| Case ID |
42e2bae2-7e7f-408e-86a8-80c76b627331 |
| Body |
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| Case Number |
Civil appeals Nos.857 to 867, 1792, 1793 of 2002 5 |
| Decision Date |
Apr 17, 2006 |
| Hearing Date |
Apr 17, 2006 |
| Decision |
The Supreme Court upheld the Lahore High Court's decision, affirming that payments made to retiring employees under the Golden Handshake Scheme constitute salary as defined under the repealed Income Tax Ordinance, 1979. The court ruled that such payments are subject to income tax under section 15 of the Ordinance. The court emphasized that the nature of these payments, whether as ex gratia or compensation for loss of employment, falls within the legal definition of salary, thereby subjecting them to taxation. The court dismissed the appeals of the retiring employees, establishing that the deductions made by the Central Board of Revenue were lawful and in accordance with the provisions of the Income Tax Ordinance. The decision clarified the interpretation of statutory provisions regarding salary and highlighted the binding nature of legal fictions created by the legislature. |
| Summary |
This case revolves around the taxation of payments made to employees opting for voluntary retirement under the Golden Handshake Scheme. The Supreme Court of Pakistan examined whether these payments should be treated as salary subject to income tax. The court concluded that such payments, despite being labeled as compensation for loss of employment, fall within the definition of salary under the Income Tax Ordinance, 1979. This ruling underscores the importance of statutory interpretation in determining tax liabilities and reinforces the principle that legal fictions in statutes must be adhered to. The decision is significant for employees and employers alike, as it clarifies the tax implications of retirement compensation packages. |
| Court |
Supreme Court of Pakistan
|
| Entities Involved |
Not available
|
| Judges |
IFTIKHAR MUHAMMAD CHAUDHRY, C.J.,
ABDUL HAMEED DOGAR,
SAIYED SAEED ASHHAD, JJ
|
| Lawyers |
Ibrar Hussain Naqvi, Advocate Supreme Court,
C.M. Lateef, Advocate Supreme Court,
Ray Muhammad Nawaz Kharal, Advocate Supreme Court,
Sikandar Hayat Khan, Advocate Supreme Court,
Muhammad Ilyas Khan Senior Advocate Supreme Court,
Malik Muhammad Nawaz, Advocate Supreme Court,
Ch. Akhtar Ali, Advocate-on-Record,
Mehr Khan Malik, Advocate-on-Record
|
| Petitioners |
Malik MUHAMMAD INAM and others
|
| Respondents |
FEDERATION OF PAKISTAN and others,
MUHAMMAD SALEEM KHAN and others,
SARA ROOHI USMANI and others,
COMMISSIONER OF Income Tax and others,
S. HAMIDULLAH SHAH and others,
DEPUTY COMMISSIONER OF Income tax/WEALTH TAX and others
|
| Citations |
2006 SLD 2773,
2006 SCMR 1670
|
| Other Citations |
Income Tax Commissioner v. E.D. Sheppard AIR 1963 SC 1343,
Commissioner Income Tax, Bengal v. Shawallace and Company AIR 1932 PC 138,
Ellahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Ministry of Finance, Islamabad and 6 others PLD 1997 SC 582,
Ghulam Mustafa Insari and 48 others v. Government of the Punjab and others 2004 SCMR 1903
|
| Laws Involved |
Income Tax Ordinance (XXXI of 1979)
|
| Sections |
2(6),
15(a),
16(2)(a)(iii)(c)(i),
50,
Second Schedule
|