MESSRS SPINTEX LIMITED VS INCOME-TAX OFFICER, GOVERNMENT OF AZAD JAMMU AND KASHMIR, MIRPUR CIRCLE, MIRPUR, 1998 PTD-SUPREME-COURT-AZAD-KASHMIR 2567 (1998)

May 20, 1998 SUPREME COURT AZAD KASHMIR 1998 PTD 2567

1998 PTD-SUPREME-COURT-AZAD-KASHMIR 2567

MESSRS SPINTEX LIMITED VS INCOME-TAX OFFICER, GOVERNMENT OF AZAD JAMMU AND KASHMIR, MIRPUR CIRCLE, MIRPUR

1998 P T D 2567

[Supreme Court (AJ&K)]

Present: Sardar Said Muhammad Khan, C. J.,

Basharat Ahmad Shaikh and Muhammad Yunus Surakhvi, JJ

Messrs SPINTEX LIMITED and others

versus

INCOME-TAX OFFICER, GOVERNMENT OF AZAD JAMMU

AND KASHMIR, MIRPUR CIRCLE, MIRPUR and others

Civil Appeals Nos.' 81 to 106 of 1997, decided on 20/05/1998.

(On appeal from the judgment of the High Court, dated 16-9-1997 in Writ PetitionsNos.99 of 1994, 1 of 1995, 115 of 1994, 39 of 1993, 102 of 1994, 96 of 1994, 81 of 1991,79 of 1991, 37 of 1993, 56 of 1992, 38 of 1993, 77 of 1991, 95 of 1994, 80 of 1991, 78 of1991, 16 of 1992, 15 of 1992, 1 and 2, of 1997, 82 of 1991,10 and 36 of 1993, 20, 21 and 22 of 1997).

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

----S. 80-D---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974)), Third Sched., Entry 42---Minimum tax on income of certain companies and registered firms---Validity---Held. "income-tax" is not only leviable in the conventional manner i.e. by working out net income, but can also be levied on the basis of gross receipts, expenditures etc. which are new species of income-tax, namely presumptive tax and minimum tax-- Imposition of tax on turnover is, therefore, not outside the scope of framework of income-tax law---Imposition of tax under S.80-D, Income Tax Ordinance, 1979 being "tax on income other than agriculture" objection that such tax, not being tax on income, is ultra vires the Entry. 42, Third Sched., of Azad Jammu and Kashmir Interim Constitution Act, 1974 loses ground.

M/s. Elahi Cotton Mills Limited and others v. Federation of Pakistan PLD 1997 SC 582 fol.

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

----S. 80-D---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974), Fundamental Right 15---Equality of State Subjects---Provisions of S.80-D, Income Tax Ordinance, 1979 imposing tax on resident companies and registered firms and leaving out non-resident companies and registered firms as well as individuals is not discriminatory.

(c) Azad Jammu and Kashmir Finance (Amendment) Act, 1979---

----S.4---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974), Third Sched., Council Legislative List---Income Tax Ordinance (XXXI of 1979), S.80-D---Adaptation of Income Tax Ordinance, 1979---Validity-- Delegation of Legislative powers---Principles---Automatic legislation of future law ---Validity--Azad Jammu and Kashmir Council while enacting S.4, Azad Jammu and Kashmir Finance Act, 1979 totally abdicated its legislative powers---No law can be enacted which provides for automatic legislation of a future law framed by another Legislature---Section 80-D, Income Tax Ordinance, 1979, therefore was not validly enforced in Azad Jammu and Kashmir and imposition of tax under S.80-D, Income Tax Ordinance, 1979 was without lawful authority and of no legal effect.

Legislation by reference is accepted form of legislation to which no valid exception can be taken, because when a law is referentially enacted the provision of the adapted law are before the legislative body in a concrete shape and members of the legislative body know what they are enacting. With a conscious mental exercise, the law- makers decided that those provisions shall become law in the territory within their realm. However, if it is laid down in law that a future law shall stand enforced, the Legislature enacts a law which has not even been seen by it and in such a situation it may be validly stated that the legislative body has become a rubber stamp in fact, worse because if something is rubber stamped it is in existence unlike the situation in which adaptation is made of a law which is not in existence. The Constitution of Azad Jammu and Kashmir, like any other Constitution, does not contemplate that the members of the Legislative Assembly or the Azad Jammu and Kashmir Council will be free to transfer their power of legislation to any other Legislature and leave it out to the wisdom of another set of law-makers to make laws for Azad Jammu and Kashmir.

If something is prescribed to be done in a particular way it must be done in that way or not at all but this principle is violated in case of automatic legislation. According to the scheme of the Constitution Act the Azad Jammu and Kashmir is entrusted with law-making. The method of making a law is that a Bill is moved in the Council and is passed by the minority of the members of the Council. It is then sent for authentication for the Chairman of the Council and upon such authentication it becomes law. If a blanket provision is made by the Azad Jammu and Kashmir Council that all laws enacted in future shall become part of the statute book of the Azad Jammu and Kashmir Council the members of the Council shall have no function to perform. It will be anomalous that law will come into force when it is passed by the Parliament of Pakistan rather than on its authentication by the Chairman of the Council after a Bill has been passed by the Council. Thus, various provisions of the Azad Jammu and Kashmir Interim Constitution will become redundant in such a situation.

In a democratic country legislative bodies comprise of elected representatives of the people. They are elected to the Legislative Assembly with a mandate to enforce their manifesto in order to serve the cause of the welfare of the people. Members of the Legislative Assembly perform their legislative functions in accordance with the mandate of the people and make, laws keeping in view the peculiar circumstances. An elected Legislature must perform the function for which it has been elected. It is against the scheme of the Constitutional instrument that the Legislature may leave it to another Legislature to act for it.

So far as the Azad Jammu and Kashmir Council is concerned it has a peculiar composition. This legislative body has been created by the Azad Jammu and Kashmir Interim Constitution Act but is not comprised only of the State Subjects as is the case of Legislative Assembly of Azad Jammu and Kashmir. It is headed by the Prime Minister of Pakistan who is also its Chairman.

The composition of the Azad Jammu and Kashmir Council shows that full weight has been given to the Parliament of Pakistan. The presence of the Prime Minister of Pakistan and Federal Ministers in the Council ensures that no legislation can be made without the active participation of the Government of Pakistan. If the Azad Jammu and Kashmir Council legislates that future laws framed by the Parliament of Pakistan shall automatically stand enforced in Azad Jammu and Kashmir the relevant provisions relating to the Azad Jammu and Kashmir Council will be rendered as a surplusage.

The Azad Jammu and Kashmir Council while enacting section 4 of the Azad Jammu and Kashmir Finance Act, 1979 totally abdicated its legislative powers. Power to make law in respect of the Council Legislative List enmerated in the Third Schedule of the Azad Jammu and Kashmir Interim Constitution Act was vested in the Azad Jammu and Kashmir Council but the Council passed a law that all laws relating to income-tax passed by the Pakistan Parliament shall stand adapted in Azad Jammu and Kashmir. There is no provision in the Constitution Act which tray warrant such a situation and the power to legislate on the Council subjects is exclusive and is not transferable to any other legislative body.

No law can be enacted which provides for automatic legislation of a future law framed by another Legislature.

Section 80-D of the income Tax Ordinance was not validly enforced in Azad Jammu and Kashmir.

Imposition of tax under section 80-D of Income Tax Ordinance was without lawful Authority and of no legal effect.

B. Shama Rao v. Union Territory of Pondicherry AIR 1967 SC 1480 and AIR (38),1951 SC 332 distinguished.

Messers Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670; Sobho Gyanchandani v. Crown PLD 1952 FC 29 and Chapter 3 under the heading Delegation of Legislative Powers ref.

(d) Legislation---

--- Delegated legislation---Principles---Enactment of a law providing for automatic legislation of a future law framed by another legislation-- Sustainability.

Delegation of Legislative Powers, Chap. 3 ref.

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

----S. 80-D---Azad Jammu and Kashmir Interim Constitution Act (VIII of 1974), Third Sched.---Azad Jammu and Kashmir Finance (Amendment) Act 1979, S.4---Automatic legislation---Provisions of S.80-D, Income Tax Ordinance, 1979 [as adapted in Azad Jammu and Kashmir] having been adapted by Azad Jammu and Kashmir Council as automatic legislation of a future law framed by another Legislature was declared to have been adapted without lawful authority and of no legal effect and would be deemed to have not come into force in Azad Jammu and Kashmir.

Delegation of Legislative Powers, Chap. 3 ref.

(f) Legislation---

---- Automatic legislation---Adaptation of a future legislation framed by another Legislature---Validity.

(g) Legislation---

---- Automatic legislation---Categories---Principles.

(h) Legislation---

---- Delegated legislation---Classifications---Prohibitions---Principles.

More and more, with a social system steadily becoming increasingly complex, the Legislature has been obliged, in order to legislate effectively, efficiently and expeditiously, to delegate some of its functions, not purely legislative in character, to other agencies, particularly to administrative officials and boards. Most prominent among the powers, thus, delegated have been the powers to ascertain facts, and the power to promulgate rules and regulations. Many of the other delegated power are to promulgate rules and regulations. Many of the other delegated powers, upon analysis, fall within one of these two major or basic classifications.

So far, however, as the delegation of any power to an executive official or administrative Board is concerned, the Legislature must declare the policy of the law and fix the legal principles which are to control in given cases and must provide a standard to guide the official or the Board empowered to execute the law. This standard must not be too indefinite or general. It may be laid down in broad and general terms. It is sufficient if the Legislature will lay down "an intelligible principle" to guide the executive or administrative official, or goes "as far as was reasonably practicable under the circumstances existing, or if the rule laid down was" reasonable and in the interest of the public interest. From these typical criterions, is apparent that the Courts exercise considerable liberty towards upholding legislative delegations, if a standard is established. Such delegations are not subject to the objection that legislative powers have been unlawfully delegated.

What is prohibited by the Legislature is the delegation of its powers to make a law but would not cover authority exercised under and in pursuance of the law itself to another agency in regard to the provision of details when by the very nature these are incapable of being laid down by the Legislature itself.

It is left open to the Legislature to delegate powers relating to the enforcement of the Act, or its application to particular area if certain conditions prevail therein. Such delegation, if necessary conditions are fulfilled, does not amount to abdication of legislative powers.

(i) Constitution---

Proposition of automatic enforcement of future laws is not applicable to Constitutional provisions---Principles.

The proposition about automatic enforcement of future laws is not applicable to Constitutional provisions because a Constitution is supreme law which stands on entirely different footing. Automatic legislation of future laws is invalid because it offends against Constitutional provisions but if Constitution itself makes a similar provision no exception can be taken to it. Ordinary laws are found invalid because of their infringement of some Constitutional provision but a Constitution, being itself supreme, cannot suffer from such defeat.

Ch. Muhammad Afzal, Advocate for all Appellants except Spintex Limited.

Syed Zahid Hussain, Advocate for Spintex Limited.

Abdul Majid Mallick and Raja Muhammad Ilyas Khan, Advocates for all Respondents.

Dates of hearing: 19th and 20th February, 1998.

JUDGMENT

BASHARAT AHMAD SHAIKH, J. ---In all these twenty-six appeals, filed by nine appellants, the validity of section 80-D of the (Pakistan) Income Tax Ordinance, 1979, as applicable to Azad Jammu and Kashmir, has been challenged. The appeals have been filed by nine limited companies which are engaged in production of various items at their respective mills situated in the districts of Mirpur and Bhimber. The appellants initially challenged the validity of the aforementioned provisions of law by filing writ petitions in Azad Jammu and Kashmir High Court which has dismissed them. They were granted leave to appeal.

Section 80-D was inserted in the (Pakistan) Income Tax Ordinance, 1979 through Finance Act, 1991 enacted by the Pakistan Parliament and was made effective from assessment year 1991-92. Some more words were inserted in the said section by Finance Act, 1992 but it was provided that the words so inserted would be deemed to have always been so inserted. Section 80-D introduced a new tax which in common parlance is now known as the "turn over tax". The section begins with non obstante clause due to which it overrides all other provisions of the Income Tax Ordinance and other laws for the time being in force. It lays down, in short, that where no income-tax is payable or paid by a resident company or a registered firm or a tax payable or paid by it is less than one-half per cent. of the turn over amount, the turn over shall be deemed to be income and tax thereon shall be charged in the manner specified in subsection (2) of section 80-D. It will be useful to reproduce section 80-D, which will also be referred to in this judgment as the impugned section: --

"80-D. Minimum tax on income of certain companies and registered firms.---(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 turn over from all sources, the aggregate of the declared turn over shall be deemed to be the income of the said company or a registered firm and tax thereon shall be charged in the manner specified in subsection (2).

[Explanation. ---For the removal of doubt, it is declared that the expressions' 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, profits or gains or set off of loss earlier years, exemption from tax, credits or rebates in tax, and allowances and deduction (including depreciation) admissible under any provision or 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 turn over; and

(b)an amount, where the tax payable or paid, is less than one-half per cent. of the said turn over, equal to the difference between the tax payable or paid and the amount calculated in accordance with clause (a).

Explanation. ---For the removal of doubt it is declared that "turn over" means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from the sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts."

Simultaneously with coming into force of section 80-D in Pakistan, it became a part of the Statute Book of Azad Jammu and Kashmir by operation of law. Income-tax is one of the subjects included in the Azad Jammu and Kashmir Council Legislative List forming Third Schedule of Azad Jammu and Kashmir Interim Constitution Act, 1974, and the said Council enjoys the exclusive power to legislate on this subject. The Council, adapting the method of referential legislation, adapted (Pakistan) Income Tax Ordinance, 1979. While doing so, the Azad Jammu and Kashmir Council went a step forward and made a provision that future amendments in the Income Tax Ordinance, 1979 shall also come into force in Azad Jammu and Kashmir. By virtue of this provision section 80-D came into force in Azad Jammu and Kashmir without fresh legislative effort.

Writ petitions were filed in the High Court to challenge the validity of section 80-D at various times. Initially writ petitions were filed in December, 1991 but new demands were created during pendency of the writ petitions in succeeding years which had to be challenged by the writ petitioners as and when the fresh liability was incurred. The main grounds urged on behalf of the appellants are as follows:--

(1)That the imposition of tax on turn over is outside the scope and framework of income-tax law.

(2)That Item No.42 of the Third Schedule of the Azad Jammu and Kashmir Interim Constitution Act empowers the Azad Jammu and Kashmir Council to legislate and impose taxes on income while' the turn over tax is not income but is sale.

(3)That turn over tax is discriminatory as it is only recoverable from the registered companies and firms resident in Azad Jammu and Kashmir, which have been selected for taxation on the basis of non- intelligible differentia, alternatively on the basis of arbitrary pick and choose and is thus violative of Fundamental Right No. 15. Equality of State Subjects which lays down that all State Subjects are equal before law and are entitled to equal protection of law.

(4)That the adoption of section 80-D is un-Islamic being against the injunctions of Qur'an and Sunnah, particularly due to the fact that exemption from income-tax granted to five; out of nine, appellants has been taken away in violation of an incentive given to them after it has been acted upon.

That the turn over tax is 'Ribah' which, being against the injunctions of Islam, cannot be imposed in Azad Jammu and Kashmir.

Except Spintex Limited, all other appellants also raised an important question of law that the provision of law that future amendments in Income Tax Ordinance, 1979 as in force in Pakistan would stand extended to Azad Jammu end Kashmir is ultra vires the Constitution as it amounts to abdication of legislative powers as well as self effacement which is not permissible under the Azad Jammu and Kashmir Interim Constitution Act.

Spintex Limited, Khawaja Textile Mills Limited, Kashmir Polytex Limited, Amin Spinning Mills Limited and Ghazi Vegetable Ghee and Oil Mills Limited raised an additional law point of importance that their units stood exempted from payment of income-tax, therefore, turn over tax is in any case not payable by them. It is an admitted position that the units mentioned above had been exempted from payment of income-tax in light of clause 118-C of the Second Schedule appended with the Income Tax Ordinance, 1979, Clause 118-C owes its existence to section 14 of the said Ordinance. It grants the aforementioned exemption to all industrial undertakings set up between the 1st day of December. 1990, and the 30th day of June, 1995, for a period of eight years beginning from the month in which the undertaking is set up or commercial production is commenced, whichever is the later. This exemption was granted by the Government of Pakistan through Notification NO.SR0.1283(1)/90 issued on 13th of December, 1990 in exercise of powers conferred by subsection (2) of section 14 of the Income Tax Ordinance, 1979. Subsection (2) which was omitted by Finance Act, 1994 gave the power to the Federal Government to amend the Second Schedule from time to by notification in the Official Gazette.

The learned counsel for the appellants took the stand that the High Court fell in error in not giving effect to the provisions of (Pakistan) Protection of Economic Reforms Act, 1992 (Act XII of 1992).

We have heard learned counsel from both sides at some length. However, it may be pointed out that on behalf of Spintex Limited point of abdication of legislative powers has not been urged.

We first take up the point urged in support of the appeals that the imposition of tax on turn over is outside the scope and framework of income -tax law. The High Court has rejected this argument by placing reliance on the judgment of the Supreme Court of Pakistan in the case reported as M/s. Elahi Cotton Mills Limited and others v. Federation of Pakistan (PLD 1997 SC 582]. This judgment has decided the controversy about the validity of section 80-D of the Income Tax Ordinance which provision of law was challenged by a large number of aggrieved companies and registered firms, resident in Pakistan.

The Supreme Court of Pakistan has found that the impugned section is valid and the tax imposed by it is in fact tax on income. After a detailed analysis of the case-law from various countries the Supreme Court of Pakistan has held that the word 'income' is of elastic import and while understanding the scope and amplitude of the expression 'income' any meaning which fails to accord with the plentide of the concept of 'income' 'in all its width and comprehensiveness should be avoided. The conclusion reached by the august Court may be reproduced:---

"The allocation of the subject to the lists is not by way of scientific or logical definition 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 presumptive 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."

It was also observed as follows: ---

"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 pay a minimum tax towards the cost 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, etc., under Schedule II and deductions allowed under the various provisions of the 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 (i) $ 100.000 (b) (c) etc., is levied."

Finally, the following conclusion was reached:--

"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 have no merits and are liable to be dismissed. However, we may clarify the following points which were urged before us: --

(i) ............................................

(ii)..............................................

(iii)..............................................

(iv)..............................................

(v) .............................................."

As already noted, in the judgment under appeal the High Court has followed the aforementioned judgment of the Supreme Court of Pakistan. The learned counsel for the appellants has not been able to show that the conclusion reached by the Supreme Court of Pakistan is not correct. We respectfully follow the dictum of Supreme Court of Pakistan, which is based on internationally accepted interpretation, that income-tax is not only leviable in the conventional manner i.e. by working out net income, but it can also be levied on the basis of gross receipts, expenditures etc which are new species of income-tax, namely presumptive tax and minimum tax. We therefore, uphold the view taken by the High Court that imposition of tax in turnover is not outside the scope and framework of income-tax law.

The view expressed above also disposes of the objection that section 80-D is ultra vires the legislative powers of the Council Item No.42 of the Third Schedule of Azad Jammu and Kashmir Interim Constitution Act empowers the Azad Jammu and Kashmir Council to legislate on the subject "Tax on income other than agricultural income". Since tax imposed by section 80-D has been construed as tax on income the objection that turn over tax, not being tax on income, is ultra vires the said entry loses ground.

Now we take up the argument that section 80-D is discriminatory and violative of Fundamental Right No.15 Equality of State Subjects. The contention is that section 80-D only imposes tax on companies and registered firms resident in Azad Jammu and Kashmir and have left all other persons who, but for the exception created by section 80-D, would have been affected by the turn over tax. This plea was also advanced and repelled in Elahi Cotton Mills' case. In repelling this objection the Supreme Court of Pakistan has laid down the following principles: --

(i)Law should be saved rather than be destroyed and Courts must lean in favour of upholding the constitutionality of legislation unless ex facie it violates a Constitutional provisions.

(ii)In view of wide variety of diverse economic criteria forming basis of a fiscal policy Legislative enjoys wide latitude in the matter of selecting a person, subject-matter, events etc. for taxation. But with all these latitudes certain irreducible desiderata of equality has to govern classification for differential treatment in taxation law as well.

(iii)The State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates of taxation if it does no reasonably.

(iv)"Reasonable" in context of "reasonable clarification has been unanimously upheld by superior Courts, as a relative generic term difficult of adequate definition. It, inter alia, connotes agreeable to reason, rational, sensible, just or proper.

We say so with great respect that the Supreme Court of Pakistan took the correct view in not finding anything discriminatory in imposing tax on resident companies and registered firms and leaving out non-resident companies and registered firms as well as other individuals. Therefore, we follow the dictum.

Now we take up they ground that the provision of law that future amendments in (Pakistan) Income Tax Ordinance, 1979 as well as all rules, notifications etc' shall automatically come into force in Azad Jammu and Kashmir is invalid. The relevant provision is contained in section 4 of the Azad Jammu and Kashmir Council Finance (Amendment) Act, 1979, This section was enacted in 1979 and was then amended on 20th June, 1982. As amended it reads as follows:----

Adaptation of the Income Tax Ordinance, 1979---The Income Tax Ordinance, 1979 (XXX of 1979), and all rules made and notifications issued thereunder as in force in Pakistan from time to time, shall, as far as practicable, be in force in Azad Jammu and i Kashmir subject to the following modifications, namely:--

(i)reference in the said Act to 'Pakistan', 'Federal Government' and 'Central Board of Revenue' shall respectively be construed to be reference to Azad Jammu and Kashmir, the Azad Jammu and Kashmir Council and the Board of Revenue established by the said Council;

(ii) ......................................

(iii)......................................

The parties are agreed on the legal position that words as in force in Pakistan from time to time" purport to lay down that whenever there is a modification in the. Income Tax Ordinance in Pakistan it will also ipso facto come into force in Azad Jammu and Kashmir. This is the provision under which section 80-D came into force in Azad Jammu and Kashmir with effect from the assessment year 1991-92. Ch. Muhammad Afzal, Advocate, who represents all the appellants before this Court. except Spintex Limited, challenged the portion of section 4 reproduced above which provides for automatic adaptation of future legislation in Pakistan as being unconstitutional.

It was vehemently contended by the learned counsel that power to legislate on any of the subjects enumerated is Second Schedule is vested in the Azad Jammu and Kashmir Council by subsection (2) of section 31 of the Azad Jammu and Kashmir Interim Constitution Act which lays down that said Council shall have exclusive power to make laws with respect to any matter in the Council Legislative List. The learned counsel submitted that when power of legislation is vested by a Constitutional instrument on a law making body that power is to be exercised by that body. He submitted that it is an accepted principle that a law-making body can make laws by referential legislation meaning thereby that it can be legislated that a law which is already in existence shall stand adapted, but a legislative body cannot make a law that all, future amendments of that law shall also stand adapted. Ch Muhammad Afzal vehemently contended that if a law-making body does so it would amount to abdication of its legislative powers which can also be called as self-effacement. The learned counsel relied on two judgments reported as B. Shama Rao v. Union Territory of Pondicherry (AIR 1967 SC 1480) and Special Reference No.1 of 1951 (in respect of Article 143, Constitution of India and Delhi Laws Act) reported as (AIR (38) 1951 SC 332).

In B. Shama Rao's case, it was held by majority opinion that if a Legislature enacts that a subsequent law enacted by another Legislature shall come into force within the realm of the first Legislature, it amounts to total abdication of legislative functions and the statute in question would be void and still-born. The provision under consideration of the Indian Supreme '4Court was enacted by the Pondicherry Legislature which adapted the Madras General Sales Tax Act but it was laid down that the Madras Act would be enforced in Pondicherry by a notification issued by the Pondicherry Government and the Madras Act as in force in Madras on the date of notification. When the rondicherry Government issued the notification making the Madras Act applicable to Pondicherry the Madras Act had been amended. An objection was raised that the amendment carried out in Madras Act was not in existence when the Pondicherry Legislature passed the adaptation Act with the result that the law enacted in the intervening period was brought into force in Pondicherry without application pf mind of the Pondicherry Legislature. It was contended that a subsequent law could not be adapted. The argument. was accepted and it was held that it was legislative abdication and self-effacement which was contrary to the instrument which constituted the Legislature. In the majority judgment paragraphs 8, 9 and 10 are relevant and may be usefully reproduced:--

"8.The question then is whether it, extending the Madras Act in the manner to the extent it did under section 2(1) of the Principal Act the Pondicherry Legislature abdicated its legislative powers -in favour of the Madras Legislature. It is manifest that the Assembly refused to perform its legislative function entrusted under the Act constituting it. It may be that a mere refusal may not amount to abdication if the Legislature instead of going through the full formality of legislation applies its mind to an existing statute enacted by another Legislature for another jurisdiction, adopts such an Act and enacts to extend it to the territory under its jurisdiction. In doing so, it may perhaps be said that it has laid down a policy to extend such an Act and directs the executive to apply and implement such an Act. But when it not only adopts such an Art but also provides that the Act applicable to its territory shall be the Act amended in future by the other Legislature, there is nothing for it to predicate what the amended Act would be. Such a case would be clearly one of non-application of mind and one of refusal to discharge the function entrusted to it by the Instrument constituting it. It is difficult to see how such a case is not one of abdication or effacement in favour of another Legislature at least in regard to that particular matter.

9.But Mr. Setalvad contended that the validity of such legislation has been accepted in Delhi Laws Act's case, 1951 SCR 747: (AIR 1851 SC 332) (supra) and particularly in the matter of heading No.4 as summarised by Bose, J. In Raj Narain Singh's case, (1955) 1 SCR 290; (AIR 1954 SC 569) (supra). In respect of that heading the majority conclusion no doubt was that authorisation in favour of the executive to adopt laws passed by another Legislature or Legislatures including future laws would not be invalid. So far as that conclusion goes Mr. Setalvad is right. But as already stated, in arriving at that conclusion each learned Judge adopted a different reasoning. Whereas Patanjali Sastri and Das, JJ. accepted the contention that the plenary legislative power includes power of delegation and held that since such a power means that the Legislature can make laws in the manner it liked if it delegates that power short of an abdication there can be no objection. On the other hand, Fazl Ali, J. upheld the laws on the ground that they contained a complete and precise policy and the legislation being, thus, conditional the question of excessive delegation did not arise. Mukherjee, J. held that abdication need not be total but can be partial and even in respect of a particular matter and if so the impugned legislation would be bad. Bose, J. expressed in frank language his displeasure at such legislation but accepted its validity on the ground of practice recognised ever since Burah's case (1879) 5 Ind. App. 178 (PC) (supra) and thought that that practice was accepted by the Constitution-makers and incorporated in the concept of legislative function. There 'was thus no unanimity as regards the principles upon which those laws were upheld. All of them, however, appear to agree on one principle, viz., that where there is abdication or effacement the Legislature concerned in truth and in fact Acts contrary to the Instrument which constituted it and the statute in question would be void and still-born.

10.In the presents case it is clear that the Pondicherry Legislature riot only adopted the Madras Act as it stood at the date when it passed in Principal Act but also enacted that if the Madras Legislature were to amend its Act prior to the date when the Pondicherry Government would issue its notification it would be the amended Act which would apply. The Legislature at that stage could not anticipate that the Madras Act would not be amended nor could it predicate what amendment or amendments would be carried out or whether they would be of a sweeping character or whether they would be suitable in Pondicherry. In point of fact the Madras Act was amended and by reason of section 2(i) read with section 1 (2) of the Principal Act it was the amended Act which was brought into operation in Pondicherry. The result was that the Pondicherry Legislature accepted the amended Act though it was not and could not be aware what the provisions of the amended Act would be. There was in these circumstances a total surrender in the matter of sales tax legislation by the Pondicherry Assembly in favour of the Madras Legislature and for that reason we must agree with Mr. Desai that the Act was void or as is often said still 'still born'.

In Special Reference No. l of 1951 the same opinion had earlier been given by the Supreme Court of India as was the dictum laid down in the B. Shama Rao's case. It may be pointed out that the objection raised in respect of the legislation declared void in Shama Rao's case was not as formidable as in the present case. The Pondicherry Legislature provided that the Madras law will be enforced in Pondicherry as it stood on the date on which the notification was to be issued by the Pondicherry Government There was no omnibus provision similar to the one made in the present case in the law made by the Azad Jammu and Kashmir Council that all amendments made in (Pakistan) Income Tax Ordinance, 1979 in future shall stand automatically adapted in Azad Jammu and Kashmir. Thus, it will be seen that the objection in the present case is much more serious than in the Indian case.

We have been able to find some judgments of Supreme Court of Pakistan on this subject. In case titled Messers Sh. Abdur Rahim, Allah Ditta v. Federation of Pakistan and others PLD 1988 SC 670 a notification issued by the Government of Pakistan in exercise of powers conferred by sub section (2) of section 18 of the Customs Act was challenged. inter alia, on the ground that subsection (2) mentioned above which empowered the Federal Government to levy, subject to some conditions, regulatory duty on all or any of the articles specified in the First Schedule of the Customs Act amounted to delegation of legislative powers which was invalid. It was observed as follows: --

"What is prohibited by the Legislature is the delegation of its function to make the law but not the authority exercised under and in pursuance of the law itself to another agency in regard to the provision of details when by the very nature these are incapable of being laid down by the Legislature itself. "

It was laid down in Sobho Gyanchandani v. Crown (PLD 1952 FC 29), Abdur Rashid, CJ., speaking for the Federal Court, held as under:--

" .-- a Legislature cannot delegate its powers of making, modifying, or repealing, any law to an external authority. If it does so, it would be creating a parallel Legislature. The power of extending the duration of an enactment, which would have terminated but for the interference of the external authority, is the exercise of legislative powers by an external authority and is invalid. Extension of the life of an Act is tantamount to re enactment. It is open to the Legislature to delegate powers relating to the enforcement of the Act, or its application to particular areas if certain conditions prevail therein, as that merely amounts to conditional legislation if any Legislature delegated legislative functions to an external authority such delegation would be invalid "

On this point there is elaborate discussion in the celebrated work of Crawford "Interpretation of Laws". In Chapter 3 under the heading "Delegation of Legislative Powers" the following portion succinctly sums up the proposition: ---

"15. In General. ---Inasmuch as the legislative power of the Government is vested exclusively in the Legislature in accordance with the doctrine of the separation of powers.

[11 Am. Juris. 921, 214; Cooley, Const. Limit., Chap. 5, p.224. Also see supra, Chapt. II, Legislative Power, Generally]

the general rule is that the Legislature cannot surrender or abdicate such power.

[State v. Davis, 178 Ark. 153, S.W. (2) 513; Pursley v. Ft. Myers, 87 Fla. 428, .100 So. 366; Oakland State Bank v. Bolin, 141 Kan. 126, 40 Pac. (2) 437; State v. Watkins, 176 La. 837, 147 So 8; Wilder v. Murphy, 56 N.D. 436, 218 N.W. 156; Peterson v. Grayce Oil Co. (Tex.) 37 S.W. (2) 367. See also Panama Ref. v. Ryan, 293 U.S. 388, 79 L. Ed. 446, 55 S Ct. 241; Schechter v. U.S. 295 US 595, 79 L Ed. 1570. 55 S Ct. 837, 97 ALR 9471.

As a result, any attempt to do so, is unconstitutional and void. [ibid].

Nor can this power to make laws be delegated by the Legislature to any other authority

[U.S. v. Shreveport Grain Co., 287 US 77, 77 L.Ed.

175, 53, S.Ct. 42; Sawyer v. U.S., 10 .Fed. (2) 416, U.S. v. D. Santo, 20 Fed. Supp. 254; Pursly v. Ft. Myers, 87 Fla. 428, 100 So.366; State v. Nelson; 36 Indaho 713, 213 Pac. State, 201, Ind. 88, 166 N.E. 270, 67 A.L'.R. 718; Blume v. Crawford Country, 217 Iowa 545, 250, N.W. 733, 92, A.L.R. 757; Ashland Transfer. Co. v. State Tax Comm., 247 Ky. 144, 56 S.W. (2) 691, 87 A.L.R. 534; State v Gauthier, 121 Me. 522, 118 Ad. 380, 26 A.L.R. 652; Williams v. Evans, 139 Minn 32, 165 N.W. 495, 166 N.W. 504; Rowe v. Ray, 120 Ad. 780; Korth v. Protland, 123 Ore 180, 261 Pac. 895, 58, A.L.R. 665; Am Basoball Club v. Pannsylvania, 321 Pa. 311, 167 Ad. 891, 92 A.L.R. 386; Brown v. Humble Oil and Ref. Co. (Tex.) 83 S.W. (2) 935, 99 A.L.R. 1107, reh. Den., 87 S.W. (2) 1069; Thompson v. Smith, 155 Va. 367, 154 S.E. 579, 71 A.L.R. 6041.

Delegatus non potest delegate. A power, however, which is not legislative in character may be delegated.

[Interstate Commerce Comm. v. Goodrish Transit Co., 224 U.S. 194, 56 L. Ed. 729, 32, SCt. 436; Panama Ref. Co. v. Ryan, 293 US 388, 79 L.Ed. 446, Sabre v. Rutland R-. Col, 86 Vt. 347, 85 Ad: 693]. "

We find force in the submission made by Ch. Muhammad Afzal that the Azad Jammu and Kashmir Council while enacting section 4 of the Azad Jammu and Kashmir Finance Act, 1979 totally abdicated its legislative powers. The learned counsel was right in contending that power to make laws in respect of the Council Legislative List enumerated in the Third Schedule of the Azad Jammu and Kashmir Interim Constitution Act was vested in the Azad Jammu and Kashmir Council but the Council passed a law that all laws relating to income-tax passed by the Pakistan Parliament shall stand adapted in Azad Jammu and Kashmir. He contended that there is no provision in the Constitution Act which may warrant such a situation and the power to legislate on the Council subjects is exclusive and is not transferable to any other legislative body.

Legislation by reference is accepted form of legislation to which no valid exception can be taken, because when a law is referentially enacted the provision of the adapted law are before the legislative body in a concrete shape and members of the legislative body know what they are enacting. With a conscious mental exercise the lawmaker decide that those provisions shall become law in the territory within their realm. However, if it is laid down in law that a future law shall stand enforced the Legislature enacts a law which has not even been seen by it and in such a situation it may be validly stated that the legislative body has become a rubber stamp, in fact, worse because if something is rubber stamped it is in existence unlike the situation in which adaptation is made of a law which is not in existence. The Constitution of Azad Jammu and Kashmir, like any other Constitution, does not contemplate that the members of the Legislative Assembly or the Azad Jammu and Kashmir Council will be free to transfer their power of legislation to any other Legislature and leave it out to the wisdom of another set of law-makers to make laws for Azad Jammu and Kashmir.

It is celebrated principle of law that if something is prescribed to be done in a particular way it must be done in that way or not at all but this principle is violated in case of automatic legislation. According to the scheme of the Constitution Act the Azad Jammu and Kashmir Council is entrusted with law-making. The method of making a law is that a Bill is moved in the Council and is passed by the majority of the members of the Council. It is then sent for authentication for the Chairman of the Council and upon such authentication it becomes law. If a blanket provision is made by the Azad Jammu and Kashmir Council that all laws enacted in future shall become part of the statute book of the Azad Jammu and Kashmir Council the members of the Council shall have no function to perform. It will be anomalous that a law will come into force when it is passed by the Parliament of Pakistan rather than on its authentication by the Chairman of the Council after a Bill has been passed by the Council. Thus, various provisions of the Azad Jammu and Kashmir Interim Constitutional will become redundant in such a situation.

In a democratic country legislative bodies comprise of elected representatives of the people. They are elected to the Legislative Assembly with a mandate to enforce their manifesto in order to serve the cause of the welfare of the people. Members of the Legislative Assembly perform their legislative functions in accordance with the mandate of the people and make laws keeping in view the peculiar circumstances. An elected Legislature must perform the function for which it has been elected. It is against the scheme of the Constitution instrument that the Legislature may leave it to another Legislature to Act for it.

(i)The President of Azad Jammu and Kashmir;

(ii)Five members to be nominated by the Prime Minister of Pakistan from time to time from amongst Federal Ministers and members of Parliament;

(iii)Prime Minister of Azad - Jammu and Kashmir or the person nominated by him;

(iv)Six members to be elected by the Azad Jammu and Kashmir Legislative Assembly, and

(v)Federal Minister of State for Kashmir Affairs and Northern Areas (ex officio, member).

The above analysis of the case-law, treatises on law, Azad Jammu and Kashmir Interim Constitution Act and the reasons recorded above, lead to the conclusion that no law can be enacted which provides for automatic legislation of a future law framed by another Legislature and we hold accordingly. It follows that impugned provision of law, namely, section 80-D of the Income Tax Ordinance, being hit by this rule, is declared to have been passed without lawful authority and of no legal effect. It will be deemed that it did not come into force in Azad Jammu and Kashmir.

However that does not exhaust the subject. There are certain other matters which are linked with this subject. One aspect is that automatic legislation is of two categories. The first category is of those laws which are future laws enacted by another Legislature. This is the category which has already been dealt with. The other category consists of future laws which are to be framed by the same Legislature which provides for adaptation of future laws. In this type of legislation provision is made for automatic enforcement of future laws but the law-maker is the same. Such laws are common. For instance certain terms are defined in a statute and, in addition to it, it is provided that other terms and conditions not so defined shall have the same meanings as are contained in another statute for the time being in force. Another example is when a Corporation or Authority is set up under a statute it is generally laid down that employees of the Corporation or Authority shall have the same terms and conditions of service as are applicable from time' to time to the civil servants in the service of the Government. Yet another example may be found when a Special Court or Tribunal is constituted under a statute and it is provided that it shall have powers of a Court set up under the Code of Civil Procedure or a Court set up under the Code of Criminal Procedure. In our view statutes falling in this category do not fall within the mischief of the rule about automatic adaptation laid down because in such cases both the statutes are enacted by the same Legislature and it cannot be said that the legislative powers have been abdicated.

Another aspect is that it is permissible that a statute may delegate some functions to administrative officers and such practice has been upheld by Courts, although subject to certain conditions. Crawford in his book Ph Interpretation of Laws has made the following observation on this point:--

"More and more, with a social system steadily becoming increasingly complex, the Legislature has been obliged, in order to legislate effectively, efficiently and expeditiously, to delegate some of its functions, not purely legislative in character, to other agencies, particularly to administrative officials and boards. Most prominent among the powers, thus, delegated have been the power to ascertain facts, and the power to promulgate rules and regulations. Many of the other delegated powers to promulgate rules and regulations. Many of the other delegated powers, upon analysis, fall within one of these two major or basic classifications.

So far, however, as the delegation of any power to an executive official or administrative board is concerned the Legislature must declare the policy of the law and fix the legal principles which are to control in given cases and must provide a standard to guide the official or the board empowered to execute the law. This standard must not be too indefinite or general. It may be laid down in broad and general terms. It is sufficient if the Legislature will lay down "an intelligible principle" to guide the executive or administrative official, or goes as far as was reasonably practicable under the circumstances existing, or if the rules laid down was' reasonable and in the interest of the public interest. From these typical criterions it is apparent that the Courts exercise considerable liberty toward upholding legislative delegations, if a standard is established. Such delegations are not subject to the objection that legislative powers have been unlawfully delegated."

In this connection we may refer again to the judgment of the Supreme Court of Pakistan in Messrs Sh. Abdul Rahim, Allah Ditta, supra. In that judgment it was held that what is prohibited by the Legislature is the delegation of its powers to make a law but would not cover authority exercised under and in pursuance of the law itself to another agency in regard to the provision of details when by the very nature these are incapable of being laid down by the Legislature itself.

Similarly in Sobho Gyanchandni case, supra, the Federal Court held that it is left open to the Legislature to delegate powers relating to the enforcement of the Act, or its application to particular area if certain conditions prevail therein. There is no occasion for examining the scope of the concept of delegated legislation in this judgment. It only needs to be pointed out that such delegation. If necessary conditions are fulfilled, does not amount to abdication of legislative powers.

It may also be observed that the proposition about automatic enforcement of future laws is not applicable to, Constitutional provisions because a Constitution is supreme law which stands on entirely different footing. Automatic legislation of future laws has been found by superior Courts to be invalid because it offends against Constitutional provisions but if Constitution itself makes a similar provision no exception can be taken to it. Ordinary laws are found invalid because of their infringement of some Constitutional provisions but a Constitution, being itself supreme, cannot suffer from such defect.

After laying down the dictum that section 80-D of the Income Tax Ordinance was not validly enforced in Azad Jammu and Kashmir, we need not discuss some other points raised on behalf of the appellants, for instance, the point that section 80-D was invalid on the ground as -it was against the injunctions of Qur'an and Sunnah due to the fact the exemption from income- tax granted to five of the appellants had been taken away in violation of a solemn undertaking given to them after it had been acted upon. This point and all other points are left open to be decided if and when such an occasion arises.

Therefore all the appeals are accepted and the judgment of the High Court is vacated. Consequently the writ petitions filed by the appellants shall stand accepted. It follows that imposition of tax under section 80-D of Income Tax Ordinance was without lawful authority and of no legal effect. No order as to costs.

M.B.A./287/SC (AJ&K)Appeals accepted.

MESSRS SPINTEX LIMITED VS INCOME-TAX OFFICER, GOVERNMENT OF AZAD JAMMU AND KASHMIR, MIRPUR CIRCLE, MIRPUR, 1998 PTD-SUPREME-COURT-AZAD-KASHMIR 2567 (1998)

JUDGMENT

Requisition against illegal voters MTBA

Comdemn Resolution against attack on Azhar Siddique ASC