MESSRS RIJAZ (PVT.) LTD. VS THE WEALTH TAX OFFICER, CIRCLE III, LAHORE
1996 P T D (Trib.) 489
[Lahore High Court]
Before Malik Muhammad Qayyum, J
Messrs RIJAZ (PVT.) LTD. through Chief Executive Riaz A. Gul,
Lahore---Petitioner
versus
THE WEALTH TAX OFFICER, CIRCLE III, LAHORE and
another---Respondent
Writ Petitions Nos. 10195 of 1991, 12254 of 1992 and 107 of 1993, heard on 27/11/1995.
(a) Wealth Tax Act (XV of 1963)--
----S. 2(e)(ii), Explanation [as amended by Finance Act (XII of 1991]---Asset-- Definition---Explanation added to S.2(e)(ii), Wealth Tax Act, 1963 is clarificatory and declaratory in nature and due effect must be given to it-- Amendment which is explanatory or clarificatory always operates retrospectively.
B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another Civil Appeal No.K-140 of 1981; Statutory Law by Craies, 7th Edn., p.58; Interpretation of Statutes by Maxwell, 12th Edn., p.224; Construction of Statutes by Crawford, p.107, para. 74 and Interpretation of Statutes by Craies, 7th Edn., p.395 ref.
(b) Interpretation of statutes-
---- Explanation added to a section---Nature.
As a general principle it is true that an explanation does not enlarge the scope of the provision to which it is attached but if doubts about true interpretation of a provision have arisen, it is open to the legislation to clarify its intention by amending the law which may as well be by adding an explanation. All principles of interpretation are geared towards finding out the true intent of the Legislature.
B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another Civil Appeal No.K-140 of 1981; Statutory Law by Craies, 7th Edn., p.58; Interpretation of Statutes by Maxwell, 12th Edn., p.224 Construction of Statutes by Crawford, p.107, para. 74 and Interpretation of Statutes by Craies, 7th Edn., p.395 ref.
Mian Saqib Nisar for Petitioner-
Muhammad Ilyas Khan for Respondent No. 1.
Date of hearing: 27th November, 1995.
JUDGMENT
This judgment shall dispose of Writ Petitions Nos. 10195 of 1991, 12254 of 1992 and 107 of 1993, as the question arising in all these petitions is common.
2. The petitioners are companies incorporated under the Companies Ordinance, 1984. They own buildings in the city of Lahore which are being used for different purposes. It is common ground between the parties that these buildings were included in list of the assets in their returns of wealth tax under the Wealth Tax Act, 1963. It however appears that certain other companies had raised an issue that the buildings which are not held for the purposes of business of construction and sale or letting out were not assets within the meaning of section 2(e)(ii) of the Wealth Tax Act, 1963 and as such no wealth tax was leviable in respect thereto. The matter remained pending before the different Courts and was ultimately decided by the Supreme Court of Pakistan in B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer and another (Civil Appeal No.K-140 of 1981) on 19-1-1989. The contention on behalf of the Wealth Tax Authorities that all kinds of buildings held by a company form assets was repelled in view of the language employed in section 2(e)(ii) and it was ruled that only such immovable properties as were held for the purposes of business of construction and sale or letting out the property fall within the definition
3. As already observed, the petitioners never denied their liability to pay wealth tax on the value of the immovable properties held by them but after the decision of the Supreme Court they at their own filed revised return of wealth tax claiming refund of the wealth tax which according to them had been erroneously paid. These claims were disallowed by the respondents in view of the amendment of the Wealth Tax Act by Finance Act, 1991 by virtue of which an explanation was added to section 2 of Wealth Tax Act. 1963, which now reads as under:--
"2(e) ' assets' includes:
(ii) In the case of a firm, an association of persons or a body of individuals, whether incorporated or not, and a company, immovable property held for the purpose of the business of construction and sale, or letting out of property.
Explanation.--For removal of doubt, it is hereby declared that immovable property and the purpose referred to in this sub-clause includes--
(i) immovable property held for the purpose of letting out or business of letting out of property;
(ii) immovable property held for the purpose of construction and Letting out of property; and
(iii) immovable property held for the purpose of construction and sale of property."
4. Learned counsel for the petitioner has raised the following two contentions in support of these petitions:
(i) That in law an explanation cannot enlarge the scope of the main provision in which a building not held for the purpose of business of construction and sale or letting out the property was not covered by the definitions of assists as contained in section 2(e)(ii) and therefore notwithstanding the addition of the explanation the position remains that such a building does not form part of the assets;
(ii) that in any case, the explanation, cannot be retrospectively applied.
5. Both the contentions have no force. As a general principle it is true that an explanation does not enlarge the scope of the provision to which it is attached but it is equally well-settled that if doubts about true interpretation of a provision have arisen, it is open to the legislation to clarify its intention by amending the law which may as well be by adding an explanation. All principles of interpretation are geared towards finding out the true intent to the Legislature which in the present case was made clear by adding an explanation which cannot be ignored. The amendment made was clarificatory and declaratory in nature and due effect must be given to it.
6. In Craies on Statutory Law (Seventh Edition) at page 58 it is stated that:
"For modern purposes a declaratory Act may be defined as an Act to remove doubts existing as to the common law, or the meaning or effect of any statute. Such Acts are usually held to be retrospective. The usual reason for passing a declaratory Act is to set aside what Parliament deems to have been a judicial error, whether in the statement of the common law or in the interpretation or statutes. Usually, if not invariably, such an Act contains a preamble, and also the word 'declared' as well as the word ' enacted'. Thus, in Price v. Bradley the Court decided eels to be freshwater fish within the Freshwater Fisheries Act, 1878. This decision was regarded by the Parliament as a scientific error, and by the Freshwater Fisheries Act; 1886 it was declared that freshwater fish in the first-mentioned Act did not include eels. A salient instance of a declaratory Act is the Territorial Waters Jurisdiction Act, 1878, passed in order to overrule the opinion of the majority of the Judges in the Franconia case as to the limits of British territorial waters The preamble asserts, in defiance of the judicial majority, that ' the rightful jurisdiction of Her Majesty, her heirs and successors, extends and has always extended over the open seas adjacent to the coasts of tire United Kingdom and of all other parts of Her Majesty's dominions to such a distance as a necessary for the defence and security of such dominions'. The opinion of the minority in the Franconia case has been therefore not merely enacted, but is declared to have been always the law."
7. From a perusal of the judgment in B. P. Biscuit Factory's case (supra) it is to be seen that the Supreme Court came to the conclusion that the definition was not happily worded; as ambiguous and was capable of several interpretation. It was observed that according to the well-accepted principles of interpretation the doubt has to be resolved in favour of the citizen. In these circumstances, the law-maker could clarify its intention by adding an explanation which cannot be legitimately objected to.
8. As regards question of retrospectivity suffice it to say that the power of legislature to legislate retrospectively is well recognised and in the present case the retrospective operation to the explanation has been given by a specific provision in the amending law. Be that as it may it is tried law that an amendment which is explanatory or clarificatory always operates retrospectively. Maxwell in his Interpretation of Statutes, 12th Edition, at page 224 has stated that "If a statute is in its nature a declaratory Act the argument that it is not to be construed so as to take away previously vested rights is inapplicable. Similar statement of law appears in Crawford on 'The Construction of Statutes' in para. 74 at page 107 and Craies on Interpretation of Statutes, 7th Edition at page 395.
In view of what has been stated above, these petitions are without any force which are dismissed leaving the parties to bear their own costs.
M.B.A./R-1/L Petitions dismissed.