HASSAN ALI ESAJI BHAIJI TRUST VS ADMINISTRATOR, CENTRAL ZAKAT ADMINISTRATION, ISLAMABAD
1991 P T D 43
[Karachi High Court]
Before Saleem Akhtar and Imam Ali Kazi, JJ
HASSAN ALI ESAJI BHAIJI TRUST through Managing Trustee
versus
ADMINISTRATOR, CENTRAL ZAKAT ADMINISTRATION, ISLAMABAD
and another
Constitution Petition No.176-D of 1986, heard on 20/04/1989.
(a) Zakat and Ushr Ordinance (XVIII of 1980)--
----S.2(xxiii)(a) & (b) [as amended by Zakat and Ushr (Amendment) Ordinance (LII of 1980)]---"Sahib-e-Nisab"---Definition and meaning-- Conditions for Sahib-e-Nisab which had been incorporated in one clause in the un-amended enactment viz. Zakat and Ushr Ordinance, 1980, were bifurcated by amendment in S.2(xxiii) by Ordinance (LII of 1980) and sub-cls. (a) & (b) were substituted in place of sub-cl. (1)---Object of amendment was that both the conditions should be complied with and sub-cls. (a) & (b) be read conjunctively-- Both the conditions prescribed in S.2(xxiii)(1)(a) & (b) have to be satisfied before claiming that a trust, fund, institution or society was not a Sahib-e-Nisab and not liable to pay Zakat.---[Words and phrases].
Maxwell's Interpretation of Statutes 232 rel.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 47---Zakaf and Ushr Ordinance (XVIII of 1980), 2(xxiii)(b)---Allowance for
donations for charitable purposes---Object of.
The purpose of section 47 of the Income Tax Ordinance is not only to grant allowance to the assessee who makes contribution to the approved institutions but inter alia its object is that charitable social or welfare organisations which receive donations should have the approval of the Central Board of Revenue, under section 47(1)(d). The Central Board of Revenue has the power to grant approval to any religious and charitable institution with the object that if any person who is an assessee makes donation to such institution he will be entitled to allowance in computation of his profit and gain. Such donations can be made to organisations which have been categorised under section 47(1)(b)(c) and (d). Therefore, when section 2(xxiii)(b) of the Zakat and Ushr Ordinance refers to section 47 of the Income Tax Ordinance it clearly means such institutions which have the approval of the Central Board of Revenue; it does not refer to the assessee or to the donor.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 47(5)---Income Tax Rules, 1982, R.41---Procedure for granting approval to charitable, religious institutions or funds.
Rule 41, Income Tax Rules, 1982, prescribes the procedure for granting approval to charitable or religious institution or fund. All the particulars mentioned in this rule are to be submitted by an institution which are scrutinised and after such scrutiny approval is accorded under section 47. The conditions prescribed by this rule are intended to regulate charitable institutions and to ensure that the donations are utilised only for religious and charitable purposes and not for any other purpose. It therefore, clearly shows that the approval by Central Board of Revenue under section 47 is inter alia for the purposes of ensuring that organisations and institutions claiming to be charitable are not fictitious institutions. Such certificate is issued for one year and remains valid upto 31st December of the calendar year. This shows that the Central Board of Revenue keeps constant watch on such organisations.
S.H. Fani for Petitioner.
A.R. Akhtar and Rashid Akhtar Qureshi for Respondents.
Date of hearing: 20th April, 1989.
JUDGMENT
SALEEM AKHTAR, J.--The petitioner is a religious and charitable trust of the Bohra Community registered on 28-1-1932 at Karachi. The petitioner Trust is exempted from payment of property tax. It holds an Account No.CD-01397348 with Habib Bank Ltd., the respondent No.2 at its Napier Branch, Karachi. The petitioner used to invest in Khas Deposit Certificates and the profits accruing on it were realised and credited by respondent No.2 in the, petitioner's account. The amount of Zakat was never deducted from it as the petitioner is a religious and charitable Trust of Bohra Community following and practising Fiqah-e-Jafria. The petitioner purchased Khas Deposit Certificates of the total value of Rs. one lac. At the time of encashment of the certificates together with the profits, the respondent No. 2 informed that Zakat shall be deducted out of the accrued profits unless the petitioner furnished a certificate. of registration of the Trust and also a certificate from the Central Board of Revenue as required under section 47 of the Income Tax Ordinance. The petitioner replied pointing out that under law it was not required to obtain any approval from the Central Board of Revenue under section 47 of the-Income Tax Ordinance. The petitioner also addressed a letter to respondent No. 1 but no relief was granted and ultimately it has filed this petition challenging the action of respondent No. 2 deducting Zakat from the profits which have accrued on the Khas Deposit Certificate and also requiring it to produce a certificate from the Central Board of Revenue under section 47 of the Income Tax Ordinance.
Mr. Fani, the learned counsel for the petitioner has contended that as the petitioner is a charitable Trust it is not required to be registered under section 47 of the Income Tax Ordinance nor any approval is necessary as required by respondent No. 2 because such approval and certificate is to be obtained by an assessee only for the purposes of, income-tax and as the petitioner does not pay any income-tax it is not bound to comply with these requirements. To properly appreciate this contention it is necessary to refer to the provisions of Zakat and Ushr Ordinance, 1980 and section 47 of the Income Tax Ordinance which are reproduced as follows:--
Zakat and Ushr Ordinance, 1980:
"2. Definitions: --In this Ordinance, unless there is anything repugnant in the subject or context."
(xxiii) `Sahib-e-nisab' means a person who owns or possesses assets not less than nisab, but does not include--
(i) an institution, fund, trust, endowment or society--
(a) registered as a charitable organisation under the Societies Registration Act, 1860 (XXI of 1860), or as a company under section 26 of the Companies Act, 1913 (VII of 1913), or registered or approved as a charitable or social welfare organisation under any other law for the time being in force, and '
(b) approved by the Central Board of Revenue for the purposes of section 47 of the Income Tax Ordinance, 1979 (XXXI of 1979);
Income-tax Ordinance. 1979:
47. Allowance for donations for charitable purposes.---(1) An assessee shall be entitled to an allowance in respect of any sum paid by him in any income year as donation to-
(a) any Board of Education in Pakistan or any University in Pakistan established or incorporated by, or under, any Federal or Provincial Act or any educational institution in Pakistan affiliated to any such Board of Education or University, or recognised, aided or run by Government or run by any local authority; or
(b) any hospital in Pakistan recognised, aided or run by Government or run by a local authority; or
(c) any relief fund sponsored or approved by Government; or
(d) any other institution or fund which is established in Pakistan for a religious or charitable purpose and is approved by the Central Board of Revenue for the purposes of this section.
(2) Nothing contained in subsection (1) shall apply to any donation made to a private religious institution or fund which does not enure for the benefit of the public.
(3) The aggregate of the allowances under subsection (1) shall not exceed--
(a) in the case of a public company, five per cent of the total income of the assessee or two hundred thousand rupees, whichever is the less;
(b) in the case of a private company seven and a half per cent of the total income of the assessee or three hundred thousand rupees, whichever is the less; and
(c) in any other case, fifteen per cent of the total income of the assessee or one hundred and fifty thousand rupees, which ever is the less;
(4) Nothing contained in subsection (3) shall apply in respect of any donation made to the Quaid-e-Azam Memorial Fund (or any donation made to a fund or institution approved by the Federal Government for the purpose of this subsection on such conditions as it may deem fit).
(5) The Central Board of Revenue may make rules regulating the procedure for the grant of approval under this section and any other matter connected with, or incidental to, the operation of this section.
The learned counsel has contended that the petitioner can claim exemption by virtue of section 2(xxiii)(i) as it is a registered charitable organisation. It has been further contended that if it satisfies any one condition mentioned in section 2(xxiii)(i) of the Zakat and Ushr Ordinance it will not fall within the category of Sahib-e-Nisab. Section 2(xxiii)(i) clearly provides that an institution, trust, fund or society will not be a `Sahib-e-Nisab', if it complies with two conditions viz. (1) it is registered as charitable organisation and (2) that it would have approval of the Central Board of Revenue for the purpose of section 47 of the Income Tax Ordinance. In order to bring an institution or trust out of the definition of Sahib-e-Nisab, these two conditions have to be satisfied. Mr. Fani, the learned counsel wants us to read sub-clauses (a) and (b) disjunctively. This object can be achieved if the word `and' after the sub-clause (a) is read as `or'. Such an interpretation by reading `or' for the word `and' will be permissible provided it reflects the true intention of the legislature or there-is an ambiguity which has to be resolved by such interpretation. Section 2(xxiii)(i) of the Ordinance originally provided as follows:-
(xxiii) Sahib-e-Nisab means a person who is liable to pay Zakat or Ushr under this Ordinance, but does not include--
(i) an institution, fund, trust, endowment or society, registered as a charitable organisation under the Societies Registration Act, 1860 (XXI of .1860), or a company registered under section 26 of the Companies Act, 1913 (VII of 1913), and approved by the Central Board of Revenue for the purposes of section 47 of the Income-tax Ordinance, 1979 (XXXI of 1979);
Thereafter by Ordinance LII of 1980 it was amended in the manner as reproduced earlier whereby the conditions which had been provided in one clause were bifurcated in sub-clauses (a) and. (b). This clearly reflects the intention of the legislature which intended both the conditions to 'be complied with and to read sub-clauses (a) and (b) conjunctively. In Maxwell's Interpretation of Statutes at page 232 it has been observed that:--
"In ordinary usage, `and' is conjunctive and `or' disjunctive. But to carry out the intention of legislature it may be necessary to read `and' in place of the conjunction `or' and vice versa."
This principle of interpretation can be applied only if there is any ambiguity in the interpretation of a particular statute. Here the legislature has clearly spelt out its intention and has left no room for any ambiguity. The intention of the legislature being clear and specific both the conditions prescribed in section 2(xxiii)(i)(a) and (b) have to be satisfied before claiming that a trust, fund, institution or society is nova Sahib-e-Nisab and not liable to pay. Zakat.
The learned counsel for the petitioner further argued that sub-clause (b) of clause (i) of section 2(xxiii) is completely irrelevant as it requires approval by the Central Board of Revenue for the purposes of section 47 of the Income Tax Ordinance. The learned counsel for the petitioner has put emphasis on the words `for the purposes' in sub-clause (b) to demonstrate that it is to be applied to those persons who are Income-tax assessees claiming allowance as provided under section 47 of the Income Tax Ordinance. The purpose of section 47 of the Income Tax Ordinance is not only to grant allowance to the assessee who makes contribution to the approved institutions but inter alia its object is that charitable social or welfare organisations which receive donations should have the approval of the Central Board of Revenue, under section 47(1)(d). The Central Board of Revenue has the power to grant approval to any religious and charitable' institution with the object that if any person who is an assessee makes donation to such institution he will be entitled to allowance in computation of his profit and gain. Such donation can be made to organisations which have been categorised under section 47(1)(b)(c) and (d). Therefore, when section 2(xxiii)(b) of the Zakat and Ushr Ordinance refers to section 47 of the Income Tax Ordinance it clearly means such institutions which have the approval of the Central Board of Revenue; it does not refer to the assessee or to the donor.
Mr. A.R. Akhtar, the learned counsel for the respondent No. 2 has placed before us the Rules framed under the Income Tax Ordinance prescribing procedure for granting approval under section 47. These rules have been framed under section 47(5). In this regard Rule 41 prescribes the procedure for granting approval to charitable or religious, institution. or fund. All the particulars mentioned in this rule are to be submitted by an institution which are scrutinised and after such scrutiny approval is accorded under section 47. The conditions'', prescribed by this rule are intended to regulate charitable institutions and to ensure that the donations are utilised only for religious and charitable purposes and not for any other purpose. It therefore, clearly shows that the approval by Central Board of Revenue under section 47 is inter alia for the purposes of ensuring that organisations and institutions claiming to be charitable are not fictitious institutions. Such certificate is issued for one year and remains valid upto 31st December of the calendar year. This shows that the Central Board of Revenue keeps constant watch on such organisations. In view of the above discussion we are of the view that the demand made by respondent No. 2 is justified and according to law. The petition is therefore dismissed with no order as to costs.
A.A./H-255/K Petition dismissed.