I.C.C. TEXTILE LTD. VS FEDERATION OF PAKISTAN
2001 P T D 1557
[Supreme Court of Pakistan]
Present: Iftikhar Muhammad Chaudhry and Mian Muhammad Ajmal, JJ
Messrs I.C.C. TEXTILE LTD. and others
versus
FEDERATION OF PAKISTAN and others
Civil Appeals Nos.1345 to 1356, 1477, 1676 to 1681 of 1999 and 1225 of 2000, decided on 16/03/2001.
(On appeal from order, dated 30‑11‑1998 passed by Lahore High Court, Lahore in Writ Petitions Nos.1637 of 1992, 16491 of 1995, 2511 of 1992, 347 of 1992, 6181 of 1996, order dated 10‑3‑1999 in, Writ Petition No.4131 of 1999, order dated 12‑3‑1999 in Writ Petitions Nos.3847 and 3846 of 1992, order dated 18‑3‑1999 in Writ Petitions Nos.7438 and 7439 of 1995, order dated 28‑10‑1999 in Writ Petition No.20224 of 1999, judgment dated 30‑11‑1998 Writ Petitions Nos. 15933 of 1995, 1352 of 1996, 4153 of 1992, 7515 of 1992, 7516 of 1992, 15059 of 1997 and 7186 of 1996).
(a) Finance Act (XII of 1991)‑‑‑
‑‑‑‑S.12‑‑‑Wealth Tax Act (XV of 1963), Preamble‑‑‑Constitution of Pakistan (1973), Arts. 185(3) 77; 141, 142 & Fourth Sched., Part I, Federal List Entry No.50‑‑‑Corporate Assets Tax, levy of‑‑‑Leave to appeal was granted by Supreme Court to consider, whether a levy known as 'Corporate Assets Tax' imposed vide S.12 of the Finance Act, 1991, by Federal Legislature, could be charged on the basis of gross value of assets inclusive of liabilities, under Entry 50 of the Federal List, Fourth Schedule read with Arts. 77, 141 & 142 of the Constitution; whether the levy of "Corporate Assets Tax, in respect of value of assets held by a Company on a specific date" as envisaged under S.12 of Finance Act, 1991, fell within the legislative competency of Federal Legislature; whether the 'Corporate Assets Tax' could be co‑related to Art.70 of the Constitution and Entry No:50 of the Federal Legislative List was contained in the Fourth Schedule to the Constitution of 1973; whether the 'Value of assets' implied gross value was distinct from and exclusive of, the liabilities of the Company as shown on the balance sheet; whether the levy was discriminatory as well as confiscatory; whether the demand of levy and or imposition of additional tax or imposition of penalty could be made by officer of Wealth Tax under Wealth Tax Act, 1963, in the absence of rules to be framed under S.12 of Finance Act, 1991 and whether the demand of levy and or imposition of additional tax or imposition of penalty could be made by officer of Wealth Tax, under the Wealth Tax Act, 1963, in the absence of conferment of power by Central Board of Revenue as per provision of the Finance Act, 1991 and or the Wealth Tax Act 1963.
(b) Finance Act (XII of 1991)‑‑‑‑
‑‑‑‑S.12‑‑‑Constitution of Pakistan (.1973), Arts. 70(4), 142(a) & Fourth Schedule, Part I, Federal Legislative List Entry No.50‑‑‑Levy of taxes on capital value of assets‑‑‑Legislation regarding such taxes‑‑‑Jurisdiction of Parliament‑‑‑Federal Legislative List and Concurrent Legislative List of the constitution.‑‑‑Scope‑‑‑Entries in Federal Legislative List, under the provisions of Art.142(a) of the Constitution, fall within the exclusive jurisdiction of the Parliament and subjects in the entries mentioned in the Concurrent list are the subjects which fall within the domain of Parliament or the Provincial Assemblies as the case may be‑‑‑Taxes on the capital value of the assets being covered by Entry No.50 of the Federal Legislative List, Part I, Fourth Schedule of the Constitution, Parliament has exclusive power to impose the same.
(c) Finance Act (XII of 1991)‑‑‑‑
‑‑‑‑S.12‑‑‑Constitution of Pakistan (1973), Arts.70(4) & 142(a)‑‑‑Levy of corporate tax on assets, one by the Parliament and the other by the Provincial Assembly‑‑‑Constitutionality‑‑‑ Taxation, one by the Parliament and the other by the Provincial Government on fixed assets is not prohibited.
Haji Muhammad Shafi and others v. Wealth Tax Officer and others 1992 PTD 726 rel.
(d) Wealth Tax Act (XV of 1963)‑‑‑
‑‑‑‑S.3‑‑‑Constitution of Pakistan (1973), Fourth Schedule, Legislative List Part I, Entry No.50‑‑‑Levy of tax on assets‑‑‑"Net value of assets" and "capital value"‑‑‑Distinction‑‑‑Entry No.50 of the Legislative List Part I, Fourth Schedule of the Constitution and Wealth Tax Act, 1963, both provide levy of tax on the assets irrespective of the fact whether it is net value of the tax or not and the only difference is that under S.3 of Wealth Tax Act, 1963, a mechanism has been provided for calculating and imposing the tax on the assets, therefore, it cannot be considered that the net value of assets is not part of the capital value.
M/s. Ellahi Cotton Mills Limited and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 6 others PLD 1997 SC 528; Haji Muhammad Shafi and others v. Wealth Tax Officer PLD 1989 Kar. 15; PLD 1989 Karachi 15; Union of India v. Harbhajan Singh Dhillon (1972) 83 ITR 582; Saeedir Chandra v. Wealth Tax Officer AIR 1969 SC 59; Bamasee Dass v. Wealth Tax Officer AIR 1965 SC 1387 and Assistant Commissioner, Madras v. PKC Company AIR 1970 SC 169 ref.
(e) Words and phrases‑‑‑
‑‑‑‑'Assets'‑‑‑Connotation‑‑‑Word 'assets' is generally used in collective plural, and in commercial law it denotes the aggregate of available property, stock in trade, cash etc., belonging to a merchant or mercantile company‑‑?Asset is also used to signify the means which a person or bank or a corporation has as compared with his/its liabilities that is, its identity is separate and is not inclusive of debt or liabilities but is only comparable to them and in this sense the word 'assets' has been used to denote whole of the property.
Black's Law Dictionary ref.
(f) Finance Act (XII of 1991)‑‑‑
‑‑‑‑S.12‑‑‑Constitution of Pakistan (1973), Art. 142 & Fourth Schedule, Legislative List Part I, Entry No. 50‑‑‑Corporate Assets Tax, levy of ‑‑‑Vires of S.12 of Finance Act, 1991‑‑‑Manner prescribed under S.12(12)(d) of Finance Act, 1991, whether contrary to Entry No.50 of Part I of Fourth Schedule of the Constitution‑‑‑Corporate Assets Tax was a tax ‑ on capital value of assets as per Entry No.50 of Legislative List and merely in view of the manner prescribed under S.12(12(d) of .Finance Act, 1991, for calculating and imposing tax, the same could not be held contrary to the Entry or unconstitutional nor its constitutionality could be objected to for that reason‑‑‑Legislature had power to promulgate S.12 of Finance Act, 1991 under Art. 142 of the Constitution to levy Corporate Assets Tax on the value of the assets held by a company on a specified date‑‑‑Gross assets of a company as per S.12(12)(d) of the Act were liable to tax inclusive of the liabilities of the company as per Entry No.50 of the Federal Legislative List Part I, Fourth Schedule of Constitution‑‑‑Corporate Assets Tax, therefore was rightly imposed under the provisions of S. 12 of Finance Act, 1991.
AIR 1962 SC 552; AIR 1969 SC 378; 1992 SCMR 563; B.P. Biscuits Factory Limited v. Wealth Tax Officer and another 1996 SCMR 1470; Sanaullah Woollen Mills Ltd. and another v. Monopoly Control Authority PLD 1987 SC 202 and PLD 1989 Karachi 15 ref.
(g) Finance Act (XII of 1991)‑‑‑
‑‑‑‑S..12‑‑‑Corporate Assets Tax‑‑‑Levy of Corporate Assets Tax subject to value of assets‑‑‑Reasonable differentia between the categories of assessees‑‑?Scope‑‑‑Where the tax had been levied upon the assessees subject to the value of the assets owned by them, the same had provided reasonable differentia between categories of assessees and there was‑no uniform policy to charge a fixed tax, without caring to the value of the assets‑‑‑Provision of S.12 of Finance Act, 1991, was neither discriminatory nor was based on illegal differentia.
?
AIR 1961 SC 552 and AIR 1969 SC 378 ref.
(h) Words and phrases‑‑‑
‑‑‑‑"Held"‑‑‑Meaning.
Ballentine's Law Dictionary ref.
(i) Finance Act (XII of 1991)‑‑‑
‑‑‑‑S.12‑‑‑Transfer of Property Act (IV of 1882), Ss.60 & 67‑‑‑Corporate Assets Tax, levy of‑‑‑Mortgage of property‑‑‑Recovery of Corporate Assets Tax on mortgaged property‑‑‑Where the property has been mortgaged without transferring its proprietary rights, the same would be deemed to be held by the original owner, and therefore, for all legal purposes its owner would. be liable to make payment of Corporate Assets Tax.
AIR 1945 Lah. 264; AIR 1952 Patna 469; AIR 1960 SC 1030 and (1997) 83 ITR 582 distinguished.
(j) Wealth Tax Act (XV of 1963)‑‑‑
‑‑‑‑Ss.23, 24, 25 & 35‑‑‑Finance Act (XII of 1991), S.12(13)‑‑‑Corporate Assets Tax, levy of‑‑‑Failure to issue Notification qua framing of Rules‑‑?Contention was that as no Notification had been issued to carry out the purposes of S.12 of Finance Act, 1991, the tax could not be recovered‑‑?Validity‑‑‑Requirement of S.12(13) of Finance Act, 1991, had been substantially complied with view of‑the Circular issued by Central Board of Revenue‑‑‑By means of the Circulars, Wealth ,Tax Officer had been authorized to receive the returns as per S.12(3) of the Finance Act, 1991 and to. deal with the same‑‑‑Such Circulars, besides providing procedure for filing of the returns had also laid down the procedure of filing of appeals and revisions in terms of Ss.23, 24, 25 & 35 of Wealth Tax Act, .1963 as per the requirement of S.12(10) of the Finance Act, 1991.
Muhammad Akram Sheikh, Senior Advocate Supreme Court and Muhammad Ahmad Zaidi, Advocate‑on‑Record for Appellants (in Civil Appeals Nos. 1345 to 1349, 1351 to 1355 of 1999 and 1225 of 2000).
Raja Muhammad Akram, Senior Advocate Supreme Court and Ejaz Muhammad Khan, Advocate‑on‑Record for Appellants (in Civil Appeals Nos. 1350 and 1477 of 1999).
Ziaullah Khan Kiavani, Advocate Supreme Court and Mahmudul Islam, Advocate‑on‑Record (absent) for Appellants (in Civil Appeal Nos. 1676 and 1677 of 1999).
Ch. Ehsan‑ul‑Haq ‑ Bhalli, Advocate Supreme Court (Absent) and Ch. Mehdi Khan Mehtab, Advocate‑on‑Record (Absent) for Appellants in (Civil Appeal No. 1678 of 1999).
Mian Ashiq Hussain, Advocate Supreme Court and Sh. Masood Akhtar, Advocate‑on‑Record (Absent) (in Civil Appeals Nos. 1679 and 1680 of 1999).
Muhammad Islam. Advocate‑on‑Record (Absent) for Appellant (in Civil Appeal No. 1681 of 1999).
Respondents Nos. l and 2 (in all cases): Ex parte.
M. Ilyas Khan, Advocate Supreme Court and Ch. Muhammad Aslam Chatta. Advocate‑on‑Record for Respondent No.3 (in all cases).
Mansoor Ahmad, Dy. A.‑G: on Court's notice in all cases.
Dates of hearing: 6th to 8th December, 2000, 11th and 12th January, 2001,
JUDGMENT.
IFTIKHAR MUHAMMAD CHAUDHARY, J.‑‑‑Instant appeals have been filed by leave of the Court against judgment, dated 30th November, 1998 passed by Lahore High Court in its Constitutional jurisdiction whereby Writ .Petitions filed by the appellants before it were dismissed, therefore, vide order, dated 15th October, 1999 to consider inter alia following points leave was granted:‑‑‑
"(I) Whether a levy known as "Corporate Assets Tax" imposed vide section 12 of the Finance Act, 1991 by the Federal Legislature, could be charged on the basis of gross value of assets inclusive of liabilities, under item 50 of the Fourth Schedule read with Articles 77, 141 and 142 of the Constitution. of Islamic Republic of Pakistan, 1973?
(II) Whether the levy of "Corporate Assets Tax, in respect of value of assets held by a Company on a specified date" as envisaged under section 12 of the Finance Act, 1991 falls within the legislative competency of the Federal Legislature?
(III) Whether the "Corporate Assets Tax" could be co‑related to Article 70 of the Constitution and Entry No.50 of the Federal Legislative List is contained in the Fourth Schedule to the Constitution of 1973?
(IV) Whether the "Value of assets" implied gross value is distinct from and exclusive of the liabilities of the Company as shown on the Balance Sheet?
(V) Whether the levy is discriminatory as well as confiscatory?
(VI) Whether the demand of levy and or imposition of additional tax or imposition of penalty could be made by officer of Wealth Tax, under the Wealth Tay, Act, 1963, in the absence of Rules to be framed under section 12 of the Finance Act, 1991?
(VII) Whether the demand of levy and or imposition of additional tax or ; imposition of penalty could be made by officer of Wealth Tax, under the Wealth Tax Act, ,1963, in the absence of conferment of power by the Central Board of Revenue as per provision of the Finance Act, 1991 and or the Wealth Tax Act, 1963?"
In all the appeals identical questions of interpretation of section 12 of the Finance Act, 1991 is the subject‑matter, therefore, we have proposed to dispose of them by this common judgment.
2. In order to give effect to the 'financial proposals of the Federal Government for fiscal year July, 1991 and to amend certain laws, the Finance Act, 1991 (hereinafter referred to as the "Act") was promulgated with effect from 1st July, 1991. As per its section 12 Corporate Assets Tax was levied on the assets held by a company on the specified date. The section is self‑contained and exhaustive in its formation. Thus its relevant components necessary for attending the point formulated in leave granting order and referred to during arguments by the learned counsel for appellants are reproduced hereinbelow:‑‑
"(12) Corporate Assets Tax.‑‑‑(1) There shall be charged a tax, hereinafter referred to as Corporate Assets Tax, in respect of value of assets held by a company on the specified date, in an amount and in the manner specified hereunder.
(2) A company shall file a return in the prescribed form, accompanied by the balance‑sheet as on the specified date prepared, audited and certified in accordance with the provisions of the Companies Ordinance, 1984 (XLVII of 1984).
(4) The Wealth Tax Officer may, at any time, by notice in writing, require any company, which, in his opinion, is liable to tax under this section, to furnish the return within thirty days from the date of service of such notice.
(5) A Company, which is liable to pay tax under this section, shall pay the tax alongwith the return.
(6)?..
(7) Where the company has, without reasonable cause, failed to furnish, within the time allowed for the purpose, the return under sub?section (2) or subsection (4), the Wealth Tax Officer may impose upon such company a penalty at the rate of one thousand rupees for every day during which the default continues.
(8) Where the company fails to pay tax under subsection (5) or the tax so paid is less than the tax payable under this section, it shall be liable to pay additional tax at the rate of twenty‑four per cent per annum on the amount not paid or the amount by which the tax paid falls short of the tax payable, calculated from the date it was payable to the date it is paid or to the date of an order under, subsection (6), whichever is earlier.
(9) ............
(10) The provisions of sections 23, 24, 25 and 35 of the Wealth Tax Act, 1963 (XV of 1963), shall, so far as may be, apply to an appeal against, or revision or rectification of, an order under this section as they apply to an appeal, revision or rectification under the said Act.
(11) The amount of tax payable under this section shall be as follows:‑‑‑‑
| Amount (a) Where the value of assets is not more than?????????????? Nil ??????????? Rs.50 million. (b) Where the value of assets is more than???????????????????????????????? Rs.500,000 ????? Rs.50 million but not more than Rs.100 ????? million. (c) Where the value of assets is more than???????????????????????????????? Rs.1,000,000 ????? Rs.100 million but not more than Rs.250 ????? million. (d)? Where the value of assets is more than??????????????????????????????? Rs.2,000,000 ?????? Rs.250 million. |
(12)????? In this section,‑‑
(a) "Company" means a company as defined in the Companies Ordinance, 1983 (XLVII of 1984);
(b) "specified date" means the date for which the balance‑sheet is made up, being the last date on which accounts of the company are closed but, not being any date preceding the 30th June, 1991, or following the 30th day of June, 1992;
(c) "tax" includes any penalty or additional tax chargeable under this section;
(d) "value of assets" means value of all assets held by the company as on the specified date but does not include the amount of accumulated losses, if any, as shown in the balance‑sheet as on the specified date; and
(e) "Wealth‑tax Officer" has the same meaning as in the Wealth Tax Act, 1963 (XV of 1963)
(13) The Central Board of Revenue may, by Notification in the Official Gazette, make rules for carrying out the purposes .of this section".
3. Mr. Muhammad Akram Sheikh learned Sr. ASC appeared in Civil Appeals No. 1345 to 1349 and 1355 of 1999 and 1225 of 2000, Raja Muhammad Akram Sr. ASC appeared for appellants in C.A. Nos. 1350 and 1477 of 1999, Mr. Ziaullah Khan Kiayani, ASC appeared in Appeals Nos. 1676 and 1677 of 1999 and Mian Ashiq Hussain, ASC appeared in CA Nos. 1679 and 1680 of 1999. None appeared in Civil Appeals No. 1678 of 1999 and 1681 of 1999, Mr. Mansoor Ahmad Khan, Deputy Attorney General appeared on Court's Notice. Mr. Ilyas Khan ASC appeared for respondent No. 3. However, respondents Nos. 1 and 2 were proceeded ex parte.
4. Mr. Muhammad Akram Sheikh, learned Sr. ASC at the very outset conceded that entries in Federal Legislative List Part I, appended with Fourth Schedule of the Constitution of Islamic Republic of Pakistan (hereinafter referred to as the "Constitution") cannot be made basis to challenge the vires of section 12 of the Act because Parliament had jurisdiction to legislate such laws, therefore, he is not praying for its striking down on this score being unconstitutional but is praying that as it is based on unreasonable classification as well as discriminatory in its nature, therefore, it may be held ineffective. Reference in this behalf was made by him to AIR 1962 SC 552, AIR 1969 SC 378 and 1992 SCMR 563.
5. Mr. Ziaullah Kiani, learned ASC subscribed to the arguments of Mr. Muhammad Akram Sheikh, Sr. ASC to the extent that law makers have powers to impose tax through legislation but it should be in clear terms and free from any ambiguity, because apparently section 12 of the Act is not covered by Entry No.50, Part I Federal Legislative List, Fourth Schedule of the Constitution which speaks in respect of taxes on the capital value of the assets whereas Corporate Tax has been levied on the gross value of the assets including debts of the company etc. He relied on B.P. Biscuits Factory Limited v. Wealth Tax Officer and another (1996 SCMR 1470).
6. Mian Ashiq Hussain, learned ASC contended that section 12 of the Act is not covered under Entry No.50 Part I, Federal Legislative List of Fourth Schedule because no such tax can be imposed on the gross value of assets held by a Company. Moreover phrase used in section 12(12)(d) "value of assets" is 'an ambiguous concept thus for these reasons it is an unconstitutional law. To substantiate his arguments he referred to the definition of the word "true value" from the Black's Law Dictionary as well as the judgment in the case of B. P. Biscuits Factory Limited (supra). Learned counsel stated that the judgment in the case of Haji Muhammad Shafi and others v. Wealth Tax Officer and others (1992 PTD 726) wherein the definition of the expression "capital value of the assets" has been interpreted is not attracted because this judgment was under Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 and in both the laws these expressions have been used in different contexts.
7. On behalf of the respondents Mr. Ilyas Khan learned counsel contended that this Court in the case of M/s. Ellahi Cotton Mills Limited and others v. Federation of Pakistan through Secretary, Ministry of Finance Islamabad and 6 others (PLD 1997 SC 528) while interpreting an entry in the Federal Legislative List has settled that it should be given widest possible meaning and approach should be to save the law rather than destroying it and Court must lean in favour of upholding the constitutionality of a legislation. He further stated that as per the dictum laid down in Ellahi Cotton Mill's case legislature is competent to classify person or properties into different categories subject to different rates of taxes, therefore, for this reason alone a law duly legislated cannot be declared unconstitutional. He also relied on 1992 PTD 726.
8. After hearing both the sides at length we are of the opinion that first of all it would be appropriate to examine the powers of the legislature to ascertain as to whether the Corporate Assets Tax is covered under Entry 50 Part I, Fourth Schedule of Federal Legislative List and it had been rightly imposed on the basis of gross value of the assets inclusive of liabilities. As per Article 142 of the Constitution the Parliament is empowered to promulgate the laws with respect to the matters which have been enumerated in the Federal Legislative List. It may also to be borne in mind that Article 70(4) of the Constitution has provided two lists i.e. the Federal Legislative List and Concurrent Legislative List. So, far entries mentioned in former is concerned its legislation falls within the exclusive jurisdiction of the Parliament as per Article 142(a) of the Constitution and so far as the entries mentioned in latter list are concerned those subjects fall within the domain of Parliament or the Provincial Assemblies w the case may be. Thus, taxes on the capital value of the assets are covered by Entry No.50 of the Federal Legislative List, Part 1, Fourth Schedule and the Parliament had exclusive power to impose the tax. But exception taken by learned counsel Mian Ashiq Hussain, 's that as the Corporate Assets Tax has been levied on the assets of a company like the taxes imposed by Provincial Government on immovable property under West Pakistan Urban Immovable Property Tax Act, 1958 (V of 1958), therefore, it is not covered by Entry No.50 of Federal Legislative List Part I, Fourth Schedule.
We are not inclined to agree with him because under the Act of 1958 no tax is imposed on the assets belonging to corporate body which has been duly incorporated under the Companies Ordinance, 1984 but tax is levied on the immovable properties situated within the boundaries of the urban areas on the annual value of the buildings and lands like other Municipal/local taxes. Whereas vide Entry No.48 of the Federal Legislative List, Part I Fourth Schedule legislation of taxation on corporation is done by the Parliament. In addition to it at a time double taxation one by the ' Parliament and the second by the Provincial Government on fixed assets is not prohibited in view of the judgment of this Court in the case of Haji Muhammad Shafi and others v. Wealth Tax Officer and others (1992 PTD 726). Relevant para reads thus:‑‑
"(5) The next contention is that on the same property the appellant is required to pay tax twice namely wealth tax and tax under the West Pakistan Urban Immovable Property Tax Act. The learned counsel calls it a case of double jeopardy. This expression seems to be inappropriate. At best it can be a case of double taxation. Wealth Tax is a Federal Tax imposed under law whereas West Pakistan Urban Property Tax is a provincial tax imposed on the rental value of the property and not on the value of assets of the assessee. Unless double taxation is prohibited by law it cannot be treated illegal. Reference can be made to M/s. Jain Bros. and others v. Union of India and others, AIR 1970 SC 778 where it was observed as follows:‑‑
"it is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted they cannot be so interpreted as to tax the subject twice over to the same tax (vide Channel, J. in Stevens v. The Durban‑Rodde Poort Gold Mining C. Ltd. (1990) 5 Tax Case 402. The Constitution does not contain any prohibition against double taxation even if it be assumed that such a taxation is involved in the case of a firm and its partners after the amendment of section 23(5y by the Act of 1956. Nor is there any other enactment which interdicts such taxation ...if any, double taxation is involved the legislature itself has in express words, sanctioned it. It is not open to anyone thereafter to involve the general principles that the subject cannot be taxed twice over. "
9. Next important question, which has engaged our attention, is whether section 12 of the Act has been validly enacted or otherwise. In this context reference is to be made to Entry Nos.43 to 53 of the Fourth Schedule which empowers the Federal Legislature, (Parliament), to enact the laws pertaining to taxes on Corporation. A careful recital of subsection (1) of section 12 of the Act indicates that Corporate Assets Tax shall be a tax in respect of value of assets held by a company on the specified date and subsection (2) provides mechanism to ascertain value of assets on the basis of the balance‑sheet as on the specified date prepared, audited and certified in accordance with the provisions of the Companies Ordinance, 1984.
All the learned counsel appearing in the instant cases were of the opinion that the manner of calculating the quantum of Corporate Assets‑ Tax under section 12(12)(d) of the Act is not in consonance with any entry of the Federal Legislative List Part I of Fourth Schedule because according to them the value of assets would be inclusive of accumulated losses as shown in the balance‑sheet as on the specified date. They further stated that their could be a case where losses are more than the profit but even then as per this provision of law corporate tax will be assessed on the gross value of assets, therefore, it may be declared unconstitutional. Whereas learned counsel appearing for the respondents as well as Mr. Mansoor Ahmad Khan, Deputy Attorney General contended that the manner of assessing the tax is covered by Entry No.50 of Federal Legislative List Part I Fourth Schedule of the Constitution, therefore, on the strength of the arguments of appellants' counsel constitutionality of section 12 of the Act cannot be objected to. To substantiate their arguments reliance was placed on Sanaullah Woollen Mills Ltd. and another v. Monopoly Control Authority (PLD 1987 SC 202).
10. It may be noted that as per the scheme of section 12 of the Art it is a one time tax which has been imposed upon the assets of the Corporations duly incorporated under the Companies Ordinance, 1984. Entry No.50 of the Federal Legislative List Part I Fourth Schedule empowers the Parliament to levy taxes on the capital value of assets, therefore, it would be seen whether Corporate Assets Tax can be equated with the Capital Value Assets Tax: The expression "value of the assets" is common under section 12(12)(d) of the Act and Entry, No.50 of Legislative List Part I Fourth Schedule of the Constitution with prefix word "capital". Whereas under section 2(16) of the Wealth Tax Act, 1963, the expression "net wealth" means the amount by which the aggregate value of all the assets computed in accordance with the provisions of this Act wherever located, belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than which are not to be taken into account and debts which are secured on or which have been incurred in relation to any asset in respect of which wealth tax is not payable etc. Under section 12(12)(d) no amount has been given of accumulated losses while determining the value of assets. The constitutionality of Wealth Tax was questioned in the case of Haji Muhammad Shafi and others v. Wealth Tax Officer reported in 1989 (59) Tax~42 as well as PLD 1989 Karachi 15 chiefly on the strength of arguments that the Parliament. is empowered under the Constitution to Legislate laws only in respect of items enumerated in the Federal Legislative List or in the Concurrent Legislative List appended to Fourth Schedule of the Constitution and as the wealth tax is recovered from the petitioner under the provisions of the Act and is calculated on the net wealth as defined under the Act which does not fall under any of the items mentioned in Federal or Concurrent Legislative Lists of the Constitution, as such levy and recovery of wealth tax from the petitioner is beyond the scope of legislative power of the Parliament. It was also contended that expression "capital value of assets" 'used in this entry cannot be equated with the expression "net wealth" as defined under the Wealth Tax Act and as such the imposition and recovery of tax on net wealth is not a tax on the Capital Value of the assets as envisaged by the Constitution, therefore, recovery of tax is liable to be declared without any lawful authority. The proposition was considered in depth with reference to the definition of the words used in both the expressions i.e. "Capital Value of the Assets" and the "net wealth" as well as the import of charging section 3 of the Wealth Tax Act according to which to determine the same deduction of the debts has been allowed, whereas no such facility seems to be available if the tax is to be imposed on the basis of the capital value of the assets as per Entry No.50 of the Federal Legislative List Part I attached with the Fourth Schedule of the Constitution. The learned Division Bench held as follows:‑‑
"We are, therefore, unable to agree with the contention that Because it was not incumbent on the Parliament while legislating in respect of tax under Entry No.50 of Federal Legislative List of Constitution to provide for deduction of debts in ascertaining the capital value of assets and that they did allow such deduction under the Act, therefore, the nature of tax levied under the Act should be held different from the concept of taxation under Entry No.50 of Federal Legislative List of the Constitution: The effect .of allowing deduction of debts in ascertaining the value of assets under the Act has been dealt with at length earlier in this order by us and need not be repeated here again: Suffice it to say that the fact that the legislature had allowed deduction of debts under the Act in? ascertaining the capita: vain, of assets could in no way change the nature of tax which is contemplated under Entry No.50 of the Federal Legislative List of the Constitution".
The above conclusion has been arrived at by the learned Division Bench by following the principle of interpreting of entries in the Legislative List in the widest and most liberal. dynamic, static, pragmatic, pathetic, and elastic manner rather than rigid judicial', approach as now has been adopted by Full Bench comprising of 5 learned Judges of this Court in the case of Messrs Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others (PLD 1997 SC 582).
11. Learned counsel Mr. Muhammad Akram Sheikh contended that learned Division Bench of Sindh High Court in arriving at above conclusion reproduced hereinabove has in fact ignored the majority view of J.M. Shelat, J. in the case of Union of India v. Harbhajan Singh Dhillon (1972 (83) ITR 582). According to him in this jilfment the majority view is against the conclusion. Suffice to say that 1.M. Shelat J. in adopting the view which has been accepted by the Division Bench has also relied upon the cases of Saeedir Chandra v. Wealth Tax Officer (AIR‑1969 SC 59), Barnasee Dass v. Wealth Tax Officer (AIR 1965 SC 1387) and Assistant Commissioner Madras v. PKC Company (AIR 1970 SC 16`?). However, the decision of the Division Bench of Sindh High Court was assailed before this Court in its appellate jurisdiction, which was maintained by three learned Judges in 1992 PTD 726. Therefore, argument so raised by the learned counsel losses its significance. For reference relevant para reads thus:‑‑
"(4) We are in full agreement with the observation made by the learned Judges of the High Court. Item 50 of the Fourth Schedule provides for tax on capital value of the assets not including taxes on capital gain on immovable property. Therefore, tax on capital value of assets can be levied which is not disputed at all. Wealth Tax is one‑of those taxes which intends to subject the assets of taxation. It is nobody's case that the Wealth Tax Act does not charge the assets. The Act has provided a mechanism for imposing and calculating the tax on capital assets. The provision for calculating such tax is provided by the Act. Section 3 denotes which part of the capital value shall be taken into consideration for the purpose of charging wealth tax. It is nobody's case that the net value of assets is not a part of the capital value. The capital value of the assets includes the net value of the assets. The definition of the net wealth under section 2(m) clearly provides that first the aggregate value of all the assets belonging to the assessee has to be taken into consideration. This is the basis, for charging the tax. Now, in order to calculate the tax the aggregate value of liabilities and debts are to be deducted from the aggregate value of assets and the excess so calculated has been termed as 'net wealth' on which tax is calculated at the specified rate. This process of calculating the tax does not exclude the capital value of assets from wealth tax charged under section 3."
In above concluding para most important principle laid down is that under Item 50 of the Legislative List Part I appended with the Fourth Schedule and the Wealth Tax Act both provide levying of tax on the assets not withstanding the fact whether it is net value of the tax or not and only the difference is that under section 3 of the Wealth Tax Act a mechanism has been provided for calculating and imposing the tax on the assets, therefore, for such reasons it cannot be considered that the net value of assets is not part of the capital value.
12. Reference at this stage may also be made to the case of Sanaullah Woollen. Mills Ltd. (PLD 1987 SC 202) which was also relied upon by this Court in Haji Muhammad Shafi's case. In Sanaullah Woollen Mills's case the expression "value of assets' as defined in the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970 came under consideration and this Court while interpreting the expression "value of assets" held; the word "means" has no other significance but that, that the word "assets' has to be given its ordinary meaning and not to be understood as having any extended meaning which the word "includes" conveys. The word "assets" is generally used in collective plural, and in commercial law it denotes the aggregate .of available property, stock in trade, cash etc., belonging to a merchant 'or mercantile company. (Black's Law Dictionary Revised Fourth Edition, page 151). It is also used to signify the means which a person or bank or a corporation has as compared with his/its liabilities that is, its identity is separate and is not inclusive of debts or liabilities but is only comparable to them. It is in this sense that the word "assets" has been used to denote whole of the property. Any other meaning given to it will be against the verbal expression of the legislature, and would defeat the very purpose of the legislation. After having read the ratio decided of both these judgments referred to herein above we feel that there should not be any doubt that the Corporate Assets Tax is tax on the capital value of the assets as per Item No‑50 of the Legislative List and merely in view of the manner prescribed under section 12(12)(d) of the Act for calculating and imposing tax it cannot be held contrary to this entry or unconstitutional nor its constitutionality can be objected to for such reason. It is thus held that legislature had power to promulgate section 12 of the Act under Article 142 of the Constitution to levy Corporate Assets Tax on the value of the assets held by a company on a_ specified date, therefore, the gross assets of the Company as per section 12(12)(d) of the Act are liable to tax inclusive of the liabilities of the company as per Entry No.50 of the Federal Legislative List Part 1 Fourth Schedule of Constitution and there is absolutely no ambiguity of whatsoever nature in imposing the Corporate? Assets Tax. As such the judgment relied upon by Mr. Ziaullah Kiani ASC and Mian Ashiq Hussain ASC in the case of B.P. Biscuits Factory (Supra) has no application on instant case, thus the contention raised in this behalf is also repelled.
13. Mr. Muhammad Akram Sheikh, learned Sr. ASC laid much stress on his . arguments namely that the provisions of section 12 of the Act are unreasonable and based on illegal differentia as it has provided different treatment to the companies which are placed in the similar circumstances whereas constitutionally they are entitled to be dealt with equally, therefore, it is required to be declared ultra vires to the Constitution. Reliance was placed by him on AIR 1961 SC 552 and AIR 1969 SC 378.
14. Learned counsel for respondent No.3 as well as learned Deputy Attorney General contended that section 12 of the Act has been promulgated by the Parliament to exercise of its powers conferred on it under Article 142 of the Constitution and in fiscal statutes legislation is not bound to ensure reasonable classification of the companies liable to pay tax nor such law can be struck down being discriminatory as per the judgment in the case of M/s. Ellahi Cotton Mills (Supra).
15. We have considered the arguments of both the sides and have also gone through the judgments cited by them. Undoubtedly in both the citations reported in AIR 1961 SC 552 and AIR 1969 SC 378 the provisions of sections 4, 5‑A and 7 of Travancore‑Cochin Land Tax Act, 1955 and section 4 read with the Schedule of Kerala Buildings Tax Act, 1961 have been declared ultra vires to 'the Constitution being based on unreasonable classification and for want of reasonability in imposing the tax but to the latest law pronounced by this Court in M/s. Ellahi Cotton Mills (supra) this aspect of a fiscal statute has been dealt with as follows,‑‑
"(iv) That the Legislature is competent to classify persons or properties into different categories subject to different rates of tax. But if the same class of property similarly situated is subject to an incidence of taxation, which results in inequality amongst holders of the same kind of property, it is liable to be struck down on account of infringement of the fundamental right relating to equality.
It is an admitted fact that the Corporate Assets Tax has been levied upon the appellants subject to the value of the assets owned by them meaning thereby that a reasonable differentia has been provided between the categories of the assessees and there is no uniform policy to charge a fixed tax, without caring to the value of the assets. Therefore, we are of the opinion that section 12 is neither discriminatory nor is based on illegal differentia. A careful perusal of section 12 of the Act would suggest to hold that section 11 of the Act itself has provided criteria for charging tax at different rates keeping in view the value of the assets owned by them, therefore, section 12 of the Act also seems to be reasonable. Thus arguments put forward in this behalf are repelled being without substance.
16. Raja Muhammad Akram, learned Sr. ASC argued that as per section 12(1) of the Act the Corporate Assets Tax is leviable on the value of assets held by a company on the specified date. Similarly under Clause (d) of subsection 12(12) of the Act while defining the value of assets word "held" has been used. Therefore, Corporate Assets Tax can be levied. In respect of only those properties i.e. building, land etc. which is actually held by the Company and if any such tangible property has been mortgaged it would not be deemed to be held by the Company as its interest stands transferred on account of mortgage in favour of mortgagee. Reference in this behalf was made by him to the judgments reported in AIR 1945 Lahore 264, AIR 1952 Patna 469, AIR 1960 SC 1030 and 1997 (83) ITR 582.
17. 'Learned counsel for the respondents as well as Mr. Mansoor Ahmad Khan, Deputy Attorney General contended that argument so raised on behalf of the appellants is contrary to the provisions of Chapter IV sections 60 and 67 of the Transfer of Property Act. They further st1ted that mortgaging of a property by the mortgagor does not deprive him from its proprietary rights and transaction depends upon the kind of the mortgage as per the provisions of the Transfer of Property Act.
18. In this behalf first of all it is to be noted that no documentary material has been placed on record by the appellants being represented by Raja Muhammad Akram Sr. ASC to ascertain the kind of the mortgage if created by them in respect of the assets owned by them and secondly a careful perusal of section 60 of the Transfer of Property Act would reveal that mortgagor enjoy a right to redeem the property as per conditions laid down therein. The most important thing which is to be noted is that unless after the due date and passing of period of limitation the property has been transferred in favour of the mortgagee under section 67 of the Transfer of Property Act pertaining to the right of the foreclosure or the sale, mortgagor remains its proprietor and tangible property shall be deemed to be held by him. According to Ballentine's Law Dictionary the word "held" has been defined as under:‑‑
"Having grasped or clutched. In reference to property, a word of variable meaning; actual possession; the right to possession, invested with title".
The above definition if viewed keeping in view the provisions of sections 60 and 67 of the Transfer of Property Act no other inference can be drawn except that even if property has been mortgaged without transferring its I proprietary rights it shall be deemed to be held by the original owner, therefore, for all legal purposes its owner will be liable to make payment of Corporate Assets Tax. The judgment cited by the learned counsel reported in AIR 1952 Patna 469 is not applicable because it is not the case of the appellants that they have hypothecated the property by an usufructory mortgage and had passed on its possession with all interests to the mortgagee. It is an admitted position that the physical possession of the properties is with the appellants and they are enjoying benefits arising out of them, therefore, even if property has been simply mortgaged they cannot be exonerated from the liability of making payment of Corporate Assets Tax. In the judgments reported in AIR 1945 Lahore 264, AIR 1960 SC 1030 and 1977 (83). ITR 582 no principle of law has been discussed to support the above argument of the learned counsel, therefore, needs no discussion in detail. Thus the argument so advanced by the learned counsel being without any substance is over‑ruled.
19. Mr. Muhammad Akram Sheikh, Sr. ASC contended that under section 12(13) of the Act the Central Board of Revenue was empowered to make Rules to carry out the purposes of this section by issuing a n6tification in the official gazette but so far no notification of the Rules has been issued, therefore, in its absence the object and purposes of the law cannot be carried out nor any penalty or additional tax can be imposed upon the appellants.
20. Mr. Muhammad Ilyas Khan learned ASC contended that objection being raised is without any substance because the Board of Revenue by issuing Circular, copies of which are available on record has complied with the provisions of section 12(13) of the Act.
21. In view of the Circulars issued by Central Board of Revenue, copies of which are available on file, we are of the opinion that the requirement of section 12(13) of the Act has been substantially complied with because by means of these Circulars Wealth Tax Officer has been authorized to receive the returns as per section 12(3) of the Act and to deal with it. Inasmuch as these circulars besides providing procedure for filing of the returns had also laid down the procedure of filing of appeals and revisions in terms of sections 23, 24, 25 and 35 of the Wealth Tax Act, 1963 as per the requirement of section 12(10) of the Act.
For the above reasons appeals are dismissed with costs.
Q.M.H./M.A.K./I‑27/SC???????????????????????????????????????????????????????? ??????????? Appeals dismissed