GATRON (INDUSTRIES) LIMITED VS FEDERATION OF PAKISTAN
1997 P T D 1077
[Balochistan High Court]
Before Iftikhar Muhammad Chaudhry and Mir Muhammad Nawaz Marri, JJ
Messrs GATRON (INDUSTRIES) LIMITED through Director
versus
THE FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Government of Pakistan Islamabad and 2 others
Constitutional Petition No. 325 of 1994, decided on 11/11/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.2(24)(c) & 80-D---Constitution of Pakistan (1973), Fourth Sched., Part I, Entry 47---Term 'income'---Connotation---Term 'income' has been used commonly in Fourth Sched., Part I, Entry 47 of the Constitution of Pakistan and Ss.2(24)(c) & 80-D, Income Tax Ordinance, 1979---Expression "deemed to be income" has been consciously employed in both the statutory provisions by the Legislature. viz. Ss.2(24)(c) & 80-D of the Income Tax Ordinance.
(b) Interpretation of statutes---
---- Sweeping general words which are difficult to apply in their full literal sense---Construction---Guideline.
It is the safest guide that when construction of sweeping general words which are difficult, to apply in their full literal sense the Court is to examine other words of like import in the same instrument and to see what limitations must be imposed on them and if it is found that a number of such expressions have to be subjected to limitations and qualifications and that such limitations and qualifications are of same nature, that circumstance forms a strong argument for subjecting the expression in dispute to a like limitation and qualification.
Maxwell on Interpretation of Statutes, 10th Edn. p.29 ref
(c) Income Tax Ordinance (XXXI of 1979)---
----S.80-D---Expression 'deemed to be income'---Connotation---Presumptive taxation---Income-tax is imposed/levied not only on the basis of profit/gain, but even on such amount which could only be deemed/believed to be gain of an assessee.
Expression 'deemed to be income' has been used repeatedly with certain limitations and qualifications in the Ordinance, while taking care of different situations in respect of accruing or arising income, for purpose of levying Income-tax. Reference can be made to sections 12(1), 13, 19(4), 22(a), 59C(a), 18(2), 18A(1-A)(b), 18AA(1), 18B, 18C, 18CC etc. of the Ordinance. At this juncture it is to be kept in mind that under these sections instead of actual/physical income, the income which will accrue/arise subsequently being presumptive income, has been accepted as income for purpose of levying income-tax. Therefore, in such situation, where the same instrument had used identical expression of 'deemed to be income' in its different parts, it would mean that, not only while enacting section 80-D, even prior to it, 'income-tax' has been imposed/levied not on the basis of profit/gain, but even on such amount which could only be deemed/believed to be gain of an assessee.
Deeming provisions containing definition of ' income' and section 80-D as well as other various provisions of the Ordinance, actually guide an assessee to pay tax on fictional profit, where he can only expect gains but has been bound down to pay income-tax. From above discussion definition of term 'income' can be stretched to a considerable large scale on the theory of presumptive taxation.
(1989) 176 ITR 481 ref.
(d) Income Tax Ordinance (XXXI of 1979)---
----S.80-D---Vires of S.80-D, Income Tax Ordinance, 1979---Legislature by levying income-tax @ 0.5 % on the amount representing the turn over of companies and registered firms from all sources has not over-stepped its jurisdiction and is in no manner unreasonable nor violative of Arts. 18, 24 & 25 of the Constitution of Pakistan (1973).
In view of the scheme of the Income Tax Ordinance and interpreting term 'income' used in the Constitution; the Legislature has not over-stepped its jurisdiction on levying income-tax 0.5 % of the amount representing the turnover' of companies and registered firms from all sources to be the income of assessee-company or firm and to avoid evasion of tax at a large scale and also to widen the taxation base, it was necessary to stretch the term 'income-tax' to presumptive taxation, in the largest interest of the economy of the country and qualifications of tax payers falling within the mischief of section 80-D of the Ordinance, in no manner is unreasonable nor it violates Articles 18, 24 and 25 of the Constitution.
AIR 1930 PC 209; (1971) 82 ITR 794; Mst. Samina Shaukat Ayub Khan v. Income Tax Officer PLD 1981 SC 85 and Pakistan Industrial Development Corporation v. Pakistan through Secretary of Finance 1992 SCMR 891 = 1992 PTD 576 ref.
(e) Interpretation of statutes---
---- Non obstante clause in a provision---Meaning---Effect---Use of word "notwithstanding" ---Object.
Dictionary of Modern Legal Usage; Corpus Juris Secundum, Vo1.LXVI and Words and Phrases, Vol. 28A ref.
(f) Income Tax Ordinance (XXXI of 1979)---
----S.80-D---Second Sched., cl. (118-C)---Exemption---Charge of income-tax on the aggregate declared "turnover" --Exemption under cl. (118-C), Second Sched. of Income Tax Ordinance, 1979 would not be applicable if the tax is not being paid for any reason whatsoever, including exemption from tax.
Iqbal Naeem Pasha for Petitioner.
Raja Rab Nawaz, Dy. A.-G. for Respondent No. 1.
Nasarullah Awan and Shaikh Haider for Respondents Nos.2 and 3.
Date of hearing: 31st October, 1996.
JUDGMENT
IFTIKHAR MUHAMMAD CHAUDHRY, J.---In Constitutional Petition No.325 of 1994, 375 and 376 of 1995, validity of section 80-D of the Income Tax Ordinance, 1979 (hereinafter referred to as ' Ordinance' ) being ultra vires to the provisions of Constitution of Islamic Republic of Pakistan, 1973 (hereinafter referred to as 'Constitution') has been challenged. Therefore, we have proposed to dispose of all these matters by this common judgment.
The petitioners are engaged in the manufacture and export/local sale of Polyester Yarn. Messrs Gatron (Industries) Limited, declared a net loss of Rs.208,942,298 and Rs.153,290,208 for the Assessment years 1994-95 and 1995-96, at the close of financial years i.e. 30th June, 1994 and 30th June, 1995, respectively. Whereas case of Lafayatte Industries Synthetics Limited, covered by C.P. No.376 of 1995, is that vide clause (188-D) of Part I of the 2nd Schedule to the Ordinance, no income-tax is liable to be paid under section 80-D of the Ordinance, because specific exemption has been granted to it.
It is the case of petitioners that their Industrial Units are not yielding profit or otherwise exemption from liability to pay income-tax' ha, been accorded, therefore, no liability can be imposed upon them under section 80-D of the Ordinance. As such, demand being made from them on 'turnover' basis at the rate of half per cent. is illegal, because the provisions of law i.e. section 80-D of the Ordinance, is ultra vires to Entry No.47 of Part I of the Fourth Schedule to the Constitution. Therefore, on declaring said section of the Ordinance being void and of no legal effect; relief as has been prayed for, be granted to them.
Mr. Iqbal Naeem Pasha, Advocate appeared on behalf of petitioners. Raja Rab Nawaz, Deputy Attorney-General. Mr. Sheikh Haider, Advocate and Mr. Nasrullah Awan, Advocate, opposed petitions on behalf of respondents, respectively.
Learned counsel for petitioners, contended that section 80-D of the Ordinance has been enacted by Legislature without jurisdiction and powers, as Income-tax, cannot be imposed on 'turnover/gross receipts' basis, because it is universally accepted phenomena that tax is to be paid on profits of a trade or business. Expression 'income' employed in Entry 47 of Part I, of the Fourth Schedule to the Constitution, is to be interpreted in view of the definition of 'Tax On Income' as it has been defined in Article 260 of the Constitution. Therefore, law givers over-stepped these Constitutional provisions, while enacting section 80-D of the Ordinance, thus, deserves to be struck down being unconstitutional. To strengthen his arguments, he relied on Excess Profits Tax Act, 1940. The Business Profits Tax Act, 1947, PLD 1984 Kar. 1, AIR 1928 PC 282, AIR 1930 PC 209 and (1971) 82 ITR 794.
Raja Rab Nawaz, learned Deputy Attorney-General, contended that petition is not maintainable, because the Company or Firm is not legally authorized to challenge vires of any statutory provision, at the touchstone of Articles 18, 24 and 25 of the Constitution, as according to him, under these Articles, only citizens can challenge a law, if it is inconsistent with or in derogation with fundamental rights, as it has been specified by Article 8 of the Constitution. Majlis-e-Shoora (Parliament) in view of Entry 47 of Part I, of the Fourth Schedule to the Constitution, has lawfully enacted section 80-D of the Ordinance. He also relied on the definition of term ' income' from the judgments delivered in the cases of Pakistan Industrial Development Corporation v. Pakistan through Secretary, Ministry of Finance 1992 SCMR 891 = 1992 PTD 576, Bhagwan Das Jain v. Union of India and others AIR 1981 SC 318. This judgment has also been reported in (1981) 128 ITR 315 SC) and Elel Hotels & Investment Ltd. and others v. Union of India (AIR 1990 SC 1664).
Learned counsel for respondent No.2, contended that term ' income' is to be construed in a wider sense in view of its definition under section 2(24)(c) of the Ordinance, to provide a wider tax base for generating revenues, enabling Federal Government to meet requirements of modern age, otherwise, if this expression is used in a narrow sense, it would tantamount to give licence to those traders, who although are running industries, successfully making huge profits, which is being used for installing other Industrial Units, only for purpose of their personal benefits, but when Income Tax Returns are fled, they desist and pay nothing on pretext of sustaining heavy losses. Therefore, the Legislature to motivate the Industrialists, owners of registered Firms and also to expand the tax base, imposed a minimum tax of 0.5% on annual 'turnover' in view of broader definition of term 'income' given in the Constitution. He also relied on judgments cited by learned Deputy Attorney-General, besides referring to judgment delivered by learned Division Bench of Lahore High Court in Writ Petition No.8621 of 1991 and number of other connected identical Constitutional petitions, on 22nd January, 1995.
Learned counsel for respondent No.3, argued that any term/expression used in the Constitution is required to be interpreted in its widest sense and should not be made subservient to any limited definition. According to him, Constitution itself has not defined the term 'income' and as far as expression 'Tax on Income' defined in Article 260 of the Constitution is concerned, it has no nexus with the proposition under consideration, because presently in Pakistan, no law to levy income-tax on excess profits in trade or business, exist. Therefore, term 'income' is to be interpreted in a liberal manner to obey the command of Constitution. He also stressed that presumptive tax is not alien to existing and repealed Income Tax Laws. To support his arguments he made reference to number of provisions from the Ordinance, wherein mere on basis of expected profit, it has been held that it would be deemed to be the income of assessee. It was also contended by him that section 80-D of the Ordinance, contains non obstante clause, on account of which, definition of term 'income' has been made wider in order to cover the case of those traders, who although are making profits but showing loss in returns. Learned counsel also emphasised that Legislative body had not over-stepped any Constitutional provision, while enacting section 80-D of the Ordinance and it was within its competence to legislate beneficiary law in largest interest of Nation. He also contended that petitioners have not been able to show that on what basis; section 80-D of the Ordinance, should be declared ultra vires to the Constitution. He relied on number of judgments, including those, which have been referred to hereinabove, while noting arguments of learned counsel for respondents 1 and 2. Reference was also made by him to Interpretation of Taxing Statutes to define the term 'income' and 'Words and Phrases' Volume 28A and Corpus Juris Secundum, Volume LXVI, to define word 'notwithstanding'.
We have heard the parties' counsel at length and also considered their respective contentions, in view of relevant substantive and precedented law, cited at Bar.
Since term 'income' is required to be interpreted therefore, for sake of convenience, relevant provisions i.e. Entry 47 of Part I of the Fourth Schedule to the Constitution, sections 2(24) and 80-D of the Ordinance, are reproduced hereinbelow:---
"Entry 47 of Part I of the
Fourth Schedule to the Constitution.
47. Taxes on income other than agricultural income.
Sections 2(24) of the Ordinance.
(24) "income" includes--
(a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this Ordinance under any head specified in section 15;
(b) any loss of such income, profits or gains; and
(c) any sum deemed to be income, or income accruing or arising or received in Pakistan under any provision of this Ordinance,
but does not include, in the case of a shareholder of a domestic company, the amount representing the face value of any bonus shares or the amount of any bonus, declared, issued or paid by the company to its shareholders with a view of increasing its paid-up share capital;"
Section 80-D of the Ordinance.
80-D Minimum tax on income of certain companies (and registered firm ---(1) Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where no tax is payable (or paid by a company (or a registered firm) resident in Pakistan or the tax payable (or paid) is. less than one-half per cent. of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company (or registered firm) and tax thereon shall be charged in the manner specified by subsection (2).
(Explanation.---For the removal of doubt, it is - declared that the expression 'where no tax is payable or paid' and, or the tax payable or paid' apply to all cases where tax is not payable or paid for any reason whatsoever including any loss of income, profit or gains or gains or set off of loss of earlier years, exemption from tax, credits or rebates in tax, and allowances and deductions (including deprecation) admissible under any provision of this Ordinance or any other law for the time being in force.)
(2) The company (or a registered firm) referred to in subsection (1) shall pay as income tax-?
(a) an amount where no tax is payable (or paid) equal to one-half per cent. of the said turnover; and
(b) an amount, where tax payable (or paid) is less than one-half per cent. of the said turnover, equal to the difference between the tax payable and the amount calculated in accordance with clause (a).
Explanation. ---For the removal of doubt, it is declared that 'turnover' means the gross receipts, exclusive of trade discount shown in invoices or bills, derived from sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts."
A cursory perusal of above-quoted provisions reveal that they are inter-linked with each other, because term 'income' has been used commonly in Constitution and remaining two statutory provisions. There is yet another similarity in section 2(24)(c) and section 80-D of the Ordinance, because connotation 'deemed to be income' has been consciously employed in both the provisions by the Legislature.
The recognized principle of Interpretation of Statutes is that it is the safest guide that when construction of sweeping general words which are difficult to apply in their full literal sense is to examine other words of like import in the same instrument and to see what limitations must be imposed on them and it is found that a number of such expressions have to be subjected to limitations and qualifications and that such limitations and qualifications are of same nature, that circumstance forms a strong argument for subjecting the expression in dispute to a like limitation and qualification. (Maxwell on the Interpretation of Statutes (10th Edition, p.29). Hurriedly surveying the Ordinance, one can visualize that connotation 'deemed to be income' has been used repeatedly with certain limitations and qualifications in the Ordinance, while taking care of different situations in respect of occurring or arising income, for purpose of levying income-tax. Reference can be made to sections 12(l), 13, 19(4), 22(a), 59C(a), 18(2), 18A(1-A)(b), 18AA(1), 1813, 18C, 18CC etc. of the Ordinance. At this juncture it is to be kept in mind that under these sections instead of actual/physical income, the income which will accrue/arise subsequently being presumptive income, has been accepted as income for purpose of levying income-tax. Therefore, in such situation, where the same instrument had used identical expression of 'deemed to be income' in its different parts, it would mean that, not only while enacting section 80-D, even prior to it, 'income-tax' has been imposed/levied not on the basis of profit/gain, but even on such amount which could only be deemed/believed to be gain of an assessee This connotation i.e. 'deemed to be income' was also used invariably at different places with reference to relevant context in repealed Income Tax Act, 1922. So is the position in the Income Tax Act, 1961 presently applicable in India. This phenomena of collecting income-tax is based on the theory of presumptive taxation introduced by Richard Musgrave. In this behalf Kerala High Court in (1989) 176 ITR 481, examined this theory with reference to Entry 82 of List of Seventh Schedule to the Constitution of India. Relevant discussion having persuasive value for convenience is reproduced herein?below:---
"The first contention may be dealt with first. The Constitutional entry reads "tax on income", "income" seemingly simple word has created a world of confusing concepts. Lord Mc Naughten's speech about income-tax is classic and has remained thought-provoking in all climes and times.
"Income-tax, My Lords if I may say so, with respect, is a tax on income.
The bewildering connotation of the term "income" came to be indicated and illustrated in long passages and a catena of judicial decisions rendered even thereafter.
Could it be said that without actual income, no income-tax is possible or positable? That query which has been raised long ago has been clearly answered by the Supreme Tribunal of the land. In variety of situations, income-tax has been fixed rigidly and artificially. Artificial fixation of house property income is demonstrated by the decision in Bhagwan Dass Jain v. Union of India (1981) 128 ITR 315 (SC). The exercise has been indulged in not merely by Parliament but also by the State Legislatures. The base of profession tax was given such an artificial structure by the Maharashtra and Gujarat States. Different standards could be selected for fixation of income-irrespective of the actuality of the situation. Illustrations are the actual value of one's own building and the undistributed profits of a company, in the context of taxation for income-tax purposes. It would be sufficient if the income figure is reached by standards which are sufficiently just.
Legislative entries should receive the widest interpretation -- is a basic tent put forward for sustaining such statutory fictions and schemes. Income is subjected to taxation whether it is actually received or has notionally accrued. (See CIT-CEPT v. Bhogilal Laherchand (1954) 25 ITR 50 (SC) and CIT v. Lady Kanchanbai (1970) 77 ITR 123 (SC) (126). In a sense, the practice can be traced back even to the earlier decisions in Shaw Wallace & Co. v. CIT (1932) 6 ITC 178 and Navin Chandra Mafatlal v. CIT (1954) 26 ITR 758 (SC). Later decisions also are available illustrating the principles. Gross receipts, without giving deduction for expenditure being treated as income was upheld in Travancore Rubber and Tea Co. Ltd. v. State of Kerala (1963) 48 ITR (SC) 102. Legal principles laid on similar lines are discernible from the decision in Punjab Distilling Industries Ltd. v. CIT (1965) 57 ITR 1 (SC). It is unnecessary to refer to the multiplicity of decisions on the point when the proposition is clear enough. It would then be sufficient to hold that irrespective of the actual receipt of an income or the factual situation in relation to the real income, it would be competent for Parliament to make a fictional computation of the income and tax it as such.
True, there have been extreme instances where attempts at taxation of receipts which had no connection with an income or income-?earning activity, have been stifled by Court decisions, Judicial thoughts in that area, and in that strain, can possibly be traced even to the time when Rowlatt, J. observed in Leigh v.. IRC (1928) 1 KB 73, 77 that for tax purposes,
"receivability without receipt is nothing."
It is however, useful to refer to the observations of Stamp L.J. in the recent decision (Dunmore v. McGowan (1978) 2 All ER 85 at 87) that Rowlatt, J.'s dictum was actually rejected in the case. (See the comment by John Tiley: Receivability and Receipt: The Problem of Timing under Income-tax Legislation 1982 British Tax Review 23). The decisions relied on by counsel for the petitioners (CIT v. Harprasad & Co. (P) Ltd. (1975) 99 ITR 118 (SC), CIT v. Birla Gwalior (P) Ltd. (1973) 89 ITR 266 (SC), do not lay down anything contrary to the view leaning in favour of the wider interpretation and permissibility of the artificial definition of the term 'income'. The decision in State Bank of Travancore v. CIT (1986) 158 ITR 102 (S), contains a corollary observation. At page 788, the Supreme Court observed:
"If real income arises interpretation should not be such that the provisions of the Act are rendered useless."
Viewed from the background of legal practice and judicial decisions, it will then be open to Parliament to deem a portion of the price of the commodity dealt with as income in the hands of the man dealing with them. The legal principles laid down by authoritative decisions holding the field do not in any way rule out such an impost. On the contrary the practice has been well set and well-recognised and even well-accepted by assessees and authorities alike.
Looked at from a theoretical angle also, the position is not different.
Many have been the experiences and experiments with income-tax after it was introduced as a temporary measure, in England, in pressing circumstances. It is unnecessary to refer to all those events and marks in the taxation's march to modern days. When rates became high the temptation to avoid and even to evade was stronger. Then it was a keen and competing race between the Revenue and the assessee. The big sharks quite often burst the net, when only minor fry was caught. That was unfair. Vigilant legislatures were alert enough to repair the meshes and tighten the ropes. The theorists and administrators made close observations about the loopholes and bestowed excruciating thoughts on the best ways to plug such holes. The long experience of the tax administrators revealed that in relation to some articles, evasion was easy. It was not merely a case of moonlighters as that terra as is now referred to in taxation parlance. (A moonlighter is a person who has considerable income, some from known and disclosed sources and some substantial portion from undisclosed sources). Certain businesses have witnessed "fly-by-light" operators, as referred to in the taxman's colloquium. In other words, there are businesses where accounts are hardly kept; where, even if accounts are kept, the opportunities for manipulations are vast and wide. Businesses are there, where as soon as income is amassed, the income earned could vanish mysteriously giving the slip even to the watching tax ?gatherer. There are businesses where a common alibi could be easily employed or where any one could be an easily available name?lender. Such trades, therefore, rightly, needed stringent and corrective approaches and additional vigilant watch.
It was Richard Musgrave who championed this device of presumptive taxation, in his well-known work on public finance. At considerable pains, and at length he explained the merits of the system. The additional revenue which accrued were welcome advantages for the State looking for chunks of money to carry out the very many welfare schemes. The Musgrave doctrine made out a case for a differential approach in less advanced countries according to him:
"A more realistic approach is needed, using presumptive taxation, applied outside and in lieu of the regular framework of income and sales taxation, as well as estimated tax, basis applied within the context of the regular tax system."
It may be seen that deeming provisions containing definition of ' income' and section 80-D as well as other various provisions of the Ordinance, actually guides an assessee to pay tax on fictional profit, where he can only expect gains but has been bound down to pay income-tax. From above discussion definition of term ' income' can be stretched to a considerable large scale on following the theory of presumptive taxation.
Petitioners' counsel had vehemently argued, on the strength of AIR 1930 PC 209 and (1971) 82 ITR 794 that 'tax is upon income, profits and. gains. It is not a tax on gross receipts' and 'the Tax Collector cannot be heard to say that he will bring the gross receipts to tax. He can only tax the profits of a trade or business'.
To meet with his this argument, learned counsel for respondents referred to case of Mst. Samina Shaukat Ayub Khan v. Income Tax Officer PLD 1981 SC 85. This judgment has also been relied upon in the case of Pakistan Industrial Development Corporation v. Pakistan through Secretary of Finance 1992 SCMR 891 = 1992 PTD 576.
Interpretation of term 'income' from the case of Mst. Samina Shaukat Ayub Khan, for guidance is reproduced hereinbelow:---
"It will be seen that the term 'income' as used in the Income Tax Act, is indeed, a term of wide significance and generally and ordinarily it connotes a periodical monetary return, coming in with some sort of regularity or expected regularity, from a definite source; but, as observed by the Privy Council, the multiplicity of forms which income may assume is beyond enumeration; and income need not necessarily be the recurrent return from a definite source; though it is generally of that character. It may consist of a series of separate receipts, as for instance happens in the case of professional earnings. In the last analysis, the question whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case. If the nature of the receipt and its source are not satisfactorily explained by the assessee, facts which are generally within his peculiar knowledge, the Income lax Officer may legitimately presume that the amount in question is an income of the assessee from an undisclosed source.
Once a finding is recorded that the amount in question could be treated as income within the meaning of the charging section. Section 3 of the Income Tax Act, the burden of proving that the income qualified for exemption under any of the clauses of section 4 of the Act was on the assessee. Subsection (1) of section 4 of the Act provides that 'subject to the provisions of the Act, the total income of any previous year of any person includes all incomes, profits, and gains from whatever source derived .... subsection (3rof the same section then enumerates exemptions, and the operative words are 'any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them..." It was for the appellant to show that she was covered by the exemption granted by clause (vii) of subsection (3). This she clearly failed to do, for the reasons that she could not satisfactorily explain the source of the entire amount of cash found in her hands, nor of the total accretions thereto in subsequent years.
It does not need much reasoning to see that if the source of income is not disclosed or satisfactorily explained, then it is not possible to hold that the income was not from business or from the exercise of a profession, vocation or occupation;"."
Similarly in the case of Bhagwan Dass Jain, the Supreme Court of India, while interpreting term 'income' as used in Entry 82 of the List of Seventh Schedule to the Indian Constitution, which is corresponding to Entry 47 of Part I of the Fourth Schedule to our Constitution, held as under:---
"Entry 82 of List of the Seventh Schedule to the Constitution empowers Parliament to levy 'taxes on income other than agricultural income'.
Now it is well settled that the entries in the Lists in the Seventh Schedule to the Constitution should not be read in a narrow or restricted sense and each and every subject mentioned in the entries should be read as including within its scope all ancillary and subsidiary matters which can fairly and reasonably be comprehended in it. Words in the Constitution conferring legislative power should. be interpreted in their widest amplitude."
Likewise the Supreme Court of India in the case of Ellel Hotels interpreted term 'income' as follows:---
"On a consideration of the matter, we are of the opinion that the submission of the learned Attorney-General as to the source of the legislative power to enact a law of kind in question require to be accepted. The word 'income' is of elastic import. In interpreting expression in the legislative lists a very wide meaning should be given to the entries. In understanding the scope and amplitude of the expression 'income' in Entry 82, List I, any meaning which fails to accord with the plenitude, of the concept of 'income' in all its width and comprehensiveness should be avoided. The cardinal rule of interpretation is that the entries in the legislative lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to all ancillary or subsidiary matter which can fairly and reasonably be said to be comprehended in it. The widest possible construction, according to the ordinary meaning of the words in the entry, must be put upon them. Reference to legislative practice may be admissible in reconciling two conflicting provisions in rival legislative lists. In construing the words in a Constitutional document conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. "
The Hon'ble Lahore High Court in Writ Petition No.8621 of 1991, examined Constitutional validity of section 80-D of the Ordinance with reference to Entry 47 of Part I of the Fourth Schedule to the Constitution and on taking into consideration relevant judgments concluded as follows:---
"The ratio deducible from the foregoing examination is as follows:--
(i) That the Constitution is a living document that it reflects the ideological aspiration of the people and is made through their will, that it deals with the governance of the State; that it lays down the framework of the distribution of the powers and subjects between the Federation and federating units. That it delimits the power of various limbs of State; i.e. Legislature, Executive and Judiciary. Being a permanent document it is to be considered liberally and with wide and comprehensive connotation designed to meet the exigencies of the State and changing conditions of socio-religio and economical dynamic of the State. It is to be given purposive, organic construction; each and every provision of the Constitution is to be construed such a manner that it is not rendered suplusage. If there is any conflict between the two provisions, the same are to be interpreted on the basis of the theory of reconciling them;
(ii) the entries in the Schedule to the Constitution are not to be given any circumscribed pedantic construction. These are to be examined in widest possible spectrum. These entries are the fields in which the Legislature of the State are empowered to act and frame laws.
(iii) The word 'income' embodied in section 2(24) of the Ordinance is not of exhaustive import but in inclusive in nature. This word like 'income' in Entry No.47 is to be construed as largely as possible.
(iv) The constitutionality of Statute/law is presumed till it is reputed on the showing of some irrefutable circumstances.
Applying these principles to the contentions of parties, we are in no manner of doubt that the Federal Legislature was fully competent to enact the challenged provisions. These did relate to the income."
Thus overall effect of above discussion leads us to hold that in view of the scheme of the Ordinance and interpreting term 'income' used in the Constitution; it is held that Legislature has not over-stepped its jurisdiction on levying income-tax 0.5% of the amount representing the 'turnover' of companies and registered firms from all sources to be the income of assessee? company or firm and to avoid evasion of tax at a large scale and also to widen the taxation base, it was necessary to stretch the term 'income-tax' t0 presumptive taxation, in the largest interest of the economy of the country and qualifications of taxpayers falling within the mischief of section 80-D of the Ordinance, in no manner is unreasonable nor it violates to Articles 18, 24 and 25 of the Constitution.
Now turning towards the case of Messrs Lafayatte Industries (C.P. No.376 of 1995), it is to be observed that section 80-D of the Ordinance, contains non obstante clause, which has been defined in Dictionary of Modern Legal Usage:---
"Notwithstanding anything to the contrary contained herein, an ungainly phrase often placed in complex contracts to introduce the most important provisions, can be fairly said to mean 'the true agreement is as follows.' It is best used when the certain provision is to override another, arguably inconsistent provision."
Above expression has also been defined in Corpus Juris Secundum, which reads as follows:---
"Notwithstanding. Without prevention or obstruction from or by; in spite of. It has been held to be equivalent to 'nevertheless'."
Similarly in Words and Phrases, Volume 28A it has been defined as under:---
Notwithstanding.
Penalty imposed by local fire-arms Ordinance for discharge of fire-arms could lawfully exceed that imposed by State fire-arms statute in light of exception to statute pre-empting field of fire-arms regulation; term "notwithstanding", within meaning of statute conditionally authorizing municipalities to restrict discharge of fire-arms "notwithstanding pre-emption statute, meant that pre-emption statute and its restrictions, including penalty restrictions, were to be disregarded. City of Seattle v. Ballsmider, Div. 1,856 p.2d 1113, 1115, 71 Wash. App. 159.
Bowaters Corporation does not have unfettered authority to bareboai charter vessels for transportation of non-proprietary cargo as common carrier in coastwise trade; "notwithstanding" language of Bowaters Amendment does not mean that Amendment supersedes Shipping Act section requiring corporations operations operating vessels in coastwise trade to be 75 % owned by United States citizens, and "shall be deemed a citizen" language does not render Bowaters Corporation a citizen for all purposes."
In view of the above definitions, it would be seen whether still petitioner is entitled for exemption to pay income-tax on aggregate ' turnover' during the assessment year or not?
Mr.` Naeem Pasha, Advocate contended that petitioner has got protection under Act XII of 1992 (Protection of Economic Reforms Act, 1992), as according to its section 6, petitioner enjoys fiscal incentives for setting up of Industry. Learned counsel also referred to SRO 1283(1)/90, dated 13-12-1990, according to which Schedule of Income Tax Ordinance under section 14(2) was amended and a new clause was added. It would be appropriate to reproduce the same hereinbelow:---
"(118C).--(1) Profits and gains derived by an industrial undertaking set up between the first day of December, 1990, and the thirtieth day of June, 1995, both days inclusive, for a period of eight years beginning with the month in which the undertaking is set up commercial production is commenced, whichever is the later.
(2) The exemption under this clause shall apply to an industrial undertaking which fulfils the following conditions, namely---
(a) that it is set up in the Province of Balochistan (excluding Hub Chowki Area), the North-West Frontier Province, the Federally Administered Tribal Areas, the Northern Areas Azad Kashmir, the Divisions of Dera Ghazi Khan and Bahawalpur in the Province of the Punjab or the Divisions of Sukkur and Larkana in the Province of Sindh;
(b) that it is owned and managed by a company formed exclusively for operating the said industrial undertaking and registered under the Companies Ordinance, 1984 (XLVII of 1984), and having its registered office in Pakistan;
(c) that it is not formed by the splitting up to the reconstruction or reconstitution of business already in existence or by transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at any time before the commencement of the new business; and
(d) that it is engaged in the manufacture of goods or materials, or the subjection of goods or materials to a manufacturing process, or mining (excluding petroleum and gas) or extraction of timber."
A perusal of explanation to subsection (1) of section 80-D of the Ordinance, clearly indicates that as far as exemption in clause (118C) is concerned that would not be applicable while charging income-tax on the aggregate declared 'turnover' if the tax is not being paid for any reasons, whatsoever, including exemption from tax. In addition to it, nothing has been brought on record to indicate that petitioner' Industry also fulfils conditions laid down under item (118C(2)). Thus for this reason argument put forth by the learned counsel is not entertainable.
The upshot of above discussion leads us to conclude, that petitions have no substance, which are accordingly dismissed, leaving the parties to bear their own costs.
M.B.A./605/Q???????????????????????????????????????????????????????????????????????????????????? Petition dismissed.