(a)Income Tax Ordinance (XXXI of 1979)---

----S. 80-C---C.B.R. Circular No. 12 of 1991, dated 30-6-1991---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Tax on income of contractors---Deduction of income-tax at the rate of five percent. instead of three percent. from the amount of payment made to contractors ---Validity-- Collection of tax being essential to run the affairs of Government, it has the right to levy and collect the same even though it may be a source of grumble for the concerned quarters---Income-tax at the enhanced rate of 5 percent. was to be collected with effect from 1-7-1995 on the amount being received by assessee contractor from that date and afterwards from the concerned Department---No constitutional right of petitioner (contractor) would be infringed on account of recovery of income-tax at the enhanced rate of 5 percent. ---Recovery of amount by the department for the work done and deduction of the income-tax at the latest rate have to go and to be adopted simultaneously---No Constitutional right of petitioner (contractor) having been infringed and averments contained in Constitutional petition being without merit, petitioner was not entitled to claim relief against deduction of income-tax at the enhanced rate on the amount of payments made to it.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.80-C---C.B.R. Circular No. 12 of 1991, dated 30-6-1991---Finance Act (I of 1995), S.9----Income-tax Circular No.4 of 1995, dated 9-7-1995---Tax on income of contractor---Deduction of tax---Application of rate---It is the year wherein taxable income is to be collected and not the year of alleged agreement which is relevant for determination of rate for deduction of tax from income of the contractor.

Sardar Ahmad Nawaz Qaisrani for Petitioner.

ORDER

M/s. Altaf Construction Company; Dera Ghazi Khan (petitioner) is a contracted; firm and obtained different works in the Highways, Irrigation and District Council at different places after the tenders submitted by the petitioner were approved. Following are the series of the work so obtained by the petitioner before 1-7-1995:--

2. Some works stated above have been completed and some are still to be completed. The petitioner was bound to pay the income to the Income Tax Department vide Circular No. 12, dated 30-6-1991 issued by the Central Board of Revenue, Islamabad (respondent No. l), tax on the income of the contractor was fixed at 3 % of whole of the amount received by the contractor and consequently respondents Nos. 2 to 8 who issued the work in favour of the petitioner have been deducting/withholding the amount at the said rate. However, vide the Finance Act 1995, the rate of income-tax on the income of the contractors has been enhanced from 3 % to 5 % upon the amount of payment made by the Department to the contractors about which a Notification, dated 9-7-1995 was issued to the relevant authorities to deduct the Income-tax at the rate of 5 % instead of 3 % . According to the petitioner on the strength of the Notification dated 1-7-1995 the concerned authorities are bent upon to deduct the amount of income-tax at the rate of 5 % on those works which were constructed much before 1-7-1995. Through the filing of this writ petition, he has challenged the vires of the Finance Act, 1995 to the extent of his case. According to the petitioner the amendment made in the Act would not operate with retrospective effect which would rather amount to be prospective till otherwise so declared. It is maintained that no adverse gain can be obtained by the respondents under the garb of the said amendment. It was pleaded that the petitioner submitted a tender keeping in view all the pros and cons to the project with reference to the payment of taxes payable at that time and that the tenders were submitted which were duly executed. According to the petitioner he was not liable to pay the income-tax at the enhanced rate with regard to the work prior to 1-7-1995 and that the impugned Notification, dated 1-7-1995 itself suggested that it would be enforced with effect from the date of its issuance viz. 1-7-1995.

3. I have heard the preliminary arguments addressed by the learned counsel for the petitioner whose main contention is that with regard to the contract approved before 1-7-1.995, the tax could be deducted at the rate of 3% instead of 5 % as the relevant impugned Notification, dated 1-7-1995 could not be enforced retrospectively. Before embarking upon the discussion of dispute in hand I would like to express that on my query learned counsel for the petitioner intimated that the tax was being deducted at the rate of 5 % on the amounts which were being paid with effect from 1-7-1995 and his stand is that the, amounts being paid with regard to the contracts which stood initiated before 1-7-1995 the tax could be deducted at the rate of 3 %. It is the admitted position that the petitioner has not denied his liability to pay the income-tax at the rate of 3% on the amount. The liability to pay tax at the enhanced rate of 5% is,therefore, denied simply on the ground that the contracts stood initiated therefore 1-7-1995 and thus the demand made at the rate of 5% was without lawful authority. My confirmed view is that the agreement, if any executed between respondents Nos.3 to 8 who issued the work orders in favour of the petitioner ere in nowhere binding on respondents Nos.1 and 2 i.e. Central Board of Revenue, Islamabad and the Commissioner, Excise and Taxation Department, Dera Ghazi Khan Division who were demanding the income-tax. at the enhanced rate of 5 % on the collected amount which had been made leviable with effect from 1-7-1995. It is not the case of the petitioner that the demand was being made at the enhanced rate for the recovered amount relevant to the period ending on 30-6-1995. The execution of an earlier agreement would not affect the deposit of the tax nor the same was retrospective as the same was to be levied on the account which was to be collected during the financial year for which the Income Tax Ordinance, 1979 was amended through the impugned Notification with effect from 1-7-1995. I must express my view that the agreement is of no consequence and legal effect in favour of the writ petitioner. This plea of the petitioner was simply erroneous. It was the year wherein taxable income was to be collected and not the year of the alleged agreement(s). It was admitted before this Court by the learned counsel for the petitioner that the petitioner was being made to pay the income-tax at the rate of 5 % being collected by them with effect from 1-7-1995. Thus respondents Nos. l and 2 were not treating the impugned Notification, dated 1-7-1995 as retrospective and no amount at the rate of 5 % was being claimed for deposit for the period ending on 30-6-1995. In short the recovery/receipt of the amount with effect from 1-7-1995 has to play the legal role and the amount being recovered from the aforesaid date is taxable at the enhanced rate of 5%. It is not in the case of the petitioner. Even the civil servant has also to face this aspect of the matter. Some time due to grant of the next National Pay Scale with retrospective effect the arrears of pay have to be collected and the income-tax is paid according to the rate prevalent at the relevant time of the receipt of the arrears of pay and not applicable at the time of the relevant time for which the amount is recovered.

4. The collection of the tax is the right of the Government who has to run the affairs of the State. It has nothing to do with the party who is in power. Even during the Colonial days the Government was run by the taxes collected by the State. With the passage of time this aspect of the matter has to be adopted and followed even though the same may be a source of grumble for the concerned quarters. Keeping in view this aspect of the matter that the tax at the enhanced rate of 5 % is being collected with effect from 1-7-1995 on the amount being recovered by the petitioner from that date and afterwards no Constitutional right of the petitioner stands infringed. In short the recovery of such an amount and deduction of tax at the latest (present) rate have to go and, adopted simultaneously. I, therefore, hold that due to the non-infringement of any Constitutional right and due to the fact that the averments contained in the writ petition have no merit, this writ petition has to fail.

Consequently I dismiss this writ petition in limine

A.A./A.27/LPetition dismissed.