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Petitioner: S. NASIM AHMED SHAH and 115 others VS Respondent: STATE BANK OF PAKISTAN through Governor and another
Court Name: Sindh High Court Judge(s): Muhammad Ali Mazhar, Adnan-ul-Karim Memon Title:S. NASIM AHMED SHAH and 115 others vs STATE BANK OF PAKISTAN through
Governor and another Case No.: C.P. No.D-440 of 2012 Date of Judgment:2017-06-13 Reported As: 2017 PTD 2029 Result: Petition dismissed Judgment ORDER MUHAMMAD ALI MAZHAR, J.---This petition has been brought to entreat the directions of this court against the respondents for the implementation of the judgment rendered by the apex court on 03.04.2001 and pay back the amount of income tax deducted on the benefits derived from golden handshake scheme. 2. The ephemeral characteristics of the case are that the State Bank of Pakistan (SBP), (respondent No.1) announced Golden Handshake Scheme (GHS) on 23.10.1997 which was opted by the petitioners. However they were found aggrieved due to deduction of income tax at source on the retirements benefits. Virtually 165 persons filed appeals including petitioners in the Federal Service Tribunal and their appeals were disposed of vide common judgment dated 19.10.2000. Mr.Abdul Hameed Khan Khattak learned member FST dismissed the appeals whereas the second member, Dr.Akhtar Hassan Khan took different view and held that the petitioners are entitled to the annual increment fell due to them on 01.01.1998 and State Bank made arbitrary deductions of income tax from the retirement benefits. On account of difference of opinion, the matter was referred to the learned Chairman and vide order dated 19.10.2000 the learned Chairman FST concurred the views of Mr. Abdul Hameed Khan Khattak but made some observations that during the course of hearing the departmental representative candidly submitted before him that the income tax deducted from the appellants will be reimbursed to them. Both the parties challenged the order in the honourable Supreme Court. 3.In the aforesaid backdrop, the learned counsel for the petitioner argued that the petitions filed by the employees in the apex court were converted into appeal with the directions that their
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pensionary benefits should be calculated on the last pay drawn between the period from 01.12.1997 to 15.12.1997 and not from the date of acceptance of option. However in SBP appeal, it was denied to have made any such statement by their representative for the reimbursement of income tax, therefore, by consent the matter was remitted to the Federal Service Tribunal to examine the question afresh in the light of affidavit of Abdul Aziz, Deputy Director Human Resources Department, State Bank of Pakistan and to inquire whether such statement was made and in case it was found that no such statement was made, the observation of the learned Chairman shall be deleted otherwise it shall remain intact and with these observations the hon'ble Supreme Court disposed of the matters vide judgment dated 03.04.2001. It was further contended that on remand, the matter was fixed on 28.07.2001 before the division bench of the same Chairman and the Member, Dr. Akhtar Hassan Khan. The matter was decided on the same date with clear order that such statement to the effect of reimbursement of the deducted income tax was made. The State Bank of Pakistan again approached to the apex court by filing separate petitions which were clubbed together and the same were dismissed vide judgment dated 30.10.2001. 4.The learned counsel further argued that the respondent No.1 (SBP) despite making various requests failed to comply with the directions, therefore some of the colleagues of the petitioners moved contempt petition being Cr. Original Petition No.66/2002. However on 02.02.2006, the counsel representing the SBP made a statement that a sum of Rs.19,88,997.42 is being deposited with the Registrar of the Apex Court through pay order. The hon'ble Supreme Court on compliance of the order dropped the proceedings and directed the claimants to collect the amount in due course. One more Cr. Original Petition No.02/2008 was filed by 116 petitioners which was ultimately dismissed by the apex court vide order dated 06.10.2011 with the observation that no contempt is made out, however, the petitioners may avail the appropriate remedy available to them under the law. The learned counsel argued that the representative of respondent No.1 before the FST made a categorical statement that the amount deducted on account of income tax shall be refunded back to the petitioners and in one contempt proceedings the amount was also deposited in the apex court but the same treatment was not given to the present petitioners hence they have approached this court. However the learned counsel did not contend with or controvert that amount paid under Golden Handshake Scheme (GHS) was not taxable but he somewhat insisted and averred enormously that this amount should be refunded back to the petitioners so in order to converge the responsibility of income tax payment, each individual petitioner may file his income tax return to pay of this statutory liability. 5. Quite the reverse, the learned counsel for the respondents argued that the State Bank deducted the amount of tax pursuant to the explicit instructions contained in the FBR Income Tax Circular No.15 of 1997 dated 06.11.1997 that the payments made by a financial institution under a Golden Handshake Scheme are taxable under the head of "Salary" according to Section 16 (2) (c) of the Income Tax Ordinance, 1979. On deduction the amount was paid into the government treasury and the State Bank never retained this amount for its own use. This action was challenged in the Federal Service Tribunal, the Lahore High Court and the hon'ble Supreme Court. All three forums agreed that this amount was liable to be taxed out the FST relied upon an alleged offer by a State Bank official to reimburse this amount. The hon'ble Supreme Court, vide its judgment dated 15.12.2004 in Criminal Misc. Application Nos.317, 371, 380 and 381 of 2004 dismissed the specific plea of the ex-employees of the SBP that as the income tax had been wrongly deducted by the SBP, the same should therefore be returned to them. The leading petitioner, Nasim Ahmed Shah was also an applicant before the hon'ble Supreme Court but he has willfully and knowingly withheld this important judgment from this court. The learned counsel further argued that the validity of Income Tax Circular No.15 was challenged before the hon'ble Supreme Court in the case reported as Malik Muhammad Inam and others v. Federation of Pakistan (2006 SCM R 1670) but the apex court
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upheld the validity of the circular in the following terms:-- "From a bare perusal of section 16(2)(a)(iii) of the repealed Ordinance it may be observed that the salary as defined includes profits in lieu of or in addition to salary or wages. Furthermore, according to section 16(2)(c)(i) of the repealed Ordinance the words profit in lieu of salary used in section 16(2)(a)(iii) of the repealed Ordinance would include any amount due or received by any employee or assessee from his employer on account of termination of or the modification of any terms and conditions relating to his service/employment. The aforesaid provision of the repealed Ordinance read together leave no room for doubt that such payments irrespective whether they were by way of compensation for loss of service or payments in lieu of the salary, which they would have been entitled to draw till their services came to an end in the normal course of their service, squarely fell within the definition of salary. This conclusion is obvious from a bare reading of the two afore-referred provisions of section 16 of the repealed Ordinance which admit of no other conclusion or inference. By virtue of the golden hand shake/voluntary separation scheme, the terms and conditions of the retiring employees were modified which resulted in termination of their employment on their voluntarily agreeing to retire from service on acceptance of such payments as compensation. Once it is concluded that such payments made to the retiring employees were salaries as defined in section 16 of the repealed Ordinance, the natural consequence would be that such payments would be liable to be taxed under clause "a" of section 15 of the repealed Ordinance. In view of the clear/express and unambiguous provisions of section 16(2)(a)(iii) and (2) (c)(i) of the repealed Ordinance all the contentions and arguments advanced by the learned counsel for the retiring employees pale into insignificance. The language used by the Legislature in section 16(2)(a)(iii) and (2)(c)(i) of the repealed Ordinance even in absence of the words payments or profits received on retirement or termination of employment on account of golden hand shake scheme or voluntary retirement scheme without any doubt or ambiguity brought such payments within the ambit of definition of salary in the repealed Ordinance, thus, falling within the tax net and chargeable to tax". 6. He further argued that the petitioners may file applications for refund to the FBR if they feel that they were not liable to be taxed. The petitioners failed to point out any circular or provision of law in terms of which this amount should not have been deducted. It was further averred by the learned counsel that when the Hon'ble Supreme Court seized with the hearing of the contempt application, i.e. Crl. Org. No.66 of 2002, filed by ex-employees of the State Bank to enforce the judgment dated 30.10.2001, the apex court's own earlier decision dated 15.12.2004 was not placed before it. The said contempt application came up for hearing on 02.01.2006 which is the date after the decision dated 15.12.2004. He argued that the order dated 02.01.2006 was per incuriam. However when some other employees sought to seek enforcement of the same decision, the Hon'ble Supreme Court refused to grant any relief on concentration of judgment dated 15.12.2004 and the judgment reported in 2006 SCM R 1670. The leading petitioner Nasim Ahmed Shah and other ex-employees of the SBP filed Crl. Review Petition No.04 of 2005 before the Hon'ble Supreme Court which was dismissed on 27.10.2010. He again approached the apex court by filing Crl. Orig. Petition No. 02 of 2008 which was also dismissed on 06.10.2011. 7.In rebuttal, the learned counsel for the petitioners argued that the case of M. Inam and others v. Federation of Pakistan reported in 2006 SCM R 1670 shall have no retrospective application when in the case of present petitioners the apex court to the extent of statement made by the SBP representative before the FST dismissed the appeal much earlier and maintained the findings of the learned Chairman FST that the statement to the effect of refund of income tax was made before him by the representative of SBP. The learned counsel for the petitioner referred to 2006 SCM R 1163(Hussain Badshah and another v. Akhtar Zaman and others in which the apex court held that "the declaration to the effect that all appointments made under the earlier policy are
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illegal, void and without lawful authority is difficult to sustain being against the law as the judgment, dated 12-5-2000 would operate prospectively and not retrospectively adversely affecting the rights already accrued to the teachers appointed before the declaration of law by Full Bench of the High Court. Admittedly, appointments made prior to the said judgment were neither inherently illegal nor ultra vires the law.Their case is protected by the doctrine of past and closed transaction, which cannot be reopened". The learned counsel further referred to PLD 1987 SC 145 (Mst. Nawab Bibi and another v. Chairman Allotment Committee and others) in which it was held that "the Judgment of Supreme Court to be operative from date of its announcement. Such judgment, held further, to have no effect of re-opening rights of parties concluded finally under High Court's judgment. The authority of law laid down by this Court under Article 189 being prospective, the decision of the High Court nonetheless stands over-ruled on the same question of law, but that will not affect the rights of the parties already determined by the High Court's judgment". 8.The core issue is whether in terms of FST and Supreme Court orders/judgment, the respondents are liable to refund the amount of income tax deducted by them on payment of GHS benefits to the petitioners? In order to delve into the long-winded issue raised up in the petition which is somewhat concomitant and associated with the implementation of the apex court order, we have to analyze and survey the niceties and nitty-gritties of the twine and chain of the orders/judgments passed by learned Federal Services Tribunal and the honourable Supreme Court in one and the same matter. The matter starts in on as a result of FST divergent views of two learned members i.e. Mr.Abdul Hameed Khan Khattak and Dr. Akhtar Hassan Khan, (Members-FST). Order of Mr.Abdul Hameed Khan Khattak, (Member-FST) dated 4.5.1999 in Appeal No.277(R)/98 and others on the issue of income tax: "12. With regard to deduction of income Tax from the retirement benefits, to our mind it was liability under the law which after said deductions was passed on to the government and if the appellants feel aggrieved thereof they can approach the income tax department for refund of the same if the decision is to be made in their favour by the said department as we think that appropriate forum for the purpose is the said department and not this tribunal. 13. For all the aforesaid reasons, we find no merit in the appeals and the same as such are hereby dismissed by leaving the parties to bear their own costs. Order of Mr. Dr. Akhtar Hassan Khan, (Member-FST) dated 5.5.1999 in the above appeals on the issue of income tax: "16. The State Bank also made arbitrary deduction of income tax from the retirement benefits. Income tax is paid by the officers when they file their annual returns in September each year and these officers would have filed their returns in September, 1998 and paid income tax according to each individual return. They cannot be arbitrary uniform withholding income tax fall all employees. Moreover, the pension, provident fund and gratuity given to the Government employees are free from income tax. The golden handshake scheme benefits are given on voluntarily retirement and hence should be free from income tax. The learned counsel for the respondents could not produce any documents which makes it mandatory for the State Bank to deduct income tax at arbitrary rate before the paying of benefits of GHSS. 17. Therefore, I agree with my learned brother on all other points but I feel that the appellants should be given (a), annual increments due on 1.12.1998 and (b), the income tax deducted by the appellant should be refunded and the money given to them should be reported to the income tax department for which they be asked them to file fresh returns for that year based on their total income if their payments are declared to be liable to income tax. In any case an arbitrary uniform rate of income tax is not justified because some of them may have other incomes and would be liable to pay higher tax while those not giving other income would be subject to lower rate of tax. To
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apply uniform withholding income tax is neither fair nor logical, nor according to income tax laws." Order of Mr. Justice (R) Jalal-ud-Din Akbarji, Chairman, Federal Service Tribunal dated 19.10.2000 "This matter has come up before me under section 3-A(2)(b) of the Service Tribunals Act, 1973 as there is difference of opinion between the two learned Members in delivering the judgment. 2. I have heard the learned counsel for the appellants as well the respondent State Bank of Pakistan and the representatives and considered the arguments of the parties. I have perused the record of appeal and the judgments proposed to be delivered by my learned brothers Mr. Abdul Hameed Khan Khattak and Dr. Akhtar Hasan Khan. Mr. Abdul Hameed Khan Khattak has delivered a very comprehensive and well-reasoned judgment, to which Dr. Akhtar Hasan Khan has also agreed almost on all points except a few. I, therefore, agree with the findings/ judgment recorded by Mr. Abdul Hameed Khan Khattak, learned Member, during the course of hearing the departmental representative candidly submitted that the income tax recovered from the appellants will be reimbursed to them. [Emphasis applied] ORDER OF THE TRIBUNAL. By virtue of proviso (B) to subsection (2) of Section 3-A of the Service Tribunals Act, 1973, the judgment of the Tribunal shall be in terms of the opinion of the Chairman". Relevant excerpt of Apex Court judgment dated 3.4.2001 in Civil Petitions Nos. 12/2001 to 63/2001. "9. In the result, we convert all these petitions into appeals and dispose of the same by modifying the impugned judgment of the Tribunal to the extent indicated above. The result is that the pension admissible to the petitioners/employees shall be calculated after bringing it to bear upon such calculation the number of days spent by them in service after their violation to abide by VGHS put differently, all the pensionary benefits shall be calculated by taking into account the period between 1.12.1997 to 15.12.1997. No costs. 10. Needless to observe that in the connected petitions brought by the Governor, State Bank of Pakistan and others against the respondent/employees, the sole grievance of the petitioners therein is that the observation of the learned Chairman of the Tribunal in the impugned judgment to the effect "...During the course of hearing, the departmental representative candidly submitted that the income tax recovered from the appellants will be reimbursed to them," is based on erroneous assumption cf fact in that neither any counsel for the Bank nor any representative of the Bank made any statement before the Tribunal during the course of proceedings that income tax will be reimbursed to the respondents/employees. With consent of Mr. Fakhruddin G. Ibrahim, Mr. Abdul Mujeeb Pirzada, Mr. Muhammad Munir Peracha, Mr. M. Bilal and Mr. K.M.A. Samdani learned counsel for the parties, we remit the case to the Tribunal to examine this question afresh in the light of the affidavit of Mr. Abdul Aziz, Deputy Director, Human Resources Department, State Bank of Pakistan, copy whereof may be forwarded to the Tribunal, after hearing the parties and holding, such inquiry as the Tribunal may deem fit. If it is established that no such statement was made as attributed to the departmental representative of the Bank, the above observation shall be deleted otherwise it shall remain intact. [Emphasis applied] Order of Justice (R) Jalal-ud-Din Akbarji, Chairman FST dated 28.7.2001 on remand by the Supreme Court "2. The learned counsel and the appellants present, affirm that the departmental representative candidly submitted that the income tax recovered from the appellants will be reimbursed to them. Appellants, Shakir Ahmed in Appeal No. 1198(K)/ 1998 and Kaleem Ahmed in Appeal No. 298(R)/1998, have also filed affidavits in the same effect. Mr. Abdul Aziz, Deputy Director, State Bank of Pakistan, states that he has not made any such submission. Learned counsel for the respondent-Bank states that the said very matter was subjudice between the parties in the Lahore High Court, and in the Intra-Court Appeal, Status quo has been issued and, therefore, the
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departmental representative of the State Bank of Pakistan could not make such statement. 4. As far as my person (Chairman) is concerned, I vividly remember, that it was stated and candidly submitted by the departmental representative of the respondent-Bank in the presence of the learned counsel for the parties and the appellants present in the court on the date of hearing i.e. 1 1 the October, 2000. The matter is disposed off accordingly". [Emphasis applied] Relevant excerpt from the Judgment of Apex Court dated 30.10.2001 in Civil Petitions Nos.2844/2001 to 3008/2001 "6. As regards the contention that the difference of opinion between the learned Members of the Tribunal needs resolution, we suffice by observing that the appeals were remanded to the Tribunal only to examine the specific question as to whether the representative of the petitioner-Bank had made the statement attributed to him or not. This being so, the above question cannot be permitted to be agitated in these proceedings. More so, when it was observed that: "If it is established that no such statement was made as attributed to the departmental representative of the Bank, the above observations shall be deleted otherwise it shall remain intact" (underlining is for emphasis) 7. Resultantly, the petitions are dismissed and leave declined". 9. Since the order of apex court 30.10.2001 passed in C.Ps. 2846 and 2851 was not complied with therefore a Criminal Original Petition No.66/2002 was filed by Manzoor Elahi and others, Ex-Officer Gr.I (P) State Bank of Pakistan, Muzaffarabad. The honourable three members bench of Supreme Court on 2.1.2006 after dilating and expounding erstwhile incidents, passed the order. The relevant excerpts of the order are as follows:-- 4.From the perusal of the above facts, we are prima facie of the opinion that violation of the order of this Court has been committed. On our query learned counsel appearing for the State Bank stated that respondent No.2 namely Mr. Akram Durrani is, responsible for the implementation of the order of this Court. Issue notice to him in terms of Article 204 of the Constitution of Islamic Republic of Pakistan to appear in person and state as to why he should not be proceeded against for the contempt of court. 5.Adjourned to a date in the 1st week of February, 2006. In the meanwhile learned counsel is directed to obtain the amount payable to each of the petitioners deducted from their dues being income tax". 10. When the aforesaid Criminal Original Petition was fixed before the three members bench of apex court in Civil Petitions Nos.2846, 2851, 2854, 2855, 2858, 2859, 2862, 2871, 2876, 28790, 2882, 2886, 2888-2890 and 2893/2001, the learned counsel for State Bank of Pakistan gave a statement that equal to amount deducted on account of income tax, a pay order amounting to Rs.1,988,997.42 is being deposited with the Registrar of the apex court. On this statement, honourable Supreme Court on 2.2.2006, passed the following order:-- "In compliance of order 2nd January, 2006 Mr. Khalid Anwar, Sr. ASC has submitted a list of persons along with calculated amount which has been deducted and paid to the Central Board of Revenue. However, equal to the said amount a pay order amounting to Rs.1,988,997.42 is being deposited with the Registrar of this Court. 2. As the order of this court has been complied with, therefore, no further proceedings are called for. The applicants/claimants can receive the amount from the Registrar in due course as per rules". 11.At this juncture few more orders passed by the honourable Supreme Court are also very essential and crucial to the instant proceedings which have been referred to by the learned counsel for the respondents. For instance, an order dated 15.12.2004 passed by the honourable three members bench of apex court in Crl.Misc.As.Nos.317, 371, 380 and 381/2004 in Crl.Misc.No.295/2004 in Cr1.O.Ps. Nos.32, 33, 34/2003 and 2/2004 in Civil Petitions Nos.2020/2000 and 12 to 55 of 2001 filed by Khyber Zaman and others, Syed Naseem Ahmed Shah and others, Shakir
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Ahmed and others and Abdul Hameed. The relevant segment is reproduced as under:-- "11. As regards income tax, it is noted that the Bank in accordance with law was obliged to deduct income tax at the time of making payment of dues to the employees. The employees kept on pressing the Bank to refund the amount of income tax. It appears that the petition filed by the employees before Lahore High Court was allowed by a learned Single Judge, but the decision was set aside by a Division Bench of said Court by means of the judgment in I.C.A. No.21/2000 and it accepted the stand of the income tax department. Be that as it may, if the employees feel that income tax was deducted from their dues, which according to them, was not their liability, they may, if so advised, approach the income tax authorities for its refund according to law. The plea that income tax be paid to them cannot be acceded to. [Emphasis applied] 12. In consequence, all the above miscellaneous applications are dismissed". 12.The order dated 20.4.2007 passed by three members bench of honourable Supreme Court in Criminal Original Petition No.83/2005 (Against the judgment dated 30.10.2001 passed in C.P. No.2844/2001) is as follows:-- "The petitioner in person stated that the department itself had under-taken to refund the income tax deducted from the benefits he had received under the Golden Handshake Scheme but did not abide…
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