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I.T.A. No.996/ KB of 1983-84, decided on 8th July, 1987.

---Sched. II, item 98, Cls. 38 & 39 [before amendment of 1985]--Word "Component"- -Meaning--Manufacturing of tractor-trolly--Exemption from it' come-tax--Tractor-trolly is complete in itself and not a component part of a tractor and thus not, a manure spreader--Income from manufacturing of tractor-trolly, held, was not exempt from income-tax. Abbas Ali Siddiqi for Appellant.

Abdul Ghani Channa D.R. for Respondent.

Date of hearing: 8th July 1987.

The appellant derived their income in assessment year 1980-81 from manufacturing of tractor trollies as well. They claimed it to be exempt from Income-tax under Item 98 of Second Schedule of the Income Tax Ordinance, 1979. The Income Tax Officer, however, has taxed it. On first appeal, the learned Appellate Assistant Commissioner has confirmed the finding of Income Tax Officer. The appellant is not still satisfied and has come in second appeal before this Tribunal against the order of learned Appellate Assistant Commissioner recorded on 31st October 1983. The precise question before me is as to whether the tractor trollies manufactured by the appellant fall within Item 98 of Second Schedule and are exempt from the clutches of Income-tax.

2. Mr. Abbas Ali Siddiqi, the learned counsel for the appellant together with the owner of the appellant appeared before me. 'The learned counsel firstly contended that since the tractor trollies a manure spreader. It, therefore, fell within Item 98 Schedule. Alternatively, the learned counsel contended that the tractor trollies was within the ambit of clause 39 of Item 98 of Second Schedule of the Income Tax Ordinance, as the trolly was a component part of the tractor. Mr. Abdul Ghani Channa, the learned Departmental Representative, on the other hand, supported both the officers below. According to learned Departmental Representative, the tractor trollies were used very often for purposes other than agriculture, hence cannot fall within the ambit of clause 39 of Item 98 of Second schedule of the Income Tax Ordinance. The Departmental Representative also vehemently argued that a tractor trolly was, definitely not a manure spreader.

3. I have heard both the learned counsel for the appellant as well as the learned Departmental Representative. The owner of the appellant has also explained various aspects of the matter. I have also gone through the material provided by the appellant.

4. Second Schedule of the Income Tax Ordinance deals with various types of incomes or classes of income or persons or clauses of persons which are exempt from tax provided the conditions mentioned therein are fulfilled. This Schedule further determines the extent of the exemption. As such, I have to refer to Item 98 to determine the tax liability of the appellant. Item 98 reads as under:-

"(98) Any income derived by an assessee from the sale, during the period commencing on the first day of July, 1968 and ending on the 30th day of June, 1988, of the following 'agricultural machinery manufactured (not assembled) by him namely:

(1) Agricultural tractor

(2) Bar Harrow.

(3) Beet Pullet.

(4) Binding machines.

(5) Border disc.

(6) Broadcast seeder.

(7 Cane crusher.

< [if supportLists]>(8) Corn picker.

(9) Corn Sheller.

(10) Cotton picker.

(11) Cotton and corn planter.

(12) Cultivator'

(13) Elevator.

(14) Fertilizer distributor.

(15) Food cutter (bullock and power driven).

(16) Ground-net digger.

(17) Hay-making equipment.

(18) Hay-tooler.

(19) Hay-press.

(20) K.R.Karandi (Crust Breaker).

(21) Manure spreader.

xxxx xxxx xxxx"

Let me also mention here that by Finance Act of 1985 the following machinery plants were further added to the list reproduced above;

"(39) Component parts of these implements, machines or tractor provided they can be easily fitted in to their proper placed in the implements, machines or tractors ant cannot ordinarily be used for purposes other than agriculture,

(40) Augering machine.

(41) Cane planter.

(42) Cutter binder.

(43) Grain loader

(44) Land leveller.

(45) Tabacco inter-cultivator.

(46) Tractor trolley."

From perusal of above quoted list of the machinery which is included Item No.(98) of Second Schedule of the Income 'Fax Ordinance 79, it appears that the income derived from manufacturing of tractor: ropy has been exempted. However, in tire appeal before me the is assessment year involved is 198(1-81. I have to examine, therefore. Its merits of the respective submissions of the learned counsel for the appellant as well as learned Departmental Representative Now dealing with the first submission of the learned counsel for the appellant that the tractor trolly was a manure-spreader hence fell within the long list attached to Item (98) of Second Schedule of the Income Tax Ordinance, 1979, with due respect to him, I do not find any force in his submission. There is nothing on record to show that the trolly manufactured by the appellant is actually used for spreading ma-lure. The appellant drew my attention to the photograph of a tractor and mechanism attached with it and submitted that he was manufacturing a trolly like the one shown in the picture. I am afraid Am unable to persuade myself to agree with him. The tractor and the mechanism has been described as a tractor mounted multipurpose slow loader. The tractor shown in the picture is a Leyland Tractor. I fail to see any connection between the Leyland Tractor and the 7 echanism attached with it with the trolly manufactured by the appellant. He should have produced before me any thing which might, have depicted the trolly manufactured by the appellant with its various functions which might have included the function of manure spreading as well. When I look at clause (21) which deals within manure-spreader in context with and with reference to other clauses, it appears that 111 of them except, the agricultural tractor are independent machineries leant for various types of agricultural processes. Some of them could be attached to or be operated on the power of the tractor but they are described in separate clauses. Each clause is mentioning the name of the machinery and the name is indicating the function thereof. As such, the function of a manure-spreader apparently is spreading the manure. There is nothing on record to show that the trolly of the appellant is fixed with various gadgets and mechanism, which are u-ed for spreading the manure in the fields. If the trolly is used for transporting manure to the fields or if the manure is loaded on the trolly and then it is driven in the field with the help of a tractor and a man sitting on it goes on spreading the manure manually, it cannot be deemed to be manure-spreader. If the contention of the appellant is taken to be true, then his trolly can also be called Corn-picker or Cotton-picker or a ground-nut digger or potato picker of spraying machine. If a person sitting on the trolly does any of the functions performed by the machines mentioned above, the trolly cannot be deemed to be that machine. As such, if the manure spreading is done by a man sitting on the trolly it cannot be deemed to be a, manure-spreader. As mentioned above, all the machines are doing the functions, which are indicated by their names. I am, therefore, not prepared to accept the contention of the learned counsel for the appellant that the trolly is a manure-spreader hence income derived from its manufacturing is exempt from tax. The contention, therefore, stands rejected. Now turning to clause 39 let me point out that it deals with component parts of those machines, which have been described in clauses (1) to (38). Clause (1) deals with Agricultural Tractor. Now if clause (39) is read with it, then trolly cannot be held to be a component part. Clause (39) speaks of component parts of implements, machines or tractors. If both clauses are read together it appear that the legislature is contemplating those component parts which make the implement, machinery or the tractor function normally. To my mind the expression 'component part' does not mean and imply the independent attachments, which are not necessary for running of the implements, machines or tractors. I at fortified in my view firstly by the meaning given to the work "component" by an ordinary dictionary. In Oxford Dictionary the word "component" means "part, element, constituent of whole". Thus, a fan and a belt is very much component part of a tractor and power blower but if they are such that ordinarily they are to he used as component part of tractor and power blower, the income derived from manufacturing of them would be exempt from tax. Otherwise, a fan or belt can be used for various purposes and is component part of various machines. Similarly, blades are used for various types of machines mentioned in various classes of item (98). However, the income derived from manufacturing them would be exempt only and only if they are ordinarily used as component, parts of various implements, machines or tractors. Thus, I am of the view that a tractor trolly cannot be called a component part of a tractor. It is an additional attachment and not a component part. A tractor is complete in itself without a trolly and trolly is merely an additional complete unit in itself. My this conclusion is further fortified by clause (23) . The legislature has taken precaution .in describing those ploughs, cultivators and sacrifices, which could be used with tractor or worked by other manual or animal power, the manufacturing of which could give rise to exempt income. If the legislature had in contemplation, the trolly which, could be attached to tractors they could have described it separately like ploughs, cultivators and sacrifices but they did not do so. It, therefore, necessarily leads to the conclusion that the income derived from manufacturing of trolly cannot be deemed to be exempt. May be it was realized subsequently that the income derived from manufacturing of tractor-trolly be further exempted from tax and consequently from assessment year 1985-86, it was also exempted. The fact that the tractor-trolly was brought on statute book subsequently further lends support to my conclusion. Had clause (21) or (39) covered the tractor trolly the legislature would not have made redundant addition. I am, therefore, firmly of the view that the income of the appellant is not exempt from tax and both the officers below came to the correct conclusion.

5. The appellant has produced before me photostat copy of a certificate of Syed Saadat Hussain Naqvi, Agricultural Engineering Department of Baluchistan to show that tractor trolly is a component part of a tractor to be utilized as a whole unit for agricultural purpose. With due respect to Syed Saadat Hussain Naqvi, I attach or value to his certificate because of the reasons given above. A tractor and a trolly both are independent units. A tractor can be used without a trolly but so many other machineries can be attached with it for various functions and so could be att4ched a trolly.

6. The appellant also produced before me a photostat copy of 'A Hard-book of Agricultural Machinery Manufacturers in Pakistan to show that in Sukkur District various persons were manufacturing small and medium size tractor trollies. On the strength of this it was argued that the trolly was an agricultural machinery or a component part of a tractor. This submission also appears to be devoid of any merit for the reasons discussed above. A trolly can, of course, be attached with a tractor. It also may usefully be used for agricultural purposes when attached to a tractor but, with due respect to the learned counsel for the appellant, it cannot be deemed to be a component part of a tractor. It is true that it can he easily fitted to a tractor and cannot ordinarily be used for purposes other than agriculture, yet it cannot be held to be a component part of a tractor, as discussed above.

7. In view of discussion made above, I find no force in this appeal and it stands rejected accordingly and the impugned order is hereby confirmed.

M.B.A./409/T

Appeal dismissed.

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