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

‑‑‑‑S.50 (2) & Second Sched., Part‑I, C1. (78‑E)‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Conversion of foreign currency account‑‑‑Deduction of withholding tax ‑‑‑Exemption‑‑ Petitioner encashed his foreign currency account and deposited the same in saving scheme‑‑‑Investments and profits derived from such scheme were re‑invested by the petitioner‑‑‑Grievance of petitioner was that the amount and profits received by him from re‑investment were subject to exception from withholding tax in view of exemption granted under Cl. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Profit or interest derived from Pak. Rupee account or certificates of deposit which had been created by conversion of foreign currency account were exempted under CI. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979, from withholding tax‑‑ Further investment of encashment of the amount converted and yield thereon in purchase of saving certificates could not be termed as conversion of a foreign currency account‑‑‑Such re‑investment did .not fall within the ambit of Cl. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979‑‑‑Petition was dismissed accordingly.

Central Insurance Company v. Central Board of Revenue 1993 PTD 766 = 1993 SCMR 1232; The Central Board of Revenue v. Sheikh Spinning Mills Ltd. 1999 SCMR 1442 = 1999 PTD 2174 and Union Bank Limited v. Federation of Pakistan 199& PTD (Trib.) 2116 ref.

(b) Taxation‑‑‑

‑‑‑‑ Levy of taxes‑‑‑Exemption‑‑‑Object, scope and purpose‑‑‑Exemption from taxes‑‑‑Principles‑‑‑Taxes are means by which State maintains its existence and anyone who claims exemption from such tax must on that account be clearly defined and founded on plain language ‑‑‑There must not be any doubt or any ambiguity upon which the claim to an exemption is founded‑‑‑Where claim is based upon plain and clearly expressed intention of legislature, it is not justified to construe liberal interpretation‑‑‑Provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statute‑‑‑Provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly.

Siraj‑ud‑Din Khalid for Petitioner.

Pervez Ahmad Malik, A.‑G. on Court call, Tahir Mehmood Gondal, Asstt. A.‑G. and Muhammad Alyas Khan for Respondent No.3.

ORDER

The petitioner maintained foreign currency account, which was frozen on May 28, 1998. In response to the option of Government of Pakistan, the petitioner got the frozen foreign currency accounts converted into Pak Rupees at stipulated rate. The petitioner opened special saving accounts and invested the encashment for a period of three years. There is no controversy with regard to the fact that the investments and profits derived therefrom, by the petitioner out of the encashment of foreign currency are exempted from levy and charge of withholding tax, under section 14(1) of Income Tax Ordinance, 1979 read with Clause 78‑E of Part‑I of the Second Schedule. Similarly exemptions are also available to a foreign currency account holder in new law i.e. Income Tax Ordinance, 2001.

2. The petitioner, at the time of maturity of the investments, again purchased Special Saving Certificates out of encashment of principal amount and the profit yield thereon. The petitioner claims exemption of Income Tax on these investments as well but the respondent No.3 declined the issuance of exemption certificate under section 50(2) of the Repealed Ordinance, 1979, on the score that it is available only to the first investment after conversion of foreign currency account.

3. The petitioner has challenged, in this petition, the deduction of withholding tax on subsequent investment. Learned counsel for the petitioner has argued that as long as clause 78‑E of Part‑I of Second Schedule is in the field, any income, which has been derived from investment originated from a foreign currency account, is exempted and that such income remains exempted without any limitation. He has contended further that the Central Board of Revenue is not vested with the power to interpret the law and curtail judicial adjudication power by issuing S.O.R. In support of his contentions he has referred to:

(1) Central Insurance Company v. Central Board of Revenue 1993 PTD 766 = 1993 SCMR 1232, (2) The Central Board of Revenue v. Sheikh Spinning Mills Ltd. 1999 SCMR 1442 = 1999 PTD 2174 and (3) Union Bank Limited v. Federation of Pakistan 1998 PTD (Trib.) 2116.

Word used is conversion in Pak. Rupees.

4. Respondent No.3 filed parawise comments and learned counsel appearing on behalf of respondent No.3 submitted that the petitioner has availed one time exemption at the time of encashment of his certificates and subsequent investments of the petitioner in Emarates Bank are not exempted from deduction of withholding tax in terms of C.B.R. U.O. No.4(32) TP‑1/90 PTI, dated 28‑5‑2002. The Deputy Attorney General has also assisted this Court with regard to the proposition under reference.

5. Heard learned counsel for the parties at length. Perused the relevant record.

6.Clause 78‑E, Part I of the Second Schedule is reproduced as under:‑‑

"Any profit of interest derived from Pak. Rupee account or certificate of deposit which have been created by conversion of a foreign currency account or deposit held on the 28th day of May, 1998, with a bank authorized under the Foreign Currency Accounts Scheme of State Bank of Pakistan."

7. Bare perusal of the said clause manifests that the profit or interest derived from Pak. Rupees account or certificate of deposit which have been created by conversion of the foreign currency account are exempted. The petitioner has converted the foreign currency account and made investment out of the encashment of the foreign currency account. The said conversion was exempted which was enjoyed by the petitioner. The petitioner has now invested the encashment of the amount converted and yield thereon, in purchase of Special Saving Certificate. Later investment cannot be termed as conversion of a foreign currency account.

8. Taxes are means by which State maintains it existence and anyone who claims exemption from such tax must on that account be clearly defined and founded on plain language. There must not be any doubt or any ambiguity upon which the claim to an exemption is founded. Where claim is based upon plain and clarity expressed intention of the Legislature, it will not be justified to construe liberal interpretation. The provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly. There is no ambiguity that the exemption relates to the conversion of a foreign currency account, and after conversion if such amount is re‑invested then it shall not fall within the ambit of clause 78‑E ibid.

9. For what has been discussed above, the instant petition is without any merit, therefore, the same stands dismissed in limine.

M.H./S‑283/LPetition dismissed.