MUHAMMAD TUFAIL VS LAHORE DEVELOPMENT AUTHORITY
1997 P T D 377
[Lahore High Court]
Before Malik Muhammad Qayyum, J
Messrs MEHRAN FLEX INTERNATIONAL INDUSTRIES (PVT.) LTD.
versus
FEDERATION OF PAKISTAN through Secretary Finance, Islamabad and 3 others
Writ Petition No. 19995 of 1996, heard on 21/11/1996.
Income Tax Ordinance (XXXI of 1979)--
----S. 50 & Second Sched., Cl. (118)---Constitution of Pakistan (1973), Art.199---S.R.0.593(1)/91 dated 30th June 1991----Constitutional petition-- Industrial undertaking---Deduction of tax at source---Collector of Customs-- Power to deduct advance income-tax at rates specified in Schedule from every importer at the time of clearance of goods from Customs-- Exemption---Petitioner's claim. to obtain exemption certificate for said purpose in accordance with notification dated 30th June, 1991 not disputed----.Subsequently condition was imposed in such certificate, that exemption would apply only to those goods which were cleared from Customs Post nearest to place where industrial undertaking was located-- Validity---Petitioners had offered that they would have no objection if Authorities were permitted to carry out inspection in order to prevent evasion of tax---Imposition of condition in exemption certificate that exemption would be applicable only in respect of goods cleared from nearest Customs Post, was declared to be without lawful authority and of no legal effect Authorities, however, would be entitled to take such measures as were permissible under law including inspection of premises in order to ensure that no evasion of tax would take place.
Wali Oil Mills Ltd. v. Federation of Pakistan W.P. No. 14125 of 1996 ref.
Naveed Anjum Andorabi for Petitioner.
Shahbaz Butt for the State.
Date of hearing: 21st November, 1996.
JUDGMENT
This judgment shall dispose of W.P. Nos. 1995/96, 13002/96 and 15603/96 which arise under the same circumstances and involve the same controversy.
2. The petitioners in all these petitions are industrial concerns whose income is exempt from income-tax in terms of clause (118) to the 2nd Schedule of the Income Tax Ordinance, 1979. Section 50(5) of the Income Tax Ordinance, 1979 requires every Collector of Customs to deduct advance income-tax at the rates specified in the Schedule from every importer at the time of clearance of the goods from customs. In view of SRO No.593(1)/91 dated June 30, 1991, this requirement is not applicable to these cases where the income is exempt from payment of income-tax. It is not disputed by the respondents that the exemption does apply to the petitioners and as a matter of fact, the learned counsel for the respondents does not dispute their right to obtain exemption certificate for that purpose. Previously on the basis of those certificates, the petitioners could have the goods cleared from any of the port from customs. However, in the recent certificates issued by respondent No.4, a condition has been imposed that the exemption would apply only to those goods which are cleared from the customs post nearest to the place where the industrial undertaking is located.
3. The learned counsel for the petitioners have contended that there is nothing either in clause (118) of the 2nd Schedule to the Income Tax Ordinance, 1979 or the Notification dated 30th July, 1996 which authorises the Income Tax Authorities to restrict exemption to those goods which are cleared from a particular customs post and as such the condition imposed in the exemption certificate is illegal and unlawful.
4. Mr. Shahbaz Butt, the learned Legal Adviser of the Income Tax Department is unable to dispute that the petitioners qualify for exemption from the withholding tax nor has the statement of facts made by the learned counsel that previously in the exemption certificates issued by the Department there was no restriction on the right of the petitioners to have the goods cleared from any customs port without deduction of advance income- tax, has been challenged. He has, however, explained that exemption was being misused by many unscrupulous importers who after clearing the goods from Karachi Port would sell those goods on way to Lahore. According to the learned counsel as the exemption is applicable only to those goods which are consumed by industrial undertakings whose income was exempt from payment of tax and the respondents were well within their right to adopt measures to prevent of evasion of duty. He did not seriously refute the contention that no restriction could be placed upon the right of the petitioners to clear the goods from any post in the customs but suggested that the right be made subject to the condition that the respondents be allowed to inspect the premises of the petitioner to verify consumption of goods by the undertakings. In this respect the learned counsel for the respondents has stated that a similar condition was imposed by this Court in the case of Wali Oil Mills Ltd. v. Federation of Pakistan (W.P. No. 14125/96), decided on 25-8-1996.
5. The learned counsel for the petitioners say that they have no objection if the respondents are permitted to carry out inspection in order to prevent evasion of tax.
In view of above, these petitions are allowed and it is declared that the imposition of condition in the exemption certificate that it would be applicable only in respect of goods cleared from the nearest customs port, without any lawful authority and of no legal effect. It shall, however, be open to the respondents to take such measures as may be permissible under the law including inspection of the promises in order to ensure that no evasion of tax takes place. Respondent No.4 shall suitably amend the exemption certificate.
No order as to costs.
A.A./M-243/L Petition accepted.