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I. T. A. No.605/PB of 1986-87, decided on 15th June, 1987.

---Sched. II, C1. 120-A--Assessee, a corporate body exclusively owned by Provincial Government--- Income of such a Body attributable to the sale of timber exempt from tax-Income flowing from interest on bank deposits is income and is taxable like any other income, unless specific exemption extended to it.

---Sched. II, C1, 120-A--Expression "attributable to" wider in import than expression "derived from"--Assessee, a corporate body exclusively owned by Provincial Government deriving income from felling and sale of trees Receipts from rental charges registration fee, sale of scrap and workshop charges being part of sale of timber, income of assessee on such activities, held, was, exempted-- Assessee's income flowing from interest on bank deposits however was not, exempted.

Cambay Electric Supply Industrial Company Limited v. Commissioner of Income Tax Gujerat II. dated 11 April, 1978 arid Chamber's Twentieth Century Dictionary New- Edition, 1964 ref.

Rafaqatullah Babar C. A. for Appellant.

Irshad Shaheen, D.R. for Respondent.

Date of hearing: 15th June, 1987.

The assessee, a corporate body exclusively owned by the Government of NWFP, has lodged this appeal against the order of learned CIT (Appeals), dated 26-1-1987 in respect of the charge year 1983-84, by which he declined to exempt it from payment of tax.

The assessee derives income from the telling and sale of trees as also from deposits in bank by way of interest and rental charges, registration fee, sale of scrap and workshop charges. It submitted return for the year 1983-84 declaring nil income, claiming complete exemption under clause 120-A of the Second Schedule of the Income Tax Ordinance, 1979 as, according to it, whole of the income was attributable to the sale of trees. The ITO accepted the contention, but only in regard to the income relatable to the sale of trees. The rest of the income declared, he held liable to tax and determined the same as under:

Aggrieved, the assessee preferred an appeal raising the same plea under clause 120-A of the Second Schedule afore-mentioned, but the learned CIT (Appeals) endorsed the view of the assessing officer and rejected the appeal as per his order aforesaid. Hence this further appeal by the assessee.

Clause under 120-A aforesaid was added through amendment on .the basis of SRO-272 (1 )/ 84, dated 28-3-1984 which reads as under:-

"Any income of a company, wholly owned by a Provincial Government as is attributable to the sale of timber where such timber is obtained from felling of trees in forests by or on behalf of, the said company. The exemption under this clause shall apply from the date of commencement of operations of the said company."

It is contended that the significant word used in the above notification is that of "attributable" which is much wider in import than the word 'derived'. It would cover the entire income received by the assessee, which in any wise could be related to its operations of felling trees. Undoubtedly, it was urged, felling of trees is the main function. Mainly, it was said income of the assessee came from the sale of trees felled in forests, but the money so realised require to be kept in banks for safe-keeping. The interest paid thereon became due, because the money remained with the bank. On payment as interest it became part of the principal amount, which represented the sale consideration. The same while remained with the bank did not change its character and the amount of interest paid on it as part of it would have the same character. Accordingly, the whole amount could be called the amount of sale consideration. Further it was said, felling of trees was done through contractors who required to be enlisted on payment of fee and the amount so received could not be separated from that of sale of trees. Fee was charged to grant licence to fell trees disposable by sale. Accordingly, fee toe became part 'of the income had from the timber sales. Similarly, it was said, the contradiction had to pay rental charges for keeping their cut timber on the assessee's premises. The same also was not separable from the sale of timber. In addition, the assessee recovered minor charges for the repair work done for its subordinate offices in regard to the machinery employed by them for the felling of trees. That too would be part of the main income. Then, it was claimed, some amount came from the sale of scrap of obsolete machinery and the same too could not be differently treated. Thus, it was claimed, the entire receipt accrued as a result operations carried out the felling of trees. Reliance for support of this view was placed on a judgment of the Supreme Court of India, in the case of Cambay Electric Supply Industrial Company Limited v. Commissioner of Income Tax, Gujerat-II, dated 11 April 1978. In this judgment the expression "attributable to" was regarded as having wider import than the expression "derived from". In the relevant portion it was observed as under"

"As regards the aspect emerging from the expression attributable to" occurring in the phrase "profits and gains attributable to the business of" the specified industry (here generation and distribution of electricity) on which the learned Solicitor General relied it will be pertinent to observe that the legislature has deliberately used the expression "attributable to" and not the expression "derived from". It cannot be disputed that the expression "attributable to" is certainly wider in import than the expression "derived from". Had the expression "derived from" been used, it could have force been contended that a balancing charge arising from the sale of old machinery and building cannot be regarded as profits and gains derived from the conduct of the business of generation and distribution of electricity. In this connection: it may be pointed out that whenever the legislature wanted to give a restricted meaning in the manner suggested by the learned Solicitor-General, it has used the expression "derived from", as, for instance, in section 80J. In our view, since the expression of wider import, namely, "attributable to", has been used, the legislature intended to cover receipts, from sources other than the actual conduct of the business of generation and distribution of electricity."

Some other decisions from Indian Jurisdiction were also quoted.

In reply the learned D.R. referred to the judgment of learned CIT (Appeals) pertaining to the earlier period of 1979-80 and 1980-81, dated 15-9-1984 wherein on the same point adverse finding was recorded with no further appeal by the assessee to question order. It was also contended that income attributable to the sale of timber only would be exempt, because the provisions relating to fiscal matters required to be given restricted meaning and if the legislature intended to exempt all income of the assessee, it could have used such expression that left no room for any doubts.

Interest un-disputably is paid by the banks on any amount kept with them, without looking to the source from which it came. Whether it be the amount of sale price of timber or of any agricultural product, the banks would pay interest on it. For that matter any money is money for them and they do not have to look to the source. As such, income flowing from interest on bank deposits is income and is taxable like any other income, unless of course, there is a specific exemption extended to it. There being no such exemption, I find that interest income would not be exempt.

However, the rest of the receipts seem exempt. They result from activities connected with the main activity viz. felling of trees. Three receipts included registration fee, rental charges, workshop charges and sale proceeds of scrap. Registration fee is paid by Contractors on seeking enlistment to work as such. Unless there be good prospects to work as Contractor, no one would like to be enlisted as such, paying fee in the process. The fee accordingly can be treated to have accrued as a result of tree felling operations.

Rental charges fall due when cut timber is kept on the assessee's premises and lifted later. The same are clearly due to tree felling operations.

And so are the workshop charges and scrap's sale proceeds Workshop charges represent the amount received from Subordinate Offices for repairing their machinery used in tree felling. Such of the said machinery as become unfit for the further use is disposed of as scrap by sale. Both workshop charges and scrap receipts as such arise from tree felling operations. All these receipts, on the ratio of Indian Ruling abovequoted, can be regarded as part of income from the sale of timber, as the expression "attributable to" has been construed as having. wider import than the expression "derived from" and the legislature by employing the former appear to have intended to cover receipts from sources other than the actual operations of tree felling. The meaning assigned to the word 'attribute' in Chamber's Twentieth Century Dictionary New Edition, 1964 as: to ascribe, assign or consider as belonging, that which is inherent in, or inseparable from that which can be predicated of anything, a quality or accessory etc. also favours the above view.

Accordingly, I find that except interest income, rest of all receipts are exempt from tax and as a result I accept the appeal and direct that income of the assessee be re-computed.

M.B.A./423/T Appeal accepted.

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