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Petitioner: Yaqoob Ahmed through Attorney and others VS Respondent: Federation of Pakistan
Court Name: Sindh High Court Judge(s): Aqeel Ahmed Abbasi, Muhammad Junaid Ghaffar Title:Yaqoob Ahmed through Attorney and others vs Federation of Pakistan
JUDGMENT
Reported As: 2020 PTD 1407 Result: Petitions allowed Judgment JUDGMENT AQEEL AHMED ABBASI, J.----Through this common judgment, we intend to dispose of the aforesaid petitions, which are divided in two categories. In the first category of petitions, imposition of income support levy at the rate of 0.5% on the value of Net Moveable Assets through Income Support Levy Act, 2013, has been challenged for having been introduced through Finance Act in terms of Article 73 of the Constitution, whereas, it does not possess the characteristic of a tax, and also for being discriminatory as it creates unreasonable classification within the same class, hence, ultra vires to the Constitution. Whereas, in the second category of petitions, Notices issued and assessment orders passed in terms of Section 5 of Income Support Levy Act, 2013, after repeal of the aforesaid Act through Finance Act, 2014, have been challenged by the petitioners for being illegal, without lawful authority, mainly on the ground that in the repealing enactment there is violation or no saving clause provided to revive the provisions of Income Support Levy Act, 2013. Since large number of petitions have been filed by the petitioners, who felt aggrieved by such imposition of Income Support Levy Act, 2013, therefore, number of counsel shown appearance on behalf of the petitioners, however, Messrs Dr. Farough Naseem, Naveed A. Andrabi along with Anwar Kashif Mumtaz, Arshad Siraj, Abid H. Shaban, Hyder Ali Khan along with Ali Almani, Ovais Ali Shah, Mustafa Lakhani and Abdul Rahim Lakhani, Advocates, have mainly argued the matter at length on behalf of petitioners, whereas, most of the Advocates adopted their arguments and filed brief synopsis of written arguments. Learned Additional Attorney Mr. Salman Talibuddin and Messrs Amjad Javaid Hashmi, Dr.Shahnawaz Memon, S. Mohsin Imam, Haider Naqi, Muhammad Aqeel Qureshi, Muhammad Taseer Khan and Ameer Bukhsh Metlo, have made their submissions on behalf of Federation and the respondents respectively. The arguments advanced by the learned counsel for the petitioners and respondents can be summarized as under:-
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2. It has been argued by the learned counsel for the petitioners that the impugned Income Support Levy Act, 2013, whereby, a tax has been levied at the rate of 0.5% on the net value of moveable assets is ultra vires to the Constitution, illegal and has been introduced without lawful authority as, according to learned counsel, the provisions of Income Support Levy Act, 2013, are not inconformity with the provisions of Article 73 read with Article 78 of the Constitution of Islamic Republic of Pakistan, 1973, hence, cannot be introduced through a Money Bill. It has been further argued that Income Support Levy Act, 2013, besides being ultra vires to the Constitution, is also discriminatory in nature, and also amounts to double taxation, as according to learned counsel, through Income Support Levy, a tax has been imposed on the accumulated wealth of an individual, which represents the income already subjected to tax or exemption, as the case may be, under the Income Tax Ordinance, 2001. Per learned counsel, the discrimination while imposing the aforesaid levy is manifest on the face of its enactment, as according to learned counsel, through impugned enactment only such individuals who are already in the tax net i.e. existing taxpayers, have been subjected to the charge of income support levy, whereas, similarly placed individuals, who do not pay any income tax i.e. non-filers of income tax returns, are excluded from the purview of subject levy, which fact alone, makes the impugned levy as discriminatory. It has been argued that the subject levy cannot be introduced through Money Bill in terms of Article 73 of the Constitution, whereas, no reasonable classification has been created by the legislature for the purposes of imposition of Income Support Levy, as according to learned counsel, a large number of persons, who have acquired huge assets and accumulated wealth have not been brought into the net of income tax, have been conveniently excluded from the charge and imposition of Income Support Levy. On the contrary, only such individuals, who are already making payment of income tax, have been subjected to further tax in respect of the accumulated wealth, however, after payment of income tax on such income from which such wealth has been accumulated. Learned counsel for the petitioners have further argued that the Income Support Levy Act, 2013, is a colourable legislation as it has been introduced through Income Support Levy Act, 2013, which was embedded in the Finance Act, 2013 and has not been introduced and passed as a separate legislation through process of being presented before both the houses as per Constitutional mandate. Learned counsel further argued that the income support levy is also violative of Article 25 of the Constitution, whereas, no reasonable nexus to the object sought to be achieved has been created. On the other hand, it creates a hostile discrimination between citizens, who own and possess the same amount of moveable assets, however, only existing taxpayers have been subjected to additional burden of income support levy, whereas, non-taxpayers, are excluded from such charge, which amounts to discrimination, even if it may be treated as a class in itself. In this regard reference has been made to the provisions of Section 3 of the Income Support Levy Act, 2013, which is a charging section, and speaks of a "levy, in respect of value of net moveable asset" therefore, according to learned counsel, income support levy is on a person, who owns net moveable wealth exceeding Rs.1.00 Million, therefore, it is a targeted legislation and violation of Article 25 of the Constitution. According to learned counsel, the term net moveable assets has been defined in Section 2(b) of Income Support Levy Act, 2013, which 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." Further reference has been made to the provisions of Section 4 of the Income Support Levy Act, 2013, whereby, time and manner of payment of levy have been defined, according to which, "a person who is liable to pay the Levy under this Act shall pay the levy along with wealth statement". According to learned counsel, the above provision of Section 4 of the Income Support Levy Act, 2013, inter alia means, that ISL is a levy on such individual who owns Net Moveable Wealth of more than Rs.1.00 M at the end of tax year and files wealth statement. In other words, if an individual owns net moveable wealth of Rs.1.00 M but does not file Wealth Statement, or he is not required to file Wealth Statement under Section 116 of the Income Tax Ordinance, 2001, then he will not be liable to pay income support levy, whereas, the Income Support Levy Act, 2013, does not contain any provision of law, whereby, a nonexisting taxpayer, or a person who does not file his income tax return, can be asked to file Wealth Statement.
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3. To support hereinabove contention, learned counsel for the petitioners have cited two examples in the following terms:- (i) if two brothers A and B both own net moveable assets each of Rs.20,00,00,000/- but brother A has Income of Rs.10,00,00/- and as such as per requirement of section 116(2) of the Income Tax Ordinance, 2001 is required to file Wealth Statement and whereas, brother B has Income of Rs.9,99,999/- and as per provisions of Section 116(2) of the Income Tax Ordinance, 2001 is NOT required to file Wealth Statement; brother A will be subjected to Income Support Levy and brother B owning same value of net moveable assets will not have to pay Income Support Levy. This surely is discrimination. (ii) Another example of brother C who owns same value of net moveable assets of Rs.20,000,000/- but has taxable income of Rs.3,90,000/- which is below the threshold of taxable income of Rs.4,00,0001-, hence he was not required by law to file his Income Tax Return and thus Wealth statement. As such brother C would not be required to ISL although he owns same amount of net moveable assets as brother A who has to pay ISL." In view of above cited examples, learned counsel for the petitioners concluded that Income Support Levy Act, 2013, is not only ultra vires to the Constitution of Islamic Republic of Pakistan, 1973, but also discriminatory, as it create unreasonable classification between individuals having same net moveable assets exceeding Rs.1.00 M (One Million), who file wealth statement along with their Income Tax Return (existing taxpayers) and excludes the individual, who do not file Wealth Statement and the Income Tax Return (non-existing taxpayers). According to learned counsel, it also discriminates within class in itself, a many similarly placed persons having net moveable wealth exceeding Rs.1.00 M (One Million), are being dealt with dis-similarly, whereas, there is no rationale for this obvious discrimination within the same class of persons. Learned counsel for the petitioners have further argued that the Income Support Levy does not fall within the definition of tax, as according to learned counsel, tax is a common burden upon public at large for raising revenue for the State for the use of general purposes, whereas, the subject levy is for a specific purpose for specified persons. whereas, it does not create common burden upon public at large. The, nature of Income Support Levy, as per learned counsel for the petitioners, is for the specific purpose i.e. social welfare and financial assistance to displaced persons and families, which according to learned counsel, is beyond the legislative competence of legislature after 18th amendment, whereby, concurrent list has been abolished, hence the same is now within the legislative competence of provincial legislature. Learned counsel for the petitioners have also referred to relevant portion of the budget speech of Finance Minister, extract of which is reproduced hereunder:- "51. It is incumbent on all of us who are blessed with exceptional favor from Allah (SWT) to contribute to the welfare of those not so fortunate. Many of us who may have earned our assets while working abroad have negligible tax liability under the existing laws and double taxation treaties. Yet we must share the burden of helping our weaker segments of population. In order to mobilize additional resources for enhancing the Income Support Program for the poorest families in Pakistan, it is proposed to impose a small levy on such persons. This levy shall apply on net moveable assets of persons on given date @ of 0.5%. The receipts under this head will be credited to Income. Support Programme of the Government. Voluntary contribution will also be solicited to mobilize additional resources. Let me admit that I shall be amongst first one's who will be hit this Levy. According to my estimation, I will have to pay an additional Rs.2.5 Million on this count this year, but I will be too happy to make this contribution for the welfare of our poor people." While making reference to hereinabove passage of the budget speech of the Finance Minister, learned counsel for the petitioners have submitted that the Income Support Levy is not a tax as it has been levied for specific purpose. In other words, a voluntary contribution for the welfare of poor people, whereas, receipts under this head will be credited to the Income Support Programme of the Government, which means the said amount will not go in the common pool of the Federation and would not be expanded for the purposes mentioned under Article 81 of the Constitution of Islamic Republic of Pakistan, 1973, hence it does not come within the ambit of Money Bill, therefore, the same could not be introduced through Money Bill/Finance Act. In addition to hereinabove submissions, it has been further argued that all the moveable assets are acquired primarily from the income of a taxpayer, which is already subjected to income tax, whereas, the moveable assets are
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accumulated by the taxpayer as his savings in the end of financial year, and there is no provision of law which allows the savings of a taxpayer to be taxed. To highlight the element of discrimination amongst the individual required to pay Income Support Levy, it has been argued that the basis for levy of Income Support Levy as per sections 3 and 4 of the Income Support Levy, 2013, an individual "who has net moveable assets of Rs.1.00 M (One Million) provided that individual is filing Wealth Statement, whereas, according to learned counsel, a person can have net moveable assets of billions of rupees but he is not required to file Wealth Statement then as per provisions of Income Support Levy Act, 2013, such individual is not required to pay Income Support Levy," which amounts to clear discrimination within the same class of person i.e. individuals having not moveable assets over Rs.1.00 M, hence such levy is ultra vires to Article 25 of the Constitution of Islamic Republic of Pakistan, 1973. To conclude the above submissions of the learned counsel for the petitioners, it has been prayed by the learned counsel for the petitioner that imposition of Income Support Levy Act, 2013, through Finance Act, 2013, may be declared to be illegal, ultra vires to the Constitution for being discriminatory and beyond the legislative competence of Federal Legislature. 4. It has been argued by learned counsel for the petitioners that prior to the Amendments introduced vide Finance Act, 2013, if the Income of an Individual filing normal return of Income was more than Rs.10 lacs as per provisions of section 116(2) filing of Wealth Statement was mandatory. And unless the Wealth Statement was filed the Return of Income would not be complete. Subsection (2) of Section 116 of Income Tax Ordinance, 2001 had been modified vide Finance Act, 2013 now making it mandatory for every Individual Resident Tax Payer to file WEALTH STATEMENT. Similarly, according to the learned counsel, if an Individual having Final Taxable Income and if the tax deduction of Final Taxable Income streams was more than Rs.35,000, as per provisions of section 116(4) filing of Wealth Statement was mandatory. And unless the Wealth Statement was filed the. Return of Income would not be complete. It has been further argued that vide Finance Act, 2013 amendment in subsection (4) to Section 116 of Income Tax Ordinance, 2001 every person (Individual) filing statement under section 115(4) FTR (Final Tax Regime) has been mandated to file a WEALTH STATEMENT, whereas, through SRO 978(1)/2013 dated 13th Nov. 2013, amendments were made in section 116(2) of Income Tax Ordinance, 2001 and now only Individuals having income of more than Rupees 1 Million are required to file wealth statement. Further, SRO 978(1)/2013 dated 13th Nov. 2013 was issued amending section 116(4) of the Income Tax Ordinance, 2001 and now restricting filing of wealth statement only to Individuals who have tax deduction of Rs.35000/- or more under various income streams covered under Final Tax Regime. According to learned counsel for petitioners, as per data of total number of Return of Income filed was 7,11,933 in Tax Year 2012 and this data was shared by FBR with Press at the time of selection of cases for Audit through Random computer Balloting. The total number included company Returns as well as AOPs, whereas, according to Member Tax Policy FBR statement dated 28 Nov. 2013 for Tax Year 2012 about: 10,280 Non Salary Returns (i.e. business, property etc income streams) Wealth Statement were filed 63,800 Salary Returns Wealth Statement were filed. Income Support Levy as was imposed originally about 6,80,000 Individuals (711933 minus AOP and Company Returns) would have filed Wealth Statements and as such if they had net moveable assets of more than Rs.10,00,000/- they would have been subjected to ISL levy. After issuance of SRO 978(1)2013 dated 13 Nov. 2013,which has restricted filing of Wealth Statement to position as it existed for Tax Year 2012, now only about 75,000 Individuals will file Wealth Statements and if their net moveable assets of more than Rs.10,00,000 they would have been subjected to ISL levy. And what is the basis for levy of ISL: an Individual who has net moveable assets of over Rs.10 lacs But this is tied with that Individual filing Wealth Statement. So person can have net moveable assets of Billions of Rupees but if (s)he is not required to file a Wealth Statement, (s)he as per provisions of Income. Support Levy Act, 2013 is not required to pay Income Support Levy. This is clear discrimination and violation of Article 25 of the Constitution. So in a country of 200 Millions with 24,66,049 Commercial Electric connections, 121 Million mobile phone subscribers, 89 TV channels, Rs".19,35,248/- Million currency in circulation, Rs.83,47,600/- Million monetary Asset Stock, 13 Motor vehicles per 1000 persons (World Bank estimate), through a discriminatory law, ISL, has been imposed defacto
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on 75,000/- Individuals who file Wealth Statements and if they have net moveable assets of over Rs.10,00,000/-. Individuals who have net moveable assets over Rs.10,00,000/- but do not file wealth statements, will not have to pay ISL. This ISL levy is arbitrary, unintelligible, unreasonable and has no reasonable nexus to the object sought to be achieved and as such it creates a hostile discrimination between citizens owning same amount of moveable assets hence a discrimination even as a class in itself. 5. In addition to hereinabove legal submissions, learned counsel for the petitioners have further argued that the subject levy introduced through Income Support Levy Act, 2013, pursuant to its preamble is a social welfare law and not a tax, therefore, cannot be introduced through Finance Act in terms of Article 73 of the Constitution. Contention of the learned counsel for the petitioners in the light of case law relied upon by the petitioners can be summarized in the following terms:- (i) I.A. Sherwani v. Government of Pakistan (1991 SCMR 1041) "that equal protection of law means that all persons equally placed be treated alike both in privileges conferred and liabilities imposed; " (ii) Inamur Rehman v. Federation of Pakistan (1992 SCMR 563) There can be no cavil against this proposition as it is a well recognized rule of Constitutional interpretation that there is a presumption in favour of the Constitutionality of a legislative enactment but if there is on the face of a statute no classification at all and no visible differentia, with reference to the object of the enactment as regards the person or persons subjected to its provisions, then the presumption is displaced. We cannot he asked to presume that there must be some undisclosed or unknown reasons for subjecting certain individuals to discriminatory treatment, for, in that case we will be making a travesty of the fundamental right of equality before law enshrined in the Constitution. (iii) Dr.Mobashir Hasan v. Federation of Pakistan (PLD 2010 SC 265) "50. There is no cavil with the proposition that Article 8 of the Constitution provides that any law, or any custom or usage having the force of law, in so far as it is inconsistent with the rights conferred by this Chapter, shall, to the extent of such inconsistency, be void; and the State shall not make any law which takes away or abridges, the rights so conferred and any law made in contravention of this clause shall, to the extent of such contravention, be void. Needless to observe that Article 8 of the Constitution is covered under Chapter I of the Constitution, which deals with fundamental rights. Article 25 of the Constitution, being one of the important Articles of the Constitution, professes that all citizens are equal before law and are entitled to equal protection of law. 58. It is important to note that as per the command of Article 4 of the Constitution all the citizens without any discrimination shall be dealt with in accordance with law, so enforcement of the law leaves no room for creating any distinction between the citizens, except a particular class, on the basis of intelligible differentia. The principal challenge to the NRO, 2007, is of its being discriminatory in nature. It is the case of the petitioners' that the NRO, 2007, being violative of Article 25 of the Constitution, deserves to be declared void ab initio, non est, thus never took birth, therefore, nothing, which is the product of the NRO, 2007 or done in pursuance of it or under it, ever came into existence or survive. It is also contended that the NRO, 2007 is void because it is a fraud on the Constitution. According to the learned counsel for the petitioners, the NRO, 2007 has violated the dictum laid down by this Court in Mahmood Khan Achakzai's case (PLD 1997 SC 426) improved upon in Syed Zafar Ali Shah's case (PLD 2000 SC 869), wherein, after a great deal of efforts, the Court eventually came to treat Article 4 of the Constitution as 'due, process clause'. So far as the provision of Article 25 of the Constitution is concerned, it has been discussed time and again by this Court in a good number of cases, reference to which may not be necessary, except the one i.e. Azizullah Memon's case (PLD .1993 SC 341), wherein inconsistency of the provisions of Criminal Law (Special Provisions) Ordinance, 1968 were examined on the touchstone of Articles 8 and 25 of the Constitution, and ultimately appellant's (Government of Balochistan) appeal was dismissed, declaring the Criminal Law (Special Provisions) Ordinance, 1968, to be void being inconsistent with the fundamental rights enshrined in Article 25 of the Constitution. In this judgment, with regard to reasonable classification."
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As far as 'intelligible differentia' is concerned, it distinguishes persons or things from the other persons or things, who have been left out. The Indian Supreme Court, while relying upon the statement of Professor Willis in Charanjit Lal v. Union of India (AIR 1951 SC 41), observed that "any classification which is arbitrary and which is made without any basis is no classification and a proper classification must always rest upon some difference and must bear a reasonable and just relation to the things in respect of which it is proposed". Same principle has been highlighted in Shazia Batool v. Government of Balochistan (2007 SCMR 410). 59. Thus, keeping in view the above principles and the definition of classification "intelligible differentia" means, in the case of the law differentiating between two sets of the people or objects, all such differentiations should be easily understood as logical and lucid and it should not be artificial or contrived. (iv) Elahi Cotton Mills. Ltd. and others v. Federation of Pakistan (PLD 1997 SC 582 = 1997 PTD 1555). "31. From the above case and the treatises, inter alia the following principles of law are deducible:- iv) 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 situates 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. (Undertaking provided for emphasis).....P: 159 xxiv) That the word 'reasonable' is a relative generic term difficult of adequate definition. It inter alia connotes agreeable to reason; conformable to reason; having the faculty of reason; rational; thinking, speaking, or acting rationally; or according to the dictates of reason; sencible; just; proper and equitable or to act within the constitutional bounds. Pg 161 xxv) xxvi) That levy of building tax on the basis of the covered area without taking into consideration, the class to which a particular building belongs, the nature of construction, the purpose for which it is used, its situation and its capacity for profitable use and other relevant circumstances bearing on the matters of taxation is not sustainable in law for want of reasonable classification. Pg. 161 ... xxxi) The though the Legislature has prerogative to decide the questions of quantum of tax, the conditions subject to which it is levied, the manner in which it is sought to be recovered, but if a taxing statute is plainly discriminatory or provides no procedural machinery for assessment and levy of the tax or that is confiscatory, the Court may strike down…
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