Sufi MUHAMMAD FARRUKH AMIN VS FEDERATION OF PAKISTAN through Secretary of Finance, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 83 (2016)

2017 P T D 83

[Lahore High Court]

Before Shahid Karim, J

Sufi MUHAMMAD FARRUKH AMIN

Versus

FEDERATION OF PAKISTAN through Secretary of Finance and 4 others

W.P. No.19763 of 2013, decided on 17/06/2016.

(a) Interpretation of statutes---

----Fiscal statute---Levy---Tax---Presumption---Court would presume constitutionality of a statute and that a particular levy was a tax if that was the stance of Federal Government and other authorities.

(b) Levy/fee---

----Determining factor---For a levy to be a fee, relation between the purpose and the persons on whom the levy is being exacted has to be established--- Levy is a common burden and a compulsory exaction of money for raising revenue and expending it for the purpose of public revenue of the State.

(c) Income Support Levy Act (XXII of 2013)---

----Ss. 3 & 9--- Constitution of Pakistan, Art.25---Reasonable classification--- Intelligible differentia--- Petitioners assailed Income Support Levy at the rate of 0.5% on the value of net movable assets/wealth as being ultra vires the Constitution--- Validity--- Reasonable classification was permissible provided it was based on intelligible differentia which had reasonable nexus with the object sought to be achieved and under which distinct persons or things were grouped together--- Different laws could be validly enacted for different persons having different financial standing--- Requirement of reasonable classification was fulfilled if in a taxing statue the Legislature had classified persons or properties into different categories which were subject to different rates of taxation with reference to income or property and such classification would not be open to attack on the ground of inequality--- Distinction between subject levy i.e. nature of which defined quality of levy, on the one hand, which must not be compared with the measure of liability, that was, the quantum of the tax---Legislature had merely created a different category of persons who were made subject to a different rate of taxation under S. 9 of Income Support Levy Act, 2013--- Such category was set apart with reference to income or net movable wealth which that category was in possession of--- Class of persons was set apart as possessing a certain threshold of affluence---No ground existed for laying a challenge on such basis and the differentia had a reasonable nexus to the object to be achieved by such classification--- High Court declined to interfere in the matter---Constitutional petition was dismissed in circumstances.

Panama Refining Co. v. Ryan 293 U.S. 388, 439 (1935); Haji Muhammad Shafi and others v. Wealth Tax Officer and others 1992 PTD 726; Haji Muhammad Shafi and 3 others v. Wealth Tax Officer, Circle IV, Karachi and 3 others 1989 PTD 488; Messrs I.C.C. Textile Ltd., and others v. Federation of Pakistan and others 2001 PTD 1557; ICC Textiles Ltd. v. Federation of Pakistan through Secretary of Finance, Islamabad and 2 others PLD 1999 Lah. 251; National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services 132 S.Ct. 2566 (2012); Unites States v. Constantine 296 U.S. 287 (1935); QUILL Corp. v. North Dakota, 504 U.S. 298 (1992); Nelson v. Sears Roebuck & Co. 312 U.S. 359 (1941); United States v. Sotelo 436 U.S. 268 (1978); Blodgett v. Holden 275 U.S. 142, 148 (1927); Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582; United States v. Reorganized CF&I Fabricators of UTAH Inc. 518 U.S. 213, 224 (1996); Federation of Pakistan through Secretary M/o Petroleum and Natural Resources and another v. Durrani Ceramics and others 2014 SCMR 1630; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402; Pakistan Flour Mills Association and another v. Government of Sindh and others 2003 SCMR 162 and 83 ITR 582 (1972) ref.

Navid A. Andrabi, Rasaal Hassan Syed, Naeem Sarwar, Muhammad Azhar Siddique, Shahid Mehmood Bhatti-I, Ch. Muhammad Ali, Mian Ashiq Hussain, Shehzad A. Elahi, Muhammad Ajmal Khan, Mian Haseeb ul Hassan, Muhammad Saqib Sheikh, Mansoor Usman, Malik Asif Hayat, Mian Muhammad Rashid, Mansoor Baig, Syed Ali Imran, Mehr Ghulam Murtaza, Khurram Shehbaz Butt, H.M Majid Siddiqui, Khurram Abbas, Javed Iqbal Qazi and Muhammad Mohsin Virk for Petitioners.

Muhammad Javed Kasuri, D.A.G., Sarfraz Ahmad Cheema, Liaqat Ali Chaudhry, Muhammad Yahya Johar and Kausar Perveen for Respondents.

Date of hearing: 2nd June, 2016.

JUDGMENT

SHAHID KARIM, J.---This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (Constitution) invites this Court to hold upon the constitutionality of the Income Support Levy (the levy) at the rate of 0.5% on the value of net movable assets/wealth as being ultra vires the Constitution and without lawful authority. The challenge has been laid to the provisions of Income Support Levy Act, 2013 (Act, 2013) promulgated through Finance Act, 2013.

2.Some of the provisions of the Act, 2013 which will come into play and will have to be considered during the course of this opinion are reproduced as under:--

2. Definitions.---(1) In this Act, unless the context otherwise requires--

(a)"Levy" means the Income Support Levy leviable or payable under this Act;

(b)"net moveable wealth" means the amount by which the aggregate value of the moveable assets belonging to a person as declared in the wealth statement for the relevant tax year, is in excess of the aggregate value of all the liabilities owed by that person on the closing date of the tax year.

Explanation.- For the purpose of this clause,-

(i)where liability claimed relates wholly and exclusively to an immovable asset, it shall not be claimed and allowed while computing the net moveable wealth. However, where the liability claimed relates wholly and exclusively to a moveable asset, it shall be claimed and allowed as a straight deduction while computing net moveable wealth; and

(ii)where the gross wealth of a person, declared in the wealth statement includes both moveable and immoveable assets and the nature of assets to which the liability relates is not determinable, the liability to be allowed while determining the net moveable wealth shall be calculated by the following formula:- (A / B) x C Where -- A is the gross value of moveable assets; B is the gross value of both moveable and immoveable assets; and C is the gross value of debts owed;"

"(h) "wealth statement" means a wealth statement required to be filed under section 116 of the Income Tax Ordinance, 2001."

"3. Charge of Levy.---Subject to the provisions contained in this Act, there shall be charged for every tax year commencing on and from tax year 2013 a Levy, in respect of value of net moveable assets held by a person on the last date of the tax year at the rate specified in section 9 and in the manner specified hereunder. 4. Time and manner of payment of Levy.- A person who is liable to pay the Levy under this Act shall pay the Levy along with wealth statement."

"9. Rate of Levy.---The rate of levy payable under this Act shall be 0.5% of the net moveable wealth exceeding one million rupees."

3.This judgment shall decide the connected petitions (Appendix-I) which also involve a similar question of law and a common thread which runs through these petitions is the challenge to the constitutionality of the levy under the Act, 2013.

4.A report on behalf of the respondent No.2 was filed which sought to justify the imposition and exaction of the levy on the ground that it was intended to provide financial assistance, social protection and other net safety measures to economically distressed persons and families as enshrined under the principles of policy given in the Constitution. Accordingly, according to the report, the charge of levy for the well being for the economically distressed citizens which is a state obligation and, therefore, is in accord with the letter and spirit of the Constitution.

Submissions of Petitioners' Counsel:

5.Three primary and related submissions have been made by the learned counsel for the petitioners. It has been argued that:--

The levy is not within the domain of the Federal Government and is outside the Entry 50 of the Federal Legislative List under which the Parliament is empowered to legislate on the capital value of assets and not on the net value of wealth and assets.

The levy is fee and not a tax and, therefore, could have been imposed through a money bill and offends the mandate of Article 73 of the Constitution.

The levy is discriminatory legislation as it only applies to those who file their wealth statement and whose net movable wealth exceeds 1 million rupees.

6.The learned counsel for the respondents has retorted by relying upon the two judgments of the Supreme Court of Pakistan as also a judgment of the Karachi High Court and that of Lahore High Court from which those cases arose in the Supreme Court of Pakistan and submitted that the question whether the net value of assets/wealth is included in the broader concept of capital levy of assets has been conclusively determined by the Supreme Court of Pakistan in the precedents cited by the learned counsel for the respondents and, therefore, a challenge on this ground does not lie. It has also been contended by the learned counsel for the respondents that the levy is a tax and not a fee and, therefore, the submission with regard to the imposition having been made through the money bill is without substance.

Entry 50 of the Federal Legislative List:--

7.Entry 50 of the Federal Legislative List of the 4th Schedule to the Constitution reads as under:--

"Taxes on the capital value of the assets, not including taxes on capital gains on immovable property."

8.It will be recalled from a reading of section 3 of the Act, 2013 that the levy is in respect of value of net movable assets held by a person on the last date of the tax year. This, according to the learned counsel for the petitioners, is beyond the legislative domain of the Parliament as Entry 50 merely permits the Parliament to legislate in respect of the capital value of assets held by persons and not with regard to the net movable assets which are two distinct and separate concepts. This submission of the learned counsel for the petitioners should receive a short shrift.

9.But prior to that, one of the fundamental principles of interpretation must be underscored. It is that "an interpretation that validates outweighs one that invalidates." Justice Cardozo of the US Supreme Court in Panama Refining Co. v Ryan, 293 U.S. 388, 439 (1935) remarked:

"When a statute is reasonably susceptible of two interpretations, by one of which it is unconstitutional and by the other valid, the court prefers the meaning that preserves to the meaning that destroys."

10.In at least two judgments of the Supreme Court of Pakistan, this question has been conclusively determined with regard to laws and provisions in those laws, which were in pari materia with the provisions of Act, 2013. The first of these cases is reported Haji Muhammad Shafi and others v. Wealth Tax Officer and others (1992 PTD 726). This judgment arose out of the judgment of the Karachi High Court penned by Saeeduzzaman Siddiqui J., and reported as Haji Muhammad Shafi and 3 others v. Wealth Tax Officer, Circle IV, Karachi and 3 others (1989 PTD 488). It will be useful firstly to refer to the judgment of the Karachi High Court which was affirmed by the Supreme Court of Pakistan in the first instance. The challenge before the Karachi High Court was to the provisions of Wealth Tax Act, 1963 (Act, 1963) on the touchstone of Entry 50 of the Federal Legislative List in the Fourth Schedule to the Constitution. The precise submission of the learned counsel for the petitioners in that case also was that the term 'capital value on assets' used in the entry cannot be equated with the expression 'net wealth' as defined under the Act, 1963 and as such the imposition and recovery of tax on net wealth was not a tax on the capital value on assets as envisaged by the Constitution. The provisions of Act, 1963, so far as relevant for our purposes and in order to lend actuality to the analysis and comparison of the two provisions contained in the Act, 1963 and the Act, 2013, are reproduced by way of reference:--

"3. Charge of Wealth tax:--Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of July, 1963, as a tax (hereinafter referred to as wealth tax) in respect of the net wealth on the corresponding valuation date of every individual (Hindu undivided family, firm, association of persons or body of individuals, whether incorporated or not, and company) at the rate or rates specified in the Schedule.

"2(m)---. 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under that Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-

(i)debts which under section 6 are not to be taken into account; and

(ii)debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth tax is not payable under this Act:

Explanation: For the purposes of this clause--

(i)any property, other than agricultural land, owned by any minor child of the assessee shall be deemed to belong to the assessee;

(ii)'assessee' shall be the (parent) determined by the Wealth Tax Officer; and

(iii)where the right, title or interest to or in any immovable property other than agricultural land vests in more than one person, such person shall, in respect of such property, be assessed as an association of persons and the value of such right, title or interest, shall not be included in the net wealth of an individual. (Provided Wealth Tax is charged on such right, title or interest."

11.While drawing a comparison between the provisions of Act, 2013 and the Act, 1963, it will be seen that the provisions of the two Acts with regard to the charging of the imposition under the respective laws are similar and couched in the same language. In both these laws, the levy is in respect of the net wealth of an individual/person. Under section 3 of the Act, 2013, the term 'net movable assets' has been used. The question peripherally arose in the Karachi High Court judgment as to whether the term 'net wealth' included the term 'assets of a person' as well. The answer to this question was given in the affirmative by the Karachi High Court and it was held that:

"Reading the above dictionary meanings of the words "Wealth and Assets" together it cannot be doubled that they are similar in concept and import. The concept of aggregation of different kinds of properties belonging to a person is common in the meaning of both the words. We are, therefore, of the view that the legislature when promulgating the Act and providing for levy of tax on wealth in its preamble were in fact intending to tax the 'assets' of a person. The contention of the learned counsel for the petitioner, however, is that 'net wealth' as defined in the Act is different in concept from the "capital value of the assets" as envisaged in entry No.50 of the Federal Legislative List. The argument of the learned counsel has not impressed us. We have already pointed out above that on the basis of dictionary meaning of words 'Capital Value' and 'Assets' the expression 'Capital Value of Assets' would mean the value expressed in terms of money of the properties of all kinds possessed by a person and it is in this sense that this expression is also commonly understood in commercial and business parlance. The learned counsel has not been able to point out to us anything either in the Constitution or in the Act or in any of the reported cases cited at the Bar to indicate that the legislature had used the above expression in entry No.50 of the Federal Legislative List in any other sense "

12.However, this question loses relevance in the context of levy under the Act, 2013 as by an amendment in the Act, 1963, the words "or assets" were inserted in section 3 of the Act, 1963 by the Act of 1997 dated 16.4.1997. Therefore, the ambiguity, if any, regarding the term 'assets' to be included in the expression "Wealth" was clarified by an amendment brought about by the legislature and referred to. The argument was raised before the Karachi High Court that while determining the wealth tax payable by an assessee under section 3 of the Act, 1963, the net wealth of the assessee was calculated by allowing the deduction of all liabilities of debts owed by the assessee and thereafter to determine the tax on the next assets of the assessee which takes the levy out of the ambit of the expression "capital value of assets" as employed in entry No.50 of the Federal Legislative List. This arguments was also repelled by the Karachi High Court. The relevant portions of the Karachi High Court judgment are reproduced as under:--

" The expression 'capital value of the assets' is neither defined in the Constitution nor in any Act concerning the field of commerce and taxation, where this expression is in vogue. It is not contended before us by the learned counsel for the petitioner that the expression 'capital value of the assets' has been used by the legislature in any particular sense or meaning. It is, therefore, necessary to understand the meaning of this expression, to first look for its ordinary dictionary meaning and then the manner in which it is commonly understood in the field of commerce and taxation "

" The whole gamut of the argument of learned counsel for the petitioner in this regard is that the authorities while determining the wealth tax payable by an assessee under section 3 of the Act first calculate net wealth of the assessee by allowing deduction of all the liabilities of debts owed by him and then determine the tax on the net assets of the assessee whereas the impression 'capital value of the assets' employed in entry No.50 of Federal Legislative List of Constitution admits of no such deduction in the value of the assets of a person. Firstly, we are unable to find any material difference between the concept of taxation under section 3 of the Act and entry No.50 of the Federal Legislative List of Constitution on the above ground. The underlying object of aggregation of all the properties of an assessee for the purposes of levy of tax is common both in section 3 of the Act as well as under entry No.50 of Federal Legislative List of the Constitution. The fact that the authorities while providing for determination of tax liability of an assessee under the Act allowed reduction of all his outstanding liabilities from the aggregated value of his assets has no bearing on the character or nature of the tax. This feature of the Act only indicates a mechanism or a method provided under the Act for calculation of the tax liability of an assessee under it which certainly cannot affect or change the character or nature of the tax. There is no justification for the above reasons to hold that the tax levied under section 3 of the Act on the 'net wealth' is in any manner different from the tax on the capital value of the assets as contemplated by entry No.50 of the Federal Legislative List of Constitution. There are no words in entry No.50 of the Federal Legislative List of the Constitution which could be interpreted as placing any fetter on the power of legislature while providing for tax on the capital value of assets of a person, to allow deduction of liabilities outstanding against him from the value of his assets. It need not be mentioned here that while interpreting a basic document like Constitution, the Court must adopt a liberal interpretation of its various clauses and articles. The Courts while interpreting an entry in the legislative lists of a Constitution have always given it the widest connotation as there is no presumption that the framers of Constitution have withheld certain powers from the legislature to frame laws. The written Constitution of a country is a living organism which should be interpreted in the widest and most liberal manner so as to advance the objective of its framers. The Constitution is the fountainhead of all powers derived by its various organs, like executive, legislature and the judiciary which are its creature. Interpretation of such a document in a narrower sense would defeat the preservation of powers contemplated by its framers "

" Suffice it to say that the fact that the legislature had allowed deduction of debts under the Act in ascertaining the capital value of assets could in no way change the nature of tax which is contemplated under entry No.50 of the Federal Legislative List of the Constitution "

13.Upon a reading of the portions, reproduced above, it is clear that the Karachi High Court arrived at the conclusion that the term 'net value of net wealth' was included in the broader concept of capital value of assets by reference to the dictionary meaning of the term "capital value of assets". By so doing, the Karachi High Court concluded that the term 'value of net wealth' was a term included in the expression "capital value of assets". Also the Karachi High Court drew a distinction between the case before it and the cases of the Indian Supreme Court referred to by the petitioners and held that those cases were not applicable.

14.In Haji Muhammad Shafi, the Supreme Court affirmed the view taken by the Karachi High Court. It was held that the Karachi High Court had, for valid reasons, disagreed with the observations made in the judgment passed by the Indian Supreme Court. In its opinion, the Supreme Court of Pakistan instructed that:--

"4. We are in full agreement with the observation made by the learned Judges of the High Court. Item 50 of the fourth Schedule provides for tax on capital value of the assets not including taxes on capital gain on immovable property. Therefore, tax on capital value of assets can be levied which is not disputed at all. Wealth Tax is one of those taxes which intends to subject the assets to taxation. It is nobody's case that the Wealth Tax Act does not charge the assets. The Act has provided a mechanism for imposing and calculating the tax on capital assets. The provision for calculating such tax is provided by the Act. Section 3 denotes which part of the capital value shall be taken into consideration for the purposes of charging wealth tax. It is nobody's case that the net value of assets is not a part of the capital value. The capital value of the assets includes the net value of the assets. The definition of the net wealth under section 2(m) clearly provides that first the aggregate value of all the assets belonging to the assessee has to be taken into consideration. This is the basis for charging the tax. Now, in order to calculate the tax the aggregate value of liabilities and debts are to be deducted from the aggregate value of assets and the excess so calculated has been termed as 'net wealth' on which tax is calculated at the specified rate. This process of calculating the tax does not exclude the capital value of assets from wealth tax charged under section 3."

15.It is clear from a reading of the judgment of Supreme Court of Pakistan that the value of net wealth or assets was taken as part of the capital value of assets of a person and not as two distinct and separate concepts. One was held to be included in the other and was a species of the same genre. The purpose was merely to categorize the two terms and not to hold it out as a separate concept. Also a distinction was sought to be drawn on the basis of the concepts of assessment and imposition of tax and its collection. In other words, the arguments raised before the Supreme Court of Pakistan were primarily and substantially similar to the ones which are now being raised by the learned counsel for the petitioners and as can be seen from the portions, reproduced above, that they were stunted and responded to by the Supreme Court of Pakistan by holding that no challenge could be laid on the basis of placing the two expressions of capital value of assets and value of net wealth or assets into different compartments.

16.The second judgment which analyses and expands upon the proposition under similar circumstances is the judgment reported as Messrs I.C.C. Textile Ltd. and others v. Federation of Pakistan and others (2001 PTD 1557). This case arose out of a judgment of this Court reported as ICC Textiles Limited v. Federation of Pakistan through Secretary of Finance, Islamabad and 2 others (PLD 1999 Lah. 251), in which an attack was laid to the imposition of Corporate Assets Tax by section 12 of the Finance Act, 1991. The tax was levied in respect of "value of assets held by a company as on the specified date". The precise submission of the learned counsel for the petitioner in that case was also on the basis of entry No.50 in the Federal Legislative List which was in relation to the capital value of assets and a distinction was sought to be drawn on the basis thereof as against the term value of assets used in section 12 of the Finance Act, 1991. On the basis of the Sindh High Court judgment as affirmed by the Supreme Court of Pakistan, it was held by the Lahore High Court that:--

"16. It is obvious from the above reproduced paras that the learned Judges were of the view that there is no limitation placed on the use of word "assets" in item No.50 of the 4th Schedule and the question as to whether "gross assets" or "net assets" are to be taxed was relatable to mechanism and could be determined by the Federal Legislature while further legislating on the subject. I am, therefore, unable to agree with the learned counsel on the interpretation being placed on Item No.50 of 4th Schedule to the Constitution. No doubt tax can only be levied by the Parliament as ordained by Article 77 of the Constitution but as by promulgating section 12 of the Finance Act, 1991, the tax is being levied on the capital value of assets, no valid exception can be taken thereto."

17.Thus, the Lahore High Court was of the view that the question whether gross assets or net assets are to be taxed, are relatable to the mechanism of recovery and which can be determined by the Federal Legislature while legislating on the subject.

18.The Supreme Court of Pakistan in Messrs ICC Textiles Ltd., upheld the decision of the Lahore High Court. In doing so, the view taken by the Sindh High Court in Haji Muhammad Shafi was referred and reaffirmed in the following words:--

" After having read the ratio decidendi of both these judgments referred to hereinabove we feel that there should not be any doubt that the Corporate Assets Tax is tax on the capital value of the assets as per Item No.50 of the Legislative List and merely in view of the manner prescribed under section 12(12)(d) of the Act for calculating and imposing tax it cannot be held contrary to this entry or unconstitutional nor its constitutionality can be objected to for such reason. It is thus held that legislature had power to promulgate section 12 of the Act under Article 142 of the Constitution to levy Corporate Assets Tax on the value of the assets held by a company on a specified date, therefore, the gross assets of the Company as per section 12(12)(d) of the Act are liable to tax inclusive of the liabilities of the company as per Entry No.50 of the Federal Legislative List Part I Fourth Schedule of Constitution and there is absolutely no ambiguity of whatsoever nature in imposing the Corporate Assets Tax. As such the judgment relied upon by Mr. Ziaullah Kiani ASC and Mian Ashiq Hussain ASC in the case of B.P. Biscuits Factory (Supra) has no application on instant case, thus the contention raised in this behalf is also repelled."

19.It can be seen from a cumulative reading of the judgment, reproduced above, that the term 'capital value of assets' was held to be broad-based and by encompassing and including within it the term 'net assets' or 'net movable assets' as used in the Act, 2013. On the basis of this holding, the Supreme Court of Pakistan has on more occasions than one held imposition under different laws on the basis of this concept to be constitutionally valid and intra vires. The challenge in this case on a similar basis must meet the same fate and must be repelled on the basis of two judgments of the Supreme Court of Pakistan referred to above.

20.While on the subject we may refer to the concept and the true nature of the entries in Legislative List of the Constitution. That concept was eruditely brought forth in Messrs Elahi Cotton Mills Ltd. in the following words:--

"16. We may point out that in a Federal Constitution like we have in Pakistan, the legislative power is distributed between the Provincial and the Federal Legislatures. With that view legislative lists are prepared. The entries contained therein indicate the subjects on which a particular Legislature is competent but they do not provide any restriction as to the power of the Legislature concerned. It can legislate on the subject mentioned in an entry so long as it does not transgress or encroach upon the power of the other Legislature and also does not violate any fundamental right as the Legislative power is subject to constraints contained in the Constitution itself. It is also a well-settled proposition of law that an entry in a legislative list cannot be construed narrowly or in a pedantic manner but it is to be given liberal construction."

21.Therefore, the basic concept that has to be kept in mind while construing a Legislative Entry is that the Entries delineate the subjects on which a particular Legislature is competent to legislate but does not provide any restriction as to the power of the Legislature concerned. The same concept was elaborated upon in the ICC Textile Ltd. by this Court and reliance was placed upon a plethora of Supreme Court judgments. It was concluded that while interpreting Entries or Items in the Federal Legislative List, the rule of law is well settled that the Entries are to be interpreted in the broadest possible sense and should not be given any restrictive, narrow or pedantic meaning. Also by relying upon Messrs Elahi Cotton Mills Ltd., it was reiterated that while interpreting laws, the Court should lean to save the law rather than to destroy it.

Fee Not Tax:

22.The basis of the submission that the levy under Act, 2013 is a fee and not a tax, is predicated on the preamble of the Act, 2013, which is as under:--

"WHEREAS it is desirable to provide financial assistance and other social protection and safety net measures to economically distressed persons and families;

AND WHEREAS under the principles of policy as given in the Constitution of the Islamic Republic of Pakistan, the State is obliged to promote social and economic well-being of the people and to provide basic necessities of life.

AND WHEREAS it is expedient to provide for financial resources for running an income support fund for the economically distressed persons and their families through a Levy to be called Income Support Levy."

23.The learned counsel for the petitioners were swayed by the purpose and the factors behind the imposition of the levy as stated above in the preamble of the Act, 2013. The preamble brought forth that the state was obliged to promote social and economic well being of the people and to provide basic necessities of life and whereas it was extended to provide for the financial resources for the economical distressed persons; hence a levy was being exacted by the name of income support levy. It has long been settled that the preamble of a statute does not determine the true nature and merit of a statute and is merely a window into the substantive provisions of the statute under consideration. Therefore, anything expressed in the preamble will not impact upon the construction to be put on the substantive part of the statute. It was stated in National Federation of Independent Business v. Sebelius, Secretary of Health and Human Services 132 S.Ct. 2566 (2012) (Health Care Case) by the US Supreme Court that "we thus ask whether the shared responsibility payment falls within Congress's taxing power disregarding the designation of the exaction and viewing its substance and application". Unites States v. Constantine 296 U.S. 287 (1935); QUILL Corp. v. North Dakota, 504 U.S 298 (1992); "magic words or labels should not disable an otherwise constitutional levy". Nelson v. Sears Roebuck & Co. 312 U.S. 359 (1941); "It passing on the constitutionality of a tax law, we are concerned only with its practical operation, not its definition or the precise form of descriptive words which may be applied to it". United States v. Sotelo 436 U.S. 268 (1978).

24.In Reading Law: The Interpretation of Legal Texts by Antonin Scalia and Bryan A. Garner, the following statements will shed light on the use of preamble and other prefatory material. It has been stated that:--

" While such provisions as a preamble or purpose clause can clarify an ambiguous text, they cannot expand it beyond its permissible meaning. If they could, they would be the purposivists' playground, since it is common for a preamble or purpose clause to invoke the most acceptable or stirring objective that the drafters had in mind---which is almost always the most general objective. "

"Of course, the function of a statute or any other legal instrument is to establish rights and duties, not to set forth facts or to announce purposes "

As Henry Campbell Black wisely observed:

"The preamble to a stature does not invariably recite the real reason for its enactment. Its statements of facts are neither infallible nor conclusive. This should operate as a restraint upon the disposition to attach too great weight to the preamble as evidencing the purpose and intention of the lawmakers."

"There are, however, two serious limitations on the use of prologues. First, an expression of specific purpose in the prologue will not limit a more general disposition that the operative text contains. There is no inconsistency between the two, since legislative remedies often go beyond the specific ill that prompted the statute. Second, an expansive purpose in the preamble cannot add to the specific dispositions of the operative text. After all, no legislation or private disposition pursues its stated purposes at all costs. And there is no requirement that the limitations contained in the enactment must be recited in the prologue. Like other indications of purpose, the prefatory text can suggest only which permissible meanings of the enactment should be preferred."

25.Other principles, which have been settled by respectable authority with regard to power to tax and the rules regarding challenge to the constitutionality of a taxing measure by the legislature have been settled over the years and may also be referred to at this point of time. The rule was laid down by Justice Holmes of the U.S Supreme Court in Blodgett v. Holden, 275 U.S 142, 148 (1927), thus; "the rule is settled that, as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act."

26.This rule was reiterated by the Supreme Court of Pakistan in the famous case of Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 Supreme Court 582) in the following words:--

"That the law should be saved rather than be destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of a Constitutional provision."

27.The other observations in the Elahi Cotton Mills Ltd., which relate to the general power of taxation and its legal and constitutional pedigree may also be alluded to. This power was elaborated upon by the Supreme Court of Pakistan in the following manner:--

"15. It will not be out of context to observe that the power of taxation rests on necessity, it is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent State or Government. In this regard reference may be made to the following passage from the Corpus Juris Secundum, Vol. LXXXIV as to the power of the State to levy tax, which reads as under:---

"The power of taxation rests on necessity, and is an essential and inherent attribute of sovereignty belongings as a matter of right to every independent State or Government. Such power is an inherent one, and is not dependent on any grant by the Constitution, or the consent of the owners of property subject to taxation. Constitutional provisions with respect to taxation constitute a limitation on the legislative power and not a grant of power. The power to tax rests primarily in the State, to be exercised by its Legislature, as discussed infra section 7, and the State may exercise the power directly or may delegate such power as political sub-divisions of the State, as considered in infra section 8. The exercise of the taxing power is a high Governmental function, in invitum in nature.

Generally, the power of taxation is as extensive as the range of subjects over which the power of the Government extends. As to such subjects, and except in so far as it is limited or restrained by Constitutional provisions, a State's power of taxation, if exercised for public purposes, in general, unlimited, and absolute, extending to all persons, property, and business within its jurisdiction."

" .It may again be observed that the power to levy taxes is a sine qua non for a State. In fact it is an attribute of sovereignty of a State. It is mandatory requirement of a State as it generates financial resources which are needed for running a State and for achieving the cherished goal, namely, to establish a welfare State. In this view of the matter, the Legislature enjoys plenary power to impose taxes within the framework of the Constitution. It has prima facie power to tax whom it chooses, power to exempt whom it chooses, so long as they do not exceed the mandate of the Constitution. It is also apparent that the entries in the Legislative List of the Constitution are not powers of legislation but only fields of legislative heads. The allocation of the subjects to the lists is not by way of scientific or logical definition but by way of mere simple enumeration of broad catalogue. A single tax may derive its sanction from one or more entries and many taxes may emanate from one single entry. It is needless to reiterate that it is a well-settled proposition of law that an entry in the Legislative List must be given a very wide and liberal interpretation."

28.The provenance of the power of tax therefore is derived from the attribute of sovereignty of a State. It has been held to be essential and inherent aspect of sovereignty belonging as a matter of right to every independent State or Government. The basic principle on which the power rests is that a constitutional provision with respect to taxation merely constitutes a limitation on the legislative power and not a grant of the power. The nature of the taxing power and the power to tax was clearly brought forth by Justice Scalia in the Health Care case in stating that "a tax is an enforced contribution to provide for the support of Government." This statement was based on a long line of cases of the U.S Supreme Court such as United States v. Reorganized CF&I Fabricators of UTAH Inc. 518 U.S 213, 224 (1996).

29.The only limit on the taxing power is as stated under the Constitution. In Messrs Elahi Cotton Mills Ltd. it was held that:--

"Taxing power is unlimited as long as it does not amount to confiscate and that the legislature does not have the power to tax to the point of confiscation."

30.In this case, in my opinion, the respondents have the better reading of the levy under Act, 2013 while stating that it is a tax and not a fee. A cluster of cases have been decided on the issue whether a levy is a fee or a tax. However, it will suffice to refer to the judgment of the Supreme Court of Pakistan which has been rendered on the question of the distinction between a tax and fee after taking into consideration the entire review of the case law on the subject. This question will necessarily impact the related question raised by the learned counsel for the petitioners with regard to the levy having been imposed under the finance bill and in case the levy is held to be a fee, that imposition through the finance bill would be ultra vires. This is settled upon respectable authority and there is no cavil with this proposition. In Federation of Pakistan through Secretary M/o Petroleum and Natural Resources and another v. Durrani Ceramics and others (2014 SCMR 1630), the challenge was to the Gas Infrastructure Development Cess Act, 2011 (GIDC). The GIDC Act was introduced as a money bill under Article 73 of the Constitution and the stated purpose of the collection of Cess was for the construction of pipelines for importing natural gas and for equalization of gas process with other imported fuel such as LNG from all gas consumers except the domestic consumers and certain other exempted sectors. In the first instance, the Supreme Court of Pakistan elaborated upon the term Cess and concluded that it could either be a tax or a fee depending upon the nature of levy. We are not here concerned with the issue whether a levy is anything other than a tax or a fee. The petitioners contend that it is a fee and not a tax and as defined and elaborated upon in a plethora of judgments by the superior Courts. The respondents, however, controverted this assertion by stating that the levy is a tax and nothing else.

31.The Supreme Court of Pakistan encapsulated the distinction between a tax and a fee and the standard of ascertaining whether it is one or the other levy in the following terms:--

"19. Upon examining the case-law from our own and other jurisdictions it emerges that the 'Cess' is levied for a particular purpose. It can either be 'tax' or 'fee' depending upon the nature of the levy. Both are compulsory exaction of money by public authorities. Whereas 'tax' is a common burden for raising revenue and upon collection becomes part of public revenue of the State, 'fee' is exacted for a specific purpose and for rendering services or providing privilege to particular individuals or a class or a community or a specific area. However, the benefit so accrued may not be measurable in exactitude. So long as they levy is to the advantage of the payers, consequential benefit to the community at large would not render the levy a 'tax'. In the light of this statement of law it is to be examined whether the GIDC is a 'tax' or a 'fee'."

32.Upon a reading of the paragraph, reproduced above, the distinction between a tax and a fee has clearly been brought forth and a mere reiteration is enunciated and propounded based upon a long line of judgments by superior Courts. Tax, according to this concept, is a common burden for raising revenue and upon collection becomes part of the Federal Consolidated Fund and public revenue of the State. Fee, on the other hand, is exacted for a specific purpose and for rendering services or providing privilege to particular individuals or a class or a community or a specific area.

33.This principle can be traced to earlier judgments of superior Courts and has remained unchanged in its broad and fundamental contours. In Collector of Customs and others v. Sheikh Spinning Mills (1999 SCMR 1402), it was emphasized that:--

"No doubt both tax and fee are compulsory exactions, but the difference between the two lies in the fact that the tax is not correlated to a particular service rendered but is intended to meet the expenses of the Government and fee is meant to compensate the Government for expenses incurred in rendering services to the persons from whom fee is collected." (underlining is mine).

34.This distinction was again hammered in the later judgment reported as Pakistan Flour Mills Association and another v. Government of Sindh and others (2003 SCMR 162). The underlined portion of Sheikh Spinning Mills is of particular significance here. One of the key factors to be considered in ruling upon the distinction between a tax and a fee, apart from the aspect of rendering of services being at the heart of the levy, is that the services are rendered towards persons from whom the fee is being collected. Thus the persons who are the subjects of the levy ought to be the primary beneficiaries as well although not by an exact mathematical formula and the benefit may befall some other persons too who may incidentally derive the benefit as well. However, this does not detract from the levy to be treated as a fee. It is on this touchstone that the instant challenge ought to be viewed and analysed.

35.In the GIDC Act, by section 4, the specific purpose and the utilization of Cess was spelt out. According to section 4, the Cess was to be utilized for or in connection with infrastructure development of Iran, Pakistan Pipeline Project, Turkmanistan, Afghanistan, Pakistan and India (TAPI) Pipeline Project, LNG, or other projects or for price equalization of other imported alternative fuels including LPG. Therefore, the specific purpose was laid out in the substantive provisions of the GIDC Act itself. It ineluctably follows that the Cess was to be utilized for no other purpose than the purpose given in section 4 of the GIDC Act. In so holding that the said Cess was in fact a fee, the Supreme Court of Pakistan was swayed by the fact that the levy was not a common burden for raising revenue generally. The element of quid pro quo was also found to exist in the imposition of the Cess, in that, the imposition was primarily on the industrial sector which had invested in the development of the infrastructure for utilization of gas for their respective concerns and stood to benefit from the pipeline which was to be laid from the funds of the Cess so levied. Thus, the industrial and commercial sector was the primary beneficiary in lieu of the payment of the Cess and this aspect brought the Cess within the realm of the term 'fee' in contradistinction to the imposition being a tax. The Supreme Court of Pakistan then went on to hold that the levy being a fee should not have been introduced as a money bill under Article 73 of the Constitution.

36.Applying the standard and test laid down by the Supreme Court of Pakistan to the levy imposed under the Act, 2013 it is evident that there is no substantive provision in the Act, 2013 itself which spells out the purpose of the levy to be with regard to a certain specific project or for rendering services or providing privilege to a community or a class of community. As adumbrated, this Court will presume the constitutionality of a statute and shall also presume that a particular levy is a tax if that is the stance of the Federal Government and other respondents. Unless rebutted in material particulars, there is no reason to assume that a particular levy is fee and not a tax. I do not find upon a holistical reading of the provisions of the Act, 2013 that there is an element of quid pro quo to exist in the provisions of the Act, 2013 between the levy and the petitioners who have laid a challenge to this levy. It is not the case of the petitioners that the levy is in lieu of certain services being rendered to the petitioners and so the petitioners stand to derive benefit from the levy. The petitioners, on the other hand, contend that the levy by the preamble of the Act, 2013 is being exacted for the purpose of expending on economically distressed persons and on this basis the levy is sought to be termed as a fee. This argument of the learned counsel for the petitioners is nuanced and has no legal legs to stand upon. For a levy to be a fee, the relation between the purpose and the persons on whom the levy is being exacted has to be established. There is none in this case. According to the settled precedents, same benefit to accrue will have to be asserted in case the levy is to be established as a fee and not a tax. From the entire reading of the provisions of Act, 2013, it seems that the levy is a common burden and a compulsory exaction of money for raising revenue and expending it for the purpose of public revenue of the State. The mere fact that the preamble of the Act, 2013 refers to the application of the levy in its practical operation, does not detract from the fact that the levy is a tax and not a fee.

37.The learned counsel for the petitioners have argued that the levy under the Act, 2013 was repealed by the Finance Act, 2014. This fact alone does not have any substantial bearing on the question raised in these petitions.

38.In view of the above, it is held that the levy under the Act, 2013 is a tax and not a fee. Therefore, the question of the constitutionality of the levy on the basis that it could not have been promulgated by a money bill becomes moot and need not be dilated upon.

Discrimination:

39.The learned counsel for the petitioners submitted that the levy would work discriminately against the petitioners as in terms of section 9 of the Act, 2013 the rate of levy payable under this Act shall be 0.5% of the net movable wealth exceeding 1 million rupees. In this manner, according to the learned counsel, the levy is, in fact, on assessees who furnish their wealth statement and whose net movable wealth exceeds 1 million rupees. This virtually means that the person whose net movable wealth does not exceed 1 million, is not caught by the provision of section 9 of the Act, 2013. This, according to the learned counsel for the petitioners, is an act of discrimination and offends Article 25 of the Constitution.

40.This submission of the learned counsel for the petitioners does not take into consideration the fact that section 9 relates to the collection of the levy under the Act, 2013. It prescribes the rate of levy and envisages it to be imposed only in case the net movable wealth of an assessee exceeds 1 million rupees. This in itself creates a class on which the levy is sought to be imposed. This class has been set apart from the other class of assessees whose net movable wealth does not exceed 1 million rupees. Therefore, an intelligible differentia has been set by the legislature itself and it is not the case of the petitioners that there is a discrimination within the class of assessees whose net movable wealth exceeds 1 million rupees. It was held in Messrs Elahi Cotton Mills Ltd. that:

"The Legislature is competent to classify persons or properties into different categories subject to different rates of tax. But if the same class of property similarly situated is subject to an incidence of taxation, which results in inequality amongst holders of the same kind of property, it is liable to be struck down on account of infringement of the fundamental right relating to equality."

41.Similarly, at page 692 of Messrs Elahi Cotton Mills Ltd. the concept was further elaborated upon in the following words:--

"46. Adverting to the second reason, namely, that they are not based on reasonable classification as they purport to treat unequal as equal, it may be observed that reasonable classification does not imply that every person should be taxed equally. It may be pointed out that reasonable classification is permissible provided it is based on an intelligible differentia which distinct persons or things that are grouped together from those who have been left out and that the differentia must have rational nexus to the object to be achieved by such classification. It may further be pointed out that different laws can be validly enacted for different sexes, persons in different age-groups, persons having different financial standings and that no standard of universal application to test reasonableness of a classification can be laid down as what may be reasonable classification in a particular set of circumstances, may be unreasonable in the other set of circumstances. The requirement of reasonable classification is fulfilled if in a taxing statute the Legislature has classified persons or properties into different categories which are subject to different rates of taxation with reference to income or property and such classification would not be open to attack on the ground of inequality or for the reason that the total burden resulting from such a classification is unequal. The question, as to whether a particular classification is valid or not, cannot be decided on the basis of advantages and disadvantages to individual assessees which are accidental and inevitable and are inherent in every taxing statute as it has to draw a line somewhere and some cases necessarily may fall on the other side of the line."

42.Thus, the rule is that reasonable classification is permissible provided it is based on an intelligible differentia which has reasonable nexus with the object sought to be achieved and under which distinct persons or things are grouped together. Further, that different laws can be validly enacted for different persons having different financial standing. Another important observation was that the requirement of reasonable classification is fulfilled if in a taxing statute the Legislature has classified persons or properties into different categories which are subject to different rates of taxation with reference to income or property and such classification would not be open to attack on the ground of inequality. At this juncture we will have to bear in mind the distinction between the subject of the levy i.e. the nature of which defines the quality of the levy, on the one hand, which must not be compared with the measure of liability, that is, the quantum of the tax.

43.Applying the test laid down in Messrs Elahi Cotton Mills Ltd. case to the facts of the present case, it is evident and clear that the Legislature has merely created a different category of persons who have been made subject to a different rate of taxation under section 9 of the Act, 2013. This category has been set apart with reference to the income or the net movable wealth which that category is in possession of. The class of persons has been set apart as possessing a certain threshold of affluence. There is thus no ground for laying a challenge on this basis and the differentia seems to have a reasonable nexus to the object to be achieved by such classification.

44.Mian Ashiq Hussain, Advocate, heavily relied upon an Indian Supreme Court judgment reported as 83 ITR 582 (1972) in which the provisions of Wealth Tax Act, 1963 were brought under challenge. The meaning of term 'capital value of assets' was dilated upon and it was held that:--

"The various decisions and authorities cited above which bear on the rue meaning of the expression 'capital value of assets' make it amply clear that the same can only mean the market value of the assets less any encumbrances charged thereon."

45.There is no material difference between the definition as expounded by the Indian Supreme Court and the Supreme Court of Pakistan of the term 'capital value of assets'. However, the Indian Supreme Court judgment loses relevance since the matter stands settled in our jurisprudence.

46.The learned counsel for the petitioners sought to bolster their arguments on the basis of section 116 of the Income Tax Ordinance, 2001. However, that provision merely relates to the powers of the Commissioner to require any person to furnish a wealth statement. Also by subsection (2) every resident taxpayer being an individual and filing a return of income for any tax year shall furnish a wealth statement along with such return. An amendment was brought about by way of Finance Act, 2013. However, section 116 does not have any perceptible impact on the question of distinction when it has been held that the levy in the first place does not act discriminately in classifying persons into two categories.

47.In view of the above, these petitions are without merit and are, therefore, dismissed.

Appendix-1

Sr. No.	W.P Nos.	Title
1.	29431 of 2013	Abdul Hayee v. F.O.P. etc.
2.	32219 of 2013	Amer Zia v. F.O.P. etc.
3.	32222 of 2013	Syed Shahryar Ali v. F.O.P. etc.
4.	32251 of 2013	Suhail Habib v. F.O.P. etc.
5.	32517 of 2013	Ch. Khalid Shafiq v. F.O.P. etc.
6.	32519 of 2013	Sharjil Khalid v. F.O.P. etc.
7.	26612 of 2013	Mansoor Rahi v. F.O.P. etc.
8.	16877 of 2014	Shah Abdul Majeed etc. v. F.O.P. etc.
9.	15335 of 2014	Kh. Muhammad Babar v. F.O.P. etc.
10.	27204 of 2013	Noor Elahi v. F.O.P. etc.
11.	31028 of 2013	Dr. Osman Quddus v. F.O.P. etc.
12.	26618 of 2013	Athar Javed Elahi v. F.O.P. etc.
13.	25486 of 2013	Malik Asif Hayat Adv. v. F.O.P. etc.
14.	29464 of 2013	Sajjad Aslam v. F.O.P. etc.
15.	29544 of 2013	Muhammad Asim Sajjad v. F.O.P. etc.
16.	30633 of 2013	Ikram ul Haq v. F.O.P. etc.
17.	18885 of 2014	Dr. Irfan Ullah Khan v. F.O.P. etc.
18.	30532 of 2013	Umber Haroon Sehgal v. F.O.P. etc.
19.	30212 of 2013	Shahid Hussain v. F.O.P. etc.
20.	30622 of 2013	Tahir Hussain Qureshi v. F.O.P. etc.
21.	30653 of 2013	M/s Huzaima Bukhari v. F.O.P. etc.
22.	30503 of 2013	Muhammad Naseem Sehgal v. F.O.P. etc.
23.	30507 of 2013	Naz Afreen v. F.O.P. etc.
24.	26614 of 2013	Asad Elahi v. F.O.P. etc.
25.	30856 of 2013	M. Waseem Mukhtar v. F.O.P. etc.
26.	32520 of 2013	Shagufta Begum v. F.O.P. etc.
27.	29538 of 2013	Raza Muhammad Aslam v. F.O.P. etc.
28.	30492 of 2013	Syed Sadaqat Ali Shah v. F.O.P. etc.
29.	29462 of 2013	Mst. Akhtar Begum v. F.O.P. etc.
30.	30203 of 2013	Sardar Aamir Hussain v. F.O.P. etc.
31.	32220 of 2013	Shahid Zia v. F.O.P. etc.
32.	29981 of 2013	Arshad Mehmood Mir v. F.O.P. etc.
33.	32252 of 2013	Dr. Niloufer Mahdi v. F.O.P. etc.
34.	30440 of 2013	Nasim Ahmad v. F.O.P.
35.	30969 of 2013	Fateh Khan Akhtar v. F.O.P. etc.
36.	30512 of 2013	Sahar Agha v. F.O.P. etc.
37.	21337 of 2013	Sufi Muhammad Farrukh Amin v. F.O.P. etc.
38.	26616 of 2013	Azhar Elahi v. F.O.P. etc.
39.	30488 of 2013	Naeem Ahmad v. F.O.P. etc.
40.	26504 of 2013	Adnan Jalil Azam v. G.O.P. etc.
41.	36706 of 2015	Sheikh M. Mushtaq v. F.O.P. etc.
42.	27578 of 2013	Mst. Sadaf Pervaiz v. F.O.P. etc.
43.	27598 of 2013	Mst. Fakhra Pervaiz v. F.O.P. etc.
44.	27587 of 2013	Mst. Saima Hassan v. F.O.P. etc.
45.	30520 of 2013	Syed Waqar Ali Shah v. F.O.P. etc.
46.	28912 of 2013	Imran Aslam v. F.O.P etc.
47.	24663 of 2013	Sufi Muhammad Amin v. F.O.P. etc.
48.	27588 of 2013	Mian Pervaiz Aslam v. F.O.P. etc.
49.	27595 of 2013	Irfan Aslam v. F.O.P. etc.
50.	30858 of 2013	Shah Mukhtar Ahmad etc. v. F.O.P. etc.
51.	30518 of 2013	Begum Razia Yousaf Sehgal v. F.O.P. etc.
52.	15437 of 2014	Aamir Mehmood v. F.O.P. etc.
53.	29429 of 2013	Ala ud Din J. Feerasta v. F.O.P. etc.
54.	14765 of 2014	Shah Mahmood Iqbal v. F.O.P. etc.
55.	14960 of 2014	Mansoor Ahmad v. F.O.P. etc.

MH/M-160/L Petition dismissed.