Syed ZIA HAIDER RIZVI VS DEPUTY COMMISSIONER OF WEALTH TAX, LAHORE, 2011 PTD-SUPREME-COURT 610 (2011)

(On appeal from the judgment dated 29-9-2005 of the Lahore High Court, Lahore passed in Writ Petition No. 15148 of 1999, W.T.As. Nos. 194, 195, 196, 206, 198, 199 and 200 of 2002).

(a) Wealth Tax Act (XV of 1963)---

----S. 27---High Court, appellate jurisdiction of---Scope---Normally High Court would answer question of law arising out of order of Tribunal and then send copy of its judgment to Tribunal for disposing of case in its conformity.

(b) Constitution of Pakistan---

----Art. 68---Parliament---Requirement of a statute to place any notification or Rules before Parliament---Mode and purpose stated.

In a democratic setup, every Government is responsible to its Legislature. When any statute requires mere lying of any notification or Rules before the Legislature, its executive, viz. State Government, comes under the scrutiny of the concerned Legislature. Every function and every exercise of power by the State Government is under one or other Ministry, who in turn is accountable to the Legislature concerned. Where any document, Rule or notification requires placement before any House or when placed, the said House inherently acquires' the jurisdiction over the same. Irrespective of the fact that such rules or notifications may not be under purview of its modification, such members may seek explanation from such Ministry of their inaction, arbitrariness etc.

Laying before the House of Parliament are made in the three different ways. Laying of any Rule may be subjected to any negative resolution within a specified period or may be subjected to its confirmation. This is spoken as negative and positive resolution respectively. Third may be mere laying before the House.

Legislature, Constitutional and Administrative Law, Stanely De Smith and' Rodney Brazier, 7th Edition; Administrative law by HWR Wade and C.F. Forsyth, 10th Edition, page 765; Atlas Cycle Industries Ltd. v. State of Haryana AIR 1979 SC 1149 and Maulana Nur-ul-Haq v. Ibrahim Khalil 2010 SCMR 1305 rel.

(c) Wealth Tax Act (XV of 1963)---

----S. 5(2) & Second Sched. Cl. 12(2)---Exemption from wealth tax in respect of shop owned/occupied by assessee for business purposes---Refusal of authority to accept such claim on ground that exemption notification, though duly gazetted, was invalid for want of its placement before National Assembly---Validity---Second Schedule of Wealth Tax Act, 1963 dealing with exemption from tax only had no concern with imposition of any new tax or change of rate of tax levied under Wealth Tax Act, 1963---Requirement of S. 5(2) of Wealth Tax Act, 1963 for placement before National Assembly notification issued by Federal Government regarding any amendment in its Second Schedule was not mandatory, rather its purpose was to give information to legislature---Principles.

Iram Ghee Mills (Pvt.) Lahore v. Income Tax Appellate Tribunal, Lahore, Commissioner of Income-Tax, Central Zone `B' v. Messrs Farrokh Chemical Industries 1992 PTD 523; Habibur Rehman v. Ali Zafar Siddiqi 1992 SCMR 2351; Rana Muhammad Jamil v. The Punjab Road Transport Board, Lahore and others PLD 1957 (W.P.) Lah. 1; Asim Khan v. Muhammad Fazil Khan PLD 1983 SC 387; Mian Rafi ud-Din and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others PLD 1971 SC 252; Iftikhar Ahmad Shaikh v. Ch. Muhammad Din and 2 others PLD 1990 Lah. 461; Zulfiqar and others v. Shandat Khan PLD 2007 SC 582; Overseas Pakistanis Foundation and another v. Sqn. Ldr. (Retd) Syed Mukhtar Ali Shah and another 2007 SCMR 569; Reference No.1 of 1988, Made by the President of Pakistan PLD 1989 SC 75; Messrs Chenab Fabrics and Processing Mills Ltd. Faisalabad v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad and 5 others, 2006 PTD 1412; Commissioner of Income Tax, Zone-C, Lahore and others v. Messrs Kashmir Edible Oils Ltd. and others 2006 SCMR 109; Mst. Musarrat Umar Daraz v. Income Tax Appellate Tribunal, Lahore and 2, others 2006 PTD 1743 and Income-tax Appellate Tribunal Pakistan, 2000 PTD (Trib.) 2133 ref.

Legislature, Constitutional and Administrative Law, Stanely De Smith and Rodney Brazier, 7th Edition; Administrative law by Rodney Brazier, 7th Edition; HWR Wade and C,F. Forsyth, 10th Edition, page 765; Atlas Cycle Industries Ltd. v. State of Haryana AIR 1979 SC 1149 and Maulana Nur-ul-Haq v. Ibrahim Khalil 2010 SCMR 1305 rel.

(d) Interpretation of statutes---

----Mandatory or directory statute, determination of---Test stated.

There is no absolute test by which it may be determined whether a statute is mandatory or directory, the primary rule is to ascertain the Legislative intent as revealed by an examination of the whole Act.

Siraj-ud-Din Khalid, Advocate Supreme Court for Appellants (in C.As. Nos.99, 104-106 of 2006).

Muhammad Ilyas Khan, Senior Advocate Supreme Court, Legal Advisor Income Tax for Respondents (in all cases) (in C.As. Nos. 99, 104-106 of 2006).

Shahbaz Butt, Advocate Supreme Court for Appellants (in C.As. Nos. 100 to 103 of 2006).

Muhammad Ilyas Khan Sr. Advocate Supreme Court for Respondents.

Date of hearing: 26th November, 2010.

JUDGMENT

KHILJI ARIF HUSSAIN, J.--The issues in these appeals, with leave of the Court, apparently impress a common picturisation of usual nature, but they are raised in an interesting way while challenging the order of Income Tax Tribunal, whereby learned Tribunal denied exemption in respect of the premises, where appellants are carrying on business, claiming the same as "Shop" and we would like to dispose of all the appeals by a consolidated judgment as identical questions of law and facts are involved in the same.

2. The facts necessary to decide the listed appeals are that' the appellant in Civil Appeal No.99 of 2006, is owner having 1/2 share in the property at 11-Fane Road, Lahore, claimed exemption in respect of assessment years 1994-95, 1996-1997, alleging that the said property is a shop, used by him as his office for the purposes of business. The appellant in Civil Appeal No.100 of 2006 is owner of property at 5 Queens Road, Lahore, where he is carrying his business of repairing automotive vehicles, claimed exemption of Wealth Tax for the assessment years 1999-2000. The appellant in Civil Appeal No. 101 of 2006, claimed exemption in respect of the property at 32-B Jail Road, Lahore, where he is carrying his business as a motorcar dealer, claimed exemption of Wealth Tax for the assessment years 1997-98. In Civil Appeal No. 103 of 2006, appellant claimed exemption in respect of the property having an area of 7 marlas, where he is carrying the business of Plastic works, claimed exemption of Wealth Tax for the assessment years 1999-2000. In Civil Appeals No.104 to 106 of 2006, appellant claimed exemption in respect of property bearing No. 5-A, Queen's Road, Lahore, where he is carrying his business of motors dealer, claimed exemption of Wealth Tax for the assessment years 1996-97, 1997-1998 and 98-99.

3. The Civil Appeal No.99 of 2006, arises out of the judgment passed by the High Court, whereby Writ Petition filed by the appellant under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973, praying for declaration that the office used by him as place of his legal profession is a 'shop', and hence exempt from wealth tax under Clause 12(2) of the Second Schedule of Wealth Tax Act, 1963.

4. The Civil Appeals Nos. 100 of 2006 and 103 of 2006, arise out of the judgment passed by the High Court, on an appeal filed by the appellants under section 27 of the Wealth Tax Act, 1963, questioned the judgment passed by the Income Tax Appellate Tribunal and requested the learned High Court to decide the question of law arising out of the order of the Tribunal.

5. The Civil Appeals Nos. 101, 102, 104 to 106 arise out of an appeal filed by the respondent against the order of Income Tax Appellate Tribunal, whereby the learned Tribunal while setting aside the order, restored the order of exemption passed by the Deputy Commissioner Wealth Tax.

6. The learned counsel for the appellants vehemently argued that the learned High Court, while exercising advisory jurisdiction in an appeal under section 27 of the Wealth Tax Act, 1963, acted without jurisdiction by disposing of the appeal on the question which had not arisen out of the judgment passed by the Income Tax Appellate Tribunal, which was impugned through an appeal under section 27 of the Wealth Tax Act, 1963. The learned counsel further argued that the proviso to section 5(2) of the Wealth Tax Act, 1963, is merely directory and not mandatory, and non-compliance of it by the official functionary cannot disentitle the appellants to claim exemption for which they were entitled under Clause 12 (2) of Second Schedule of Wealth Tax Act, 1963. It was further argued that the proviso to a section couldn't nullify the very section itself. In support of contentions, learned counsel for the appellants relied upon the cases of Iram Ghee Mills (Pvt.) Lahore v. Income Tax Appellate Tribunal, Lahore, Commissioner of Income-Tax, Central Zone `B' v. Messrs Farrokh Chemical Industries, (1992 PTD 523), Habibur Rehman v. Ali Zafar Siddiqi, (1992 SCMR 2351), Rana Muhammad Jamil v. The Punjab Road Transport Board, Lahore and others, (PLD 1957 (W.P.) Lahore 1), Asim Khan v. Muhammad Fazil Khan, (PLD 1983 SC 387), Mian Rafi-ud-Din and 6 others v. The Chief Settlement and Rehabilitation Commissioner and 2 others (PLD 1971 SC 252), Iftikhar Ahmad shaikh v. Ch. Muhammad Din and 2 others, (PLD 1990 Lahore 461).

7. In support of the contentions whether a subject can be made to suffer due to an act of the Government, learned counsel relied upon the cases of Zulfiqar and others v. Shandat Khan, (PLD 2007 SC 582), Overseas Pakistanis Foundation and another v. Sqn. Ldr. (Retd) Syed Mukhtar Ali Shah and another 2007 SCMR 569, Reference No.1 of 1988, made by the President of Pakistan, (PLD 1989 SC 75) and Messrs Chenab Fabrics and Processing Mills Ltd. Faisalabad v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad and 5 others, (2006 PTD 1412).

8. On the other hand, learned counsel for the respondents, in reply, argued that the Clause 12(2) inserted by 'a notification, does not become operative for want of its approval from the National Assembly, as required under section 5(2) of the Wealth Tax and as such, learned High Court rightly disposed of the matter by holding that exemption does not mature for want of its approval from National Assembly. In support of his contention he relied upon the cases of Commissioner of Income Tax, Zone-C, Lahore and others v. Messrs Kashmir Edible Oils Ltd. and others (2006 SCMR 109), Mst. Musarrat Umar Daraz v. Income Tax Appellate Tribunal, Lahore and 2 others, (2006 PTD 1743) and Income-Tax Appellate Tribunal Pakistan, (2000 PTD (Trib.) 2133).

9. We would first like to discuss the contention of learned Advocate Supreme Court for the appellants, that the appeal under section 27 of the Wealth Tax Act, 1963 is an advisory appeal where High Court as an Appellate Court has to decide the question of law arises out of the order passed by the Tribunal only, and since the question of validity of the Clause 12(2) was not before the Tribunal, the High Court exceeded its jurisdiction.

10. Normally in an appeal under section 27 of the Wealth Tax Act, 1963, High Court is supposed to answer the question of law that arises out of the order of the Tribunal, and then send copies of the judgment to E the Tribunal, who has to pass such order as is necessary, to dispose of the case in conformity of such judgment, in terms of it. However, in the instant case the appellant claimed "exemption" from the tax under the Wealth Tax Act, 1963, which pre-supposes that the property for which the appellants seek exemption, was liable for the tax. It was for the appellant first to establish that they had rightly claimed exemption and then for the High Court to decide the question of law arising out of the order of the Tribunal. Learned High Court, in given circumstances, rightly called upon the appellants to establish whether the exemption under Clause 12(2) of the Second Schedule of Wealth Tax Act, 1963 has any force of law, to claim the exemption.

11. Now coming to the question, whether the exemption granted under Clause 12(2) cannot be enforced for want of placement before the National Assembly.

12. We would like first to reproduce section 5 of the Wealth Tax Act, 1963 as well as Clause 12(2) of the second Schedule of the said Act.

"(5) Exemptions.---(1) The assets or classes of asset, or person or classes of persons specified in the Second Schedule shall be

(a)exempt from tax under this Act subject to the conditions and to the extent specified therein; or

(b)liable to tax at such rates, which are less than the rates specified in the first Schedule, as are specified therein; or

(c)allowed a reduction in tax liability, subject to the conditions and to the extent specified therein; or

(d)exempt from the operation of any provision of this Act, subject to the conditions and to the extent specified therein.

(2) The Federal Government may, from time to time, by notification in the official Gazette, made such amendment in the Second Schedule by--

(a)adding any clause or condition therein;

(b)omitting any clause or condition therein; and

(c)making any change in any clause or condition therein, as it may think fit, and all such amendment shall have effect in respect of any such year beginning on any date before or after the commencement of the financial year in which the said notification is issued."

"(12)2. One shop owned and occupied by the assessee for the purposes of his own business."

13. In a democratic setup every Government is responsible to its Legislature. When any statute requires mere lying of any notification or Rule before the Legislature, its executive, viz. State Government, comes under the scrutiny of the concerned Legislature. Every function and every exercise of power, by the State Government is under one or other Ministry, who in turn is accountable to the legislature concerned. Where any document, rule or notification requires placement before any House or when placed, the said House inherently acquires the jurisdiction over the same. Irrespective of the fact that such rules or notifications may not be under purview of its modification, such members may seek explanation from such Ministry of their inaction, arbitrariness, etc.

14. A bare reading of proviso to section 5 as well as clause 12(2) of the Second Schedule Wealth Tax Act, 1963, it appears that the Federal t Government only requires to place before the National Assembly, all the amendments made by it in the Second Schedule during a financial year, not for its approval/voting etc., but apparently only for information. The second schedule of the Wealth Tax Act deals with the exemption from the tax, and not for imposition of any new tax or change of rate of tax levied under the Act. Subsection 1 of section 5 deals with the assets of a person to whom benefit of exemption subject to condition to the extent specified in the second schedule has been extended. Subsection 2 of section 5, without any limitation, gives powers to Federal Government to make such amendments in the second schedule by adding any clause of condition, omitting therein or change in any clause of condition therein as it may fit deem. However, such change has to be made by a notification in official Gazette and affect in respect of any such year begin or after the commencement of the Financial year in which the said notification has been issued. Admittedly Notification No. S.R.O. 595(I)/96 dated 9th July, 1996, was duly gazetted whereby one shop owned and occupied by the assessee for the purposes of his own business, was exempted from Wealth Tax. What only required by the proviso to section 5 is the placement of notification by which Federal Government by his policy decided to add or omit any clause or condition in respect of the assets to be exempted from Wealth Tax before' the National Assembly during the financial year for the information of Legislation.

15. Laying before the House of Parliament are made in the three different ways. Laying of any rule may be subjected to any negative resolution within a specified period or may be subjected to its confirmation. This is spoken as negative and positive resolution respectively. Third may be mere laying before the House. In the present case, we are not concerned with either affirmative or negative procedure, but consequence of mere laying before the legislature.

16. In the well known book, Legislature, Constitutional and Administrative Law, Stanely De Smith and Rodney Brazier, 7th Edition, learned author recorded:--

"If the instrument has merely to be laid or laid in draft, before Parliament, it will be delivered to the Votes and Proceedings office of the House of Commons. No opportunity is provided by parliamentary procedure for the instrument to be discussed, but its existence will' at least be brought to the notice of members and the Minister is more likely to be questioned about it than if it is not laid before Parliament at all."

17. Administrative law by HWR Wade and C.F Forsyth, 10th Edition, page 765 records with reference to mere laying before Parliament that:

"An Act of Parliament will normally require that rules or regulations made under the Act shall be laid before both Houses of Parliament. Parliament can then keep its eye upon them and provide opportunities for criticism. Rules or regulations laid before Parliament may be attacked on any ground. The object of the system is to keep them under general political control, so that criticism in Parliament is frequently on grounds of policy."

18. In the case of Atlas Cycle Industries Ltd. v. State of Haryana, (AIR 1979 SC 1149), while dealing with the question almost identical to one before us, it was held that:

"From the foregoing discussion, it inevitably follows that the. Legislature never intended that non-compliance with the requirement of laying as envisaged by subsection (6) of Section 3 of the Act should render the order void. Consequently non-laying of the aforesaid notification fixing the maximum selling prices of various categories of iron and steel including the commodity in question before both Houses of Parliament cannot result in nullification of the notification. Accordingly, we answer the foresaid question in the negative. In view of this answer, it is not necessary to deal with the other contention raised by the respondent to the effect that the aforesaid notification being of a subsidiary character, it was not necessary to lay it before both Houses of Parliament to make it valid."

19. In the case of Maulana Nur-ul-Haq v. Ibrahim Khalil, (2010 SCMR 1305), while determining the question whether Statute is mandatory, this Court held that:--

"There is yet another aspect of the matter to which it is necessary to refer to section 32 of the Act appears to be mandatory, in view of the expression 'shall' used therein, but in fact is director) for want of a penal clause. No doubt there exists no faultless acid test or a universal rule for determining whether a provision of law is mandatory or directory and such determination by and large depends upon the intention of Legislature and the language in which the provision is couched but it is by now firmly settled that where the consequence of failure to comply with the provision is not mentioned the provision is directory and where the consequence is expressly mentioned the provision is mandatory. It was held in NiaZ Muhammad Khan v. Mian Fazal Raqeeb (PLD 1974 SC 134) that as a general rule a statute is understood to be directory when it contains matters merely of direction, but it is mandatory when those directions are followed by an express provision that in default of following them the facts shall be null and void. In Major Shujat Ali v. Mst. Surrya Begum (PLD 1978 SC (AJ&K) 118) it was held that in the absence of a penalty for failure .to follow the prescribed procedure the provisions are to be taken to be directory and not mandatory. The provisions of section 32 of the Act being directory cannot in any manner override or dilute the provisions of section 31 of the Act which are mandatory by all standards."

20. There, is no absolute test by which, it may be determined whether a Statute is mandatory or directory, the primary rule is to ascertain the Legislative intent as revealed by an examination of the whole Act.

21. What appears from the perusal of the section 5(2) of the Act the 'requirement of placement before National Assembly, the notification issued regarding any amendment in Second Schedule of the Act, does not mandatory make it null; if the same is not placed.

22. From .the perusal of material on record, it appears that at no point in time neither the assessee nor the Revenue Authority questioned the validity of Clause 12(2) of Second Schedule of Wealth Tax Act, 1963 being invalid for want of its placement before the National Assembly.

23. For what has been discussed above, the listed appeals are allowed and the impugned judgments are set aside. The matters are remanded to the learned High Court to decide the questions, raised in the appeals after hearing the parties.

S.A.K./Z-1/SCCase remanded.