Law:

Section:

(a) Income Tax Ordinance (XXXI of 1979)--- ----Ss.26(b), First Sched. & Fifth Sched.---Special provisions regarding business of insurance and production of oil and natural gas and exploration and extraction of other mineral deposits---Rate of tax---Assessee contended that specific provisions had been laid in S.26(b) of the Income Tax Ordinance, 1979 to the effect that rules contained in Part-I of Fifth Schedule of the Income Tax Ordinance, 1979 shall not apply for the purposes of working out profits and gains and tax payable thereon in respect of income of companies who discovered petroleum (including natural gas) before 24-9-1954---In such conditions, rates of tax on income of companies as contained in First Schedule to the Income Tax Ordinance, 1979 were applicable---Tax was payable @ 35% in assessment year 1997-98 and 33% in assessment year 1998-99 on company's income in the light of provisions contained in First Schedule to the Income Tax Ordinance, 1979---Assessing Officer was not justified to apply tax 50% on company's income and First Appellate Authority was not legally correct to uphold the same---Validity---On 24-9-1954 no separate Schedule existed in the Income Tax Act, 1922, about working out tax liability of petroleum companies---With the introduction of Income Tax Ordinance, 1979 Fifth Schedule was specifically introduced therein which contained rules for the computation of profits of petroleum companies and taxes payable thereon---When said specific legislation came into existence, the profit of all petroleum companies and taxes payable thereon had to be worked out in the light of such specific/exclusive provisions of law---Nevertheless the agreement between the company and Government of Pakistan was at the same time applicable for working out the tax liability of the company---Since, taxes had been specifically fixed @ 50% in the agreement, dated 24-9-1954, the company's profits shall be taxable at the same rate during the entire period of currency of agreement-- Any upward or downward revision in tax rates by Government of Pakistan shall not apply to the case of said company---During such assessment years, rate of tax for private companies…

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