MESSRS KHAWAJA TEXTILE MILLS LTIS.,
KHALIQNAR BHIMBER
VS DEPUTY COMMISSIONER INCOME TAX, MIRPUR
CIRCLE, MIRPUR
1998 P T D 245
[High Court (Azad J&K)]
Before Khawaja Muhammad Saeed, CJ.,
Ch. Muhammad Taj and Muhammad Siddique Farooqi JJ
Messrs KHAWAJA TEXTILE MILLS LTIS.,
KHALIQNAR BHIMBER through
Khawaja Aneesur Rehman, Director and others
versus
DEPUTY COMMISSIONER INCOME TAX, MIRPUR
CIRCLE, MIRPUR and others
Writ Petitions Nos.99, 115, 102, 96, 95 of 1994, 81, 79, 77, 80, 78, 82 of 1991, 56, 16, 15 of 1992, 39, 37, 38, 36, 10 of 1993, 1 of 1995, 1, 2, 22, 20, 7.1,-42, 41 and 43 of 1997, decided on 16/09/1997.
(a) Azad Jammu and Kashmir Income Tax Ordinance, 1979----
----S. 80-D---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974), Third Sched., Entires 42 & 45---Vires of S. 80-D, Azad Jammu and Kashmir Income Tax Ordinance, 1979---Provision of S. 80-D, Azad Jammu and Kashmir Income Tax Ordinance, 1979 are not ultra vires the Constitutional provisions and teachings of Islam.
Provisions of section 80-D of the Azad Jammu and Kashmir Income Tax Ordinance, 1979 are not ultra vires the Constitutional provisions. There is no discrimination made through the said provision of law. These provisions in no way, impose any restriction on the business or status of the assessees as businessmen. The imposition of taxes through the aforesaid provision inserted in the Income Tax Ordinance is lawful. The tax levied through these provisions is not interest/ribba, therefore, there is no violation of the Constitutional provisions.
Provisions of section 80-D and similar other provisions of the Income Tax Ordinance are not against the teaching of Islam.
PLD 1997 SC 582 fol.
AIR 1961 SC 522; PLD 1979 SC (AJ&K) 148; PLD 1979 SC (AJ&K) 193; PLD 1979 SC (AJ&K) 217; 1961 (1961) 41 ITR 393; (1965) 56 ITR 141; (1965) 56 ITR 597; AIR 1963 Mad. 183; PLD 1981 SC 95; PLD 1990 SC 990; 1951 SCR 735; AIR 1941 FC 16; AIR 1955 SC 58; AIR 1964 SC 922; AIR 1968 SC,59; AIR 1955 FC 1667; AIR 1961 SC 1602; AIR 1961 SC 1733; AIR 1960 SC 457; AIR 1957 SC 9; AIR 1957 SC 157; AIR 1952 SC 75; AIR 1961 SC 552; AIR 1967 SC 1895; PLD 1980 SC 44; (1989) 178 ITR 31 (AP); PLD 1979 SC (AJ&K) 147; PLD 1992 FSC 329; PLD 1997 SC 582; Corpus Juris Secundum, Vol. LXXXIV; Assistant Commissioner of Land, Madras and others v. Buckingham and Carnatic Co. Ltd. (1970) 75 ITR 603; Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1964; Federation of Hotel and Pestaurant v. Union of India and others 1990 SC 1637; Express Hotels Ltd. v. State of Gujarat (1989) 178 ITR 151; M/s. Hoechst Pharmaceuticals Ltd. v. State of Bihar AIR 1938 SC 1019; (1943) 11 ITR 515; AIR 1943 PC 153; AIR 1965 SC 1375; P. Kunhammed Kutty Haji and others v. Union of India and others (1989) 176 ITR 481; T.K. Aboobacker and others v. Union of India and others (1989) 177 ITR 358; Sat Pal & Co. v. Excise and Taxation Commissioner and others (1990) 185 ITR 375; Sri Venkateswara Timber Depot v. Union of India and others (1991) 189 ITR 741; Union of India and another v. Sanyasi Rao and others (1996) 219 ITR 330; AIR 1941 FC 72, AIR 1980 SC 1042; AIR 1974 SC 555; AIR 1978 SC 597; Commissioner of Income Tax/Excise Profits Tax. Bombay City v. Messrs Bhogilal Batlibai &, Co., Bombay AIR 1954 SC 155; Khandige Sham Bhat and another v. Agricultural Income-Tax Officer, Kasaragod and another AIR 1963 SC 591; Travancore Rubber and Tea Co. Ltd., Alleppey and another v. State of Kerala and another AIR 1964 SC 572; Commissioner of Income-tax, Bombay City-I v. Amarchand N. Shroff (1963) 48 ITR 592; Navnit Lal C. Javeri v. K.K. Sen, Assistant Commissioner of Income-tax, Bombay AIR 1965 SC 1375; Deputy Commercial Tax Officer, Saidapet, Madras and another v. Enfield India Ltd., Cooperative Conteen Ltd. AIR 1968 SC 838; The State of Kerala v. Haji K. Kutty Kaha and others etc. AIR 1969 SC 378; The Madurai District Central Cooperative Bank Ltd. v. The Third Income Tax Officer, Madural AIR 1975 SC 2016; Pathumma and others v. State of Kerala and others AIR 1978 SC 771; Avinder Singh and others v. State of Punjab and others (1979) 1 S CC 137; Bhagwan Dass Jain v. Union of India and others (1981) 128 ITR 315; AIR 1961 SC 604; (1948) 16 ITR 240; (1955) 2 SCR 603; (1963) 50 ITR 171; AIR 1966 SC 1370; (1955) 27 ITR 389, 36 ITR 65; AIR 1959 SC 771; Attorney-General for British Columbia v. Canadian Pacific Railway Company 42 TLR 750 (PC); Attorney-General for British Columbia v. Kingdom Navigation Company Limited 150 LT 81 (PC); King F. Caledonia Collieries Ltd. AIR 1928 PC 282; Begum B.H. Syed v. Mst. Afzal Jahan Begum and another PLD 1970 SC 29; Mrs. Samina Shaukat Ayub Khan v. Commissioner of Income-Tax, Rawalpindi PLD 1981 SC 85; The Commissioner of Income Tax, Rawalpindi Zone, Rawalpindi v. Messrs Haji Maula Bux Corporation Limited, Sargodha PLD 1990 SC 990; Messrs Noon Sugar Mills Limited v. The Commissioner of Income-lax, Rawalpindi 1990 PTD 768; I.A. Sharwani and others v. Government of Pakistan through Secretary, Finance Division, Islamabad and others 1991 SCMR 1041; Inamur Rehman v. Federation of Pakistan and others 1992 SCMR 563; Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry Finance 1992 SCMR 891; Government of Pakistan and others v. Muhammad. Ashraf and others PLD I993 SC 176; Haji Ibrahim Ishaq Johri v. The Commissioner of Income Tax (West), Karachi 1993 SCMR 287; Altaf Construction Company v. Central Board of Revenue and others 1996 PTD 804 and Fazalur Rehman Bin Muhammad v. Federation of Pakistan and others PLD 1992 FSC 329 ref.
(b) Azad Jammu and Kashmir Income Tax Ordinance, 1979----
----S. 80-D---Tax under S. 80-D, Azad Jammu and Kashmir Income Tax Ordinance, 1979 has bean imposed with reference to the assessment year and not the accounting year.
(c) Azad Jammu and Kashmir Income Tax Ordinance, 1979----
----S. 80-D---No ambiguity exists in S. 80-D of the Ordinance---Tax under 5.80-D, Azad Jammu and Kashmir Income Tax Ordinance, 1979 has been imposed on the turn over basis at the rate of 0.50 per cent. and has been levied in case of companies and registered firms.
(d) Azad Jammu and Kashmir Income Tax Ordinance, 1979----
----S. 80-D---Provisions of S. 80-D, Azad Jammu and Kashmir Income Tax Ordinance, 1979 are not subject to any restriction whatsoever.
(e) Islamic Jurisprudence----
---- Taxation---Islam does not prohibit the collection of taxes from any particular class of persons in the society---Categorization of the people for the purpose of realizing the tax is not against Injunctions of Islam---Levy of taxes for the just needs of the people is allowed in Islam.
In Islam, the imposition of taxes has a background; Zakat, Ushr and Jizya area the various forms of taxes. Zakat is not realized only on new income of the individuals rather it is levied on the entire belongings of an individual even if there is no income. The tax on the turnover of a business is, thus, of a lesser gravity than that of Zakat. Jizya is. realized from non -Muslims, for defence services rendered by the State. In the present day world, the State is managing various affairs and also provides different services to the people in the shape of defcnce, health, education and so many other developments for the benefit of the citizens. All this requires a huge sum of money which has to be collected from the people. Without taxes it is not possible for a Government to defend the country and to provide other services and facilities or perform certain functions for the welfare and well being of the people. Thus, the taxes have to be levied for different purposes in different shapes on different classes of persons. The Islamic Shariah does not prohibit the collection of taxes from any particular class of persons in the Islamic society.
The levy of taxes for the just and righteous needs of the, people, is allowed in Islam.
(f) Azad Jammu and Kashmir Income Tax Ordinance, 1979-
----S. 80-D---Assessee a travelling agent---Total amount of sale proceeds of tickets cannot be treated as turn-over for the purpose of S. 80-D, Azad Jammu and Kashmir Income Tax Ordinance 1979 as the travelling agency received only commission on the sale proceeds of the tickets and not the money which goes to the Air Line.
Haji Muhammad Afzal for Petitioners (except in Writ Petition No. 10 of 1993).
Zahid Hussain for Petitioner (in Writ Petition No-10 of 1993).
Bilal Ahmed for Respondents (in all the Petitions except in Petition No. 10 of 1993).
Abdul Majeed Mallick for Respondents (in Writ Petition No. 10 of 1993)
JUDGMENT
MUHAMMAD SIDDIQUE FAROOQI, J. ---The petitioners, through the above title writ petitions, have challenged the provisions of section 80-D of the Income Tax Ordinance 1979, whereby the turn over tax was levied in Azad Kashmir.
2. The facts briefly are that through Finance Act (Act XII of 1991), section 80-D was inserted in the Income Tax Ordinance which provides that notwithstanding anything contained in the said Ordinance, or any other law, for the time being in force, where no tax was payable by a company resident in Pakistan or the tax payable is less than one-half per cent of the amount representing its turn over from all sources, the aggregate of declared turn over shall be deemed to be the income of the said company and tax thereon shall be charged in the manner specified in subsection (2), wherein it was provided that where no tax was payable, a tax equal to one-half per cent of the turn over would be the amount payable and where the amount of tax is less than one-half per cent of the turn over, the amount equal to the difference between the tax payable and the amount calculated in accordance with clause (a) shall be payable as tax under that provision. The words "turn over" were also explained as gross receipts exclusive of trade discount show on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services, or benefits or from execution of the contracts.
3. The grounds taken up in the petitions assailing the provisions of law are as under:--
(a) The provisions of section 80-D of the Income Tax Ordinance are ultra-vires of the Constitutional authority of the AJ&K Council;
(b) The provisions of section 80-D are discriminatory and infringe the fundamental right (4.12) as provided in the Azad Jammu and Kashmir Interim Constitution Act;
(c) The imposition of the taxes through these provisions is a restriction imposed on business and the business status of the petitioners and as such violative of fundamental rights (4. 8 and 4.14);
(d) The provisions are violative of Injunctions of Islam;
(e) The tax levied through these provisions amounts to interest/Ribha and as such violative of the Constitution; and(f) The imposition of tax is without lawful authority.
Apart from the Constitutional position, further; grounds of attack are as under:---‑
(a) If, at all, the tax levied under section 80‑D is applicable, it will be effective from the assessment year 1992‑93 in the case of "Ghazi Ghee Mills";
(b) The provisions being ambiguous are to be resolved in favour of the tax payers/petitioners;
(c) The mode of legislation is violative of the Interim Constitution, in the sense that a provision cannot be made in a statute for the adoptation of laws of Pakistan which may come into existence in future, because through such a provision made in the Income Tax Laws, all the future amendments in Pakistan become applicable in Azad Kashmir. This type of legislation has the effect of transferring the powers of the AJ&K Council to the Legislative Authority of Pakistan which is not permissible under the Interim Constitution Act, 1974.
4. It may be noted that Income Tax Ordinance of 1979 of Pakistan has been adopted by the AJ&K Council which is the authority, competent to legislate upon the subject of Income Tax in view of Item 42 of Third Schedule read with section 31(2) of the Interim Constitution Act. The adaptation of Income Tax Ordinance made in Pakistan in the Income Tax Ordinance from time to time, shall become applicable in Azad Jammu and Kashmir, automatically. On the strength of this provision, section 80‑D inserted in the Income Tax Ordinance of Pakistan became applicable in Azad Kashmir.
5. Levy of tax under the aforesaid law, by the income tax authorities, was also challenged on the further grounds that some of the petitioners/industrial units stand exempted under various provisions of law, therefore, any tax under section 80‑D, could not be realized from the exempted units. It was also urged that the Protection of Economic Reforms Act, 1992 (hereinafter called the Reforms Act), was applicable in the cases of the petitioners in the matter of exemptions. In the petition brought by "Spintax Ltd., the main ground is that even if section 80‑D inserted in the Income Tax Ordinance is held valid, in spite of that, the exemption granted to various units shall be affective, therefore, this company is not liable to pay any tax.
6. The respondents denied all the assertions of the petitioners and pleaded that the law has been validly enacted in Pakistan and has come in force` in Azad Kashmir. According to the respondents, provisions of Constitution is Pakistan, empower the Federal Legislative body to enact law respecting the income tax and similar power have been conferred on the AJ&K Council, in such matters through the Interim Constitution Act. It has been pleaded that law is not against the provisions of Islam.
7. On facts, it has been pleaded that the industrial units in which exemption has been claimed, are not covered by the various statutory orders granting the exemptions. It has been further pleaded that Reforms Act, 1992 was not adopted by AJ&K Council, therefore, the exemption provided in this law is no longer applicable in Azad Jammu and Kashmir. It has been pleaded that the Azad Jammu and Kashmir Legislative Assembly had no power to enact a law respecting the Income Tax Act, therefore, the provisions of section 80‑D of the Ordinance are not affected by any Act of this Assembly.
8. The arguments in this case were heard on May 13 and 14, 1997 and the case was again taken up on June 15, 1997 and then the arguments were concluded by the learned counsel for the parties.
9. Haji Muhammad Afzal, the learned counsel for the petitioners argued that provisions of section 80‑D are violative of the Constitution on the following grounds:‑‑‑
(i) It is confiscatory in nature;
(ii) it is outside the frame‑work of the Income Tax Laws and is not covered by the principle, determining the levy of income tax;
(iii) it is not within the scope of Item 42 of the AJ&K Council Legislative List;
(iv) it is not covered by the definition of income. Turn over tax is not permissible under the provisions of the Constitution; and
(v)turn over tax is just like sale tax which cannot be levied throughlegislation of AJ&K Council.
10. The second ground taken up is that the impugned provision of law is discriminatory and offends the provisions of fundamental rights of equality before law. The class legislation of this nature is not a classification. It is a discrimination which is not allowed by the Constitution.
11. The third ground is that this provision imposes a restriction on the business as well as the petitioners status as businessmen thus infringes the Fundamental Rights (4.8 and 4.14).
12. The fourth ground is that the law is violative of Injunctions of Islam.
13. The fifth ground relates to additional tax levied under sections 88 and 89 of the Ordinance, therefore, the additional tax is also assailed as violative of Injunctions of Islam and Sharia. The charging of additional tax retrospectively, has been also challenged.
14. The sixth ground is that law relating to the turn over tax is ambiguous.
15. The seventh ground is that provision in the Income Tax Act for adopting automatically the amendments made in Pakistan, amount to transferring the legislative powers to the Federal Legislative authority which is not permissible under the Constitution.
16. The learned counsel prepared the table of the income relating to the various assessment years in respect of 17 units and tried to show that the tax levied, is not on any income derived by these units. Some of the units were suffering losses, nevertheless, those are being required to pay tax. Under the scheme of law relating to income tax, no person can be asked to pay tax who has no income or is sustaining loss. The impugned provision of law is, thus, outside the scope of the Constitutional provision, authorising the legislation for tax on income. The learned counsel relied on the following cases:‑‑‑
AIR 1961 SC 522 and
PLD 1979 SC (AJK) 148, 193 and 217,
The learned Counsel discussed the cases from Indo‑Pakistan jurisdiction relating to the provision of section 80‑D. Reference was made to: ‑
1961 (41), ITR 393,
1965 (56), ITR 141, ITR 597
AIR 1963, Mad. 183,
PLD 1981 SC 95,
PLD 1990 SC 990,
1951 SCR 735,
AIR 1941 FC 16,
AIR 1955 SC 58,
AIR 1964 SC 922, and
AIR 1966 SC 59.
The learned counsel discussed the provisions of sections 1, 3(1)(a), 2(b), 3, 13, (i), (ii), (iii) and sections 9, 14, 23, 24, 32(4), 35, 61 and 62 of the Income Tax Ordinance, 1979.
17. On ground No.2 relating to discrimination, the‑ learned Counsel argued that reference to all companies in the impugned legislation, is not a classification of persons rather it is a class legislation which being discriminatory offends against the Constitutional provisions providing equality and equal protection before law to all the citizens. He mentioned various categories of persons and business and trade and profession, not made liable to pay the tax.
18. Regarding class legislation, reference was made to the following authorities:‑‑
AIR 1955 SC 1667,
AIR 1961 SC 1602,
AIR 1961 SC 1733,
AIR 1960 SC 457,
AIR 1957 SC 9/157,
19. In the matter of discrimination, reference was made to the following cases:‑-
AIR 1952 SC 75,
AIR 1961 SC 552,
AIR 1967 SC 1895,
PLD 1980 SC 44,
(1989) 178, ITR 31 AP.
20. In the matter of restriction of the business, it has been argued that turn over tax levied at the rate of Rs. 0.50 per cent, affects the status of a company and it violates the Fundamental Rights, therefore, the same is void. This tax also deprives a person of his property, therefore, it offends the provisions of Fundamental Right‑14 because a person is deprived of the property without the authority of law. Reference was made to a case reported as PLD 1979 SC (AJK) 147. The learned counsel for the petitioners argued that levy of tax at the rate of Re. 0.50 per cent on the turn over is an illegal deprivation from the property which is not permitted in Islam. Therefore, this provision is violative of teaching of Islam. He discussed some individual cases and stated that some industrial units have the different accounting years. Therefore, the turn over tax could only be levied from the assessment years 1992‑93. The legislation even if held valid, does not authorise the tax realization from any previous date.
21. Mr. Zahid Hussain, Advocate who represented "Spintex Limited" argued that the tax exemption was allowed to various industries for a period of 8 years through Notification No. SRO/283 (1)/90, issued on 13‑12‑1990 which reads as under:‑‑‑
"MINISTRY OF FINANCE AND ECONOMIC AFFAIRS.
Islamabad, the 13th December, 1990.
Income Tax
S.R.O. 1283 (1)/90.‑‑‑In exercise of the powers conferred by subsection (2) of section 14 of the Income Tax Ordinance, 1979, (XXXI of 1979) the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the said Ordinance, namely:‑
In the aforesaid Schedule,‑
(1) in para. 4 after clause (118‑B), the following new clause shall be inserted, namely:‑‑‑
(118B). (1) Profits and gains derived by an assessee from 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:‑‑‑
(a)that it is set up in the Province of Balochistan (excluding sub- 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 or 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 subjections of goods or materials to a manufacturing process, or mining (excluding petroleum and gas) or extraction of timber. "
According to the learned Counsel, the exemption was allowed to industries in Balochistan, N.‑W.F.P., FATA, Northern Areas, Azad Kashmir and Dera Ismail Khan etc., therefore, turn over tax cannot be realized from Spintex which is established in Azad Kashmir. The learned Counsel made reference to Protection of Economic Reforms Act, 1994 dated 25‑1‑1994, enacted by Azad Kashmir whereby the protections allowed through the aforesaid Act of 1992 in Pakistan, were extended to Azad Kashmir. According to him, the Legislative Assembly of Azad Kashmir was competent to legislate on the subject of concessions/exemptions in the matter of taxes as well as for providing the protection to the industries. The Legislation by the AJK Legislative Assembly extends to the provisions of SRO No. 1283 to Azad Jammu Kashmir, therefore, if the enforcement of provisions of law embodied in section 80‑D are held valid, the exemption already given are not affected. Resultantly, the industrial units benefited by SRO 1283, dated 13‑12‑1990 shall continue to enjoy the concession for the period prescribed thereunder.
22. Mr. Bilal Ahmed, Advocate argued that the provisions of law embodied in Item 42 Schedule. Third of Azad Jammu and Kashmir Interim Constitution Act, is similar to one as per Item 47 Part‑I of the Federal Legislation List in Schedule IV of Pakistan Constitution. According to the learned Counsel, the provisions of the Constitution are wide enough to cover the turn over tax. He argued that a number of taxes have been levied through the Income Tax Ordinance. One form of the tax is actually the income derived by a person from different sources. The other is additional tax and then the taxes are levied, under the provisions of sections 80‑C, 80‑CC and BO‑D etc. He referred to the definition of "income" provided in the Income Tax Ordinance. It was argued by him that the word "income" does not refer to the actual income. It includes any amount deemed as income. According to the learned Counsel, the deeming Clause appearing in any statute. makes a thing to be assumed to be existing which factually may not exist. The learned Counsel argued that the Reforms Act is not applicable in 'Azad Kashmir. According to him, the petitions pertain to the industries which came into operation before 1‑12‑1990, whereas SRO 1283 applies to the units which came into production after 13‑12‑1990. Even otherwise, this law was not enacted by the AJ&K Council, hence not applicable in Azad Kashmir. Mr. Bilal Ahmed, Advocate further argued that the instant case is not a Shariat petition, therefore, the question of violation of any Injunction of Islam, cannot be considered by this Court. Alternatively, he argued that even in the Islamic States, Kharaj and Ghanemat etc. were the sources of income, therefore, levy of any tax through legislation in the shape of section 80‑D, could not be treated as violative of Islamic Sharia. The State has to meet certain expenses for which it should have some resources. The taxes are the only way through which the State can realize the sum of money for meeting the expenses. The learned counsel placed reliance on PLD 1992 FSC 329 and argued that levy of tax has been held justified by the Federal Shariat Court. It was further argued that the State also realises Zakat and Usher which is permissible in Islam. According to him, it is not correct to suggest that realization of tax is the deprivations of the property. The reference was made to decisions of Karachi, and Quetta High Courts. When the case was lastly argued, the judgment of Supreme Court of Pakistan delivered by Full Bench comprising five learned Judge had been also announced. Mr. Bilal Ahmed, Advocate referred to various paragraphs of the said judgment and justified the legislation. It was argued that all the points agitated by the learned counsel for the petitioners stand answered by various petitions of the judgment of the Supreme Court. In view of the authoritive judgment, the petitioners have got no case because the Supreme Court of Pakistan held that section 80‑D, has been validity inserted as a piece of legislation. The objections regarding the violation of fundamental rights have been also repelled by the Supreme Court. According to the learned counsel, there was no violation of fundamental rights.
23. Mr. A.M. Mallick, Advocate, representing the respondents in the petition filed by Spintex Limited, argued that there was no material on record to show as to when this industry was established in Azad Kashmir and how it was entitled to any concession. The ingredient for application of SRO 1283 are not on record. The petitioner in order to claim exemption has to place necessary documents on record. According to him, SRO‑1283 was not applicable in Azad Kashmir. The exemption visualised by the provision of section 6 of the Reforms Act, 1992, does not cover the petitioners, case. It was further argued by him that the law enacted by the Azad Jammu and Kashmir Legislative Assembly, cannot extend any concession of income tax because this is a subject falling within the domain of the AJ&K Council and not the Legislative Assembly.
24. We have considered the respective arguments of the learned council for the parties and perused the record.
25. The main ground taken up in the petition, relates to the Constitutional position of the provisions of section 80‑D of the Income Tax Ordinance, 1979. About two hundred petitions were brought in the High Courts in Pakistan which were disposed of by Lahore, Karachi and Quetta High Courts and finally appeals have been decided by the Supreme Court of Pakistan. The lengthy judgment delivered by the F.B. of Supreme Court of Pakistan is reported as PLD. 1997 SC 582. In this judgment, most of the points canvassed before us were also discussed and determined. It was observed that powers of Taxation rest on necessity. It is essential and inherent attribute of sovereignty belonging as a matter of right to every independent State of Government. Referring to "Corpus Juris Secundum, Vol. LXXXIV as to the power of the State to levy tax, the following portion was reproduced: ‑‑
"The power of taxation rests on necessity: and is a essential and inherent attribute of sovereignty belonging as a matter of right to every independent State or Government. Such power is an inherent one, and in not dependent on any grant by the Constitution, or the consent of the owners of property subject to taxation; Constitutional provisions with respect to taxation constitute a limitation of the legislative power and not a grant of power. The power to tax rests primarily in the State, to be exercised by its legislature as discussed infra section 7, and the State by exercise the power directly or may delegate such power as political sub‑divisions of the State, as considered in infra section 8. The exercise of taxing power is a high Governmental function, in invitum in nature."
The case‑law from Indian jurisdiction was also discussed. Referring to the case titled "Assistant Commissioner of Land Madras and others v. Buckingham and Carnatic Co. Ltd., (1970) 75 ITR 603, the following portion was reproduced: ‑‑‑
"The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subject to the lists is not byway of scientific or logic definition but by way of a mere simplex enumeration of broad categories. We see no reason, therefore, for holding that entries 86 and 87 or List I preclude legislature from taking capital value of lands and buildings under entry 49 of List II. In our opinion there is no conflict between 86 of List I and entry 49 of List II. The basis of taxation under the two entries is quite distinct. As regards entry 86 of List I the basis of the taxation is the capital value of the asset. It is not a tax directly on the capital value of assets of individuals and companies on the valuation date. The tax is not imposed on the components of the assets of the assessee. The tax under entry 86 proceeds on the principle of aggregation and is imposed on the totality of the value of all the assets. It is imposed on the total assets which the assessee owns and in determining the net wealth not only the encumbrance specifically charged against any item of asset, but the general liability of the assessee to pay his debts and to discharge his lawful obligation have been taken into account. In certain exceptional cases, where a person owes no debts and is under no enforceable obligation is discharged and liability out his assets it may be possible to break up the tax which is leviable on the total assets into components and attribute a components to lands and buildings owned by an assessee. In such a case, the components out of the total tax attributable to lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual values under entry 49, List II. But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may or may not form a component of the total assets of the assessee."
In case titled "Elel Hotels and Investments Ltd., and another v. Union of India," (AIR 1990 SC 1964), was considered and paragraph 6 was reproduced as under:‑‑
"6. On a consideration of the matter, we are of the opinion that the submissions of the learned Attorney‑General as to the source of the Legislative power to enact a law of the kind in question require to be accepted. The word 'income' is of elastic import. In interpreting expressions 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 plentide 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 all ancillary or subsidiary matters 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 on them. Reference to legislative practice may be admissible in reconciling two conflicting provisions of 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 Supreme Court categorized the arguments advanced in this case. From Indian Supreme Court, the following cases were discussed wherein the levy of tax on gross receipts and expenditure was upheld:‑
(i) Federation of Hotel and Restaurant v. Union of India and others (1990 S.C. 1637);
(ii)The Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1664;
(iii)Express Hotels Ltd. v. State of Guajrat (1989) 178 ITR 151..
On the question of violation of fundamental rights the following observations were made at page 637:‑‑‑
"It is now well‑settled that though taxing laws are not outside Article 14, however, having regard to the wide variety of diverse economic criteria that go into the formulation of a fiscal policy legislature enjoys a wide latitude in the matter of selection of persons, subject‑matter, events etc., for taxation. The test of the vice of discrimination in a taxing law are, accordingly, less rigorous. In examining the allegations of a hostile, discriminatory treatment what is looked into is not its phraseology, but the real effect of its provision A Legislature does not, as an old saying goes, have to tax everything in order to be able to tax something. If there is equality and uniformity within each group, the law would not be discriminatory. Decisions of this Court on the matter have permitted the legislature to exercise an extremely, wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes."
Referring to the contravention of Article 19 (i)(g), the following observations were made:‑‑
"A taxing statute is not per se a restriction on the freedom under Article 19 (i) (g). The policy of a tax, in its effectuation, might, of course, bring in some hardship in some individual cases. But that is inevitable, so long as law represents a process of abstraction from the generality of cases and reflects the highest common‑factor. Every cause, it is said, has his martyrs. Then again, the mere excessiveness of a tax or even the circumstance that its imposition might tend towards the diminution of the earning or‑profits of the persons of incidence does not per se, and without more, constitute violation of the rights under Article 19 (i) (g). Fazal Ali, J., though in a different context, in Sonia Bhatia v. State of U.P. (1981) 3 SCR 239 at p.258: AIR 1981 SC 1274 at page 1284 observed: ‑‑‑
''...The Act seems to implement one of the most important constitutional directives contained in Part IV of the Constitution of India. If in this process a few individuals suffer severe hardship that cannot be helped for individual interests must yield to the larger interests of the community or the country as in deed every noble cause claims its martyr."
The Supreme Court of Pakistan also quoted the following paragraphs from cases titled "M/s Hoechst Pharmaceuticals Ltd. v. State of Bihar AIR 1938 SC 1019"‑‑
"On questions of economic regulations and related matters, the Court must defer to the legislative judgment. When the power to tax exists, the extent of burden is a matter for the discretion of the law maker. It is not the function of the Court to consider the propriety or justness of the tax or enter upon the reality of legislative policy.
If the evident intent and general operation of the tax legislation is to adjust the burden with a fair reasonable degree of equality, the Constitutional requirement is satisfied..."
26. Reference was also made to (1943) 11 ITR 515, AIR 1943 PC 153, AIR 1965 SC 1375. Agreeing with the conclusions arrived at by the Courts in India, the Supreme Court of Pakistan upheld the validity of the legislation respecting the levy of the taxes. In paragraph 27 of the judgment, the validity of sections 44 A.C. and 206‑C inserted by Finance Act 1988 iii the Indian Income Tax Act, was discussed. The provisions of this section are similar to the provisions of sections 80‑C, 80‑CC and 80‑D, of the Income Tax Ordinance, 1979. The powers of Indian Legislature, as per Schedule VII List Entry 82 correspond to the entry 47 of Schedule IV Part I of Pakistan Constitution. It has been already observed by that provisions of entry 42 of Schedule Third of Jammu and Kashmir Interim Constitution Act, are exactly the same that of the aforesaid entry 47 The cases discussed by the Supreme Court of Pakistan are as under:‑‑‑
(i)A. Sanyasi Rao and another v. Government of Andhra Pradesh and others 1989 178 ITR 31;
(ii)P. Kunhammed Kutty Haji and others v. Union of India and others (1989) 176 ITR 481;
(iii)T.K. Aboobacker and others v. Union of India and others. (1989) 177 ITR 358;
(iv)Sat Pal & Co. v. Excise and Taxation Commissioner and others (1990) 185 ITR 375;
(v)Sri Venkateswara Timber Depot v. Union of India and others (1991)189 ITR 741:
(vi)Union of India and another v. Sanyasi Rao and others (1996) 219 ITR 330.
27. After discussing the aforementioned six cases, the Supreme Court found that the Supreme Court of India, had also considered various cases, namely, AIR 1941 FC 72, AIR 1980 SC 1042, AIR 1974 SC 555 and AIR 1978 SC 597.
29. In paragraph 28 of the judgment, the following 14 cases were discussed: ‑‑‑
(i)Commissioner of Income‑tax/Excise Profits Tax, Bombay City, Appellant v. Messrs Bhogilal Batlibai & Co., Bombay, respondent AIR 1954 SC 155.
(ii)Kunnatha Thathunni Moopil Nair etc. v. State of Kerala and another AIR 1961 SC 552;
(iii)Khandige Sham Bhat and another v. Agricultural Income‑TaxOfficer, Kasaragod and another AIR 1963 SC 591.
(iv)Travancore Rubber and Tea Co. Ltd., Alleppey and another v. Stateof Kerala and another AIR 1964 SC 572;
(v)Commissioner of Income‑tax Bombay City I v. Amarchand N. Shroff (1963) 48 ITR 592;
(vi)Navnit Lal C. Javeri v. K.K. Sen, Appellant Assistant Commissioner of Income‑tax, Bombay AIR 1965 SC 1375;
(vii) Deputy Commercial Tax Officer, Saidapet, Madras and another v. Enfield India Ltd. Cooperative Conteen Ltd. AIR 1968 SC 838;
(viii)The State of Kerala v. Haji K. Kutty Kaha and others etc. Att 1969 SC 378;
(ix)Assistant Commissioner of Land Tax, Madras and others v. Backingham and Carnatic Co. Ltd. (1970) 75 ITR 603
(x)The Maduri District Central Cooperative Bank Ltd. v. The third Income Tax Officer, Madural AIR 1975 SC 2016;
(xi)Pathumma and others v. State of Kerala and others AIR 1978 SC 771;
(xii) Avinder Singh and others v. State of Punjab and others (1979) 1 Supreme Court Cases 137;
(xiii) Bhagwan Dass Jain v. Union of India and others (1981) 128 ITR 315;
Reference was also made by the Supreme Court in this judgment to some other cases, namely:‑
AIR 1961 SC 604,
(1948) 16 ITR 240,
(1955) 2 SCR 603,
AIR 1941 FC 16,
(1963) 50 ITR 171,
AIR 1966 SC 1370,
(1955) 27 ITR 389, 36 ITR 65,
AIR 1959 SC 771.
After discussing the cases from Indian jurisdiction, the Supreme Court of Pakistan considered the following cases decided by Privy Council:‑‑‑
(i)Attorney‑General for British Columbia v. Canadian Pacific RailwayCompany, (XLII) the Times Law Reports (Privy Council) page 750;
(ii)Attorney‑General for .British Columbia v. Kingdom NavigationCompany Limited. 150 Law Times (Privy Council) 81; and
(iii)King F. Caledona Collieries Ltd., (AIR 1928 PC 282).
The Supreme Court of Pakistan brought into consideration the following cases from Pakistan jurisdiction, as per para. 29 of the judgment:‑‑‑
(i)Begum B.H. Syed v. Mst. Afzal Jahan Begum and another PLD 1970 SC 29;
(ii)Mrs. Samina Shaukat Ayub Khan v. Commissioner of Income‑Tax,Rawalpindi PLD 1981 SC 85;
(iii)The Commissioner of Income Tax, Rawalpindi Zone, Rawalpindi v. Messrs Haji Maula Bux Corporation Limited, Sargodha PLD 1990 SC 990;
(iv)Messrs Noon Sugar Mills Limited v. The Commissioner of Income Tax Rawalpindi 1990 PTD 768;
(v)I.A. Sharwani and others v. Government of Pakistan through Secretary, Finance Div. Islamabad and others 1991 SCMR 1041;
(vi)Inamur Rehman v. Federation of Pakistan and others 1992 SCMR 563;
(vii) Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry Finance 1992 SCMR 891;
(viii) Government of Pakistan and others v. Muhammad Ashraf and others PLD 1993 SC 176;
(ix)Haji Ibrahim Ishaq Johri v. The Commissioner of Income Tax (West), Karachi 1993 SCMR 287;
(x)Altaf Construction Company v. Central Board of Revenue and others 1996 PTD 804;"
29. After evaluation of the case‑law from Indian as well as Pakistan jurisdiction and the cases decided by the Privy Council, the principles of law were summarized in paragraph 31 of the judgment Cap: E to Z and AA to KK, included in this Paragraph. There appear XXXIV sub‑paragraphs showing various conclusions drawn by the Supreme Court. Thereafter paragraph 32 appears as under: ‑---
."We have summarised hereinabove in para. 31 the ratio decidendi of the above discussed cases and certain pertinent observations made therein. A perusal of above sub‑paras. (i) to (xxx) of para. 31 indicates that the same do not advance the case of the appellants. On the contrary, they reinforce the principle of law that the Legislature, particularly in economic activities, enjoys a wide latitude in the matter of selection of persons, subject‑matters, events etc, for taxation, the presumption is in favour of the validity of the legislation. The burden to prove that the same is invalid is on the person who alleges it."
Again, in paragraph 34, it was held:‑‑‑
"Keeping in view the above case‑law and the treatises and the aforesaid legal inferences drawn therefrom, we may now revert to the question of vires of impugned sections. It may again be observed that the powers to levy taxes is a nine qua non for a State. In fact it is an attribute of sovereignty of a State. It is mandatory requirement of a State as it generates financial resources which are needed for running a State and for achieving the cherished goal, namely, to establish a welfare State. In this view of the matter, the Legislature enjoys plenary power to impose taxes within the framework of the Constitution. It has prima facie power to tax whom it chooses, power to exempt whom it chooses, power impose such conditions as to liability as to exemption as it chooses so long as they do not exceed the mandate of the Constitution. It is also apparent that the entries in the Legislative List of the Constitution are not powers of Legislation but only fields of legislative heards. The allocation of the subjects to the lists in not by way of scientific or logical de6nation but by way of mere simple enumeration of broad catalogue. A single tax may derive its sanction from one or more entries and many taxes may emanate from one single entry. It is needless to reiterate that it is a well settled proposition 'of law that an entry in the Legislative List must be given a very wide and liberal interpretation. The word ' income' is susceptible as to include not only what is in ordinary parlance it conveys or it is understood, but what. is deemed to have arisen or accrued. It is also manifest that income tax is not only levied in the conventional manner i.e. by working out the net income after adjusting admissible expenses and other items, but the same may also be levied on the basis of gross receipts, expenditure etc., There are new species of income tax, namely, presumptive tax and minimum tax.'
In our view, sections 80‑C and 80‑CC of the Ordinance fall within the category of preumptive tax as under the same the persons covered by them pay a pre‑determined amount of presumptive tax in full and final discharge of their liability in respect of the transactions on which the above tax is levied."
The Supreme Court in the aforesaid
judgment at page 687 in paragraphs 40, 41 and 42 observed as under:‑‑‑
"Adverting to the impugned newly added section 80‑D, it may be stated that we have already pointed out hereinabove that sections 80‑C and 80‑CC cannot be equated with section 80‑D as the same is founded on different basis. It may again be observed that section 80‑D is based on the theory of minimum tax. It envisages that every individual should a minimum tax towards the costs of the Government. The object of the minimum tax is to ensure that the tax payers, who receive substantial amounts from exempt sources, pay at least some tax on their economic incomes of the year. This is achieved by reducing or disallowing certain itemised deductions. We may again observe that a large number of assessees though generally earn profits but on account of various tax concessions including tax holidays, depreciation allowance, under Schedule II and deduction allowed under the various provisions of Ordinance, show loss instead of any net profit, with the result that they do not contribute any income tax towards the public exchequer. The levy of minimum tax has been adopted in some other countries of the world including U.S.A., Israil, France, Columbia and Thailand besides India. In United States, under section 56(a) a tax equal to 15 per cent of the amount, by which sum of the items of tax preference exceeds the greater of (ill 100,000 (b) (c) etc. is levied.
41. We may observe that during the course of arguments, the question arose, as to whether in view of non‑obstante clause in section 80‑D, as assessee can carry forward loss under section 35 of the Ordinance from year to year. Mr. Ilyas Khan, the learned Counsel for the Income Tax Department, has orally as well as in his written submission answered the above query in the affirmative. It appears to be correct legal position. It may be stated that obstante clause in section 80‑D is for the purpose of liability to pay minimum tax of half per cent., on the annual turnover. This will exclude any provision of the Ordinance which may be inconsistent with it. But the same does not exclude the application of other provisions of the Ordinance which are not inconsistent with section 80‑D. There seems to be no conflict between above section 80‑D and section 35 of the Ordinance, and hence the same remains available to assessees. To claim business loss or to carry forward the same under section 35 of the Ordinance from year to year, it is affected by the above levy of half per cent. On the annual turn over under section 80‑D as was submitted by the learned counsel for the Income Tax Department, Mr. Ilyas Khan, orally as well as in his written submission."
42. We may again point out that the N.T.R.C., which mostly comprised the representative of business community representing various trades associations, in its report of December, 1986, quoted hereinabove in para. 17, highlighted the corruption obtaining in Government and Semi Government Departments and so also to dishonest tendency on the part of the tax payers to evade the payment of lawful taxes by using unfair means. In such a scenario, the Legislature is bound to adopt modern and progressive approach with the object to eliminate leakage of public revenues and to generate revenue which may be used for running of State and welfare of its people. The imposition of minimum tax under section 80‑D is designed and intended to achieve the above objectives. The rate of half per cent of minimum tax adopted under section. 80‑D, seems to be on the basis of minimum late of tax suggested by Experts Enhancement Committee. In our view, the above provision falls within the legislative competence under Entry 47 read with Entry 5? '
30. Finally, the Supreme Court of Pakistan held in paragraph 57 as order:---
"The upshot of the above discussion is that no exception can be taken to the impugned sections 80‑C, 80‑CC and 80‑D of the Ordinance as they do not suffer from any Constitutional infirmity and, therefore, the above appeals hay a no merits and are liable to be dismissed. However, we may clarify the following points which were argued before us :‑
(i)That assessees who are covered by the notification mentioned in Schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992), are entitled to the protections in terms thereof as per paras. 52 to 54 hereinabove. They may approach the Income Tax Department:
(ii)That assessees who fulfil the conditions of Circular ~No. 3, dated 18‑3‑1996 for excluding the amount of excise duty and sales tax while computing turn overs for the purpose of section 80‑D, shall also be entitled to it benefits in respect of pending cases as per written undertaking dated 9‑4‑1997 filed by the Central Board of Revenue before this Court referred to hereinabove in para. 41.
(iii) That the provisions of section 35 and other provisions of the Ordinance which are not inconsistent with section 80‑D continue to apply even to the cases covered by the latter provision as discussed hereinabove in para. 41.
(iv)That there is no conflict between subsection (4) and subsection (5) of section 80‑C as the same are to operate terms of para. 55 hereinabove.
(v) ..''
31. The case‑law discussed, considered and evaluated by the Supreme Court of Pakistan is exhaustive on the subject. Entries 42 and 45 of Schedule Third of the Azad Jammu and Kashmir Interim Constitution Act, 1974 are exactly the same as that of entries 47 and 52 of Schedule Fourth Part I of the Pakistan Constitution. The Supreme Court of Pakistan has upheld the validity of the provisions of sections 80‑C, 80‑CC and 80‑D inserted in the Income Tax Ordinance 1979. We find ourselves in respectful agreement with the view of the Supreme Court. We thus accordingly hold that provisions of section 80‑D are not ultra vires the constitutional provisions. We also hold that there is no discrimination made through the impugned provision of law. It is further held that these provisions, in no way, impose any restriction on the business or status of the petitioners as businessmen. The imposition of taxes through the aforesaid provision inserted in the Income Tax Ordinance is lawful. The tax levied through these provisions is not interest‑ribba, therefore, there is no violation of the Constitutional provisions.
32. The arguments of the learned Counsel that if, at all, section 80‑D is applicable, it will apply from Assessment Year 1992‑93 in the case of "Ghazi Ghee Mills" has no substance. The statutory assessment years starts from 1st day of July and ends with 30th day of June of the next year. The tax has been imposed with reference to the assessment year and not the accounting year.
33. The contention of the learned counsel that the provisions are ambiguous and should be resolved in favour of the petitioners, is baseless. On our consideration of the matter, we have found that there is no ambiguity in the law. The tax has been imposed on the turn over basis at the rate of rupees 0.50 per cent. It has been levied in cases of companies and registered firms. The argument, therefore, is repelled.
34. Another argument of the learned Counsel that through the impugned provisions for the adaptation of law, the amendment to be made in Pakistan, have been also adopted. According to the learned Counsel, this provision has the effect of transferring the legislative powers from the AJ&K Council to the Legislative Authority in Pakistan. We are of the view that the laws are enacted in Pakistan after sufficient exercise on a particular subject. There is no bar to the adaptation of such law in Azad Kashmir. If and when the AJ&K Council feels that any provision of law made in Pakistan should not be, made applicable in Azad Kashmir, the Council has the authority to amend the same. The authority of legislation, thus, does not stand abdicated. The question of abdication or transfer will arise only in the case the AJ&K Council is not left with any power to make necessary amendments which is not the case under consideration. The argument is, thus, repelled.
35. It was also argued that the provisions of the Income Tax Ordinance, 1979 are subject to the provisions of section 6 of the provisions of Protection of Performs Act, 1992 of Pakistan. The two fold arguments were addressed; firstly, that the similar legislation was effected in Azad Kashmir in 1994 and secondly, that even if the Act of the AJ&K Assembly passed in 1994, was not there, the Income Tax Ordinance as in force in Pakistan has been adopted. So, according to the learned counsel, if the provisions of Income Tax Act embodied in sections 80‑C, 80‑CC and 80‑D were subject to the provisions of section 6 of Protection of Economic Reforms Act, 1992, the same position will be enforced in Azad Kashmir. We have considered this aspect. The Income Tax Ordinance and the Protection of Economic Reforms Act, 1992 are the two independent laws enacted by the Legislature in Pakistan. The provisions of section 80‑D have become subject to the provisions of section 6 of the Act which came into being latter. Thus, section 80‑D will yield to the provisions of section 6 of latter law. In Azad Kashmir, the Reform Act has not been made applicable; therefore, the provisions of section 80‑D are not subject to any restriction, whatsoever. The exemption protected through the law enacted in 1992, will not remain effective in Azad Kashmir on the strength of the Reforms Act, 1992, as this Act has not been adopted in Azad Kashmir by the AJ&K Council.
36. The last point to be determined is whether the provisions of the impugned law, are repugnant to the teaching of Islam or not. The reasons advanced are as under :‑
(a)Nothing can be deemed in Qur'an and Sunnah, factually which is not so. (It is deception; fraud; lie; Cheating; Falsification; Injustice; Snatching of rights/property of the petitioners, through ' Zoolum' .
(b)(i)Withdrawal of Statutory Commitment/Promise of exemption, already allowed under section 14 read with various clauses of, second schedule of Income Tax Ordinance, 1979. Snatching of other vested rights permissible under the Income Tax Ordinance, 1979 is violative of direct mandate of Qur' an and Sunnah ' Ifa‑e‑Ehad' .
(ii)Enforcement and levy of turn over tax, (on exempted units) under section 80‑D in Azad Jammu and Kashmir, on the basis of Finance Act 1991 of Pakistan is unconstitutional, un‑Islamic and without lawful authority for:‑‑‑
(a)It is against the AJ&K Council Adaptation Act, 1979, read with section 6 of Economic Reforms Act, 1992, enforced in Pakistan, read with Act X of 1994 of the AJK wherein Economic Reforms Act, 1992 of Pakistan also stand adopted. There is also no denial regarding this in the relevant written statement.
(b)Enforcement of section 80‑D of the Income Tax Ordinance 1979 (in case enjoying Tax holidays) is prohibited in Qur'an and Sunnah.
(c)Assessment orders of Income Tax exempted Industrial units (petitioners at Serial Nos. 2 to 6, 6‑A, 6‑B, 7 to 11, 15 to 17), are attached as an admission by the Respondent that these units qualify for Income Tax Exemption under section 14 read with second Schedule of the Income Ordinance, 1979. "
37. Almost all the points have been already covered in the earlier part of this judgment, which relates to the provisions of the Constitution and the exemption granted to the Industrial Units. .
38. In so far as the violation of Islamic provisions is concerned, it was argued that money collected as a turn over of business becomes the property of an individual and cannot‑ be snatched away through the imposition of taxes. Even in Islam, the imposition of taxes has a background. Zakat, Ushar and Jizya are the various forms of taxes. Zakat is not realized only on new income of the individuals rather it is levied on the entire belongings of an individual even if there is no income. The tax on the turnover of a business is, thus, of lesser gravity than that of Zakat. Jizya is realized from non- Muslims, for defence services rendered by the State. In the present day world, the State is managing various affairs and also provides different services to the people in the shape of defence, health, education and so many Bother developments for, the benefit of the citizens. All this requires a huge sum of money which has to be collected from the people. Without taxes, it is not possible for a Government to defend the country and to provide other services and facilities or perform certain functions for the welfare and well being of the people. Thus, the taxes have to be levied for different purposes in different shapes on different classes of persons. The question of classification has been discussed in detail in the judgment delivered by the Supreme Court and justified. The Islamic Shariah does not prohibit the collection of taxes from any particular class of persons in the Islamic Society. The categorization of the people for the purpose of realizing the tax is not against the Injunctions of Islam. The learned Counsel for the petitioner had argued that realization of this type of tax is fraud, lie, deception, cheating, falsification, injustice. and snatching of the property of the petitioner through ' Zulam' . The various references made by the learned Counsel to the books on Islamic Jurisprudence, do not support this contention.
39. The other points raised by the learned Counsel for supporting the arguments in relation to these points have been already discussed in the earlier part of this judgment.
40. The learned Counsel for the respondents referred to the judgment of the Shariat Court titled "Fazalur Rehman Bin Muhammad v. Federation of Pakistan and others" (PLD 1992 FSC 329). It has been observed in paragraphs 16 and 17 as under:‑‑‑
Again, at pages 353 and 358, it. was observed:‑‑‑
Lastly, at page 360 the Court held as under:‑
41. From the abovequoted portions of the judgment it is very much clear that the levy of taxes for the just and righteous needs of the people, is allowed in Islam. A number of citations have been quoted by the Shariat Court in this judgment from the books on Islamic Sharia.
42. In view of the aforesaid position, it is held that provisions of section 80‑D and similar other provisions of the Income Tax Ordinance are not against the teaching of Islam.
43. The Writ Petitions Nos. 10 of 1993, 95 of 1996, 99 of 1994, 102 of 1994, 1 of 1997, 2 of 1997, 1 of 1995, 11 of 1994 and 96 of 1994, (9 in number), were ripe for arguments whereas petitions Nos. 77 to 82 of 1991, 15 and 16 of 1992 and 36 of 1993, 37 of 1993 and 41 of 1993, (11 in number), were also ripe but the applications for amendment had been made in these petitions. Objections had also been received from the non -petitioners. The view we‑have taken in these writ petitions, the applications made for amendment, are rejected. The points involved in these petitions are of identical nature to those in other petitions, as such all these petitions were heard together and are being disposed of through this single judgment.
44. In Petitions Nos.56 of 1992 and 38 of 1993, apart from legal grounds, taken up in other petitions, it was contended that the sale proceeds of tickets for air journey by the petitioners in two different assessment years, has been taken to be the turn over by the Income Tax Authorities. According to the petitioners, the sale proceeds could not be treated as turn over, rather according to the Petition No.56 of 1992 the amount of Rs.1,37,41,331.47 received as commission could be taken up to be the income and was liable to tax and not the amount of Rs.11,48,11,050 which was the total sale proceeds. Similarly, in Petition No.38 of 1993, it was stated that for the assessment year 1992‑93, the commission received was Rs.1,94,22,599.97. This could be treated as the income and not the entire amount of the tickets. According to the petitioners, the mount of the sale proceeds is transferred by the petitioners to the Air‑Lines and is no way a profit or income of the petitioners. The P.I.A. who is principal of the petitioners, is receiving the amount of the sale proceeds. According to this petition, the amount of Rs.16,69,47,200 was the total of the sale proceeds out of which Rs.14,75,24,600.03 was received by the P.I.A. In these petitions, the points agitated, mostly included the law points urged in other petitions. The prayer clauses in both the petitions are as under:‑‑‑
WRIT PETITION NO. 56 OF 1992.
"It is prayed that this Honourable Court may be pleased to strike down and declare, the provisions of section 80‑D of Income Tax Ordinance, 1979, as ultra vires the Constitution and resultant assessment and demand of Rs.6,19,979 on account of Turn Over Tax, as illegal, without legal authority and without legal effect. Pending disposal of the writ petition, the respondents may be restrained to recover the impugned Turn Over Tax. Any other appropriate remedy for which the petitioner is found entitled by this Hon'ble Court may also please be granted."
WRIT PETITION N0.38 OF 1993.
"It is prayed that this Honourable Court may be pleased to strike down and declare, the provisions of section 80‑D of Income Tax Ordinance, 1979, as ultra vires the Constitution and resultant assessment and demand of Rs.8,34,736 on account of Turn Over Tax, as illegal, without legal authority and without legal effect. Pending disposal of the writ petition, the respondents may be restrained to recover the impugned Turn Over Tax. Any other appropriate remedy for which the petitioner is found entitled by this Hon'ble Court may also please be granted."
A perusal of the prayer clauses show that the Court was requested to declare the demand notice for the tax as illegal and ultra vires on the ground of Constitutional position of the provisions of section 80‑D and not other grounds. Therefore, these petitions are also being decided alongwith other petitions, involving the similar ground as to the vires of the relevant statute.
In respect of Writ Petitions Nos.56 of 1992 and 38 of 1993 we, however, observed that the total amount of sale proceeds of tickets cannot be treated as turn over for the purpose of section 80‑D of the Income Tax Ordinance, because the travelling agency receives only the commission on the sale proceeds of the tickets and not the money which goes to the Air- Lines. The Income Tax Authorities may consider this aspect.
46. Writ Petitions Nos.20, 21, 22, 41, 42, and 43 of 1997 were at the stage of preliminary argument but the points canvassed in these petitions, are the same which are urged in other petitions, namely, the vires of the provisions embodied in section 80‑D of the Income Tax Ordinance. The main grievance relates to the legislation. Therefore, these are also being disposed of through this single judgment.
47. As upshot of the above discussion, Writ Petitions Nos.20, 21, 22, 41, 42 and 43 1997 are dismissed in limine whereas all other writ petitions are dismissed on merits. However, keeping in view the complicated questions involved in these petitions, we pass no order as to the costs.
M.B.A./136/AJ&K Petitions dismissed.