GUARANTEE ENGINEERS (PVT.) LTD. VS FEDERATION OF ISLAMIC REPUBLIC OF PAKISTAN, 2000 PTD-LAHORE-HIGH-COURT-LAHORE 2441 (2000)

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

----S. 50(4)---Contract Act (IX of 1872), S.2(f)---Finance Act (I of 1995)-- Constitution of Pakistan (1973), Arts. 199, 2A, 3, 4 & 25---Constitutional petition---Deduction of tax at source---Tax on payment to assessee on execution of contract was deducted at enhanced rate of 5 % as fixed by Finance Act, 1995 instead of 3 % prevailing rate at the time of execution of contract ---Assessee contended that imposition of modified tax must be levied to new contracts and not on the existing old contracts same being violative of Arts.2A, 3, 4 & 25 of the Constitution of Pakistan (1973)---Validity-- Contracts between the parties showed that assessee was supposed to pay income-tax in accordance with the prevailing law, therefore, assessee was estopped to agitate the matter on the principle of approbate and reprobate as principle of reciprocal promises was not attracted---Constitutional petition having no merit was dismissed by High Court.

Elahi Bakhsh Cotton's case PLD 1997 SC 582; Ghulam Rasool's case PLD 1971 SC 376; The Chandpur Mills Ltd. v. The District Magistrate, Tippera and others PLD 1958 SC 267; Messrs Momin Motors Co. v. The Regional Transport Authority, Dacca and others PLD 1962 SC 108; Muhammad Insar and others v. Administrator, Town. Committee, Kabirwala and 4 others 1999 YLR 950; Multi National's case PLD 1995 SC 432; Fauji Foundation's case PLD 1983 SC 457; Salauddin's case PLD 1991 SC 546 and Messrs Haider Automobile Ltd. v. Pakistan PLD 1969 SC 623 ref.

(b) Interpretation of statutes---

---- Court should save the laws instead of declaring them ultra vires.

Multi National's case PLD 1995 SC 432 and Fauji Foundation's case PLD 1983 SC 457 rel.

(c) Interpretation of Constitution---

---- Constitution should be read as organic whole.

(d) Interpretation of statutes---

---- Legislature cannot make retrospective penal laws.

(e) Interpretation of statutes---

----- Any law including taxation law may be made by the Legislature with retrospective effect under the Constitution.

Salauddin's case PLD 1991 SC 546 and Haider Automobile Ltd. v. Pakistan PLD 1969 SC 623 rel.

Nisar A. Mujahid for Appellant.

Shafqat Chohan for Respondent.

Date of hearing: 4th April, 2000.

JUDGMENT

The brief facts out of which the present writ petition arises are that the petitioner is conducting; the construction work of various projects with Pakistan Automic Energy Commission at Kundian Nuclear Complex, Chashma Barrage Colony, District Mianvrali. The petitioner completed the lot of work till 12-3--1995. The petitioner was paying income-tax at source under section 50(4) of the Income-tax Ordinance, 1979 at the rate of 3 percent. Subsequently, the respondents have enhanced deduction' of the income tax to the tune of 5 n on the basis of the provisions of the Finance Act, 1995-96. ,

2. The learned counsel of the petitioner submits that action of the respondents is in violation of section 2(f) of the Contract Act, 1872 as the petitioner has accepted the works from respondent No.2 as a contract which is binding between the parties on the well-known principle of Reciprocal Promises. He further submits that petitioner has completed lot of work before the promulgation of Finance Act, 1995-96, therefore, retrospective deduction by the respondents from the petitioner qua income-tax at source is ultra vires of Me fundamental requirement of the contract. He further submits that nobody is allowed to amend the contract unilaterally. The imposition of the modified tax must be levied to the new contracts and of existing old contracts be exempted from deduction of 5%. He summed up his arguments that action of the respondents is in violation of Article 2A, Articles 3, 4 and 25 of the Constitution. .

3. The learned counsel of the respondents submits that action of the respondents is in accordance with law. He further submits that there is no classification in the provisions of the Finance Act, 1995-96 therefore, there is no violation of Article 25 of the Constitution. Similarly, there is no violation of Article .2A and Articles 3 and 4 of the Constitution.. He further submits that similar controversy was raised regarding vires of section 80-C of the Income Tax Ordinance, 1979 in Elahi Bakhsh Cotton's case and the Supreme Court repelled all these contentions in Elahi Bakhsh Cotton's case PLD 1997 SC 582. He further submits that petitioner wants enforcement of the contract through Constitutional petition which cannot be resolved in Constitutional jurisdiction. He further submits that Finance Act was enforced prospectively and not retrospectively as is evident from the provisions of the Finance Act.

4. I have given my anxious consideration to the contentions of the learned counsel of the parties and perused the record myself. It is better and appropriate to reproduce clause 54 of the Contract Act to resolve the controversy between the parties:

54.---(1) The contractor or any of his sub-contractors shall be responsible for the payment of octroi charges royalties rent fees customs and excise duties sales taxes on goods materials plant required for the purpose of or in connection with the works all income-tax super-tax and other taxes on income arising out of the contract and the rates and prices stated in the Priced Bill of quantities shall be deemed to cover all such taxes, duties, rent royalties, fees charges and other such imposts.

(2) Deduction of advance income-tax from all payments to the contractor shall be made in accordance with the prevalent Income tax Law of the Government of Pakistan. Such deducted amounts shall be deposited by the employer in the Government Treasury to the account of the contractor. "

Mere reading of sub-clause (2) of clause 54 clearly reveals that petitioner has to pay income-tax in accordance with the prevailing Income-tax Law of the Government of Pakistan, therefore, petitioner is estopped to agitate the A matter before High Court on the well-known principle of approbate and reprobate as per rule laid down by the Hon'ble Supreme Court in Ghulam Rasool's case (PLD 1971 SC 376). The petitioner wants enforcement of contract, through Constitutional jurisdiction which is not permissible as per principle laid down by the Hon'ble Supreme Court in the following judgments:---

PLD 1958 SC 267 (The Chandpur Mills Ltd. v. The District Magistrate, Tippera etc.).

PLD 1962 SC 108 (Messrs Momin Motors Co. v. The Regional Transport Authority, Dacca etc.).

1999 YLR 950 (Muhammad Insar etc. v. Administrator, Town Committee, Kabirwala and 4 others).

The contents of the writ petition as well as contentions of the learned counsel of the petitioner do not reveal that the petitioner has challenged vires of the provisions of the Finance Act, therefore, respondent No.2 is well within his right to deduct the income-tax from the petitioner to the tune of 5 percent. on the basis .of provisions of Finance Act, 1995-1996. It is settled proposition of law that Court should save the laws instead of declaring them ultra vires. I am fortified by the following judgments:---

PLD 1995 SC 432 (Multi National's case):

PLD 1983 SC 457 (Fauji Foundation's case).

The learned counsel of the petitioner does not mention any provision of Finance Act in the contents of the writ petition which was framed by the competent authority which is in violation of Articles-2A, 3 and Article 25 of the Constitution. It is settled proposition that Constitution should be read as organic whole. The Articles of the Constitution do not reveal prohibition that the Pakistani Legislature/Parliament and Provincial Assembly do not possess the right to make retrospective legislation which every sovereign Legislature possesses. The only express limit imposed upon the .power of retrospective legislation is that Legislatures cannot make retrospective penal laws meaning thereby any other law including Taxation Law may, therefore, be made with retrospective effect under, the Constitution. In arriving to this conclusion I am fortified by the leading judgment of the subjection by the Hon'ble Supreme Court in Salauddin's case PLD 1991 SC 546. The aforesaid proposition of law is also supported by the judgment of Hon'ble Supreme Court in M/s. Haider Automobile Ltd. v. Pakistan (PLD 1969 SC 623). In the present case as mentioned above there is no retrospective effect of the Finance Act since the contention was raised by the learned counsel of the petitioner and the contention of the learned counsel of the petitioner has no force on the basis of the aforesaid judgment of the Hon'ble Supreme Court. In view of clause 54(2) of the Contract executed between the petitioner and respondent No.2 principle of Reciprocal Promises is not attracted.

In view of what has been discussed above the writ petition has no merit and the same is dismissed with no order as to costs.

C. M. A. /M. A. K./G-24/LPetition dismissed.