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Petitioner: SONERI BANK LTD. VS Respondent: FEDERATION OF PAKISTAN through Secretary of LawHonorable Justice Ijaz ul AhsanSyed Ali Zafar,Muhammad Ilyas Khan
2015 P T D 1030
[Lahore High Court]
Before Ijaz ul Ahsan, J
SONERI BANK LTD. through Authorized Attorneys
versus
FEDERATION OF PAKISTAN through Secretary of Law and 2 others
Writ Petition No.19821 of 2013, decided on 26th December, 2014.
(a) Constitution of Pakistan---
----Art. 73(2)---Term incidental ---Object and scope---Term incidental as used in Art. 73(2) of the Constitution widens the scope of sub-clauses (a) to (f) of Art. 73(2) of the Constitution, by providing that any matter connected with or supplementary to any of the matters specified in preceding paragraphs are also deemed to be Money Bill and it is on such basis that Finance Bill regarding rates of taxes also contains provisions relating to machinery for collection, assessment, appeals, revisions etc. are treated as Money Bills because such matters are incidental to imposition of taxes---Bill seeking to amend or consolidate law relating to income tax is treated as Money Bill provided such bill aims at imposition, abolition, remission or regulation of any tax or any matter incidental thereto---Only one section in a bill imposing a tax and several others which may deal with the scope, methodology and manner of its imposition, collection, assessment etc. is a "Money Bill".
Oxford Advanced Learner's Dictionary, 8th Edition; Longman Dictionary of Contemporary English, DVD-ROM; Black's Law Dictionary 9th Edition; The Essential Law Dictionary, Sphinx (R) Publishing, Illinois, 2008 P. 237; Biswas Enclycopedic Law Dictionary, 3rd Edition, 2008, Wadhwa Nagpur, P.799; Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402 and Wharton's Law Lexicon, 14th Edition rel.
(b) Income Tax Ordinance (XLIX of 2001)---
----Ss. 165, Explanation & 165-A---Constitution of Pakistan, Arts.73(2)(a)(g) & 199---Constitutional petition---Amendment, vires of---Plea raised by petitioners was that insertion of Explanation to S. 165 and S. 165-A in Income Tax Ordinance, 2001, through Money Bill were ultra vires the Constitution---Validity---Provisions of S. 165 of Income Tax Ordinance, 2001, related to furnishing of various statements by person collecting or deducting taxes on behalf of government and the statements contained information in respect of persons from whom tax was deducted or collected including amount of payment collected and deposited---Information so collected was utilized by tax authorities in regulation of income tax and other taxes as well---Tax authorities, on the basis of such information, could find out and verify whether or not withholding agent had correctly withheld taxes as per rates prescribed in Income Tax Ordinance, 2001, and had deposited taxes collected by it in government treasury within the prescribed period---Such information was used to monitor withholding agents and thereby regulating collection of taxes through such mechanism and the information could be utilized to see whether or not persons to whom payments had been made correctly declared their receipts and incomes---Provisions of S. 165 of Income Tax Ordinance, 2001, fell within the ambit of words provisions dealing with the imposition, or regulating of any tax as used in Art. 73(2)(a) of the Constitution---Explanation in question was not a substantive provision, did not and could not add anything to existing section and had been added to explain, facilitate and be utilized as an aid to interpretation of the section---Explanation was added to S. 165 of Income Tax Ordinance, 2001, which already fell within the purview of the language of Art.73(2)(a) and (g) of the Constitution, was also covered by the language of sub-Articles (a) and (g)---Provisions of S. 165-A, of Income Tax Ordinance, 2001, were similar to S. 165 of Income Tax Ordinance, 2001---Amendments in question fell within the purview of Art. 73(2)(a) and (g) of the Constitution, and therefore, intra vires the Constitution---Petition was dismissed in circumstances.
Halsbury's Laws of England, Fourth Edition, Volume 3, Banking, Page 72; 2013 PTD 1459, 2013 PTD 969; 1998 PTD 1804; Legal Terms & Phrases by M. Ilyas Khan 2006 Edition at p. No.447; K.J. Aiyar Judicial Dictionary 16th Edition at p.No.850; Chambers Dictionary 12th Edition at P. No.765; Black's Law Dictionary Fifth Edition; The Australian Oxford Dictionary, Second Editoin; Webster's New World College Dictionary; Malik Asghar and 3 others v. Government of Punjab PLD 2003 Lah. 73; Ch. Muhammad Akram and another v. District Magistrate Multan 1984 PCr.LJ 117; Messrs East and West Steamship Company v. Pakistan PLD 1958 SC (Pak.) 41; Colony Sarhad Textile Mills v. Collector, CE & LC PLD 1969 Lah. 228; Muhammad Hussain Petel v. Habib Wali Muhammad PLD 1981 SC 1; Arshad Akram and Co. v. Divisional Superintendent, Pakistan Railways PLD 1982 Lah. 109; PLD 1968 Lah. 202 (DB); AIR 1939 Lah. 587 (D.B.); Mir Muhammad Idris and others v. Federation of Pakistan through Secretary Ministry of Finance and others PLD 2011 SC 2013 and East Pakistan Chrome Tannery (Pvt.) Ltd. v. Federation of Pakistan and others 2011 PTD 2643 ref.
Syed Ali Zafar for Petitioner.
Muhammad Ilyas Khan for Respondent No.3.
Sarfraz Ahmed Cheema for Respondent.
Muhammad Sohail, Standing Counsel for Pakistan.
Nasar Ahmed, Deputy Attorney General for Pakistan.
Date of hearing: 28th November, 2014.
JUDGMENT
IJAZ UL AHSAN, J.---Through this common judgment, I intend to decide the instant petition as well as a number of other petitions mentioned in Schedule-A to this judgment. All these petitions raise common questions of law.
2. Through this constitutional petition, the petitioner challenges amendments made in the Income Tax Ordinance, 2001 ("ITO") through Finance Act, 2013. By virtue of the said amendments, the respondents have incorporated an "Explanation" after the proviso of Section 165(1) of the ITO. Further, a new section 165-A has been added. The impugned explanation clarifies that Section 165(1) overrides all conflicting provisions of other laws in so far as divulgence of information under section 165 is concerned.
3. The newly added Section 165-A inter alia requires banking companies to provide access to FBR through specified functionaries to its their database containing details of account holders and furnish information regarding their account holders to the Federal Board of Revenue on periodical basis.
4. The learned counsel for the petitioner submits that in the banking business, the relationship of banker and customer ought to be sacrosanct in nature and the banker is obliged to treat all personal information of its customers as confidential. He maintains that it is the duty of a banker to safeguard the confidentiality of its customer's transactions, which is not only a legal duty but also stems from the contract between the bank and its customer. It is argued that the respondents have violated the above mentioned principal of banking secrecy in an unlawful manner and that too by making amendments in the Income Tax Ordinance, 2001 through a Money Bill. The learned counsel maintains that the impugned amendments could not have been introduced as a Money Bill in view of the fact that they did not meet any of the requirements as envisaged in Article 73(2) of the Constitution of Islamic Republic of Pakistan, 1973 ("Constitution"). He submits that a plain reading of sub-clauses (a) to (g) of Article 73(2) of the Constitution makes it clear that these only relate to "Imposition, Abolition, Remission, Alteration or Regulation" of any Tax. He, therefore, maintains that the insertion of the impugned provisions in the ITO is ultra vires the Constitution. He submits that merely the fact that the impugned amendments have been made in the Income Tax Ordinance does not make such amendments fall under the purview of Article 73(2) of the Constitution.
5. Although learned counsel for the petitioner had taken other grounds in his petition, yet he has confined his challenge and arguments to the sole ground that the impugned amendments could not have been introduced through a Money Bill. Since no other ground was argued, the other grounds will be deemed to have been abandoned.
6. The respondents were put to notice. Parawise comments were filed on behalf of respondent No.3, which have been perused.
7. The learned counsel for the respondent submits that there is no constitutional infirmity in the impugned enactments. The same have competently and validly been passed by the National Assembly as a Money Bill. He submits that the alleged violation of Secrecy norms of the banks do not render the impugned amendments contrary to constitutional propriety. He argues that the principal of banking secrecy is not an absolute rule anywhere in the world. It is universally and invariably subject to restrictions imposed by state law and regulations. The learned counsel for the respondent points out that banks are under a legal obligation to provide information to tax authorities about their account holders in situations where interest of the state is involved. Relying on Halsbury's Laws of England, Fourth Edition, Volume 3, Banking, Page 72, he submits that a bank is legally required to provide information where circumstances give rise to a public duty of disclosure. As such where state revenue is involved and fiscal considerations require disclosure of customer information, compliance by banks is a statutory obligation.
8. The learned counsel for the respondents further maintains that requisition of necessary information from banks by the competent authorities is not a new phenomenon. He has referred to Anti Money Laundering Act, 2010 as well as National Accountability Bureau Ordinance, 1999, which obligate banks to provide information relating to account holders. Referring to section 176 of the ITO, he argues that banks are already sharing information about their account holders with the Federal Board of Revenue in compliance with notices under section 176 of the Income Tax Ordinance, 2001. It is submitted that there are sufficient safeguards available in the ITO to maintain secrecy of the record and details of a tax payers financial transactions which cannot be disclosed or shared with any third party except as provided by law.
9. On the question of vires of the impugned amendments, the learned counsel submits that the impugned amendments relate to imposition/regulation of levy of income tax through calling for information about fiscal transactions in the bank accounts of customers. Hence the enactments fall within the scope of Article 72(2)(a) and (g) of the Constitution. He maintains that matters relating to levy / imposition of tax and all incidental matters fall within the ambit of a Money Bill. Therefore, no illegality has been committed by undertaking the impugned amendments through a Money Bill. He finally argues that no vested right of the petitioner has been violated. Banks have no right to cover up dubious financial transactions under the garb of secrecy and confidentiality. The amendments are a part of the government's focus on undocumented and hidden economy, which is not contributing its due share to the national exchequer.
10. Notice was issued to the Attorney General of Pakistan in terms of Order XXVII-A, C.P.C. A learned Standing Counsel as well as the learned Deputy Attorney General have appeared on behalf of the Federation. The learned Deputy Attorney General for Pakistan has referred to proviso added to sections 165 and 165-A of the Income Tax Ordinance, 2001 ("Ordinance") to argue that all information received under the said Sections will be used for tax purposes only and kept confidential as envisaged in section 165(4) of the Ordinance. He maintains that the said provision has been narrowly tailored for the restricted purpose of dealing with the matters involving tax. He further submits that the impugned amendments are clearly covered by provisions of Article 73(2)(g) of the Constitution of the Islamic Republic of Pakistan, 1973 ("Constitution") as amendments in question relate to regulation of tax. He emphasizes the fact that the information in question would not be used for any other purpose and its confidentiality has also specifically been ensured in so far as there is no obligation to disclose any information to any other person or regulatory authority. He further maintains that the language of Article 73(2)(g) of the Constitution also substantiates the above argument in so far as anything that relates to advancing the main purpose of the provision can also be introduced through Money Bill being incidental to the said purpose. In this regard, he has referred to 2013 PTD 1459, 2013 PTD 969 and 1998 PTD 1804 to argue that any purpose which is required to be given effect to the main purpose of the legislation, falls within the definition of "incidental and therefore falls within the purview of Article 73(2)(g) of the Constitution.
11. The Deputy Attorney General further submits that Article 73(5) creates a jurisdictional bar to the effect that the certificate issued by the Speaker National Assembly certifying that a bill is a Money Bill is conclusive and cannot be called in question. He has however frankly conceded all judgments of this Court as well as the Hon'ble Supreme Court of Pakistan so far rendered in this regard deal with the said jurisdictional bar and have concluded that the bar is not absolute and in suitable cases, the Court can examine vires of such money bill on the touchstone of Article 73 of the Constitution. He has also adopted the arguments advanced by learned counsel for FBR.
12. Since all parties have been heard at length, with their consent, this petition is admitted to regular hearing and is being decided as a "Pacca" case.
13. I have heard the learned counsel for the parties and gone through the record with their assistance.
14. The only question requiring determination by this Court is whether the impugned amendments made in the ITO through Finance Act, 2013 could have been introduced through a Money Bill.
15. In order to answer the said question, it would be necessary to examine the meaning and scope of the impugned provisions in the backdrop of Article 73(2) of the Constitution. For ease of reference, the impugned provisions are reproduced below:--
In Section 165,---
(a) In subsection (1), after the proviso, the following explanation shall be added, namely:-
"Explanation.---For the removal of doubt, it is clarified that this subsection overrides all conflicting provisions contained in the Protection of Economic Reforms Act, 1992 (XII of 1992), the Banking Companies Ordinance, 1962 (LVII of 1962), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, in so far as divulgence of information under section 165 is concerned"; and
(b) in subsection (6), for the semicolon a full stop shall be substituted and thereafter the proviso shall be omitted;
"Section 165A. Furnishing of information by banks.---(1) Notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (XII of 1962), the Protection of Economic Reforms Act, 1992 (NI of 1992), the Foreign Exchange Regulation Act, 1947 (VII of 1947), and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, every banking company shall make arrangements to provide to the Board in the prescribed form and manner,--
(a) online access to its central database containing details of its account holders and all transactions made in their accounts;
(b) a list containing particulars of deposits aggregating rupees one million or more made during the preceding calendar month;
(c) a list of payments made by any persons against bills raised in respect of a credit card issued to that person, aggregating to rupees one hundred thousand or more during the preceding calendar month;
(d) a consolidated list of loans written off exceeding rupees one million during a calendar year; and
(e) a copy of each currency transactions report and suspicious transactions report generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010 (VII of 2010).
(2) Each banking company shall also make arrangements to nominate a senior officer at the head office to coordinate with Board for provision of any information and documents in addition to those listed in subsection (1), as may be required by the Board.
(3) The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance.
(4) Subject to section 216, all information received under this section shall be used only for tax purposes and kept confidential."
16. Article 73(2) of the Constitution makes a departure from the legislative procedure for introducing bills with respect to any matter in the federal legislative list. It provides the procedure with respect to the Money Bills and envisages that notwithstanding anything contained in Article 70, a Money Bill shall originate in the National Assembly. If the National Assembly passes the bill with or without incorporating recommendations of the senate, it shall be presented to the President for assent. Simultaneously when a Money Bill including the Finance Bill containing the Annual Budget Statement is presented in the National Assembly, a copy thereof shall be transmitted to the Senate, which may within fourteen days make recommendations thereon to the National Assembly. In this regard, the provisions of Sub-Article (2) of Article 73 of the Constitution are relevant to answer the question raised before this Court. For ease of reference, Article 73(2) is reproduced below:--
73. Procedure with respect to Money Bills. - [(1).. .
. . . . . . . .
(1A) . . . . . . . .
(2) For the purposes of this Chapter, a Bill or amendment shall be deemed to be a Money Bill if it contains provisions dealing with all or any of the following matters, namely:--
(a) the imposition, abolition, remission, alteration or regulation of any tax;
(b) the borrowing of money, or the giving of any guarantee, by the Federal Government, or the amendment of the law relating to the financial obligations of that Government;
(c) the custody of the Federal consolidated Fund, the payment of moneys into, or the issue of moneys from, that Fund;
(d) the imposition of a charge upon the Federal Consolidated Fund, or the abolition or alteration of any such charge;
(e) the receipt of moneys on account of the Public Account of the Federation, the custody or issue of such moneys;
(f) the audit of the accounts of the Federal Government or a Provincial Government; and
(g) any matter incidental to any of the matters specified in the preceding paragraphs.
. . . . . . . . . . . . . .
17. It will be seen that sub-articles (a) and (g) of Article 73(2) are relevant to the controversy and the answer to the question ibid, lies in interpreting the meaning and scope of the words "imposition, abolition, remission, alternation or regulation of any tax; and any matter incidental to any of the matters specified in the preceding paragraphs".
18. While the learned counsel for the petitioner has argued that the impugned amendments do not fall within the parameters of sub-clauses (a) to (g), the learned counsel for the respondent has vehemently argued that the impugned amendments relate to imposition and regulation of taxes and matters incidental thereto. As such they are covered by the said language. It would, therefore, be necessary to understand the real meaning of the terms "imposition, regulation, and incidental" as used in Article 73(2) of the Constitution. The terms imposition, regulation / regulate have been defined in various dictionaries and has also been examined by superior courts in the following terms:--
Imposition
Phrase "Imposition" has been defined in different dictionaries as follows:-- K.J. Aiyar Judicial Dictionary 16th Edition At P. No.850
Imposition:
Levy, collection and assessment. See Assessment, collection, imposition and levy. [Assistant Collector Central Excise v. National Tobacco Co AIR 1972 SC 2563, (1972) 2 SCC 560].
Legal Terms & Phrases By M. Ilyas Khan 2006 Edition At P.No.447
Imposition:
"The work 'imposition' has not been defined in Section 3 of Taxes Act, 1931 however, its meaning is well known. In Ballentine's Law Dictionary it means 'any form of tax or enforced contribution to the public treasury'. Messrs National Tanneries of Pakistan Ltd. v. Federation of Pakistan and others NLR 1991 Tax 66"
The Chambers Dictionary 12th Edition At P. No.765
Imposition;
"An act or instance of imposing or laying on; the act of laying on hands in ordination and certain sacraments; something imposed, a burden; a punishment task; "
Regulation:
Phrase "Regulation" has been defined in different dictionaries as follows: -
Black's Law Dictionary Fifth Edition:--
Regulation. - The act of regulation; a rule or order prescribed for management or government; a regulating principle; a precept. Rule of order prescribed by superior or competent authority relating to action of those under its control. Regulation is rule or order having force of law issued by executive authority of government.
Regulate:
To fix, establish, or control; to adjust by rule, method, or established mode; to direct by rule or restriction; to subject to governing principles of laws. The power of Congress to regulate commerce is the power to enact all appropriate legislation for its protection or advancement; to adopt measures to promote its growth and insure its safety; to foster, protect, control, and restrain.
The Australian Oxford Dictionary, Second Edition:
Regulation. - The act or an instance of regulating, the process of being regulated. A prescribed rule; an authoritative direction.
Webster's New World College Dictionary has defined the word "regulation" as under:-
(i) a regulating or being regulated; (ii) a rule, ordinance, or law by which conduct, etc. is regulated.
PLD 2003 Lahore 73 (Malik Asghar and 3 others v. Government of Punjab)
To regulate is to fix, establish, or control, to adjust by rule, method, or establish mode; to direct by rule or restriction; to subject to governing principles or laws.
The power to regulate necessarily includes even a power to prohibit. The power to regulate implies, a power to foster, to protect, control and restrain.
1984 PCr.LJ 117 (Ch. Muhammad Akram and another v. District Magistrate Multan)
Word regulate , held, synonymous with word control or "govern". It may, therefore, cover orders of prohibitory nature which may be deemed necessary by the District Magistrate for the regulation of the movements of vehicles on roads and streets in any town or other places in which he thinks fit.
PLD 1958 SC (Pak) 41 (Messrs East and West Steamship Company v. Pakistan) (at pare 45)
The power to regulate implies a power to foster, protect, control and restrain.
The word "Incidental" has been defined as follows: -
Oxford Advanced Learner's Dictionary, 8th Edition
To mean happening in connection with, supplementary
Longman Dictionary of Contemporary English, DVD-ROM
Happening or existing in connection with something else that is more important:
Incidental to
Companies that carry out investment business that is incidental to their main activity
Naturally happening as a result of something
Black's Law Dictionary 9th Edition
Incidental, adj. (I7c) Subordinate to something of greater importance; having a minor role <the FAA determined that the wind played only an incidental part in the plane-crash>.
The Essential Law Dictionary, SPHINX(R) PUBLISHING, Illinois, 2008 P.237
Incidental, ADJ. Accompanying something else, usually in a subordinate way; occurring in connection with something else by chance or as a consequence.
Biswas Encyclopedic Law Dictionary, 3rd Edition, 2008, Wadhwa Nagpur, P.799
"...the term 'incidental' has been defined to mean that 'depending upon or, appertaining to something else as primary; something necessary, appertaining to, or depending upon another which is termed the principal, something incidental to the main purpose." [2005 II LLJ 492]
Collector of Customs and others v. Sheikh Spinning Mills, 1999 SCMR 1402:
Although the words 'incidental' and 'ancillary' literally mean things of lesser or subordinate degree or of consequential nature, but in legislative interpretation, they mean more than this."
Wharton's Law Lexicon, 14th Edition
"A thing necessarily depending upon or following another that is more worthy."
A
19. The term "incidental" as used in Article 73(2) of the Constitution appears to widen the scope of sub-clauses (a) to (f) by providing that any matter connected with or supplementary to any of the matters…
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