BOARD OF INTERMEDIATE AND SECONDARY EDUCATION, SARGOHDA VS FEDERATION OF ISLAMIC REPUBLIC OF PAKISTAN, 2005 PTD-LAHORE-HIGH-COURT-LAHORE 2099 (2005)

Income Tax Ordinance (XXXI of 1979)---

----S.50(2A) & Second Sched., Part-I, cl. 86---Punjab Boards of Intermediate and Secondary Education Act (XIII of 1976), S.37--Constitution of Pakistan (1973), Art.199--Constitutional petition---Provisions of S.50(2A), Income Tax Ordinance, 1979 were not applicable to the interest/profit accruing: on the deposits of the Board of Intermediate and ` Secondary Education with the Banks and Financial Institutions---Act of department in deducting . or causing or directing to deduct any tax under the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 qua the said deposits was declared to be void and without lawful authority---Principles.

Federal Board of Intermediate and Secondary Education, Islamabad v. Federation of Pakistan through its Secretary and others Writ Petition No.121 of 2004 fol.

Dr. Muhammad Mohy-ud-Din Qazi for Petitioner.

Muhammad Ilyas Khan for the Revenue.

ORDER

In this Constitutional petition following prayer has been made:

"It is, therefore, most respectfully prayed that the impugned order of respondent No.1 as contained in Memo. No.148 of 2002-Rep (FTO) Law, dated 29-10-2003 (Annexure-G) and order of respondents Nos. 2 and 3, dated 26-3-2003 (Annexure-H) may graciously be declared illegal, void arbitrary, discriminatory, without any lawful authority and of no legal effect."

2. The petitioner-Board of Intermediate and Secondary Education, Sargodha through its Chairman claims that recovery of withholding tax under section 50 (2A) of the late Income Tax Ordinance, 1979 from the profits of the saving accounts of the petitioner is totally illegal inasmuch as under section 3 of the Punjab Board of Intermediate and Secondary Education Act No. XIII of 1976 it is an allied department of the Provincial Government.

3. It is claimed that on their representation Messrs Board of Intermediate and Secondary Education, Dera Ghazi Khan as well as the Federal Board of Intermediate and. Secondary Education, Islamabad were declared by the Revenue as exempt from the application of the aforesaid provisions of section 50(2A) of the late Ordinance, 1979. Lastly it is claimed that the petitioner-Board of Intermediate and Secondary Education is running on no profit no less basis and also exempt from levy of income tax under Clause (86) of the Second Schedule (Part-I) to the late Income Tax Ordinance, 1979 which reads as under:--

"(86) Income of universities and educational institutions:---

Any income of any University or other educational Institution established solely for educational purposes and not for purpose .of profit."

4. At the time of arguments learned counsel for the petitioner has relied upon a recent judgment recorded by my learned brother Maulvi Anwarul Haq, J. at Rawlapindi Bench in Writ Petition No.121 of 2004, dated 7-4-2004 in re: Federal Board of Intermediate and Secondary Education, Islamabad v. Federation of Pakistan through its. Secretary and others.

5. The Revenue in its reply has denied the assertions made in the petition in a vague and uncertain manner. The comparable instances of other Board of Intermediate and Secondary Education enjoying exemption from levy of Income tax as also the application of the provisions of section 50(2A) of the late Ordinance, 1979 have not been specifically controverted.

6. Learned counsel appearing for the Revenue also does not dispute that in the aforesaid judgment of my learned brother Maulvi Anwarul Haq, J. the issues in hand have been discussed and ruled upon in detail. The relevant paras. 8 to 13 of the said judgment, read as under:--

"Para. 8 Upon a reading of the said provisions of the Act of 1975 and the said Act, 1976 it is but apparent that the petitioners have been constituted by the Federal and the Provincial Governments respectively for the sole purpose of organizing, regulating, developing and controlling Intermediate Education and Secondary Education in Islamabad Capital Territory and the Rawalpindi Division respectively.

Para-9. Now as already stated by me above, the said Income Tax Ordinance exempts any income of a university or an educational institution established solely for educational purposes and not for purposes of profits. Now I have examined the University of the Punjab Act, 1973 and the Quaid-i-Azam University (erstwhile University. of Islamabad) Act, 1973. I find that section 3 of the said two Acts are almost in para meteria. Under the said provisions of the said two Acts, the universities reconstituted A respectively at Lahore and at Islamabad, under section 4 of the said Acts, shall have the powers, inter alia, to provide for instruction- in such branches of learning as the University may deem fit and to make provision for research and for the advancement and dissemination of knowledge in such manner as the University may determine, to prescribe courses of studies to be conducted by it and the colleges; to hold examination and to award and confer degrees, diploma, certificates and other academic distinctions to and on persons who have been admitted to and have passed its examinations under prescribed conditions.

Para-10: It will be thus seen that one of the primary power/ function of the said Universities is to hold examination in the manner prescribed and as a result to confer the said awards upon successful candidates.

Para11. Now the contention of the learned counsel for the respondents as noted above is that the exemption envisaged by the said Income Tax laws is to be availed only by such institutions who impart education. Precisely, what is being tried to be argued is that only such institutions would be exempted where only teaching is imparted in various courses and since the petitioners-Board do not involve themselves in the teaching process directly they would not be entitled to the said exemption. In my humble opinion, the contention is wholly misplaced. The words used by the Legislature are "established solely for educational purposes" as distinct from "for purpose of profits". It can be safely stated that the petitioner-Boards have not been established for purpose of profits rather the purposes are duly laid down in the said respective Federal and Provincial enactments. Now the said profits are accruing not because the purpose of the petitioners is to earn those profits rather the first petitioner have made those deposits in compliance with the provisions of the law governing it while the second petitioner is maintaining its funds also in accordance with the said Act of 1976. It cannot at all be said that petitioners established primarily for the purpose of organizing, regulating, developing and controlling Intermediate and Secondary Education in their respective territories have not been established solely for education purpose.

Para. 12. So far as the said preliminary objection raised by the learned counsel for the respondents is concerned, suffice it to say that in view of the persistent conduct of the respondents, in the matter, the remedies provided under the said Income Tax Ordinance would be illusory.

Para. 13. For all that has been stated above, both the writ petitions are allowed. and the act of the respondents in deducting or causing or directing to deduct any tax under the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 qua the said deposits is declared to be void and without lawful authority is declared to be void and without lawful authority. No orders as to costs."

7. Being in respectful agreement with the findings recorded by my learned brother Maulvi Anwarul Haq, J. to which I subscribe and for the other reasons discussed in the said order, I will allow this petition and hold that provisions of section 50(2A) of the late Income Tax Ordinance, 1979 are not applicable to the interest/profit accruing on the deposits of the petitioner with the banks or financial institutions.

M.B.A./B-90/LPetition accepted.