ADR proceeding, upon examining the newly inserted provision of ‘Alternative Dispute Resolution (ADR) Procedure’ as has been inserted by the Finance Act 2011, since the same has gone to the root of the instant proceeding.
  5. It appears that the newly inserted Chapter-XVIIIB of the Income Tax Ordinance 1984 provides the recently innovated noble idea of ‘Alternative Dispute Resolution (ADR) Procedure’ within the provision of the Income Tax Ordinance 1984, containing section 152F up to Section 152S of the Income Tax Ordinance 1984, out of which section 152I of the Income Tax Ordinance 1984 provides for the substantive provision of ‘Alternative Dispute (ADR) Resolution’ procedure in the following language;
Income Tax Ordinance 1984
Section 152F. Alternative Dispute Resolution.-
Notwithstanding anything contained in Chapter XIX any dispute of any assessee lying with any income tax authority, Taxes Appellate Tribunal or Court may be resolved through Alternative Dispute Resolution (hereinafter referred to as ADR) in the manner described in the following sections of this Chapter and rules made thereunder.
  1. Section 152I of the Income Tax Ordinance 1984 provides, inter alia, that the Assessee-applicant, if already preferred a Income Tax Reference Application before the High Court Division, it shall obtain a permission from this court for proceeding to the Alternative Dispute Resolution and the provision of section 152II of the Income Tax Ordinance 1984 (inserted through Finance Act 2012) liable the Assessee-applicant to obtain an order of stay of the pending proceeding from this court and upon such prayer this court will not only allow the application, praying for approaching the Alternative Dispute Resolution (ADR) procedure, but also stay the proceeding till disposal of the ADR proceeding. The provision of section 152II of the Income Tax Ordinance 1984 reads as follows;
Income Tax Ordinance 1984
Section 152II. Stay of proceeding in case of pending appeal or reference at Appellate Tribunal or High Court Division.-
Where an assessee has filed an application for ADR for any income year and for the same income year, the Deputy Commissioner of Taxes has filed an appeal before the Appellate Tribunal or the Commissioner has made a reference before the High Court Division and no decision has been made in that respect by the Appellate Tribunal or High Court Division as the case may be, the proceeding of such appeal or reference shall remain stayed till disposal of the application for ADR.
  1. The aforesaid provision indicates that the Income Tax Reference proceeding shall be kept stayed  in this court till a report from the facilitator as to the conclusion of the ADR proceeding is being filed by the facilitator pursuant to the provision of section 1520(6) of the Income Tax Ordinance 1984, so far the dispute resolution is a unsuccessful one. The said provision of section 1520(6) of the Income Tax Ordinance 1984 reads as follows;
Income Tax Ordinance 1984
Section 1250(6). Decision of the ADR.-
Where no agreement, whether wholly or in part, is reached or the dispute resolution is ended in disagreement between the applicant-assessee and the concerned Commissioner’s Representative for non-cooperation of either of the parties, the Facilitator shall communicate it, in writing recording reasons thereof, within fifteen days from the date of disagreement, to the applicant and the Board, the concerned court, Tribunal, appellate authority and income tax authority, as the case may be, about such unsuccessful dispute resolution.
  1. In the instant case it appears that the Assessee-applicant obtained the permission from this court to proceed to ADR on 04.6.2014 and the facilitator issued the certificate along with the agreement of the parties, which has been submitted before this court as Annexure-D to the supplementary-affidavit, dated 8.1.2015, whereupon the Assessee-applicant prayed for resumption of the instant Income Tax Reference Application and to answer the question which has been left un-resolved in the ADR Proceeding regarding the applicability of section 44(1) read with Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984.
  2. It appears the issues left out to be resolved in ADR, clearly involves the issue of laws. An issue of law is the subject of court or the tribunal to be resolved in accordance with the provision of law. No agreement inter vivos can be made on the issue of law and even it is done the same will be a nullity. The proceeding of ADR only allow the parties to come to an agreement in the presence of facilitator, who must be present in the proceeding of negotiation of the parties, but has nothing to do and to remain present as on looker, only to issue a certificate whether the ADR is a success or failure. In the ADR procedure the parties may only come to an agreement so far the factual aspects are concerned and the law has not allowed the parties to make an agreement, derogatory to the provision of law. 
  3. The argument advance by the learned Deputy Attorney General Ms. Kazi Zinat Haque that the instant Income Tax Reference Application cannot be revived as the facilitator has issued the certificate on the basis of the agreements of the parties, has got no merit to be considered by this court. Because, the parties did not resolve the issue of law and left the same unresolved to be decided by this court. Any question involving legal issue cannot be resolved in Alternative Dispute Resolution procedure. The entire Income Tax Reference jurisdiction requires the expression of opinion by the court on legal issue as has been provided in section 160 of the Income Tax Ordinance 1984. Therefore, the question which was un-resolved in the Alternative Dispute Resolution Procedure can well be taken into consideration by this court for expressing opinion on the same.
  4. But it appears that section 152Q of the Income Tax Ordinance 1984 provided for an appeal which “may” be preferred by the Assessee-applicant on the failure of the parties to reach into an agreement in the Alternative Dispute Resolution Procedure. The said provision runs as follows;
Income Tax Ordinance 1984
Section 152Q: Limitation for appeal where agreement is not concluded.-
(1)     Notwithstanding anything contained in any provision of this Ordinance, where an agreement is not reached under this Chapter, wholly or in part, the assessee may prefer an appeal-
(a) To the Appellate Joint Commissioner of Taxes or appellate Additional Commissioner of Taxes or Commissioner of Taxes (Appeals), s the case may be, where the dispute arises out of an order of a Deputy commissioner of Taxes;
(b)  To the Taxes Appellate Tribunal where the dispute arises out of an order of the Appellate Joint Commissioner of Taxes or Appellate Additional commissioner of Taxes or Commissioner of Taxes (Appeals), as the case may be; and
(c)  To the respective appellate authority or court from where the assessee applicant has got permission to apply for ADR.
(2)     In computing the period of limitations for filing appeal, the time elapsed between the filing of the application and the decision or order of the ADR shall be excluded.
  1. In this respect the learned Advocate Mr. Ashraful Hadi, appearing along with the learned Advcoate Mr. Sarder Jinnat Ali, drawn the attention of this court, that the word “appeal” used in the provision of section 152Q of the Income Tax Ordinance 1984 has to be interpreted in a harmonious way pursuant to the established principle of interpretation of legal provision, upon taking all the relevant provision into consideration. In such interpretation of the provision of section 152Q of the Income Tax Ordinance 1984, this court finds that although the procedure of appeal has been provided in section 152Q of the Income Tax Ordinance 1984, but the word “may” as used in the said provision makes it an optional provision for the Assessee-applicant to prefer the appeal before appellate authorities of this court, meaning thereby that any issue upon which the parties fail to come to an agreement, shall be the subject of Appeal before the Appellate Division of the Supreme Court of Bangladesh as of right, without resorting to the provision of Article 103(3) of the Constitution, if the party aggrieved intends to opt for the Appeal.
  2. However, in the instant case the provision of section 152Q of the Income Tax Ordinance 1984 has no application, in as much as the parties have not failed on any factual issue, rather the parties left the legal issue unresolved. Failing to resolve on any point and leaving aside any point unresolve, are not the same and as such the assessee applicant is not liable to opt for preferring Appeal in the instant case against the unresolved issues.
  3. Now turning to the question as has been raised in this income tax reference application, it appears that the parties to the ADR left unresolved the question as to the applicability of the provision of section 44(1), read with Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984 as to the tax liability of a charitable organization, like the Assessee-applicant and accordingly this court is now duty bound to answer the question as has been reformulated in the supplementary-affidavit.
  4. The provision of paragraph No. 1(1) of part A of sixth Schedule of the Income Tax Ordinance 1984 was in the form as reproduced below, at the relevant period, before it was amended by the Finance Act 1999;
“Any income derived from property held under trust or other legal obligation wholly for religious or charitable purpose, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto.
.......................................
Explanation.- For the purposes of this paragraph, “property held under trust or other legal obligation” includes a business undertaking so held and where a claim is made that the income of any such undertaking shall not be included in the total income of the person in receipt thereof the Deputy Commissioner of Taxes shall have the power to determine the income of such undertaking in accordance with the provisions of this Ordinance relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking such excess shall be deemed to be applied to purposes other than charitable or religious purposes.”
  1. By the Finance Act 1999 the ‘Explanation’ portion of the provision was omitted, upon which not only in the instant case but on the other cases as well, the assessing officers started to treat the income derived from the business activity by the charitable organization as not entitled to the exemption, as provided under section 44(1) of the Income Tax Ordinance 1984. This being a wrong interpretation of such omission this court has already decided that such decisions of the assessing officers were wrong in some other cases.
  2. In this respect the referred case of Bangladesh Rural Advancement Committee (BRAC)-Vs-The Commissioner of Taxes in Income Tax Reference Application No. 279 of 2003, may be profitably examined, wherein a Division Bench of this court, upon considering a series of previous decisions from the Privy Council and up to the Appellate Division of Bangladesh Supreme Court has come to the decisive holding that despite the fact of deletion of ‘Explanation’ from the provision of paragraph 1(1) of the Sixth Schedule, Part-A, of the Income Tax Ordinance 1984, the non taxability of the income of the charitable organization shall continue to be applicable. The relevant portion of the decision is reproduced below for better appreciation;
“The word ‘property’ has been used but in the proviso the word ‘business’ has been used, Nevertheless, there is no difficulty to hold that ‘business’ is also a property. The business is a property is an established fact; it was held so as far back as in the case of the Trustees of Bombay Tribune, by the Privy Council, reported in 7 ITR 415. In the Bangladesh Statue, after the amendment brought about in 1973, it has been specifically laid down that for the purpose of this clause (i) property held under trust “includes a business undertaking so held”. The property in this case, consisting, as stated above, of the running business of launch-plying is held under trust, and income derived therefrom has been applied wholly for a religious or charitable purpose. But the proviso is to the effect that in the case of income from business this clause shall not apply, even if the income has been applied wholly for religious or charitable purpose, unless the business has been run in the course of the carrying out of a religious or charitable purpose of the trust. It should be noted that the proviso contains two other conditions (1) one is that the business is carried on “on behalf of a religious or charitable institution”, and the (2) other is that ‘the work in connection with the business is carried on by the beneficiaries” of the trust or institution.
  1. It appears that the similar question has arisen in the issue in front of this court as to the applicability of the provision of Paragraph-1(i) of the Sixth Schedule, Part-A, of the Income Tax Ordinance 1984, as it was prevailing at the relevant period, since admittedly the Assessee-applicant is a charitable organization having no dividend to be paid to its sponsor directors and the whole income is being applied for the charitable purpose. Therefore, the issue appears to have been wrongly considered by the IACT concern, who found that due to the deletion of the ‘Explanation’ from the provision of Sixth Schedule, Part-A, Paragraph-1(i) of the Income Tax Ordinance 1984, the charitable organization became taxable under the said provision. The said issue was not meticulously or independently considered by the two appellate authorities which practically mechanically affirmed the assessment order, on the basis that the IACT concern has shown a cogent reason. But this court finds that the reason, as has been shown by the IACT concern, not being lawful, the question which has been formulated in the supplementary-affidavit, is required to be answered in negative and in favour of the Assessee-applicant.
  2. Under the reasoning and discussion as above, this court finds merit in the instant Income Tax Reference Applications and the question, as has been formulated in the supplementary-affidavit dated 8.1.2015, is required to be answered in negative and in favour of the Assessee-applicant.
Result of the cases:
  1. In the result, the instant Income Tax Reference Application is allowed.
  2. The question as has been formulated by the Assessee-applicant in the instant Income Tax Reference Application is hereby answered in negative and in favour of the Assessee-applicant.
However, there shall be no order as to costs.
Ed.