| Case ID |
0320c4af-5f26-4e27-8617-383c606ff5de |
| Body |
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| Case Number |
Civil Appeal No.123-K of 1983 |
| Decision Date |
Oct 08, 1991 |
| Hearing Date |
Aug 29, 1991 |
| Decision |
The Supreme Court of Pakistan ruled that the Free Reserve of a company does not constitute income within the meaning of Entry No.43 of the Third Schedule of the Constitution of Pakistan, 1962. Consequently, it determined that the Finance Acts of 1967 and 1968, which taxed what was not classified as income, were ultra vires. This decision reinforced the principle that once an income has been assessed and taxed, it cannot be treated as income again for taxation purposes. The court emphasized the need for clarity in legislative language to avoid double taxation and highlighted the importance of interpreting tax laws in a manner that avoids taxing the same income multiple times. |
| Summary |
In the case of Pakistan Industrial Development Corporation v. Pakistan through the Secretary, Ministry of Finance, the Supreme Court of Pakistan addressed critical issues regarding taxation under the Income Tax Act, 1922, and the Constitution of Pakistan, 1962. The key focus was on whether the Free Reserve of a company could be classified as income subject to tax. The court found that the Free Reserve does not meet the definition of income as stipulated in the relevant laws. This determination has significant implications for corporate taxation practices in Pakistan, particularly regarding the treatment of retained earnings as income. The decision reinforces the legal principle that income, once taxed, cannot be taxed again under the same classification, thus protecting corporations from potential double taxation. The ruling also highlights the importance of precise legislative drafting in tax laws to prevent ambiguities that could lead to unjust taxation scenarios. The court's interpretation of the income definition aligns with judicial precedents that stress the need for a broader understanding of income in the context of corporate finances. This case serves as a landmark decision in clarifying the boundaries of taxable income and the legislative authority to impose taxes on corporate reserves. |
| Court |
Supreme Court of Pakistan
|
| Entities Involved |
Not available
|
| Judges |
SHAFIUR RAHMAN,
MUHAMMAD RAFIQ TARAR,
SALEEM AKHTAR
|
| Lawyers |
Khalid Anwar, Advocate Supreme Court,
S.M. Abbas, Advocate-on-Record,
Shaikh Haider, Advocate Supreme Court,
Ali Ahmed Fazeel, Advocate Supreme Court,
Muzaffar Hassan, Advocate-on-Record
|
| Petitioners |
PAKISTAN INDUSTRIAL DEVELOPMENT CORPORATION
|
| Respondents |
PAKISTAN through the Secretary, Ministry of Finance
|
| Citations |
1992 SLD 90,
1992 PTD 576,
(1992) 65 TAX 84
|
| Other Citations |
Maharajkumar Gopal Saran v. Commissioner of Income Tax (1935) 3 ITR 237,
Navinchandra Hafatlal, Bombay v. Commissioner of Income Tax (1954) 26 ITR 758,
K.P. Varghese v. Income Tax Officer AIR 1981 SC 1922,
Mst. Samina Shaukat Ayub Khan v. Income Tax Officer PLD 1981 SC 85,
Commissioner of Income Tax, Rawalpindi v. Messrs Haji Maula Bux Corporation, Sargodha PLD 1990 SC 991,
United Provinces v. Mst. Atiqa Begum and others AIR 1941 FC 16,
C.I.T. v. Bombay Trust Corporation 4 ITC 312,
Keshav Mills Limited v. C.I.T. 23 ITR 230,
C.I.T. v. Ahmedbhai Umerbhai 18 ITR 472 (SC)
|
| Laws Involved |
Income Tax Act, 1922,
Constitution of Pakistan, 1962
|
| Sections |
2(6c),
4,
55,
Third Schedule, Entry No.43
|