Al-Haj GHULAM MUHAMMAD & SONS VS CENTRAL BOARD OF REVENUE through Chairman Government of Pakistan, Islamabad, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 2507 (2007)

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

----Ss. 59, 62, 80-D [as inserted by Finance Act (XII of 1991) & Second Sched., Part-IV, Cl. (32-D) [as inserted through C.B.R. Notification S.R.O. 773(I)/2000, dated 31-10-2000 and omitted by Finance Ordinance (XXV of 2001)]---(C.B.R. Circular No. 21 of 2000, dated 11-9-2000)---Self-Assessment Scheme 2000-2001---Constitution of Pakistan (1973), Arts. 25 & 199---Constitutional petition---Business of dealership of products---Commission on sale of products received by petitioners assessees engaged in such business as association of persons, individual and unregistered firm---Self-Assessment Scheme for assessment year, 2000-2001 issued through Circular No.21 of 2000, dated 11-9-2000---C.B.R.'s Clarification, dated 24-10-2000 that S.80'D of Income Tax Ordinance, 1979 would apply to all categories of cases for assessment year 2000-2001 whether or not covered by Self-Assessment Scheme---Denial of benefit of such Scheme to petitioners for not being eligible under Cl. (32-D) in Part-IV of Second Sched. of Ordinance, 1979---Petitioners alleged such. denial to be discriminatory---Validity---Irrespective of nature of source of income, such Cl. (32-D) excluded provisions of S. 80-D of the Income Tax Ordinance, 1979 to turn over of different kinds of assessees who qualified for such Scheme---Petitioners, instead of declaring higher income and paying more tax, declared loss, thus, they were required to file regular return---Scheme would not become discriminatory for petitioners' failure to fulfil conditions laid down therein---Clause (32-D) of Second Schedule Part-IV, Income Tax Ordinance, 1979 was a rider for every assessee, who had declared loss in relevant year---Different rates applicable to different slabs of income would not be discriminatory---Person earning more must contribute more to snare burden of development in country---Petitioners were not being discriminated against in any manner---High Court dismissed constitutional petition---Principles.

Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others PLD 1957 SC (Pak) 9; Zia Ullah Khan and others v. Government of Punjab and others PLD 1989 Lahore 554; Government of Baluchistan v. Azizullah Memon and 16 others PLD 1993 SC 341;-Khyerbari Tea Co. v. State of Assam AIR 1964 SC 925 (V) 51 C 122 and Elahi Cotton Mills Ltd. and, others v. Federation of Pakistan through Secretary, Ministry, of Finance Islamabad and others PLD 1997 SC 582 = 1997 PTD 1555 ref.

(b) Taxation---

----Person earning more must contribute' more to share burden of development in country.

As a general rule, a person who earns more must contribute more to share the burden of development in the country. This principle is based upon one of the reasons for framing the Constitution i.e. to create an egalitarian society.

Dr. Ilyas Zafar for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 16th April, 2007.

JUDGMENT

NASIM SIKANDAR, J.---Through this single judgment I intend to dispose of Writ Petitions Nos. 19120 of 2002,. 24354 of 2000, and Writ Petition Nos. 563 and 566 of 2002.

2. The presumptive tax regime found its way into our direct tax system through the insertion of section 80-D in the late Income Tax Ordinance, 1979. It was titled "Minimum Tax on income of certain Companies."The insertion was made by Finance' Act, 1991 and the provision was to -take effect from the assessment year, 1991-92. As originally framed the levy of minimum tax of one-half per cent was to be charged on the amount representing the total turn-over of a company from all sources. In other words the aggregate of the total turn-over was deemed to be the income of a company to be charged with tax at the above rate where no tax was payable by it. The Central Board of Revenue through Circular No.8 of 1991, dated June 30, 1991 explainer) the provisions of section 80-D in the following words:-

"Section 80D has been inserted in the Ordinance to provide that where no tax is otherwise payable by any company, body corporate or trust resident in Pakistan for any reason, including tax holiday or accounting concessions or the tax paid by it is less than 0.5 % of its declared turn-over, tax equal to 0.5 % of the turn-over shall be paid and where the tax otherwise payable is less than 0.5 % of the said turn-over, the difference between the tax otherwise payable and the amount calculated at the rate of 0.5 % of the turn-over shall become payable. "

3. In the very next Finance Act, 1992 the scope of the provision was extended to registered firms. Also an explanation was added to the. section with retrospective effect to declare that the expression' where no tax is payable or paid" and "or the tax payable or .paid" applied to all cases where tax was not payable or paid for any reason whatsoever .including -any loss of income, profits or gains or set off losses of earlier years, exemption from tax; credit or rebates in tax and allowances and deductions admissible under any provision of the late Ordinance or any other law for the time being in force. Subsequently in the year, 1999 the provision .was also made applicable to individuals, association of persons, unregistered .firms and Hindu undivided families.

4. On representations made by the tax-payers engaged in different trades particularly those selling products on commission basis, the Federal Government not only reduced the rate of minimum of tax but also explained the nature of total turn-over to betaken for the purpose of levy. It. was notified that in cases of travel agencies and those selling cigarettes the commission charged by them and not the total price of the Air tickets or the cigarettes sold will be taken as their total turn-over. Than kind of patch work continued till the repeal of the late Ordinance. though the concession extended to certain kinds of assessees including the travel agents and cigarette sellers was never made- applicable across the Board i.e. all kinds of tax payers engaged in selling products on commission basis.

5. Two of the four petitioners are AOPs. One is an individual and the fourth one is an unregistered firm. The AOPs are engaged in business dealership of products made by the Lever Brothers (Pakistan) Ltd. on commission basis. The individual is a dealer of Colgate Palmolive (Pakistan) Ltd. and the unregistered firm receives commission on sale of lubricating oil. All four of them are aggrieved of insertion of clause (32D) in Part-IV of the Second Schedule to the Income Tax Ordinance, 1979 through C.B.R. Notification S.R.O. 773(I)/2000, dated October 31, 2000. The clause so added reads as under:-

"32D. The provisions of section 80-D shall not apply to turn-over of an individual an association of persons and unregistered firm or a Hindu undivided family which qualify for Self-Assessment Scheme made under subsection (1) of section 59 for the assessment year 2000-2001".

This clause remained on statute book only for about eight months and was omitted by Finance Ordinance, 2001.

6. It is the case of the petitioners that -Self-Assessment Scheme for the assessment year, 2000-2001 as originally issued through Circular No.21 of 2000, dated 11th September,- 2000 was clarified by the Central Board of Revenue on 24-10-2000 that section 80-D applied to all categories of cases for the assessment year 2000-2001 whether or not covered by Self-Assessment Scheme. However, subsequently, through the aforesaid notification clause 32D was added in the Schedule which had the direct effect of denying the benefit of the added provision to the petitioners which were not eligible to avail Self-Assessment Scheme. All the four petitioners on account of some decrease in their income and accordingly the tax paid by them at the rate less than the one paid by them in the previous year stood excluded from the Self-Assessment Scheme. The scheme also did not permit an assessee to make lump sum addition to avail the benefits of the Self-Assessment Scheme. Therefore, the four assessees had to file a regular return which had the effect of enormous increase in their tax liability based upon their turnover as contemplated in section 80D. It is the case of the first petitioner, an individual assessee that other individual assessees doing similar business with exactly similar turn-over had to pay only Rs.15000 under the Self-Assessment Scheme while his liability on filing a regular return pitched at Rs.206105. Likewise one of the two AOPs claims that if its return qualified for Self-Assessment Scheme it had to pay income tax only at Rs.76,593 as against its liability to pay turn-over tax under section 80-D at Rs.7,16,826. The second AOP claims that under Self-'Assessment Scheme it was obliged to pay tax only at Rs.98,666 while it was being required to pay turn-over tax at Rs.7,08,583. The fourth petitioner, an unregistered firm also claims that under Self-Assessment Scheme its tax liability stood at Rs.20,538 as against the turn-over tax which it was required to pay at Rs.3,56,891 by filing a regular return.

7. According to the petitioners the denial of the benefit of clause 32D only on the basis of meeting the requirement and qualifications settled for acceptance of returns under Self-Assessment Scheme has resulted in discrimination when compared with the persons engaged in exactly the same kind of business and at times rather being the agent of the same principal/manufacture of products. The denial of benefit of the said clause to the petitioners merely for the reason that they did not qualify for filing their returns under Self-Assessment Scheme is claimed to be violative of the Article 25 of the Constitution which provides for not only equality before law but also the equal protection of law. The Self-Assessment Scheme, according to the petitioners, is framed by the executive/revenue and it also provides for wide discretion for the Commissioner/Tax. Collector to exclude any return out of the Scheme. The exercise of such discretion by the Executive, according to the petitioners, is again discriminative inasmuch as those falling in or found qualified for the scheme will pay much less tax as compared to those who did not qualify or were otherwise excluded out of the scheme at the whim and discretion of the- officers of the revenue.

8. In support of his claim that the treatment being meted out of the petitioners is discriminatory, learned counsel places reliance upon the ratio settled in re: Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others (PLD 1957 SC (Pak) 9), re: Zia Ullah Khan and others v. Government of Punjab and others (PLD 1989 Lahore 554), re: Government of Baluchistan v. Azizullah Memon and 16 others (PLD 1993 SC 341) and Khyerbari Tea Co. v. State of Assam (AIR 1964 SC 925 (V 51 C 122).

9. Learned counsel for the Revenue, on the other hand, states that there is no question of any discrimination inasmuch as the provisions of Self-Assessment Scheme for the year under consideration are being made applicable across the board. It is pointed out that the assessee did not file return under Universal Self-Assessment Scheme because he was required to declare income not less than the last, income assessed for the year 1999-2000 and to pay tax thereupon. Learned counsel further contends that the assertion that difference of tax under Self-Assessment Scheme and under section 80D is discriminatory and unreasonable is not correct inasmuch as the filing of return under the Self-Assessment Scheme or under the normal law was optional. Accordingly since the assessee had not availed the Self-Assessment. Scheme as such it was liable to pay minimum tax at the rate of 0.5 % under section 80D on the total turn-over declared. Lastly it is repeated that the Self-Assessment Scheme being not mandatory the assessee could make payment of tax either under Self-Assessment Scheme or under the provisions of section 80D of the late Ordinance, 1979. The wires of section 80D providing for minimum tax liability under the late Ordinance is supported by making a reference to the judgment of the Hon'ble Supreme Court of Pakistan in re. Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance Islamabad and others PLD 1997 SC 582 = 1997 PTD 1555. In that judgment the Hon'ble apex Court while rejecting a number of civil appeals observed:--

"57. The upshot of the above discussion is that no exception can be taken to the impugned sections 80C, 80CC and 80D of the Ordinance as they do not suffer from any constitutional infirmity and, therefore, the above appeals have' no merits and are liable to be dismissed"

10. After hearing the learned counsel for the parties I am not inclined- to agree that the petitioners are being discriminated against in any manner. In the first case relied upon at the bar for the petitioner in re. Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others (PLD 1957 SC (Pak) 9), a Full Bench of the apex Court while interpreting the constitutional phrases "equality before law" and "equal protection of law" inter alia observed that classification of persons or things was in no way repugnant to the equality doctrine provided the classification is not arbitrary or capricious, is natural and reasonable and bears a fair and substantial relation to the object of the legislation. According to the Bench the Constitution prohibited discriminatory treatment of individuals or a group of individuals or class of people similarly placed. ,In the case in hand by way of insertion of clause (32D) In Part-IV of the Second Schedule to the late Income Tax Ordinance under the notification mentioned in para.4 above it was provided that provisions of section 80D will not "be applicable to those who qualify for the Self-Assessment Scheme announced for the year. All the four petitioners did not qualify inasmuch as instead of declaring higher income and paying more tax they declared loss. Therefore, they were required to file a regular return. The consequence of that return may have resulted in a higher tax liability. However, the issue remains the entitlement or eligibility of the petitioners to the Self-Assessment Scheme which was applicable to all assessees of the Income Tax Department.

11. Learned counsel for the Revenue is also correct in pointing out that the Self-Assessment Scheme in question was issued under section 59 of the late Income Tax Ordinance, 1979. These provisions provided for the competency of the Central Board of Revenue to issue schemes for self-assessment as also to make orders or instructions thereunder Sub-clause (1A) also provided for the competency of the Central Board of Revenue to select returns for regular assessments under section 62. It is, therefore, rightly pointed out that the complaint of the petitioners against insertion of clause (32D) in the Schedule is direct against the scheme as the insertion in the Schedule was nothing more than an extension of the scheme to provide that section 80D shall not apply to those qualifying for Self-Assessment Scheme. In re. Jibendra Kishore Achharyya Chowdhury and 58 others v. The Province of East Pakistan and others (supra) the Hon'ble Supreme Court further held that there was no condition that in matter of acquisition there had in point of fact been any discrimination because all rent-receiving interests through .out the Province were acquired by District-wise notifications of the same date. Therefore, in the view of their Lordships the appellant Had no ground to complain or discrimination, fore they were not in a position to assert that while the rent-receiving interests of certain persons had been acquired, other rent receivers had not been 'touched. As noted above in the case in hand, irrespective of the nature or source of income, clause (32D) excluded the provisions of section 80D to the turn over of different kinds of the assessees who qualified for Self-Assessment Scheme. These provisions are neither appellant specific nor in fact any such, case can possibly be made out.

12. The ratio settled in the case re: Zia Ullah Khan and others v. Government of Punjab and others (supra) is also distinguishable. In that, case a Division Bench of this Court inter alia held that the provisions of Special Courts for Speedy Trials Ordinance, 1987 discriminated between the accused persons tried by the Special: Courts and those tried by the ordinary Courts under the normal procedure laid down in the Criminal Procedure Code, 1898. In the casein hand as noted above, the Self-Assessment Scheme for the year, 2000-2001 was available to all those assessees who fulfilled the conditions laid down in the scheme. If for one reason or the other the four petitioners could not avail the scheme on account of their failure to answer one or more conditions set out therein, the scheme as such cannot be held to be discriminatory.

13. In the case re: Government of Baluchistan v. Azizullah Memon and 16 others (supra) the Hon'ble Supreme Court reiterated the principles of interpretation of the Constitution. In the view of their Lordships the interpretation of Constitution attracted most of the principles employed in interpreting the statutes, but care had to be taken that it was not restrictive, pedantic or limited. The Hon'ble Court while detailing the principles for application of equality clause of the Constitution held that equal protection of .law meant that all persons equally placed be treated alike both in privileges conferred and liabilities imposed. As rightly pointed out by Mr. Muhammad Ilyas Khan, Advocate, the appellants as income taxpayers are .equally placed with other assessees irrespective of the nature or source of income. Like every other assessee they have been deprived of availing the scheme on account of their having declared loss in the year under consideration. The impugned clause or condition was a rider for every assessee who had declared loss in the year. Their inability to answer all the requirements of the scheme resulting into a higher tax liability does not make the whole of the scheme discriminatory. Nor it can be said that those engaged in similar business of selling products on commission basis had been treated in a better manner.

14. The last case cited at the bar is from Indian Jurisdiction. In re: Khyerbari Tea Co. v. State of Assam (supra) the Supreme Court of India examined the vires of Assam Taxation (On Goods Carried by Road or on Inland Waterways) Act (10 of 1961): While rejecting the contention that levy of flat rate of taxation was an unreasonable restriction, their Lordships observed that "the law of taxation is on the ultimate analysis the result of the balancing of several complex consideration, and so, it would be unreasonable to insist upon the .application of a general rule that if a tax is levied at a flat rate., it must be treated as unreasonable. Thus is in the case of the tax under section 3 of the Assam Act of 1961 the legislature may have considered the requirements of the trade carried on by the producers of tea and may have thought that a flat rate would be just and fair to the trade as a whole. These are questions which must normally be left to the legislature to decide. Therefore, the ground on which the reasonableness of the tax .levied by section 3 was impeached cannot be sustained. Same appears to be the situation in the case in hand. Every year the scheme for self-assessment is formulated keeping in view the peculiar incidence of revenue generation, sources of income and a number of other considerations including suggestions put forth by the stake-holders. In case the contentions of the appellant are accepted, then different rates applicable to different slabs of income will also be held to be discriminatory. That obviously is not possibly. As a general rule a person who earns more must contribute more to share the burden of development in the country. That principle is based upon one of the reasons for framing the Constitution i.e. to create an egalitarian society.

15. No case for interference having been made out, all four petitions shall be dismissed.

S.A.K./A-208/LPetitions dismissed.