Gunn Chit Tuan CJ (Malaya):

This appeal by the National Land Finance Co-operative Society Ltd. (the taxpayer) raised the question whether the words of the amendment made by Act A471 to paragraph 33 of Schedule 9 of the Income Tax Act, 1967 (the Act) was capable of removing the exemption from tax granted to the tax payer by s. 13(1)(f)(ii) of the Income Tax Ordinance 1947 (Repealed).

The Special Commissioners of Income Tax in their Deciding Order dated 10 June 1987 found that the taxpayer is a society registered on 4 June 1960 under s. 7 of the Co-operative Societies Ordinance 1948. It was therefore exempted from payment of income tax under the said section 13(1)(f)(ii) of the Income Tax Ordinance 1947 which conferred exemption from the payment of income tax on any cooperative society registered under the law in force relating to the registration of co-operative societies. The Income Tax Act 1967 came into force on 28 September 1967 and repealed the Income Tax Ordinance 1947 and subsection 3 of section 1 of that Act stipulates that the Act shall have effect for the year of assessment 1968 and subsequent years of assessment. The exemption conferred by the Income Tax Ordinance 1947, was continued by paragraph 33 of Schedule 9 of the Act and by the said paragraph 33 that exemption was "deemed to have been made by an order under s. 127 of the Act" .

There was no dispute that paragraph 33 of Schedule 9 of the Act continued the previous exemption under the Ordinance. The Director General of Inland Revenue (the Revenue) had previously disputed that the exemption was continued under the Act and had raised tax on the taxpayer for the years of assessment 1968 to 1975 under the Act when it cameinto force. In a case No. PKR 256, the Special Commissioners of Income Tax had discharged those assessments on 2 November 1978 and held that the taxpayer continued to enjoy the exemption by virtue of the said paragraph 33 read with s. 156 of the Act relating to transitional and saving provisions. It was held by the Special Commissioners that those provisions prevailed over paragraph 12 of Schedule 6 of the Act which limited exemptions from tax for co-operative societies. The Revenue accepted that decision as good law for the purposes of the present appeal. But the Revenue also contended that the amendment to the proviso to the said paragraph 33 by Act A471 of 1980, which came into force on 1 February 1980, had removed the exemption and moreover by s. 1(5) of that Amendment Act A471 , the amendment to paragraph 33 of the Act was made retrospective to the year of assessment 1968. Therefore acting under the said Amendment Act A471, the Revenue raised assessments afresh on the taxpayer for the years of assessment 1977 to 1981.

In a Deciding Order given on 10 June 1987, the Special Commissioners discharged the said assessments and held that the amendment to paragraph 33 of Schedule 9 of the Act did not have the effect of removing the exemption from tax. On appeal by the Revenue, the High Court on 19 October 1987, reversed the decision of the Special Commissioners and held that the tax payer no longer enjoyed the exemption by virtue of the said amendment. Unfortunately no written grounds of judgement are available although this appeal has been adjourned several times by the Supreme Court to enable the learned Judge to give his grounds of decision.

On appeal before us on 11 October 1993, Mr. C.V. Das, leading Counsel for the taxpayer, contended that the learned Judge had misconstrued the said amendment and the effect it had on paragraph 33 of Schedule 9 of the Act . He pointed out that paragraph 33 remained the same and that the only change made by the Amendment Act was the alteration of the proviso to paragraph 33 by the addition of a paragraph (a) which reads as follows:

Provided that this paragraph shall not apply in relation to -

(a) any such exemption for which provision is made, with or without modification, in this Act;