INDUS JUTE MILLS LTD. through Chief Executive VS FEDERATION OF PAKISTAN through Secretary Finance, Islamabad, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 1473 (2009)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 235---Constitution of Pakistan (1973), Art.199 & Fourth Schedule Federal Legislative List, Item 47---Constitutional petition---Vires of S.235, Income Tax Ordinance, 2001.--Three stages of imposition of tax i.e. declaration of liability; assessment and recovery---Said three stages need not necessarily occur in any particular order---Recovery of tax whether directly from the assessee or indirectly through collection from expenditure or deduction from receipts, as the case may be, did not amount to assessment of tax, nor created any liability to pay said amount---Advance tax was merely a provisional payment---Mode of recovery of tax was not the sole determining factor in ascertaining the subject-matter of tax---"Collection of tax" and "its levy or chargeability", distinguished---Mode of collection of tax through advance tax was valid and legal, challenge thereto on the grounds of being violative of fundamental rights/or beyond the legislative competence of the Parliament was rejected---Provision for collection of advance tax was within legislative competence of Parliament in view of Fourth Schedule Item 47 of Federal Legislative of the Constitution---Collection of advance tax on the amount of bills did not affect the essential subject-matter of tax which remained tax on income, however, in case of companies subject-matter of the tax remained the income of the assessee and not the electricity bill---Principles.

Whiteny v. Inland Revenue Commissioners AIR 1926 AC 37; Elahi Cotton Mills Ltd. PLD 1997 SC 582; Call Tel and another v. Federation of Pakistan and others 2005 PTD 833 and Call Tel Pvt. Ltd. v. Federation of Pakistan 2004 PTD 3032 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 235 & 169---Companies---Contention was that some companies may be entitled to final discharge under S.169, Income Tax Ordinance, 2001; hence, S.235 of the Ordinance could not be applied to them---Held, in case of presumptive tax regimes where there was a final, discharge of liability under S.169 of the Ordinance, said discharge was limited to the transaction or the income covered by such provision of the presumptive tax regimes which were enunciated in S.169 of the Ordinance; it did not extend to any other income of the assessee under the same or different head---Tax collected under S.235 of the Ordinance thus could be adjusted against any tax due with regard to other income of the assessee not covered under the separate presumptive tax regime, and where no such liability of tax existed, then the amount collected under S.235(1) of the Ordinance would be refunded to the company under S.235(4) of the Income Tax Ordinance, 2001---So far as applicability of S.235 of the Income Tax Ordinance, 2001 qua companies was concerned, no exception could be taken thereto, as said provision did not offend against any fundamental right of the assessee and was also well within the legislative competence of the Parliament.

(c) Income tax Ordinance (XLIX of 2001)---

---Ss. 235 & 169---Treatment being meted out by S.235, Income Tax Ordinance, 2001 with reference to persons other than companies, is dramatically different---Presumptive minimum tax has been levied on the basis of the electricity bill which is an expenditure and is valid especially as there is a direct nexus between the energy consumed, and the economic activity conducted resulting in generation of income or the capacity to earn and pay---Mere fact that the basis of the levy is the electricity bill; does not detract from the essential nature of the tax i.e. a tax on the income of the assessee---Contention of the assessees was that some of such assessees which were not companies, were subject to other presumptive tax regimes envisaged by the Ordinance, in terms whereby, collection made on deductions effected were a complete discharge of their tax liability under S.169, Income Tax Ordinance, 2001, whereby, recoveries effected under the provisions mentioned therein were treated as final tax, and therefore, the assessees could not be subjected to S.235 of the Ordinance---Validity---Held, in this regard, it was for the assessees to establish on a case to case basis as to which of such assessees was subject to which particular presumptive tax regime of the Ordinance mentioned in S.169 of the Ordinance and therefore, there existed a final discharge of liability---Such information supported and substantiated by verifiable material was conspicuous by its absence in the present case---In such an eventuality, the collections made under S.235 of the Ordinance in respect of persons other than companies would at best encroach into the territory of double taxation and there was no constitutional guarantee against double taxation, nor was there a constitutional bar upon the legislative for imposing the same---Principle applicable merely was that double taxation should not be presumed in the absence of clear, express and unequivocal provision---Provisions of S.235, Income Tax Ordinance, 2001 were crystal clear leaving no room for doubt as to its applicability with the rate leviable spelt out in Part-IV of the First Schedule of the Ordinance---Contention of the assessee was repelled---Principles.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary Ministry of Finance Islamabad and 6 others PLD 1997 SC 582 and Pakistan Industrial Development Corporation v. Pakistan through Secretary Ministry of Finance 1992 PTD 576 ref.

(d) Income Tax Ordinance (XLIX of 2001)---

----S. 235---Provision of S. 235, Income Tax Ordinance, 2001 is not confiscatory, in view of the quantum of tax levied---Reasons.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad PLD 1998 SC 582 ref.

(e) Income Tax Ordinance (XLIX of 2001)---

----S. 235---Constitution of Pakistan (1973), Arts.4 & 24---Surplus advance tax---Surplus amount after adjustment of minimum tax in case of persons other than companies in law and in fact belongs to and vests in the assessee and is the property of the assessee which can only be appropriated by the department if the said amount can be brought within the mischief of a charging provision in respect whereof---By virtue of S.235(4) of the Income Tax Ordinance, 2001, in case of persons other than companies, the department is retaining and the assessess are being deprived of the funds and the properties in violation of the law---Such act of the department is not only violative of Art.4 of the Constitution, it manifestly offends against the fundamental rights of the assessees as guaranteed under Art.24 of the Constitution---Section 235, inasmuch as it purports to deal with the surplus advance tax after the adjustment of the minimum tax up to a bill of Rs.20,000 per month it is ex facie in violation of the Constitution and the fundamental rights of the assessees---Principles.

Commissioner of Income Tax v. Asbestos Cement Industries Ltd. and others 1993 PTD 342 and Lt. Col Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan Karachi and another PLD 1962 SC 335 ref.

(f) Income Tax Ordinance (XLIX of 2001)---

----S. 235---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of S.235, Income Tax Ordinance, 2001---Section 235, Income Tax Ordinance, 2001, to the extent that it applies to companies, is intra vires the Constitution, however, tax collected from the person other. than a company under S.235(1) of the Income Tax Ordinance, 2001 after deduction of minimum tax charged/levied under S.235(4) of the Ordinance, though in the custody of the department, in law and in fact, is the property of the assessee, and is available for adjustment against any other charge under the Income Tax Ordinance, 2001 and the surplus, if any, thereafter is liable to be refunded to the assessees---Principles.

Elahi Cotton Mills and others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad PLD 1997 SC 582 ref.

(g) Income Tax Ordinance (XLIX of 2001)---

----S. 234-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of S.23-A, Income Tax Ordinance, 2001---Section 234-A, Income Tax Ordinance, 2001 is intra vires the Constitution and no exception can be taken thereto---Principles.

Mian Ashiq Hussain, Ch. Anwar ul Haq-I, Mr. Muhammad Ajmal Khan, Mian Tabasam Bashir, Mr. Shahbaz Butt, Mian Mehmood Rashid, Mr. Siraj ud Din Khalid, Musthaq Ahmed Mughal, Muhammad Aslam Khan Dhakar, Sardar Muhammad Hussain Khan, Javed Iqbal Qazi, Akbar Ali Sheikh, Zafar Iqbal Chuhan, Shehzad Ahmed Durrani, Rana Muhammad Afzal, Sh Naveed Masud, Shafqat Mehmood Chuhan, Muhammad Naveed, Barrister Zargam Lakhser, Ch. Mumtaz ul Hasan, Muhammad Farooq Sheikh, Ijaz Ahmed Awan, Shahbaz. Siddique, Waqar Azeem, Shahid Mehmood Bhatti, Shahzada Mazhar, Javed Mazhar Dhoon, Ijaz ul Ahsan, Ustad Muhammad Iqbal, Muhammad Akram Shahid, Ch. Mumtaz ul Hasan, Qamar uz Zaman Akhtar Tarar, Rana Munir Hussain, Muhammad Akhtar Rana, Khalid Nawaz Ghuman, Malik Imran Nazir Awan, Kh. Saeed uz Zafar, Rana Muhammad Arshad Khan, Ijaz Ali Bhatti, Irtaza Ali Naqvi Muhammad Arif Yaqub Khan, Muhammad Jamil ur Rehman, Muhammad Waseem, Aamir Umar Khan, Zahid Farani Sheikh, Abdul Razaq Mirza, Asif Masud Khan, Ali Mansur Malik, Muhammad Nadeem, Umar Alvi, Abdul Qadoos Mughal, Ghulam Abbas Sandhu, Aamir Ali Khan, Agha Sarfraz, Muhammad Saqib Sheikh, Muhammad Hussain Chutia, Tariq Saleem Sheikh, Muhammad Aamir Malik and Muhammad Shahzad Shaukat for Petitioners.

Muhammad Ilyas Khan, Senior Legal Advisor Income Tax, Shahid Jamil Khan, Jan Muhammad Chaudhri, Tahir Mehmood Khokhar and Fayyaz Sangera for Respondents.

Muhammad Ashraf Khan, DAG and Nawaz Waseer Standing Counsel.

Date of hearing: 11th, 12th, 13th, 30th and 31st March, 2009, 1st 2nd, 3rd, 6th, 8th and 10th April, 2009.

JUDGMENT

SH. AZMAT SAEED, J.---Through this order it is proposed to dispose of all the connected writ petitions wherein the vires of section 234 and/or 235 of the Income Tax Ordinance, 2001 have been challenged including Writ Petition Nos. 8872, 9296, 9485, 9295, 6410, 3602-BWP, 2600-BWP, 3473-BWP, 3225-BWP, 3062-BWP, 12213, 12214, 12643, 12901, 12080, 12079, 12081, 12196, 13875, 13997, 13058, 13770., 13145, 13969, 13970, 13971, 13703, 13921,13947, 13928, 13715, 13825, 13827, 13828, 13919,13816, 13874, 13702, 14038, 14592, 14603, 14533, 14468, 14498, 14488, 14489, 14490, 14491, 14492,14110, 14736, 14118, 14119, 14295, 14072, 14061, 14476, 14040, 14086, 14182, 14728, 14039, 14469, 14062, 14063, 14067, 14070, 14066, 14064, 14065, 14068, 14069, 14071, 14053, 14052, 14076, 14055, 14054, 14232, 15051, 15701, 15353, 15352, 15217, 15211, 15483, 15147, .15423, 16500,16634, 16635, 16774, 16858, 16047, 16499, 16596, 16595, 16594, 16695, 16353, 16334, . 16732, 16849, 16897, 16910, 16682, 16940, 16208, 16700, 16587, 16818, 16726, 16725, 16598, 16295, 16903, 17826, 17661, 17573, 17549, 17580, 17131, 17025, 17023, 18847, 17848,'17850, 17557, 17849, 17210, 17350, 17271, 17004, 17132, 17523, 18412, 18413, 18374, 18414, 18382, 18375, 18645, 18074, 18591, 18056, 18053, 18462, 18605, 18603, 18604, 18602, 18452, 18451, 18564, 18672, 18407, 18170, 18060, 18164, 18569; 18165 of 2008 and Writ Petitions Nos. 82, 83,801, 822, 150, 736, 735, 734, 515,122, 985, 290, BWP, 746, 747, .579, 900, 901, 902, 790, 809, 825, 802, 899, 784, 616, 615, 614, 619, 805, 816, 624, 829, 831, 874, 103, 956, 504, 742, 995, 877, 380, 133, 903, 737, 3180, 3182, 2957, 7386, 1315, 2774, 3179, 2958, 2935, 2936, 2543, 2548, 2586, 1080, 6328, 6329, 6327, 4976, 1456, 5048, 3193, 1449, 1046, 2539, 2946, 2897, 1131, 1130, 1081, 4925, 2934, 3286, 3329, 3503, 5024, 5086, 1772, 3132, 1849, 3131, 1284, 1653, 4548, 3520, 3423, 3660, 3521, 3522, 3523, 4984, 1170, 3052, 1052, 3502, 3501, 5076, 2763,7387, 1455, 1115, 1119, 2537, 1114, 1120,2547,3266, 5727,3037, 1748, 1147, 1146, 7290, 3472, 7335, 7358, 7293, 4778, 4773, 2877, 3774, 7375, 7456, 7378, 2570, 1727, 6529, 5115, 1668, 6249, 3596, 2560, 2321, 6630, 7372, 6688, 7457, 7377, 7376, 7373, 5006, 5005, 5178, 5003, 5004, 3225, 3154, 5041, 2909, 1584, 1079, 3017, 3589, 6551 and 3016 of 2009.

3. That on behalf of the petitioners, challenge has been thrown by Mian Ashiq Hussain Advocate in addition to Messrs Ch. Anwar-ul-Haq, Siraj-ud-Din Khalid, Shahbaz Butt and Tariq Saleem Sheikh Advocates who also addressed their arguments which were adopted by the other counsel representing other petitioners.

4. It was contended on behalf of the petitioners that section 235 of the Income Tax Ordinance, 2001 as amended offends against Article 142(c) of the Constitution of Islamic Republic of Pakistan, 1973. It is the case of the petitioners that by virtue of the impugned provision purportedly the tax, which is levied and is being collected on electricity bills of the assessee in pith and substance is a tax imposed upon the consumption of electricity which is an expenditure incurred by the assessees for carrying on business, and such tax on expenditure does not fall within the pale of any of the items of the Federal Legislative List of the Constitution. Hence, Majlis-e-Shoora was not vested with the legislative competence to impose the said tax in view of Article 142(c) of the Constitution of Islamic Republic of Pakistan, 1973. It contended that legislative competence in this behalf at best would vest in the Provincial Legislature subject to the other contentions raised on behalf of the petitioners. It is added that the said tax does not come within the parameters of item 47 of the Federal Legislative List of the Constitution, hence, cannot be levied thereunder or in lieu thereof under item 52 of the said Legislative List. In this behalf, it is further contended that it is not the nomenclature employed which is relevant but rather the pith and substance of the tax.

5. In the alternative it was further contended that any expenditure incurred may at best be used as a measure for determining the capacity of an assessee to pay the income tax. However, in such circumstances there must necessarily be a direct nexus between the subject-matter of tax, (in the instant case income) and the levy. And by virtue of section 235 of the Ordinance, the collection is effected in respect of the electricity consumption bill from a great variety of business concerns including both commercial and industrial (other than those exempted therefrom) and the cost of electricity as a proportion of the cost of production in case of industrial units and cost of business in case of commercial units is of incredible variation ranging from negligible to overwhelming, hence, no logical and rational nexus can be drawn between the cost of consumption of electricity and the income generated by consumers thereof.

6. It is next contended on behalf of several of the petitioners that the cost of electricity consumption as a total cost of production is extremely high if industrial activity being undertaken is power intensive as for example foundries. While in other cases, the cost of electricity consumption as a total cost of business may be very low, say for commercial activities, and the same rate of tax has been levied on both sets of consumers/assesses. Two assesses in an unequal situation have been treated equally which is the worst form of discrimination. Hence, section 235 of the Ordinance' under challenge offends against Article 25 of the Constitution of Islamic Republic of Pakistan, 1973. Furthermore, the said provision is also discriminatory inasmuch as the collection made from companies is refundable while in respect of persons other than companies, the same is only adjustable but not refundable. There is no rationale basis for such discrimination. It is added that there is no intelligible differentia to sustain the claim of valid classification in this behalf.

7. It is also the case of the petitioners that in fact provision of section 235 of the Income Tax Ordinance, 2001 is confiscatory in nature, hence, offends against Article 24 of the Constitution of Islamic Republic of Pakistan, 1973. In this behalf it is contended that with reference to power intensive industrial concerns the tax levied and collected under section 235 of the Ordinance is in fact more than the normal profit/ income that can be earned from such business, as a consequence whereof such business have not only become uneconomical, but also it is impossible to pay the tax liability from the income of the business necessitating disposal of its capital to pay such liability, hence the impugned levy is confiscatory and expropriatory, and thus, violative of Article 24 of the Constitution of Islamic Republic of Pakistan, 1973.

8. It is further added that tax under Ordinance, 2001 can only be levied on income and not expenditures, in the instant case the cost of power or energy cannot be treated as income especially in the absence of any deeming clause or a charging section. It is further contended that even otherwise section 235 is vague and ambiguous.

9. It is also contended that several of the petitioners are also being dealt with under various other presumptive tax regimes and deductions effected thereunder are a final discharge of their tax liability, hence, provision of section 235 of the Ordinance cannot be pressed into service as it would constitute double taxation.

10. Great emphasis was also laid on the fact that in respect of persons other than companies, the collections effected under section 235 of the Income Tax Ordinance are adjustable and the surplus, if any, left over in the hands of the Revenue is not refundable, hence, respondents are retaining the said amount without any lawful basis, hence, section 235 also offends against Article 77 of the Constitution of Islamic Republic of Pakistan as there is no charging provision in respect of the said amount.

11. In the above context, it is contended on behalf of the petitioners that section 235 of the Income Tax Ordinance 2001 being ultra vires of the Constitution be declared as such and struck down. In support of their contentions, learned counsel for the petitioners relied on PLD 1995 SC 66 Pir Sabir Shah v. Shad Muhammad Khan and another, 1999 SCMR 382 Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan and three others, PLD 1997 SC 582 Elahi Cotton Mills Ltd. and others v. Federation of Pakistan and 6 others, 1996 SCMR 1470 BP Biscuit Factory Ltd. Karachi v. Wealth Tax Officer and another, PLD 1993 SC 176 Government of Pakistan and others v. Muhammad Ashraf and others, 1992 PTD 576 Pakistan Industrial Development Corporation v. Pakistan through Ministry of Finance, 1993 SCMR 1905 Molasses Trading and Export Pvt. Ltd v. Federation of Pakistan and others, 2003 PTD 1 Ms. Tanzeb Textile Industries Faisalabad v. CIT Faisalabad Zone Faisalabad, (1989) 3 Supreme Court cases 211 Buxa Dooars Tea Company Ltd., and others v. State of West Bengal and others, 1996 SCMR 700 Central Board of Revenue Islamabad etc., v. Seven Up Bottling Company Pvt. Ltd., 2008 PTD 838 Ms. Al-Rai Flour Mills Lahore v. Commissioner of Income Tax/Wealth Tax Companies Zone 1 Lahore, 2001 PTD 570 Karachi High Court Messrs Continental Chemical Co. Pvt. Ltd. v. Pakistan and others PLD 1997 Lahore 797, Messrs Highway Petroleum Service (Regd.) Lahore v. Islamic Republic of Pakistan and another, 1992 PTD 576 Pakistan Industrial Development Corporation v. Pakistan through Secretary Ministry of Finance, 2001 PTD 1557, Messrs ICC Textile Ltd., and others v. Federation of Pakistan and others and 1992 PTD 726 Haji Muhammad Shafi and others v. Wealth Tax Officer and others.

12. In defence of the provision of section 235 of the Ordinance, Messrs Muhammad Ilyas Khan, Shahid Jamil Khan Advocates addressed this court on behalf of respondents. Learned Deputy Attorney General as well as Mr. Fayyaz Ahmed Sanghera, and the Standing Counsel also made their submissions on behalf of the respondents.

13. It is contended on behalf of the respondents that items of the Federal Legislative List are to be construed liberally. The impugned provision is within the parameters of item 47 read with item 52 of the Federal Legislative List. It is added that expenditure is an acceptable mode for determination an assessee's capacity to earn and can be employed to determine the tax payable under the minimum presumptive tax regime, as has been held by the Hon'ble Supreme Court in the case reported as PLD 1997 Supreme Court 582 Messrs Elahi Cotton Mills Ltd., and others v. Federation of Pakistan through Secretary Ministry of Finance Islamabad and 6 others. It is further added that in matters pertaining to levy of tax, the protection against discrimination in terms of Article 25 of the Constitution of Islamic Republic of Pakistan, 1973 is not attracted with the same rigor and force as in other cases, for in the ultimate analysis, it is the legislative judgment of whom to tax and how much to tax, which must prevail and due deference may be paid to such decision of the legislature and in this behalf, judicial self-restraint must be exercised. It is further added with reference to such of the petitioners who may be subjected to presumptive tax regime under any other provision of Income Tax Ordinance that the final discharge is only with reference to the income or the transaction subject thereto. Any other income under the same or a different head of income would be liable to tax under the law including under section 235 of the Income Tax Ordinance, 2001 which, it is contended, does not amount to double taxation. Even otherwise, such double taxation is not prohibited by law as long as there is an express provision therefor. It is added that there is presumption of legality with regard to legislative enactments both with reference to legislative competence as well as being intra vires the Constitution. Furthermore, a statutory provision should not be lightly struck down and every effort must be made by interpreting the same so as to protect and preserve the same. It is further contended that corporate and non corporate entities have always been dealt with differently under the Income Tax Ordinance and the same is a valid classification. In this behalf vires of the provisions of the Income Tax Ordinance, 2001 were referred. In the above context, the learned counsel for the respondents prayed that it be held that section 235 of the Ordinance as intra vires the Constitution and the petitions be dismissed accordingly.

14. Counsel for the parties have been heard. Record perused. It would be appropriate to first advert to the challenge thrown to the vires of section 235 of the Income Tax Ordinance, 2001, which is a common ground in all the captioned Constitutional Petitions. Said provision of law as amended reads as follows:--

"(1) There shall be collected advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer.

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

(3) Advance tax under this section shall not be collected from a person who produces a certificate from the Commissioner that his income during tax year is exempt from tax.

(4) The tax collected under this section (up to bill amount of twenty thousand rupees per month) shall be minimum tax on the income of a person (other than a company). There shall be no refund of the tax collected under this section, unless the tax so collected is in excess of the amount for which the tax payer is chargeable under this Ordinance in the case of a company)."

15. On examination, the said provisions reveals that different treatment is being meted out to the companies as opposed to persons other than companies, and the contentions of the learned counsel for the parties must necessarily be examined separately with respect to the two separate species of assessees in the context of the applicability of section 235 thereto.

16. However, before proceeding further it would be appropriate to draw a distinction between the collection of tax and its levy or changeability. Similarly, the process of assessment of liability also must be distinguished. The distinction between the subject matter of the tax and the standard whereby it was measured must also be borne in mind. In the case of Whiteny v. Inland Revenue Commissioners reported as AIR 1926 AC 37 it has been held at page 52 as follows:--

..."Now there are three stages in the imposition of a tax, there is the declaration of liability, that is the part of the statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That ex-hypothesis has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay."

17. In the case reported as Elahi Cotton Mills Ltd. PLD 1997 SC 582, the Hon'ble Supreme Court held as under:--

"(xxvii) That there is a clear 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 thought that it would facilitate the collection of tax due from specified traders on a presumptive basis, the same is not violative of the Fundamental Rights relating to equality"....

18. The aforesaid clearly identifies three stages of imposition of tax, i.e., 'Declaration of Liability, Assessment and Recovery. However, the aforesaid three stages need not necessarily occur in any particular order. More importantly, the recovery of tax whether directly from the assessee or indirectly through collection from expenditure or deduction from receipts, as the case may be, does not amount to assessment of tax, nor creates any liability to pay the said amount. Advance tax is merely a provisional payment. Furthermore, the mode of recovery of tax is not the sole determining factor in ascertaining the subject matter of tax.

19. In respect of the companies the collection made under section 235(1) of the Ordinance is an Advance Tax, which by virtue of section 235(4) is liable to be adjusted against any charge of tax and surplus, if any, after such adjustment against the tax liability is available for refund to the assessee. It is thus clear and obvious that in respect of the companies, section 235 of the Ordinance merely provides for the collection of tax and does not perceive for either its assessment or its charge or levy. It is a settled law that the mode of collection of tax through Advance tax is valid and legal, challenges thereto on the grounds of being violative of fundamental rights and/or beyond the legislative competence of the Majlis-e-Shoora have been rejected. The Advance Tax collected under section 236 of the Income Tax Ordinance, 2001 was held to be valid by the Honourable Sindh High Court in its judgment reported as Call Tel and another v. Federation of Pakistan and others (2005 PTD 833) which was upheld by the apex Court through its judgment reported as Call Tel Pvt. Ltd. v. Federation of Pakistan (2004 PTD 3032) by following its own earlier judgment in the case of Elahi Cotton Mills PLD 1997 SC 582 holding that a provision for the collection of Advance Tax was within the legislative competence of Majlis-e-Shoora in view of Item 47 of the Federal Legislative List. Furthermore, any such advance tax was not in violation of any of the fundamental rights. It was further held that collection of Advance Tax on the amount of telephone bills did not effect the essential subject matter of tax which remained tax on income.

20. In the instant case, it is clear and obvious that the Legislature has employed a mode for the collection of tax through the electricity bills, and the amounts so collected, are liable to be adjusted against any charge or levy due from the assessee under the other provisions of the Income Tax Ordinance, 2001 and the surplus if any refunded. Thus, for all intents and purposes, the subject-matter of tax remains the income of the assessee which is separately charged and assessed under the other provisions of the Ordinance and section 235 of the Ordinance with regard to the companies merely perceives of mode of collection subject to assessment and charge. Thus this court in view of the law laid down by the apex Court referred to above, has no hesitation in holding that in case of companies subject matter of the tax remains the income of the assessee and not the electricity bill.

21. A feeble attempt was made by the learned counsel for the petitioners to contend that some companies may be entitled to final discharge under section 169 of the Ordinance; hence, section 235 cannot be applied to them. Suffice it to say that in case of presumptive tax regimes where there is a final discharge of liability under section 169 of the Income Tax Ordinance, 2001, said discharge is limited to the transaction or the income covered by such provision of the presumptive tax regimes which are enumerated in section 169 of the Ordinance. It does not extend to any other income of the assessee under the same or different head. Thus, the tax collected under section 235 of the Ordinance can be adjusted against any tax due with regard to other income of the assessee not covered under the separate presumptive tax regime, and where no such liability of tax exists, then obviously the amount collected under section 235(1) of the Ordinance would be refunded to the company under section 235(4) thereof.

22. In view of above, as far as applicability of section 235 of the Ordinance qua companies is concerned, no exception can be taken thereto, as the said provision does not offend against any fundamental rights of the assessee and is also well within the legislative competence of Majlis-e-Shoora.

23. With reference to persons other than companies, treatment being meted out by section 235 of the Ordinance is dramatically different. The recovery effected under section 235(1) is an advance tax, and the amounts collected up to a bill of Rs.20,000 per month it is to be treated as minimum tax of the income of such person by virtue of section 235(4) of the Ordinance. With regard to the amounts collected over and above the bill of Rs.20,000 per month in respect of persons other than companies, the same is not refundable though perhaps adjustable against any charge of income tax. The two amounts i.e., the collection from bill of upto Rs.20,000 per month and collections from bills over and above Rs.20,000 have been dealt with separately and subjected to a different treatment and thus the challenge thrown by petitioners would therefore have to be examined separately in both cases.

MINIMUM TAX

24. The collections effected by virtue of subsection (1) of section 235 is an advance tax, which in respect of persons other than the companies is a minimum tax on the income of such persons in respect of bill upto Rs.20,000 per month. At the current rate as specified in Part IV of the Schedule, same is at the rate of 10% and would be a maximum of Rs.2000 per month. Such a minimum or presumptive tax is an acceptable mode for broadening the tax base and eliminating the mal practices in the taxation system both at the official level and by the assessees. The distinction has already been drawn between the subject-matter of the tax and the measures of tax. The hallmark of the minimum or presumptive tax regime is that it may not necessarily be levied directly on the basis of net income but on the basis of receipts or expenditures as has been held by the Honorable Supreme Court in Elahi Cotmn Mills case supra as under: -

"The word "income" is susceptible as to include not only what is in ordinary parlance it conveys or it is understood, but what is deemed to have arisen or accrued. It is also manifest that income tax is not only levied in the conventional manner i.e., by working out the net income after adjusting admissible expenses and other items, but the same may also be levied on the basis of gross receipts, expenditure etc. There are new species of income tax, namely, presumptive tax and minimum tax".

25. In the instant case, presumptive minimum tax has been levied on the basis of the electricity bill which is an expenditure and in view of the above quoted ratio of the said judgment of the apex court is valid especially as there is a direct nexus between the energy consumed and the economic activity conducted resulting in generation of income or the capacity to earn and pay. The mere fact that the basis of the levy is the electricity bill does not detract from the essential nature of the tax i.e., a tax on the income of the assessee.

26. Adverting now to the contentions of the learned counsel for the petitioners that some of such petitioners which are not companies are subject to other presumptive tax regime envisaged by the Ordinance, in terms whereof, collection made on deductions effected is a complete discharge of their tax liability under section 169 of the Ordinance, 2001, whereby, recoveries effected under the provisions mentioned therein are treated as final tax, and therefore, the petitioners cannot be subjected to section 235 of the Ordinance. In this regard, it was for the petitioners to establish on a case to case basis as to which of such petitioners was subject to which particular presumptive tax regime of the Ordinance mentioned in section 169, and therefore, there existed a final discharge of liability. Such information is supported and substantiated by verifiable material is conspicuous by its absence.

27. Be that as it may, in such an eventuality, the collections made under section 235 of the Ordinance in respect of persons other than companies would at best encroach into the territory of double taxation. There .is no constitutional guarantee against double taxation, nor is there a constitutional bar upon the Legislature from imposing the same. The principle applicable merely is that double taxation should not be presumed in the absence of clear, express and unequivocal provision as held by the Honourable Supreme Court of Pakistan in the case of 1992 PTD 576 Pakistan Industrial Development Corporation v. Pakistan through Secretary Ministry of Finance wherein it was held as under:--

"It is thus, clear that unless there is any prohibition or restriction imposed on the power' of Legislature to impose a tax twice on the same subject matter double taxation though a heavy burden and seemingly oppressive and inequitable cannot be declared to be void or beyond the powers of the Legislature. It may, however, be noted that double taxation can be imposed by clear and specific language to that effect"...

As discussed above in the absence of any prohibition or limitation by Constitution or law the legislature can impose tax twice over on the same amount or income. Super tax has been levied in addition to income tax by a clear and independent provision for whose charge, assessment and recovery procedure has been provided by section 58. The legislature by clear unambiguous and definite terms levied super tax on the total income determined for purposes of income tax. In these circumstances even if it amounts to double taxation it cannot be struck down"...

28. In the instant case, the provisions of section 235 are crystal clear leaving no room for doubt as to its applicability with the rate leviable spelt out in Part-IV of the 1st Schedule of the Ordinance. In this view of the matter, this court finds itself unable to agree with the contentions of the learned counsel for the petitioners in this behalf.

29. Before proceeding further it would be appropriate to advert to the contentions of the learned counsel for the petitioners that the provisions of section 235 of the Income Tax Ordinance, 2001' are confiscatory in nature, hence, offends against the fundamental rights. There can be no escape from the fact that the quantum of tax to be levied is the prerogative of the Legislature and judicial deference has to be shown to the legislative judgment in this behalf as long as the tax imposed does not loose its essential character as a tax so as to result in acquiring a property of those on whom the incidents of the tax fell. However, distinction needs to be drawn between mere hardship and actual expropriation as a consequence of the levy of the tax in question.

30. The mode for determining as to whether a particular lax is confiscatory or not has been set forth in Elahi Cotton Mills case supra in E the following terms:--

"the burden to show that the impugned taxes are confiscatory or expropriatory, was on the appellants. In our views, they have failed to bring on record any reliable material on the basis of which it can be concluded that the same are confiscatory or expropriatory"...

The question as to whether a particular tax is confiscatory or expropriatory is to be determined with reference to the actual earning or earning capacity of an average prudent successful entrepreneur in a particular trade or business. The fact that a particular assessee has suffered loss/losses during certain assessment years, is not germane to the above question."...

31. In the instant cases no material was placed on record so as to enable this court to adjudicate upon the contentions being raised on behalf of the petitioners. In all fairness, Mian Ashiq Hussain Advocate did furnish some figures before this court as a samples, but they were not substantiated/supported by reliable material, which in the instant case would be audited account and feasibility reports etc of the businesses of the petitioners. Furthermore, an individual case is not representative per se of an average prudent successful entrepreneur. Thus, this court is unable to hold section 235 of the Ordinance as confiscatory in view of the quantum of tax levied.

SURPLUS ADVANCE TAX

32. The tax collected under section 235 of the Income Tax Ordinance, 2001 in case of persons other than companies in respect of electricity bills upto Rs.20,000 per month has been held to be the minimum tax. However, with reference to an amount collected from bills over and above Rs.20,000 per month, i.e., the surplus amount of advance tax, situation appears to be very interesting. It is merely stated in sub section 4 of section 235 of the Ordinance that the said amount shall not be refunded after adjustment of any other charge of the tax except in the case of a company. With respect to persons other than companies, no specific provision has been made, except that the said surplus amount shall not be refunded.

33. There can be no escape from the fact that the amount collected in its entirety including the surplus amount over and above the minimum tax by virtue of sub section 1 of section 235 of the Ordinance is Advance tax as has been categorically stated in the said provision. The legal status of Advance tax has been held by the Hon'ble Supreme Court in the case reported as 1993 PTD 343 Commissioner of Income Tax v. Asbestos Cement Industries Ltd., and others to be:--

"The said amount does not become the property of the Central Government but remains vested in the assessee-company. Undoubtedly, it is an amount which must be paid in advance in respect of tax before it becomes due. But it (the tax) becomes due only after regular assessment and if on regular assessment nothing or a lesser amount is found due and payable, the Government in that event shall have to return the amount paid of the sum paid in excess with interest from the date of payment to the date of such assessment."...

34. Thus the amount of advance tax in fact and in law is the property of the assessee. Its collection is merely recovery and does not amount to either assessment or liability to pay the tax, in respect whereof, specific provision must exist as has been held by the Hon'ble Supreme Court in the, case reported as Lt. Col Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty, Government of Pakistan Karachi and another (PLD 1962 SC 335) in the following manner:--

"The liability to pay the tax arises by virtue of the charging sections alone, though quantification of the amount payable may be postponed".

35. In view of above it is clear and obvious that the surplus amount after adjustment of minimum tax in case of persons other than companies in law and in fact belongs to and vests in the assessee and is the property of the assessee which can only be appropriated by the respondents if the said amount can be brought within the mischief of a charging provision in respect whereof. Learned counsel for the respondents have been specifically asked to identify the charging provision whereunder the said amount would become liable as a tax. The response was a deafening silence. Neither the learned counsel for the respondents could identify any such provision creating a liability of the assessee vis-a-vis the said surplus amount nor this court could discover the same in the Income Tax Ordinance, 2001. Thus, it is equally clear and obvious that by virtue of section 235(4) in case of persons other than companies, the respondents are retaining and the assessees are being deprived of the funds and the properties in violation of the law. This act is not only violative of Article 4 of the Constitution but manifestly offends against the fundamental rights of the petitioners as guaranteed under Article 24 of the Constitution of Islamic Republic of Pakistan 1973.

36. There is a plenty of authority to support the view as canvassed by the learned counsel for the respondents that there is a presumption of legality and validity attached to the Legislative Enactments, and every effort should be made to save rather than to destroy the law. No doubt, in taxation matters more than usual latitude is usually accorded to the Legislature, and judicial deference to legislative judgment is called for by exercising judicial self-restraint by the courts. However, in the instant case, the literal interpretation of the impugned provision of law i.e., section 235 of the Income Tax Ordinance, 2001 leads this court to an irresistible conclusion that inasmuch as it purports to deal with the surplus advance tax after the adjustment of the minimum tax up to a bill of Rs.20,000 per month it 'is ex facie in violation of the Constitution and the fundamental rights of the assessees, as has been discussed herein above.

37. In view of above, this court is confronted with two possible options; either is to strike down impugned section 235 Income Tax Ordinance, 2001 being ultra vires the Constitution and fundamental rights of the citizens or in the alternate, to resort to the time honoured rule of interpretation of employing the theory of reading down and looking beyond the literal meaning of the provision. (See Elahi Cotton Mill's case supra). In the instant case, latter course of action appears to be more appropriate, firstly, because section 235 ibid in its entirety, and in all its manifestation is not ultra vires the Constitution, but only in its applicability to persons other than companies in respect of the surplus of the advance left over after deduction of the minimum tax is questionable. Furthermore, a presumption exists that Legislature is aware of the limitations imposed by the Constitution qua its competence and the necessity to legislate so as not to encroach upon the fundamental rights of citizens, as guaranteed by the Constitution and did not intend to overstep such limitations. The courts in such circumstances may reach out beyond the literal words so as to interpret the law in a manner that it conforms with the Constitutional. In the instant case, the Legislature should not be attributed the intention of depriving the citizens of their property without due process and in violation of their fundamental rights. Consequently this court is constrained to hold that any tax collected from the person other than a company under subjection 1 of section 235 of the Income Tax Ordinance, 2001 after deduction of minimum tax charged levied under subsection 4, though in the custody of respondents, in law and in fact, is the property of the assessee, and is available for adjustment against any other charge under the Ordinance and the surplus, if any, thereafter is liable to be refunded to the assessee.

38. That as a consequence of reading down the provision of section 235(4) of the Ordinance it is not necessary for this court to adjudicate upon the pleas raised on behalf of the petitioners that the said provision is discriminatory and hence in violation of Article 25 of the Constitution of Islamic Republic of Pakistan.

SECTION 234 INCOME TAX ORDINANCE, 2001

39. In some of the writ petitions reflected ibid, challenge has also been thrown to the vires of section 234A of the Income Tax Ordinance, 2601 which reads as follows:-

"234A-CNG Stations.---(1) There shall be collected advance tax at the rates specified in Division VIB of Part II of the First Schedule on the amount of gas bill of a Compressed Gas Station.

(2) The person preparing gas consumption bill shall charge advance tax under sub section (1) in the manner gas consumption charges are charged.

(3) The Tax collected under this section shall be final tax on the income of the CNG Station arising from the consumption of gas referred to in sub section (1)

(4) The taxpayers shall not be entitled to claim any adjustment of the withholding tax collected or deducted under any other head during the year."

40. Learned counsel representing the petitioners in these petitions have attempted argue that the aforesaid tax is confiscatory and is violative of the fundamental rights of the petitioners. It is added that in pith and substance it is a tax levied on expenditure and not on income, hence, beyond the legislative competence of the Majlis-e-Shoora. Grievance has also been raised that with reference to subsection 4 of the aforesaid provision.

41. Learned counsel for the respondents have controverted the contentions being raised on behalf of the petitioners.

42. As discussed in the preceding paragraphs of this judgment, reliable material was required to be brought on record to establish that in fact the tax levied under section 234-A is confiscatory. Neither the accounts audited or otherwise or any feasibility report was placed on record so as to enable this court to come to any such conclusion. Similarly, as already observed above, there is a difference between mode of recovery of the tax and the. subject matter of tax. Merely because the tax is collected from expenditure does not make it any less a tax on income especially as there is a direct nexus between the consumption of natural gas and the business of CNG Station, as a consequence whereof, the levy does not lose its essential feature of being a tax on income rather than expenditure as alleged. It is within the legislative competence of Majlis-e-Shoora on the accumulative reading of Items 47 and 52 of the Federal Legislative List.

43. With reference to subsection 4 of section 234A, questions have been raised by the learned counsel for the petitioners with reference to adjustment of advance tax or withdrawals from the bank accounts under section 231-A, on the purchase of car or jeep under section 231-B on token tax on vehicles under section 234 and advance tax on telephones and mobile phones under section 236.

44. In the report and parawise comments filed on behalf of the respondents through Commissioner Income Tax Legal Division, it has been specifically stated in para 20 that "the tax collected under sections 231A, 234, 236 of the Income Tax Ordinance, 2001 is adjustable/refundable. The objection of the petitioner is premature".

45. In view of the aforesaid the anxiety being expressed by the learned counsel on behalf of the petitioners is misconceived and no adjudication by this court in this context is called for. In the above context, this court is not persuaded to hold that section 234A or any part thereof is ultra vires the Constitution of Islamic Republic of Pakistan, 1973.

46. For the foregoing facts and reasons, this court holds that section 234A of the Income Tax Ordinance, 2001 is intra vires the Constitution of Islamic Republic of Pakistan, 1973 and no exception can be taken thereto.

47. It is further held that section 235 of the Ordinance ibid to the extent that it applies to companies it is also intra vires the Constitution. However, it is held that that any tax collected from the person other than a company under subsection 1 of section 235 of the Income Tax Ordinance, 2001, after deduction of minimum tax charged and levied under subsection 4, though in the custody of respondents, in law and in fact, is the property of the assessee and is available for adjustment against any other charge under the Ordinance, the surplus, if any, thereafter is liable to be refunded to the assessee. Disposed of in terms enumerated ibid.

M.B.A./I-43/LOrder accordingly.