BOARD OF INTERMEDIATE & SECONDARY EDUCATION VS CENTRAL BOARD OF REVENUE
1998 P T D 2012
[Lahore High Court]
Before Mrs. Fakhar-un-Nisa Khokhar, J
BOARD OF INTERMEDIATE & SECONDARY EDUCATION
versus
CENTRAL BOARD OF REVENUE and others
Writ Petition No.4135 of 1981, decided on 22/04/1998.
(a) Income-tax Act (XI of 1922)---
----Ss.50 & 48---Constitution of Pakistan (1973), Art.199---Constitutional petition--- Maintainability--- Deduction of income-tax ---Limitation---Assessee, a statutory body was exempted from deduction of income-tax on Government securities---Any action of deduction of tax taken by the Income-tax, Authorities was not only arbitrary but also without lawful authority, justification and jurisdiction---Provisions of Ss.50 & 48, Income-tax Act. 1922 would not be applicable to the assessee's case---Constitutional petition was maintainable in circumstances.
Government Securities purchased by the Statutory Board was exempted from the deduction of income-tax. Any action taken by the Income-tax Authorities was not only arbitrary but also without lawful authority justification and jurisdiction. When the assessee was not liable to pay the income-tax then the same was not governed by law to avail the remedies. The order on its face was void order and made without lawful authority. The provision of section 50 and the provision of section 48 of the Income-tax Act on their bare reading explain that they relate to a person who is liable to pay tax and he has paid wrongly and incorrectly a tax not due from him or he has paid a tax in excess of what was required from him. It does not apply to one who is exempted from payment of income-tax. Therefore, it was incumbent upon the Assessing Authority to see and apply conscious mind to the facts that they had wrongly deducted the income-tax on the securities belonging to the assessee which were, admittedly, exempted from payment of income-tax. When an order is void and made without lawful authority High Court has the jurisdiction to deal with the matters in order to determine the legal rights of the parties. In the instant case, admittedly, the assessee on coming to know about the illegal deduction had filed numerous reminders and appeal before the Authorities and the limitation of four years as envisaged in section 50 and section 48 of the Income Tax Act was, obviously, not applicable to the assessee's case. Therefore, it was incumbent upon the Authorities to refund the income-tax on Securities illegally deducted by them. The question that writ petition was suffering from laches because the assessee had availed a remedy before the Central Board of Revenue, instead of availing the remedy before the Income Tax Appellate Tribunal, was not convincing. The assessee was not liable to pay income-tax, therefore, was not governed by the provisions of Income Tax Act.
(b) Constitution of Pakistan (1973)---
----Art.199---Constitutional jurisdiction of High Court---Scope---When any Authority guided and governed by law exceeds jurisdiction and interferes in any person's right by passing a void order, High Court in the exercise of extraordinary jurisdiction can determine the rights of such party against a void order and Constitutional jurisdiction is available to such party.
(c) Constitution of Pakistan (1973)---
----Art.199---Constitutional jurisdiction of High Court---Scope---When an order is void and made without lawful Authority, High Court has the jurisdiction to deal with the matter in order to determine legal rights of the parties.
Shahid Waheed for Petitioner.
Zahid Pervaiz for Respondent.
Date of hearing: 22nd April, 1998.
JUDGMENT
The petitioner being a Corporate Body purchased Government Securities (Pak Loans 1983-84) which were to be matured in 1983-84. The grievance of the petitioner is that the State Bank of Pakistan deducted Rs.2,250 and Rs.4,318.20 in 1965 and 1969 respectively as income-tax from the half-yearly interest on these securities. The petitioner after coming to know about the said deduction filed two applications before the Income Tax Officer on 20-8-1974 contending that the said deduction is not provided by law. Hence, the same is illegal, as the Board is exempted from payment of income-tax on all the investments made by the Board in various Government Loans vide Certificate No.7, dated 15-2-1965 issued by the National Grindlays Bank Ltd., The Mall Lahore, that the income-tax erroneously deducted by the State Bank of Pakistan, Lahore stands refundable to the Board and that accordingly it was requested that the refund of Rs.2,250 may please be made to the Board as early as possible. A reminder of the same was given to the State Bank of Pakistan by the Assistant Secretary, Board on 4-8-1976 about the decision of the applications. Another reminder dated 14-9-1974 was issued to the Income Tax Officer and third reminder on 2-10-1974, fourth reminder on 29-10-1974, fifth reminder on 12-11-1974 and the sixth reminder on 18-12-1974. On the advice of the Income Tax Officer an application signed by the Secretary, Board of Intermediate and Secondary Education was sent to the Income Tax Officer for the refund of the said amount 31-12-1974. On 7-4-1975 two separate reminders were also sent to the Income Tax Officer. The Income Tax Officer did not accept the position and dismissed the application on 12-4-1975 with the opinion that the claim made on 20-8-1974 is barred by time and cannot be issued in-view of the provisions of section 50 of the Income Tax Act.
2. Repeatedly the .petitioner on 24-4-1975 sent another application before the Income Tax Officer requesting that the Board is exempted from income-tax and Section 50 of the Income Tax Act is not applicable to his case and afterwards ninth reminder was sent to the concerned Income 'Tax Officer. Another Exemption Certificate was issued by the State Bank of Pakistan to the Board on 30-8-1975: Last reminder was sent on 9-6-1980 and on 16-8-1980 again an application for the refund of illegal deduction was filed before the Commissioner Income Tax, Lahore but the same was dismissed vide letter dated 12-10-1980 by a Special Assistant to Commissioner of Income Tax, Zone-B, Lahore. Subsequently regular appeal was filed before the Commissioner which was dismissed on 15-11-1980. Thereupon an appeal was filed by the petitioner before the Central Board of Revenue which was dismissed on 15-3-1981 by the second Secretary of the Board of respondent No.3. That instant writ petition is filed to assail the orders of the respondents being passed without lawful authority and without jurisdiction. ,
3. Learned counsel for the petitioner has further argued that a question of law is involved in the present case, whether the period of limitation as provided under section 50 of the Income Tax Act is applicable to the petitioner's case or not, as the petitioner is admittedly exempted from payment of income tax. The Income Tax Officer has wrongly assumed jurisdiction to deduct the said income-tax which was not permitted by law. It was illegally and arbitrarily deducted by them from the Government Securities. Hence the order of deduction is void ab initio and against a void order limitation does not run. Time is not 'essential nor it is an essence because the limitation does not run against a void order and an illegal deduction. He further submitted that the provision under section 50 of the Income Tax Act does not apply to the petitioner's case. The pre-conditions of the provision of section 50 of the Income Tax Act are that one is liable to pay income-tax or has paid income-tax incorrectly or has paid in excess. The language of section 50 of the Income Tax Act runs as follows:
"No claim to any refund of income-tax (or super-tax) under this chapter shall be allowed, unless it is made within four years from the last date of the financial year commencing next date after the expiry of the previous year in which the income arose, accrued or was received or was deemed to have arisen. "
Learned counsel for the petitioner further submitted the section 50 of the Income Tax Act is wrongly interpreted in cases of levy of income-tax on exempted securities for the purpose of limitation and that where the original order is void the question of limitation does not arise, thus the orders passed by all the respondents are based on misapplication of law and therefore, these are liable to be set aside and a direction be issued to the respondents to refund the income-tax illegally deducted on the Government Securities purchased by the petitioner. He relied on Singer Sewing Machine Company v. The Commissioner of Income Tax, Karachi and others (1982 PTD 274), Syed Nazir Hassan v. Settlement Commissioner and another (PLJ 1974 Lah. 598) and The Punjab Province v. Federation of Pakistan (PLD 1956 FC 72).
4. Learned counsel for the respondents has submitted that the instant writ petition is not maintainable as it suffers from laches, because the statutory remedies were available to the petitioner which were not exhausted by Board The Board "I could have move to the Income Tax Appellate Tribunal against the impugned orders but the Board moved wrongly before the Central Board of Revenue where no appeal lies under the provisions of the Income Tax Act. He relied on Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to the Government of Pakistan in the Ministry of Finance, Islamabad and 5 others (1993 SCMR 1798), Wealth Tax Officer and another v. Shaukat Fazal and 4 others (1993 SCMR 1810) and The Commissioner Income Tax, Karachi and 2 others v. M/s. N.V. Philip's Gloeilampenfabriaken, Karachi (1993 PTD 865) in support of his contention, that the petitioner cannot switch over to the extraordinary jurisdiction without availing the remedies available to him under the law. He submitted that the petitioner applied for the refund of the securities for the years 1965 to 1974 and in 1980 and it is not necessary that against a void order the limitation does not start, against a void order the limitation does start. He relied on Azad Government of the State of Jammu and Kashmir through its Chief Secretary and others v. Haji Sumandar Khan and others 1995 MLD 1350 (Supreme Court AJ&K) and, this writ petition can be dismissed on point of limitation.
5. I have heard the learned counsel for the parties and have perused the record.
6. The instant writ petition has been admitted to regular hearing, therefore, the question of alternative remedy is not available to the respondents. Admittedly, the Board Securities are exempted from the deduction of income-tax. Any action taken by the Income Tax Authorities was not only arbitrary but also without lawful authority, justification and jurisdiction. When the petitioner is not liable to pay the income then the Board is not governed by law to avail the remedies. The order on its face is a void order and made without lawful authority. The provision of section 50 and the provision of section 48 of the Income Tax Act on its bare reading explain that it relates to a person who is liable to pay tax and he has paid wrongly and incorrectly a tax not due from him or he has paid a tax in excess of what was required from him. It does not apply to one who is exempted from payment of income-tax. Therefore, it was incumbent upon the respondents to see and apply conscious mind to the facts that they had wrongly deducted the income-tax on the securities belonging to the petitioner which were admittedly exempted from payment of income tax. Even the Assistant Secretary to Secretary of Finance is also requesting the Income Tax Authorities to act in accordance with the law but they remained abdurate and were bent' upon dismissing the applications made to them time and again for refund of the illegal deduction of income-tax. When an order is void and made without lawful authority this Court has the jurisdiction to deal with the matters in order to determine the legal rights of the parties. In the instant case admittedly the petitioner on coming to know about the illegal deduction had filed numerous reminders and appeal before the respondents and the limitation of four years as envisaged in section 50 and section 48 of the income Tax Act was obviously not applicable to the petitioner's case. Therefore, it was incumbent upon the respondents to refund the income-tax on securities illegally deducted by them. The question that writ petition is suffering from laches because the petitioner had availed a remedy before the Central Board of Revenue, Islamabad, instead of availing the remedy before the Income Tax Appellate Tribunal is not convincing to me. The petitioner was not liable to pay income-tax, therefore, was 'not governed by the provisions of Income Tax Act. The Board was making hectic efforts but all the respondents were misapplying their mind holding that the claim made by the petitioner is time-barred which was not time-barred as their original action of illegal deduction of income-tax, from tax exempted security, was void ab initio, and arbitrary in nature, was not sustainable in law. Where any authority guided and governed by law exceeds jurisdiction and interferes in any person's right by passing a void order, this Court in the exercise of extraordinary jurisdiction can determine the rights of such party against a void order and writ jurisdiction is available to such party.
6. Therefore, I accept this writ petition, set aside the orders passed by the respondents, and direct the respondents to refund the illegal deduction of income-tax of Rs.2,250 and Rs.4,318.20 to the petitioner within a month of receipt of this judgment.
7. No order as to costs.
M.B.A./B-33/L ?????????????????????????????????????????????????????????????????????????????????? Petition accepted.