IN THE HIGH COURT OF SINDH, KARACHI
I.T.R.A. No. 130 of 2014
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Date |
Order with signature of Judge |
Present:
Mr. Justice Aqeel Ahmed Abbasi.
Mr. Justice Aziz-ur-Rehman.
Hearing of Case
For hearing of Main Case.
10.10.2017:
Mr. Altamish Faisal Arab, advocate for the applicant.
O R D E R
Aqeel Ahmed Abbasi, J.: Through instant Reference Application, the applicant department has proposed following questions, which according to learned counsel for the applicant, are questions of law arising from the impugned order dated 01.07.2015 passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi in ITA No. 778/KB/2013 (Tax Year 2012) for opinion of this Court: -
“(a) Whether on the facts and circumstances of the case, the learned ATIR was justified to vacate the order passed u/s. 122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner (IR), charging WWF charged at Rs.7,508,872/- on declared receipts of tax payer duly mentioned in the return of income, as per Board Circular No.10 of 2008, read with section 4 of Workers Welfare Fund ordinance, 1971, wherein it is specifically mentioned that in PTR case WWF should be charged WWF at 2% of 4% of total receipts?
(b) Whether on the facts and circumstances of the case, the learned ATIR was justified to vacate the order passed u/s. 122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner (IR), charging WWF at Rs.7,508,872/-, without considering the order passed by the learned CIR (Appeals), wherein WWF charged was upheld after thrashing/highlighting the issue thoroughly?
(c) Whether on the facts and circumstances of the case, the learned ATIR was justified to vacate the order passed u/s. 122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner (IR), charging WWF at Rs.7,508,872/-, without verifying the calculation/s made by the ADCIR, in terms of section 4 of the Workers Welfare Fund Ordinance, 1971 as amended vide Finance Act, 2006 and 2008 and on the basis of decision of Apex Court vide No.D-2753 to 2756 of 2009 dated 01.03.2013?
(d) Whether on the facts and circumstances of the case, the learned ATIR was justified in observing that WWF has been charged in the captioned case on imputed income against the tax deducted whereas same has been charged at Rs.7,508,872/- on declared receipt available on income tax return at Rs.9,386,089,944/-?”
2. Learned counsel for the applicant department at the very outset submits that the controversy involved in the instant Reference Application primarily revolves around the dispute relating to imposition of Workers Welfare Fund (WWF) in respect of total receipts under presumptive tax regime. However, according to learned counsel, since the question regarding imposition of WWF pursuant to amendment introduced through Finance Act, 2006 and 2008, has already been decided by the Hon’ble Supreme Court in the case of Workers Welfare Fund (WWF), Ministry of Human Resources Development, Islamabad through Secretary Employees Old Age Benefits Institution through its Chairman and another v. East Pakistan Chrome Tannery (Pvt.) Ltd. through its G.M. Finance, Lahore and others [Civil Appeals No.1049 to 1055 of 2011 and several other connected Civil Appeals], therefore, instant Reference Application may also be disposed of in terms of the aforesaid judgment of the Hon’ble Supreme Court. In support of his contention, learned counsel for the applicant has placed on record copy of order dated 13.01.2017 passed by this Court in I.T.R.A. No. 250 of 2011.
3. We have heard the learned counsel for the applicant, perused the record with his assistance and have also examined the order passed by this Court in the aforesaid Income Tax Reference Application, wherein, while placing reliance on the judgment passed by the Hon’ble Supreme Court of Pakistan dated 27.09.2016 passed in Civil Appeals No.1049 to 1055 of 2011, as referred to hereinabove, instant Reference Application is disposed of in view of the aforesaid judgment of the Hon’ble Supreme Court of Pakistan. It will be advantageous to reproduce the relevant finding of the Hon’ble Supreme Court and also the judgment passed by this Court in the aforesaid petitions, which reads as follows:
“ Learned counsel for the petitioners/applicants in the above cases, at the very outset submit that in view of the recent judgment of the Hon’ble Supreme Court of Pakistan dated 27.09.2016, passed in Civil Appeals No.1049 to 1055 of 2011 (and several other connected Civil Appeals) in the case of Workers Welfare Fund (WWF), Ministry of Human Resources Development, Islamabad through Secretary Employees Old Age Benefits Institution through its Chairman and another v. East Pakistan Chrome Tannery (Pvt.) Ltd. through its G.M. Finance, Lahore and others, whereby, Hon’ble Supreme Court of Pakistan has been pleased to declare that Worker’s Welfare Fund is not a tax, hence, the amendments introduced through Finance Act, 2006 and 2008 are ultra-vires to the Constitution, the above petitions may be allowed, whereas, reference applications may be disposed of in terms of the decision of the Hon’ble Supreme Court by holding that levy of WWF pursuant to amendments introduced through Finance Act, 2006 and Finance Act, 2008 are illegal.
2. Learned counsel for the petitioners/applicants have placed the copy of the aforesaid judgment and have readout the relevant finding of the Hon’ble Supreme Court as contained in paragraph 22 & 23, which reads as follows:-
“22. As we have established from the discussion above that none of the subject contributions/payments made under the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 possess the distinguishing feature of a tax, i.e. a common burden to generate revenue for the State for general purposes, instead they all have some specific purpose, as made apparent by their respective statutes, which removes them from the ambit of a tax. Consequently, the amendments sought to be made by the various Finance Acts of 2006, 2007 and 2008 pertaining to the subject contributions/payments do not relate to the imposition, abolition, remission, alteration or regulation of any tax, or any matter incidental thereto (tax). We would like to point out at this juncture that the word ‘finance’ used in Finance Act undoubtedly is a term having a wide connotation, encompassing tax. However not everything that pertains to finance would necessarily be related to tax. Therefore merely inserting amendments, albeit relating to finance but which have no nexus to tax, in a Finance Act does not mean that such Act is a Money Bill as defined in Article 73(2) of the Constitution. The tendency to tag all matters pertaining to finance with tax matters (in the true sense of the word) in Finance Acts must be discouraged, for it allows the legislature to pass laws as Money Bills by bypassing the regular legislative procedure under Article 70 of the Constitution by resorting to Article 73 thereof which must only be done in exceptional circumstances as and when permitted by the Constitution. The special legislative procedure is an exception and should be construed strictly and its operation restricted. Therefore, we are of the candid view that since the amendments relating to the subject contributions/payments do not fall within the parameters of Article 73(2) of the Constitution, the impugned amendments in the respective Finance Acts are declared to be unlawful and ultra vires the Constitution.
23. There is another aspect of the matter which requires due attention. No doubt the feature of having a specific purpose is a characteristic of a fee, which the subject contributions /payments possess as discussed in the preceding portion of this opinion. However, there are certain other characteristics of a fee, such as quid pro quo, which must be present for a contribution or payment to qualify as a fee. This was the main argument of the learned counsel who categorized the subject contributions in the nature of a tax, that they (the contributions) lacked the element of quid pro quo or in other words the benefit of the contribution did not go the payers. The industrial establishments or employers etc. were liable to pay the contribution but they were not the beneficiaries of the purpose for which such contributions were being made; the beneficiaries were their employees or workers etc. Mr. Rashid Anwar attempted to argue that the benefit need not be direct and can be indirect, therefore although the employees were directly benefited by contributions made to the Employees’ Old-Age Benefit Fund as they received the disbursements, the employers received an indirect benefit in that this results in happier employees which ultimately leads to greater productivity. Whilst this may be true, albeit a strained argument, the attempt of the learned counsel challenging the legality of the amendments in the Finance Acts has all along been to categorize the contributions/payments as a fee, which would mean that they were not a tax. While a fee is obviously not a tax, there was absolutely no need to try and squeeze the contributions/payments into the definition of a fee, when all that is required is to take them out of the ambit of a tax. We may develop this point further; although Article 73(3)(a) of the Constitution states that a Bill shall not be a Money Bill if it provides for the imposition or alteration of a fee or charge for any service rendered, this does not mean that if a particular levy/contribution does not fall within Article 73(2) it must necessarily fall within Article 73(3). Sub-articles (2) and (3) are not mutually exclusive. There may very well be certain levies/contributions that do not fall within the purview of Article 73(3) but still do not qualify the test of Article 73(2) and therefore cannot be introduced by way of a Money Bill, and instead have to follow the regular legislative procedure. The discussion above that the subject contributions/payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill, i.e. the Finance Acts of 2006 and 2008, as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution.”
3. All the learned counsel for the petitioners/applicants and the respondents as well as learned Standing Counsel submit that the aforesaid petitions and the reference applications can be disposed of in terms of the aforesaid judgment of the Hon’ble Supreme Court, whereby, it has been held that since the WWF is not a tax, therefore, amendment introduced through Finance Act, 2006 and Finance Act, 2008, are ultra-vires to the Constitution of Islamic Republic of Pakistan, 1973.
4. Accordingly, all the aforesaid Petitions/ITRAs are disposed of in terms of paragraph 22 and 23 as reproduced hereinabove of the judgment of the Hon’ble Supreme Court passed in the Civil Appeals No.1049 to 1055 of 2011 (and several other connected Civil Appeals) in the case of Workers Welfare Fund (WWF) Ministry of Human Resources Development, Islamabad through Secretary Employees Old Age Benefits Institution through its Chairman and another v. East Pakistan Chrome Tannery (Pvt.) Ltd. through its G.M. Finance, Lahore and others.”
4. Since the questions proposed through instant reference application relate to imposition of WWF in respect of presumptive income, whereas, such amendment through Finance Act, 2006 and 2008 has been declared to be ultra vires to Constitution by the Hon’ble Supreme Court in the above terms, accordingly, instant reference application is also disposed of in the aforesaid terms.
J U D G E
J U D G E
A.S.