PAKISTAN SEAMEN CONTRIBUTORY WELFARE FUND, KARACHI VS INCOME TAX TRIBUNAL
1993 P T D 734
[Karachi High Court]
Before Mamoon Qazi and Muhammad Hussain Adil Khatri, JJ
PAKISTAN SEAMEN CONTRIBUTORY WELFARE FUND, KARACHI
versus
INCOME TAX TRIBUNAL and 2 others
Const.Petition No. D-856 of 1992, decided on 14/01/1993.
(a) Income Tax Ordinance (XXXI of 1979)---
----Second Sched., cl. 94---Claim of exemption under Second Schedule, cl.94-- Conditions.
In order to claim exemption under clause 94; (i) the assessee must be either a religious or a charitable institution, (ii) the income, in respect of which the exemption is sought, must be the income derived from voluntary contributions, donations, subscriptions, house property or investments in securities of the Federal Government and (iii) such income must be applicable solely to religious or charitable purposes of the institution.
(b) Income Tax Ordinance (XXXI of 1979)--
----Second Sched., cl. 94, proviso---Claim of exemption under Second Sched., cl. 94---Proviso to cl. 94, Second Sched. refers only to a private religious trust and if the assessee is not a religious trust the said proviso cannot be invoked in assessee's case and assessee is only required to satisfy the other conditions laid down in cl. 94 to claim exemption.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.2(14)---"Charitable purposes"----Definition---Scope.
The definition of "charitable purposes is not exhaustive but the same is an inclusive definition which only has the effect of enlarging the ordinary meaning of the expression "charitable purposes". It would, therefore, be erroneous to assume that the definition in any case restricts the meaning of the said expression to what has been referred to be in the said definition.
(d) Income Tax Ordinance (XXXI of 1979)---
-----Second Sched., cl. 94 & S. 47(1)(d)---Claim of exemption under cl. 94, Second Sched. by an institution approved by C.B.R. under S. 47(1)(d) of the Ordinance---Mere fact that the object, for which the institution has been constituted, is not public benefit, cannot in any manner disentitle it to claim exemption under cl. 94.
Commissioner of Income Tax v. Messrs West Pakistan Management Association 1985 PTD 287 distinguished.
Aga Faquir Muhammad for Appellant.
Shaik Haider for Respondents.
Date of hearing: 14th January, 1993.
JUDGMENT
MAMOON QAZI, J.---Pakistan Seamen's Contributory Welfare Fund, the petitioner in this case is a charitable institution. In the assessment years 1988-89 and 1989-90, the petitioners while filing their returns of income -tax, claimed exemption under clause 94 of the Second Schedule on the contributions received thereby from their members, i.e. seamen and shipping companies. The claim was, however, disallowed by the Income Tax Officer, who dealt with the petitioner's case, firstly, on the ground that the claim of exemption was only available to a class of persons who had served with shipping companies and the same was for the benefit of the public-at-large and secondly, that the rules framed by the petitioners did not exhibit any purpose which was of religious or charitable nature as the benefit was transferred by virtue of employment to ex-employees of the shipping companies. The petitioners being aggrieved by the said order, filed appeal first before the Appellate Commissioner of Income Tax and subsequently to the Income Tax Appellate Tribunal but without any success. The learned Tribunal while concurring with the order of the Income Tax Officer concerned, took the view that the important condition for grant of exemption to the petitioners is that it must ensure benefit of the public.
We have heard Mr. Aga Faquir Muhammad, learned counsel for the petitioner and Mr. Shaik Haider, learned counsel for the respondents.
Mr. Aga Faquir Muhammad has mainly placed reliance upon clause 94 in the Second Schedule to the Income Tax Ordinance, 1979 which provides as follows:---
"(94)Any income of a religious or charitable trust derived from voluntary contributions, donations, subscriptions, house property and investments in securities of the Federal Government applicable solely to religious or charitable purposes of the institution:
Provided that nothing contained in clause (93) or this clause shall apply to the income of a private religious trust which does not enure for the benefit of the public."
It is also pertinent to refer to section 14 of the said Ordinance which provides as under:---
"14.Exemptions.---(1) The income or classes of income, or person or classes of persons specified in the Second Schedule shall be---
(a) exempt from tax under this Ordinance, subject to the conditions and to the extent specified therein; or
(b) liable to tax at such rates, which are less than the rates specified in First Schedule, as are specified therein; or
(c) allowed a reduction in tax liability, subject to the conditions and to the extent specified therein; or
(d) exempt from the operation of any provision of this Ordinance, subject to the conditions and to the extent specified therein:
Provided that, where any income which is exempt from tax under any provision of the Second Schedule, such income, as may be specified in the said Schedule and subject to such conditions as may be specified therein, shall be included in the total income, so however, that the tax shall not be payable in respect of such income.
(1-A) Omitted by the Finance Act VI of 1989.
(2) The Federal Government may, from time to time, by notification in the official Gazette, make such amendment in the Second Schedule by---
(a) adding any clause or condition therein;
(b) deleting any clause or condition therein; or
(c) making any change in -any clause or condition therein,
as it may think fit, and all such amendments shall have effect in respect of any assessment year, as may be specified in this behalf, including any such year beginning on any date before or after the commencement of the financial year in which the said notification is issued."
It is thus clear from clause (94) that in order to claim exemption under clause 94; (i) the assessee must be either a religious or a charitable institution, (ii) the income, in respect of which the exemption is sought, must be the income derived from voluntary contributions, donations, subscriptions, house property or investments in securities of the Federal Government and (iii) such income must be applicable solely to religious or charitable purposes of the institution. As to the question whether the above conditions are satisfied by the petitioner in order to claim exemption under the said clause (94), there appears to be no serious controversy. Mr. Aga Faquir Muhammad has invited our attention to the Pakistan Seamen's (Contributory) Welfare Fund Rules which are said to have been duly approved by the Central Board of Revenue under section 47(1)(d) of the Income Tax Ordinance. According to the said Rules, "Fund" means the Pakistan Seamen's (Contributory) Welfare Fund, "Members" means "representatives of the seamen nominated by the Federation, representatives of the foreign shipping companies nominated by the Owners' Agents' Committee (Crew), a representative of the National Shipping Corporation, a representative of the Nationalised Pakistani Shipping Companies, a representative of the Director-General of the Ports and Shipping (The Shipping Master) and a representative of the Directorate of Bureau of Emigration". The word "Seaman" has also been defined to mean as "any seaman who is contributing or has at any time contributed to the Fund." Mr. Aga Faquir Muhammad has also invited our attention to the definition of "Schemes of Expenditure" as contained in clause (16) of the said Rules which provides as under:---
"(16). Schemes of Expenditure.--
Subject to the provisions contained in Rule 3, the Welfare Scheme shall be confined to the betterment of the seamen, in general, and the Fund would be utilised for the following purposes in particular;
(i) Monetary relief to poor and needy seamen;
(ii) Provision of old-age pension or gratuity to seamen on retirement and also assistance to the dependents of deceased seamen;
(iii) Medical aid;
(iv) Education;
(v) Recreational facilities;
(vi) Other amenities of life, service and benefits such as provision of food grains and stores at concessional rates, housing, canteen transport facilities, life insurance and promotion of cooperative societies."
In view of the above provisions although it is not disputed by Mr. Shaik Haider, learned counsel for the respondents that the petitioner is a charitable institution, however, the contention of Mr. Shaik Haider is that since the petitioner does not ensure any benefit to the public, clause (94) cannot be invoked in its case. Reference has been made by the learned counsel to the proviso to clause (94). Reference has also been made by the learned counsel to section 2(14) of the Income Tax Ordinance which defines "charitable purposes" as follows:---
"(14) "charitable purposes" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility."
We find no force in Mr. Shaik Haider's contention. So far as the first contention of the learned counsel is concerned, proviso to clause (94) refers only to a private religious trust. Since admittedly the petitioner is not a religious trust, the said proviso cannot be invoked in the petitioner's case. If the said proviso is not applicable to the petitioner's case, then the petitioner is only required to satisfy the other conditions laid down in clause (94). In this regard it may be pointed out that nothing can be spelt out from any of the orders impugned by the petitioner that the status of the petitioner as a charitable institution or the nature of the contributions or donations etc. received by the petitioner are under dispute. Consequently, in our opinion the petitioner's entitlement to claim exemption under clause (94) on the aforesaid ground cannot he challenged. The next argument of Mr. Shaik Haider is that, as is indicated by clause (94), the petitioner can claim exemption only if the contributions received thereby are applicable solely for religious or charitable purposes of the institution. In this regard the learned counsel has sought support from section 2(14) of the Income Tax Ordinance which has already been reproduced in this judgment. As is evident from clause 2(14), the definition of "charitable purposes" is not exhaustive but the same is an inclusive definition which only has the effect of enlarging the ordinary meaning of the expression "charitable purposes". It would, therefore, be erroneous to assume that the definition in any case restricts the meaning of the said expression to what has been referred to be in the said definition. Consequently, the mere; fact that the object, for which the petitioner-institution has been constituted, is not public benefit, cannot in any manner disentitle the petitioner to claim exemption under clause (94). Mr. Shaik Haider has placed reliance on the case of Commissioner of Income Tax v. Messrs West Pakistan Management. Association 1985 PTD 287, wherein the expression "Association" has been interpreted by a Division Bench of this Court but in our view the ratio laid down in the said case is not attracted to the facts of the present case because the main question, which requires determination in the present case is, whether the petitioner is a charitable institution which is covered by the provisions of clause (94) to the Second Schedule. As earlier pointed out, the case of the, petitioner clearly falls within the purview of clause (94) and, therefore, in our opinion, the learned Tribunals were not justified in invoking the proviso to the said clause 94 in the case of the petitioners. In fact, we find that none of the Tribunals below have addressed itself to the real issue involved in the case as they have proceeded only on an assumption that the object, for which the petitioners came into existence, was not to benefit public-at-large. This, in view of the provisions of clause (94), was clearly an erroneous view taken by the learned Tribunals below.
In the result, we accept this petition and declare the orders passed by the learned Tribunals below as without lawful authority and of no legal effect.
The parties are left to bear their own costs.
M.BA./P-274/K Petition accepted.