| Case ID |
233bac7a-a7e0-43ae-8f39-34becdd4eb8b |
| Body |
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| Case Number |
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| Decision Date |
Jun 04, 1997 |
| Hearing Date |
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| Decision |
By this common judgment we intend to dispose of above 294 appeals which have been filed against the judgments of various Division benches/Single Judges of the Lahore High Court passed in Writ Petitions mentioned in the title of the aforesaid appeals, dismissing the same. The brief facts are that the Finance Act, 1991 (Act No. XII of 1991), which was assented to by the President on 20-6-1991 and was gazetted in the Gazette of Pakistan, Extraordinary; Part I on 27-6-1991, incorporated inter alia section 80-C and section 80-D in the Income Tax Ordinance, 1979, hereinafter referred to as the Ordinance. Subsection (1) of the former section imposed tax on income of certain contractors and importers on the basis of the amount referred to in subsection (2) thereof that was received by or accrued or arose or was deemed to accrue or arise to any person being a resident. It also provided that the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged at the rates specified in the First Schedule. Whereas subsection (1) of the latter section (i.e., section 80-D) laid down that 'Notwithstanding anything contained in this Ordinance or any other law for the time being in force, where no tax is payable by a company resident in Pakistan or the tax payable is less than one-half per cent. of the amount representing its turnover from all sources, the aggregate of the declared turnover shall be deemed to be the income of the said company and tax thereon shall be charged in the manner specified in subsection (2)'. Subsection (2) thereof provided that the company referred to subsection (1) shall pay as income tax--- (a) an amount, where no tax 'is payable, equal to one-half per cent. Of the said turnover; and (b) an amount, where tax payable is less than one-half per cent. of the said turnover, equal to the difference between the tax payable and the amount calculated in accordance with clause (a). Explanation.---For the removal of doubt it is declared that 'turnover' means the gross receipts, exclusive of trade discount shown on invoices or bills, derived from sale of goods or from rendering, giving or supplying services or benefits or from execution of contracts. |
| Summary |
In the landmark case cited as 1997 SLD 494 and 1997 PTD 1555, the Supreme Court of Pakistan deliberated on the constitutional validity of certain provisions within the Income Tax Ordinance, 1979, specifically sections 80-C, 80-CC, and 80-D. Decided on June 4, 1997, after hearings conducted from April 1 to April 4 and April 7 to April 10, the case involved Messrs ELAHI COTTON MILLS LTD. and others as petitioners against the Federation of Pakistan through the Secretary M/o Finance, Islamabad, and six other respondents.
The central issue revolved around the imposition of presumptive taxes based on declared turnover without allowing assessees to adjust their tax liabilities based on actual income. Petitioners argued that such provisions were arbitrary, expropriatory, and violated fundamental rights under Articles 4, 18, and 25 of the Constitution of Pakistan. They contended that the presumptive tax scheme lacked reasonable classification and treated unequal entities equally, thereby infringing upon constitutional mandates.
Conversely, the respondents maintained that the legislature possessed the inherent power to enact such tax provisions under Entry No.47 of the Fourth Schedule of the Constitution, which governs taxes on income other than agricultural income. They asserted that the presumptive tax mechanism was a legitimate exercise of legislative authority aimed at broadening the tax base and ensuring revenue collection efficiency.
The Supreme Court, presided over by Justices AJMAL MIAN, SAIDUZZAMAN SIDDIQUI, MUHAMMAD BASHIR KHAN, JEHANGIRI, NASIR ASLAM ZAHID, and KHALIL-UR-REHMAN KHAN, meticulously examined the constitutional provisions related to taxation. The Court emphasized that while the power to tax is an essential attribute of sovereignty vested in the legislature, it must be exercised within the confines of the Constitution. The Court evaluated whether the presumptive tax provisions adhered to the principles of reasonable classification and non-discrimination as mandated by the Constitution.
Upon detailed analysis, the Court upheld the validity of sections 80-C, 80-CC, and 80-D of the Income Tax Ordinance, 1979. It concluded that the presumptive tax provisions did not violate constitutional mandates as they were based on intelligible differentia and had a rational nexus with the objectives of broadening the tax base and enhancing revenue collection. The Court noted that the legislature's discretion in taxation matters permits such categorizations provided they are not arbitrary or capricious.
Furthermore, the Court addressed the procedural aspects, reaffirming that the legislative framework for presumptive taxation includes mechanisms for tax computation based on turnover, which was deemed reasonable and non-expropriatory. The Court dismissed the appeals, reinforcing the legislature's authority to implement tax policies that align with the nation's economic objectives, provided they conform to constitutional standards.
This judgment underscored the judiciary's role in upholding the balance between legislative authority and constitutional safeguards, ensuring that tax laws serve public purposes without encroaching upon fundamental rights. The decision has significant implications for the interpretation of tax laws in Pakistan, affirming the constitutionality of legislative measures aimed at enhancing fiscal stability and governance efficacy. |
| Court |
Supreme Court of Pakistan
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| Entities Involved |
FEDERATION OF PAKISTAN,
ELAHI COTTON MILLS LTD.
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| Judges |
AJMAL MIAN,
SAIDUZZAMAN SIDDIQUI,
MUHAMMAD BASHIR KHAN,
JEHANGIRI,
NASIR ASLAM ZAHID,
KHALIL-UR-REHMAN KHAN
|
| Lawyers |
Raja Muhammad Akram,
Ch. Muhammad Aslam,
Ch. Mehdi Khan Mehtab,
M.A. Qureshi,
Syed Zahid Hussain,
S. Inayat Hussain,
Mian Ashiq Hussain,
Sh. Maqbool Ahmad,
Ashter Ausaf Ali,
Sh. Salah-ud-Din,
Sh. Masud Akhtar,
Rana M. A. Qadri,
M. Ziaullah Kiani,
Talat Farooq Sh.,
Ch. Latif
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| Petitioners |
others,
ELAHI COTTON MILLS LTD.
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| Respondents |
6 others,
FEDERATION OF PAKISTAN through Secretary M/o Finance, Islamabad
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| Citations |
1997 SLD 494,
1997 PTD 1555
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| Other Citations |
Assistant Commissioner of Land Tax, Madras and others v. Buckingham and Carnatic Co. Ltd. (1970) 75 ITR 603,
The Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1664,
Corpus Juris Secundum, Vol. LXXXIV,
Black's Law Dictionary, Sixth Edn.,
Ballentine's Law Dictionary, Third Edn.,
Legal Thesaurus by Steven C. DeCosta,
Morey v. Doud (1957) US 457,
Willi's Constitutional Law,
Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan and others 1992 SCMR 1652,
Pakistan Industrial Development Corporation v. Pakistan through Secretary, Ministry of Finance 1992 SCMR 891,
Government of Pakistan and others v. Muhammad Ashraf and others PLD 1993 SC 176,
Haji Ibrahim Ishaq Johri v. The Commissioner of Income Tax (West), Karachi, 1993 SCMR 287,
Altaf Construction Company v. Central Board of Revenue and others 1996 PTD 804,
Al-Samrez Enterprise v. Federation of Pakistan 1986 SCMR 1917,
Zaibtun Textile Mills Ltd. v. Central Board of Revenue and others PLD 1983 SC 358
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| Laws Involved |
Income Tax Ordinance, 1979,
Income Tax Act, 1961,
Income Tax Act, 1922,
Protection of Economic Reform Act, 1992
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| Sections |
32,
38,
37,
80D,
41,
34,
30,
35,
4,
80C,
80CC,
2(6C),
36,
6,
28,
29,
31,
33,
39,
40,
42,
115JA,
44AF,
44-AC,
206C,
43C,
42(1)
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