CALL TELL VS FEDERATION OF PAKISTAN, 2005 PTD-KARACHI-HIGH-COURT-SINDH 833 (2003)

2005 P T D 833

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

CALL TELL and another

versus

FEDERATION OF PAKISTAN and others

C.P. No. D‑468 of 2003, decided on 05/08/2003.

(a) Income‑tax‑‑‑

‑‑‑‑Advance tax‑‑‑Concept‑‑‑Deduction/collection of advance tax does not amount to levy of tax, except in cases falling under the presumptive tax regime where the deduction/collection of tax amounts to final payment of tax and no refund is made‑‑‑Principles.

In fact the collection of advance tax does not amount to levy of tax. Advance tax is a payment made merely on account to be adjusted against the charge of Income Tax as finally ascertained. It is not a tax but merely a provisional payment of an amount towards tax due. The said amount does not become the property of the Central Government but remains vested in the assessee.

Thus the deduction/collection of advance tax does not amount to levy of tax, except in the cases falling under the presumptive tax regime where the deduction/collection of tax amounts to final payment of tax and no refund is made.

CIT v. Asbestos Cement Industries Ltd. (1992) 66 Tax 140 ref.

(b) Taxation‑‑‑

‑‑‑‑ Powers of legislation‑‑‑Scope‑‑‑Power of taxation rests on necessity, and is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent State or Government‑‑‑Legislature, particularly in economic activities, enjoys a wide latitude in the matter of selection of persons, subject‑matters, events etc., for taxation‑‑‑The presumption is in favour of the validity of the legislation and burden to prove, that the same is invalid is on the person who alleges it‑‑‑Principle.

CIT v. Asbestos Cement Industries Ltd (1992) 66 Tax 140; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Corpus Juris Secundum, Vol. LXXXIV; Assistant Commissioner of Land Tax, Madras, and others v. Buckingham and Carnatic Col. Ltd. (1970) 75 ITR 603 and The Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1664 ref.

(c) Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑5.236 & First Sched., Part IV, Division V, para..(b)‑‑‑Constitution of Pakistan (1973), Arts. 199, 23, 24, 25 & 4, Federal Legislative List‑‑ Constitutional petition‑‑‑Collection of advance tax, and refund of the advance taxes already collected ‑‑‑Vires of 5.236, Income Tax Ordinance, 2001 read with para. (b) of Division V of Part IV of the First Schedule of the Ordinance‑‑‑Validity‑‑‑Advance tax impugned in the present case does not fall within the purview of presumptive tax regime‑‑‑Advance tax collected by the company engaged in the business of selling prepaid cards for telephones from the buyers/users of the prepaid telephone cards shall ‑ be merely credited to the Government which can be utilized and adjusted to the extent found necessary towards the ultimate liability of income tax dues, after it has been determined and the excess amount if any is to be refunded to the purchasers of prepaid cards‑‑‑If, however, there is no ultimate liability to pay income tax by a purchaser, the entire amount collected by the cards company or any other seller of the prepaid telephone cards will be refunded‑‑‑Mere hardship or ignorance about the mechanism of law by any person, shall not form a basis for declaring any provision of statute to be invalid or unconstitutional‑‑‑If a person sought to be taxed comes within the letter of law he must be taxed, however great hardship may appear to the judicial mind‑‑‑High Court, on having found no substance in the contentions of the petitioners that 5.236, Income Tax Ordinance, 2001 read with its para. (b) of Division V of Part IV of the First Schedule was ultra vires the Constitution or the provisions contained therein suffered from any invalidity, dismissed the Constitutional petition.

Commissioner of Income Tax v. Pakistan Tobacco Ltd. 1988 PTD 66; Commissioner of Income Tax v. Mackinnon Mackenzie 1993 PTD 46; CIT v. Asian D Enterprises 2000 PTD 892.; M. Shakel Saigol v. Income Tax Officer PLD 1976 Lah. 616 and Highway Petroleum Service v. Islamic Republic of Pakistan PLD 1977 Lah. 797 ref.

[Leave to appeal was refused by the Supreme Court against this judgment vide 2004 PTD 3032]

Dr. Amjad Hussain Bukhari for Petitioners.

Nemo for Respondents.

Date of hearing: 5th august, 2003.

ORDER

MUHAMMAD MUJEEBULLAH $IDDIQUI, J.‑‑The petitioners have challenged vires of section 236 of the Income Tax Ordinance, 2001 (hereinafter referred to as the Ordinance) read with para. (b) of Division V of Part IV of the First Schedule to the above Ordinance. They have prayed for issuance of injunction against the Respondents from acting in pursuance of the above provisions which envisage the collection of advance tax, and refund of the advance taxes already collected.

2. For the sake of convenience the provisions contained in section 236 of the Ordinance, and Para. (b) of Division V of Part IV of the First Schedule thereof are reproduced below:‑‑

"236. Telephone users: (1) Advance Tax at the rate specified in Part IV of the First Schedule shall be collected on the amount of:

(a) telephone bill of a subscriber; and .

(b) prepaid cards for telephones.

(2) The persons preparing the telephone bill shall charge advance tax under subsection (1) in the manner telephone charges are charged.

(3) Person issuing or selling repaid cards for telephones shall charge advance tax under subsection (1) from the purchaser at the time of issuance or sale of cards.

(4) Advance tax under this section shall not collected from Government, a foreign diplomat, a diplomatic mission in Pakistan, or a person who produces a certificate from the Commissioner that his income during the tax year is exempt from tax."

First Schedule Part IV, Division V, para. (b). Rates of collection of tax under section 236‑‑

(b) in the case of 10% of the amount of

subscriber of mobile bill or sale price of pre

telephone and pre‑paid paid telephone card.

telephone card

3. The Petitioner No. l is a private limited company engaged in the business of selling prepaid cards for telephones and has alleged that since promulgation of above provisions of the Ordinance, with effect from 1st of July, 2002, it has been collecting advance tax from subscribers and depositing the same with the Respondent No.2 while, Petitioner No.2 is a purchaser/user of the prepared telephone cards.

4. The contention of the Petitioners is that, the provisions contained in section 236 of the Ordinance and para. (b) of Division V of Part IV of the First Schedule thereof are void and unconstitutional being arbitrary and ultra vires the Federal Legislative List. According to the Petitioners, the tax has been imposed under the impugned provisions which is beyond the scope of Entry No.47 of the Federal Legislative List of the Constitution, which confers the authority on the Federal Legislature (Majlis‑e‑Shoora Parliament) to levy taxes on income. The purchase of prepaid telephone card, does not amount to earning any income. On the contrary, it is an expenditure. It is further contended that a duty has been cast on the Petitioner No. 1 to charge advance income‑tax on all prepaid calling cards which is contrary to fundamental rights as envisaged under Articles 23, 24 and 25 read with Article 4 of the Constitution. The Petitioners have urged that the advance tax has been levied on sale of prepaid cards on telephone irrespective of the fact A whether the purchaser of the card is liable to pay any income tax or not and thus, the levy of this advance tax is against the spirit of Constitution. It is further contended that the Petitioner No.1 sells cards without any information pertaining‑to the customers and therefore, customers would not be able to get the adjustment/refund and therefore, the Petitioner No. l has been forced to become instrument to confiscate properties of the consumers without compensation, which is contrary to the provisions of Article 24 of the Constitution. It is further alleged that the petitioner No.2 does not know anything about the scheme of income tax and law and cannot claim refund to the advance tax collected on purchase of cards by him, with the result that the impugned provisions violate the provisions contained in Articles 24, 4 and 25 of the Constitution. It is further stated that the impugned provisions obliges the Petitioner No. l to charge, collect and pay advance income tax from the buyers of prepaid telephone cards at the rate which is arbitrary, discriminatory and unreasonable. It is alleged that two different slabs of advance income taxes have been imposed on the users of telephone services. The subscribers of PTCL who pay their; telephone bills after usage are subjected to payment of tax at 5 % while the users of prepaid telephone cards are subjected to payment of tax at 10%. The Petitioners have maintained that there is no reasonable classification on the basis of which consumers/users of prepaid and post paid telephone services are meted different treatment. The Petitioner No. l has further taken plea that, the impugned provisions restrict the fundamental rights of freedom of trade and, business and consequently, militate against the fundamental rights guaranteed under article 18 of the Constitution. According to Petitioners the Federal Legislature does not enjoy unlimited powers to levy tax and only such laws can be enacted as are backed by the provisions contained in the Constitution and the impugned levy of advance tax is exploitative, confiscatory and expropriatory as well as ultra vires the constitutional provisions, therefore, the impugned provisions are liable to be struck down.

5. We heard Dr. Amjad Hussain Bukhari, learned counsel for the Petitioners, Mr. Bukhari has reiterated the contentions contained in the Petition and reproduced by us above.

6. We do not find any substance in the contentions for the reason that, in spite of being asked repeatedly the learned counsel for the Petitioners is not able to point out any specific article in the Constitution of Islamic Republic of Pakistan which has been violated with the enactment of the impugned provisions.

7. First of all, we would like to point out that the collection/ deduction of advance tax is not a new concept introduced by the Income Tax Ordinance. 2001. The concept was introduced for the first time in the Indian subcontinent in the year, 1944 and since then it has continuously occupied the field in the realm of Income Tax. It is also incorrect that the provisions pertaining to the collection of advance tax from telephone users have been introduced by Finance Ordinance, 2002. This provision was enacted for the first time by Finance Act, 1996, with the insertion of subsection (7F) in section 50 of the repealed Income Tax Ordinance, 1979, which reads as follows:‑‑

"Section 50

(7F) At the time of preparing telephone bills or issuing or selling prepaid telephone cards for mobile telephones, the person responsible for preparing such bills or issuing or selling such prepared telephone cards shall charge tart on the amount of such bill or card, as the case may be at the rate specified in the First Schedule, and the credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such subscriber for the assessment year commencing on the first, day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year in which the "said date" as referred to therein falls, whichever is the later:

Provided that nothing contained in this subsection shall apply where the Government or a diplomat is the subscriber."

8. In fact the collection of advance tax does not amount to levy of tax as alleged by the learned counsel for the petitioners. The Hon'ble Supreme Court of Pakistan has held in the case 'of CIT v. Asbestos Cement Industries Ltd. 1992‑66 Tax 140, that the advance tax is a payment made merely on account to be adjusted against the charge of income tax as finally ascertained. It is not a tax but merely a provisional payment of an amount towards tax due. The said amount does not become the property of the Central Government but remains vested in the assessee.

9. Thus the deduction/collection of advance tax does not amount to levy of tax, except in the cases falling under the presumptive tax regime where the deduction/collection of tax amounts to final payment of tax and no refund is made: The provisions falling under the presumptive tax regime have been upheld by the Hon'ble Supreme Court of Pakistan in the Case of Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582. It would be instructive to reproduce paras. 15 and 16 from the judgment of Hon'ble Supreme Court in Elahi Cotton Mills, which read as follows:‑‑

(15) It will not be out of context to observe that the power of taxation rests on necessity. It is an essential and inherent attributed of sovereignty belonging as a matter of right to every independent State or Government. In this regard reference may be made to the following passage from the Corpus Juris Secundum. Vol. LXXXIV as to the power of the State to levy tax, which reads as under:‑‑

"The power of taxation rests on necessity, and is an essential and inherent attribute of sovereignty belonging as a matter or right to, every independent State or Government. Such power is an inherent one, and is not dependent on any grant by the Constitution, or the consent of the owner of property subject to C taxation; Constitutional provisions with respect to taxation constitute a limitation on the legislative power and not a grant of power. The power to tax rests primarily in the State, to be exercised by its Legislature, as discussed infra section 7, and the State may exercise the power directly or may delegate such power as political sub‑divisions of the State; as considered in infra section 8. The exercise of the taxing power is a high Government function, in invitum in nature.

Generally, the power of taxation is as extensive as the range of subjects over which the power of the Government extends. As to such subjects, and except insofar as it is limited or restrained by Constitutional provisions, a State's power of taxation, if exercised for public purposes, in general, unlimited, and absolute, extending to all persons, property, and business within its jurisdiction. "

Since this power is contained in our Constitution, our approach while interpreting the same‑should be dynamic, progressive and oriented with the desire to meet the situation, which has arisen, effectively. The interpretation cannot be narrow and pedantic but the Court's efforts should be to construe the same broadly, so that it may be able to meet the requirement of ever changing society. The general words cannot be construed in isolation but the same are to be construed in the context in which they are employed. In other words, their colour and contents are derived from their context.

16. We may point out that in a Federal Constitution like we have in Pakistan, the legislative power is distributed between the Provincial and the Federal Legislatures. With that view legislative lists are prepared. The entries contained therein indicate the subjects on which a particular Legislature is competent but they do not provide any restriction as to the power of the Legislature concerned. It can legislate on the subject mentioned in any entry so long as it does not transgress or encroach upon the power of the other Legislature and also does not violate any fundamental right as the Legislature power is subject to constraints contained in the Constitution itself. It is also a well‑settled proposition of law that an entry in a legislative list cannot be construed narrowly or in a pedantic manner. but it 'is to be given liberal construction. In this behalf, reference may be made to the following case:‑‑ .

(i) Assistant Commissioner of Land Tax, Madras, and others v. Buckingham and Carnatic Col. Ltd. (1970) 75 ITR 603: ‑

`in which the facts were that the Madras Urban Land Tax‑ Act, 1966, imposed a tax on urban land at a percentage of the market value. The above Act was enacted by the State legislature pursuant to the power contained in entry 49 of List 11 of Schedule VII to the Constitution of India. The same was‑impugned in the Madras High Court to declare the provisions of the aforesaid Act as ultra vires. The matter was brought before the Indian Supreme Court by the Revenue‑: Authorities. The Supreme Court while setting aside the judgment of the Madras High Court made the following observations as to how the entries in the legislative list are to be interpreted:‑‑

"The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeration of broad categories: We see no reason, therefore, for holding that entries 86 and 87 or List I preclude the State Legislature from taxing capital value of lands and buildings under entry 49 of List II. In our opinion there is no conflict between entry 86 of List I and entry 49 of List II. The basis of taxation under the two entries is quite distinct. As regards entry 86 of List I the basis of the taxation is the capital value of the asset. It is a tax directly on, the capital value of assets of individuals and. companies on the valuation date. The tax is not imposed on the components of the assets of the assessee. The tax under entry 86 proceeds on the principle of aggregation and is imposed on the totality of the value of all the assets. It is imposed on the total assets which the assessee owns and in determining the net wealth not on the encumbrance specifically charged against any item of assets, but the general liability of the assessee to pay his debts and to discharge his lawful obligations have to be taken into account. In certain exceptional cases, where a person owes no debts and is under no enforceable obligation to discharge and liability out of his assets it may be possible to break up the tax which is leviable on the total assets into components and attribute a component to lands and buildings owned by an assessee. In such a case, the component out of the total tax attributable to lands and buildings may in the matter of computation bear similarity to a tax on lands and buildings levied on the capital or annual value under entry 49, List II. But in a normal case a tax on capital value of assets bears no definable relation to lands and buildings which may‑or may not form a component of the total assets of the assessee."

(ii) The Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1664;

In the above case validity of the ‑Hotel Receipts Tax Act (1‑980), which imposed a special tax on the gross receipts of certain category of hotels, was impugned through a batch of writ petitions under Article'32 of the Indian Constitution directly before the Supreme Court of India on the ground of lack of legislative competence and violation of Articles 14 and, 19(1)(g) of the Indian Constitution. The Supreme Court while dismissing the aforesaid writ petition and upholding the validity of the aforementioned Act made the following observations as to the interpretation of entry 82 of Legislative List I of the Indian Constitution (which corresponds to Entry 47 of our Constitution):‑‑‑

(6) On a consideration of the matter, we are of the opinion that the submissions of the learned Attorney‑General as to the source of the legislative power to enact a law of the kind in question require to be accepted. The word "income" is of elastic import. In interpreting expression in the legislative lists a very wide meaning should be given to the entries. In understanding the scope and amplitude of the expression "income" in entry 82, List 1, any meaning which fails to accord with the plenitude of the concept of `income' in all its width and comprehensiveness should be avoided. The cardinal rule of interpretation is that the entries in the .legislative lists are not to be read in a narrow or restricted sense and that each general word should be held to extend to al all ancillary or subsidiary matters which can fairly and reasonably be said to be comprehended in it. The widest possible construction, according to the ordinary meaning of the words in the entry, must be put upon them. Reference to legislative practice may be admissible in reconciling two conflicting provisions of rival legislative lists. In construing the words in a Constitutional document conferring legislative power the most liberal construction should be put upon the words so that the same may have effect in their widest amplitude. "

10. In the above judgment Hon'ble Supreme Court considered large number of rulings and treatises. We can do no better than to reproduce para. 31 and Part of para. 32 of the above judgment which read as follows:‑‑

"(31) From the above case‑law and the treatises, inter alia the following principles of law are deducible:‑‑

(i) That in view of wide variety of diverse economic criteria, which are to be considered for the formulation of a fiscal policy. Legislature enjoys a wide latitude in the matter of. selection of persons, subject‑matter, events, etc. for taxation. But with all this latitude certain irreducible desiderata of equality shall govern classification for differential treatment in taxation law as well.

(ii) That 'Courts while interpreting laws relating to economic activities view the same with greater latitude than the laws relating to civil rights such as freedom of speech, religion etc., keeping in view the complexity of economic problems which do not admit of solution through any doctrinaire or strait jacket formula as pointed out by Holmes, J. in one of his judgments.

(iii) That Frankfurter, J., in Mory"v. Doud (1957) U.S. 457 has remarked that "in the utilities, tax and economic regulation cases, there are good reasons for judicial self‑restraint if not judicial deference to the legislative judgment".

(iv) That the Legislative 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.

(v) That "a State dose not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably", (Willi's Constitutional Law).

(vi) That the rests of the vice of discrimination in a taxing law are less rigorous. If there is equality and uniformity within each group founded on intelligible differentia having a rational nexus with the object sought to be achieved by the law, the Constitutional mandate that a law should not be discriminatory is fulfilled.

(vii) That the policy of a tax, in its operation, may result in hardships or advantages or disadvantages to individual assessees which are accidental and inevitable. Simpliciter this fact will not constitute violation of any of the fundamental rights.

(viii)That while interpreting Constitutional provisions Court should keep in mind, social setting of the country, growing requirements of the society/nation, burning problems of the day and the complex issues facing the people, which the Legislature in its wisdom through legislation seeks to solve. The judicial approach should be dynamic rather than static, pragmatic and not pedantic and elastic rather than rigid.

(ix) That the law should be saved rather than be destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of a Constitutional provisions.

(x) That as per dictionary the word `income' means "a thing that comes in". Its natural meaning embraces any profit or gain which is actually received. However, while construing the above word used in an entry in a legislative list, the above restricted meaning cannot be applied keeping in view the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of mere simplex enumeration of broad categories.

(xi). That the expression' "income" includes not merely what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. For example, use of a house by its owner.

(xii) That what is not "income" under the Income Tax Act can be made "income" by a Finance Act. An exemption granted by the Income Tax Act can be withdrawn by the Finance Act or the efficacy of that exemption may be reduced by the imposition of a new charge, of course, subject to Constitutional Limitations.

(xiii)That the question, whether a particular kind of receipt is income or not would depend for its answer on the peculiar facts and circumstances of the case. If the nature of the receipt and its source are not satisfactorily explained by an assessee, facts 1 which are generally within his peculiar knowledge, the Income Tax Officer may legitimately presume that the amount in question is an income of the assessee from an undisclosed source.

(xiv) That the expression "clothes make the man" would be more nearly right if it were "Income makes the man". Knowledge about the income of a person will reveal most about him. It is a barometer to evaluate about his habits and views.

(xv) In Haig's language income is "the increase of accretion in one's power to satisfy his wants in a given period insofar as that power consists of (a) money itself or (b) anything susceptible of valuation in terms of money, whereas Simons equates personal income with algebraic sum of consumption and change is net worth".

(xvi) That the process of income determination is often expressed as one of the matching costs and revenues. It involves the process of working out costs used in connection with the earning of the revenue in a particular accounting period.

(xvii) That generally the effect of a deeming provision in a taxing statute is that it brings within the tax net an amount which ordinarily would not have been treated as an income. In other words, it brings within the text of chargeability income not actually accrued but which supposedly to have accrued notionally.

(xviii)That when a statute enacts that something shall be deemed to have been done which in fact and in truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be restored to.

(xix) That where a person is deemed to be something the only meaning possible is that whereas he is not in reality that something, the Act required him to be treated as he was with all inevitable corollaries of that state of affairs.

(xx) That the legal fictions are limited for a definite purpose, they cannot be extended beyond the purpose for which they are created.

(xxi) That income‑tax is a tax on a person in relation to his income. It is a tax imposed upon a person (natural or artificial) in relation to his income.

(xxii) That any legislation whereby either the prices of marketable commodities are fixed in such a way as to bring them below the cost of production and thereby make it impossible for a citizen to carry on his business or tax is imposed to such a way so as to result in acquiring property of those on whom the incidence of taxation fell, then such legislation would be violative of the fundamental rights to carry on business and to hold property as guaranteed in the Constitution.

(xxiii) That the taxing power is unlimited as long as it does not amount to confiscation and that the Legislature does not have the power to tax to the point of confiscation.

(xxiv) That the word `reasonable' is a relative generic term difficult or adequate definition. It inter alia connotes agreeable to reason; conformable to reason; having the faculty of reason; rational; thinking, speaking, or acting rationally or according to the dictates of reason; sensible; just; proper and equitable or to act within the Constitutional bounds.

(xxv) That a direct tax is one which is demanded from the very person, who it is intended or desired should pay it, whereas indirect taxes are those, which are demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another, like custom duties, excise taxes and sales tax, which are borne by the consumers.

(xxvi) That levy of building tax on the basis of the covered area without taking into consideration, the class to which a particular building belongs, the nature of construction, the purpose for which it is used, its situation and its capacity for profitable use and other relevant circumstances bearing on the matters of taxation is not sustainable in law for want of reasonable classification.

(xxvii) That there is a clean distinction between the subject‑matter of a tax and the standard by which the amount of tax is measured keeping in view the practical difficulties, which are encountered by the Revenue to locate the persons and to collect the tax due in certain trades, if the legislature in its wisdom, though that it would facilitate the collection of tax due from specified traders on a presumptive basis, the same is not violative 'of the Fundamental Right relating to equality.

(xxviii) That denial of reliefs provided by sections 28 to 43‑C of the Indian Income Tax Act to the particular business or traders covered by section 44‑AC thereof without showing some basis fair and rational and without having nexus to the object sought to be achieved by the Legislature, held unfair, arbitrary, disproportionate to the prevalent evil and constitutes denial of equal treatment. Consequently, the Indian Supreme Court did not press into service no obstante clause of section 44‑AC by applying theory of reading down as a rule of interpretation.

(xxix) That it is an accepted canon of taxation to levy tax on the basis of ability to pay. The sections 115‑J and 115‑JA incorporated in Indian Income Tax Act, 1961, were intended and designed to bring within the tax net the companies, which though making huge profits and also declaring substantial dividends, but have been managing their affairs in such a way by availing of tax concessions etc., as to avoid payment of income‑tax.

(xxx) That the theory of reading down is a rule of interpretation which is resorted to by the Courts when they find a provision read literally seems to offend a fundamental right or falls outside the competence of the particular legislature.

(xxxi) That though the Legislature has the prerogative to decide the questions of quantum of tax, the conditions subject to which it is levied, the manner in which it is sought to be recovered, but if a taxing statute is plainly discriminatory or provides nor procedural machinery for assessment and levy of the tax or that is confiscatory, the Court may strike down the impugned statute as unconstitutional.

(xxxii) That the rule of interpretation that while interpreting an entry in legislative List it should be given widest possible meaning does not mean that parliament can choose to tax as income an item which in no rational sense can be regarded as a citizen's income: The item, taxed should rationally be capable of being considered as the income of a citizen.

(xxxiii) That before charging tax, an assessee must be shown to have received income or the same has arisen and accrued or deemed to be so under the statute. Any amount which cannot be treated as above is not an income and, therefore, cannot be subject to tax.

(xxxiv) That there is a marked distinction between a tax on gross revenue and a tax on income, which for taxation purposes, means gains and profits. There may be considerable gross revenues, but no income taxable by an income‑tax in the accepted sense.

(32) We have summarized hereinabove in para. 31 the ratio decidendi of the above discussed cases and certain pertinent observations made therein. A perusal of above sub‑paras (i) to (xxx) of para. 31 indicates that the same do not advance the case of the appellants. On the contrary, they reinforce the principle of law that the Legislature, particularly in economic activities, enjoys a wide latitude in the matter of selection of persons, subject matters, events etc., for taxation, the presumption is in favour of the validity of the legislation. The burden to prove that the same is invalid is on the person who alleges it.

However, one can urge that the general observations contained in sub‑paras, (xxxi) to (xxxiv) of para. 31 lend support to some extent to the appellants' case. However, it should not be overlooked that in none of the cases from the judgments of which the above observations have been lifted the question, as to whether there can be presumptive tax or the minimum tax, in view of entries 47 and 57 of the Legislative List, was in issue. In this view of the matter, it would be inappropriate to apply the tests traditionally prescribed by the Income Tax Act and/or any other statute.

The Indian Supreme Court in the three cases falling in the first category mentioned in para. 25(i) hereinabove upheld the levy of tax on expenditure, hotel receipts and luxuries for the reasons already discussed hereinabove in para. 26. In the cases falling in the second category referred to hereinabove in para. 25(ii) which consists of six cases, the vires of newly‑added sections 44‑AC and 206‑C of the Indian Income Tax Act were in issue. The matter eventually was taken up by the Indian Supreme Court in the case of Sanyasi Rao (supra), which has been dealt with in detail with reference to the contentions of the learned counsel for the appellants hereinbelow in para. 44. The cases falling under the above category do not advance the case of the appellants. "

11. The advance tax impugned, in this petition does not fall within the purview of presumptive tax regime. The advance tax collected by the petitioner No. l from the petitioner No. 2 and all other buyers of the prepaid telephone cards shall be merely credited with the Government which, can be utilized and adjusted to the extent found necessary towards the ultimate liability of income‑tax due, after it has been determined and the excess amount if any is to be refunded to the purchasers of prepaid telephone cards. In case, there is no ultimate liability to pay income tax by a purchaser the entire amount collected by the petitioner No. l or any other seller of the prepaid telephone card and (sic.).

12. It is established principle pertaining to the validity of a legislative enactment that mere hardship or ignorance about the mechanism of law by any person, shall not form a basis for declaring any provision of statute to be invalid or unconstitutional.

13. The nature of advance tax paid under section 18‑A of the repealed Income Tax Act, 1992, came for consideration before a Division Bench of this Court in the case of Commissioner of Income Tax v. Pakistan Tobacco Ltd. (1988 PTD 66), it was held as follows:

"This provision also reinforces the conclusion that any amount payable under section 18‑A is merely on account payment and for the purpose of account this is to be shown as such."

The above view was followed by another Division Bench of this Court in the case of Commissioner of Income Tax v. Machkinnon Mackenzie 1993 PTD 46.

14. The validity/constitutionality of the advanced tax came for consideration before the Supreme Court of Azad Jammu and Kashmir in the case of CIT v. Asian D Enterprises, 2002 PTD 892, and it was held as Under:

"The deduction of advance tax is only a tentative deduction which has to be adjusted when the final assessment of income tax to be paid by the respondents‑Companies is made. Thus the findings of the High Court that demand of additional advance income‑tax is violative of Fundamental Right No.14 guaranteed by the Interim Constitution Act, are devoid of "any force and are not sustainable."

(Fundamental Right No. 14) of the Azad Jammu and Kashmir Interim Constitution Act, 1974 is pari materia to the provisions contained in Article 24 of the Constitution of Islamic Republic of Pakistan. The provisions contained in sections 18‑A and 45‑A of the repealed Income Tax Act, 1922, pertaining to the advance tax were challenged before the Lahore High Court in the case of M Shakel Saigal v. Income Tax Officer PLD 1976 Lahore 616, in a Constitution Petition. It was held as follows:‑‑

"A half‑hearted argument was also addressed on the vires of the section. Reference was made to the Third Schedule of the 1962 Constitution which prescribed matters with respect to which the Central Legislature had exclusive powers to make laws under Article 131. (Item 43(c) empowers the Central Legislature to pass laws in respect bf "Corporation taxes and taxes on income other than agricultural income". It was argued that since the impugned demand was neither a tax on income nor a corporation tax, the Central' Legislature had no power to enact section 45A. "

15. With reference to items Nos.43(c) and 49 in the Central Legislative List of the 1962 Constitution the provisions pertaining to advance tax were upheld and the petition was dismissed.

16. The above view 'was followed by another Division Bench of the Lahore High Court in the case of Highway Petroleum Service v. Islamic Republic of Pakistan PLD 1977 Lahore 797 and the contentions that the impugned provisions were invalid for lack of legislative competency on the part of Federal Legislature and that no tax can be imposed on a expenditure were repelled. The provisions contained under sections 18‑A and 45‑A of the repealed Income Tax Act, 1922 were held neither invalid for lack of legislative competence nor in conflict with the relevant Constitutional provisions of the Constitution of Islamic Republic of Pakistan, 1973. The principle was approved that if a person sought to be taxed comes within the letter of law he must be taxed, however, great hardship may appear to the judicial mind.

17. It would be appropriate to refer that the provisions contained in Items Nos.43(c) and 49 in the Schedule III of the Constitution of Pakistan 1962 were similar to the provisions contained in the Entries Nos.47 and 59 in Part IVth Schedule under Article 70(4) of the Constitution of Islamic Republic of Pakistan.

18. As all the contentions raised by the learned counsel for the Petitioners already stand decided by the judgments cited above, therefore, we do not find any substance in the contention that the provisions contained in section 236 of the Income Tax Ordinance 2001 read with para. (b) of Division V of Part IV of the First Schedule to the said Ordinance are ultra vires the Constitution or the provisions contained therein suffer from any invalidity. The petition is without substance which stands dismissed in limine.

19. After hearing the learned counsel for the petitioners, the Petition was dismissed in limine on 5‑8‑2003. These are the detailed reasons in support thereof.

M.B.A./C‑18/K Petition dismissed.