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Petitioner: Reliance Commodities (Private) Limited VS Respondent: Federation of Pakistan and JUDGMENT
Court Name: Lahore High Court Judge(s): Jawad Hassan Title:Reliance Commodities (Private) Limited vs Federation of Pakistan and
JUDGMENT
Reported As: 2020 PTD 1464, PLD 2020 Lahore 632, 2020 LHC 1266, PLJ 2020 Lahore 420 Result: Petition allowed Judgment In exploring the neglected art of statutory interpretation, the judges resist the temptation to use legislative intention and legislative history. Hence, it is incompatible with democratic government to allow the meaning of a statute to be determined by what the judges think the lawgivers meant rather than by what the legislature actually promulgated. Eschewing the judicial lawmaking that is the essence of common law, judges should interpret statutes and regulations by focusing on the text itself. (Justice Antonin Scalia, Judge, US Supreme Court) JUDGMENT JAWAD HASSAN, J. The nucleus of the controversy fallen for determination is the anthropology of Section 4B of the Income Tax Ordinance, 2001 (the "Ordinance ") viz a viz its character and nature for being a complete code onto itself with the semantic underpinnings as to exclusion of the machinery provisions of the Ordinance i.e. Section 122(5A) read with Section 122(9) of the Ordinance. The findings will also discuss the principles of interpretation employed for fiscal laws as well as the maintainability of writ petition against show cause notices on the touchstone of the ripeness doctrine. The Petitioner has invoked the constitutional jurisdiction of this Court under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (the "Constitution") by challenging two show cause notices dated 22.12.2017 and 03.01.2018 respectively issued by the Respondent No.3/Additional Commissioner Inland Revenue on the ground that aforesaid-Respondent had no power to issue the same under section 122 (5A) read with 122(9) of the Ordinance as the power to issue such notices only laid with the Respondent No.2/Commissioner Inland Revenue under Section 4B of the Ordinance. I. BRIEF BACKGROUND OF THE CASE 2. The Petitioner is the part of the Fatima Group of Companies which has made significant investments in large- scale manufacturing plants, utilizing technology and promoting manufacturing excellence, which extends to1
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fertilizer , sugar , textile, commodities trading, mining and energy . It is a private limited company and is also a leading commercial exporter/importer of different commodities (i.e. export of molasses and import of sugar & fertilizers). It is a registered taxpayer and has received show cause notices dated 22.12.2017 under Section 122(5)(a) of the Ordinance and then on 03.01.2018 issue d by the Respondent No.3. Instead of filing replies to the aforesaid show cause notices, the Petitioner filed this constitutional petition with the stance that power to assess and determine liability of super tax vests only with the Respondent No.2. This Court issued notices to the Respondents on 22.01.2018 and also granted interim relief on the rule of consistency , as a similar relief was granted in W.P.No.126992 of 2017 and W.P.No.10477 of 2017. The Respondents filed report and para-wise comments on 09.04.2018 by raising preliminary objections to the maintainability of the petition. II. PETITIONER'S ARGUMENTS 3. Advocate Chaudhary Muhammad Ali, counsel for the Petitioner inter-alia contended that impugned show cause notices were issued under section 122 (9) read with section 122 (5A) of the Ordinance to amend the deemed assessment of income of the Petitioner; that assessing the Super Tax on income by the Respondent No. 3 is without lawful authority , without jurisdiction, malafide and an illegal assumption of power under section 122 (5A) of the Ordinance as such the same is against the letter , intent and spirit of the Ordinance and the Constitution; that language of section 122(9) of the Ordinance clearly demonstrate that "No assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard"; that the Respondent No.3 has no power to issue show cause notices because in section 122(5A) of the Ordinance, the word used is 'Commissioner ' only. 4. Chaudhary Muhammad Ali, Advocate further argued that section 4B of the Ordinance is a complete section with all of its mechanism because language of sub-section of Section 4 refers to as Charging Sections, Definition Sections, Collection Sections, Recover y Sections and Legislative Sections and other miscellaneous Sections; that provision for the purposes of assessment has been specifically provided for under sub-section 4 of Section 4B and bare reading of the same reveals that legislature has provided for assessment for the purposes of Section 4B separately , for which the Respondent No. 2 has been exclusively empowered to assess and collect such levy; that powers have been given by the legislature to the Respondent No.4 under Section 237 of the Ordinance to frame rule for the purpose of Section 4B. However , no rules have been framed so far to give effect to the provision of Section 4B of the Ordinance. The counsel for the Petitioner has argued that Sectio n 4B's heading is super tax and recovery because the Ordinance has Chapters, Parts wherein division is made primarily through Chapters and there are certain Sections which are Definitions, Charging Penal, Recovery , Asses sment and others. Therefore, he further argued that since the law is the command of sovereign and enforces through Statutes which were without heading, chapters and parts. He mention ed that since 1547, the King of England started printing the Statutes in separate numbering and then in 1796, House of Commons appointed a comm ittee to consider most effective means of promulgating the Statutes and the committee recommended the responsibility for the drafting of marginal notes to be shifted from King' s Printer . However , despite such recommendations, in 1831 the English theoretical jurist Professor Jeremy Bentham advocated the numbering of sections to make statutes more practical and readable. The suggestions that the sections, created by the Parliament should carry descriptive heading appeared expressly in 1838 in a letter of Arthur Symonds of the Board of Trade to CP Thomson, President of Board of Trade. Ch. Muhammad Ali, Advocate next contended that the view is now settled that the Headings or titles prefixed to sections can be referred to in construing an Act but conflicting opinions have been expressed on the questions as to what weight should be attached to the headings. However , this question was settled by the Supreme Court of India in "Raiburumatham Prabbaker V. Rawatmal" (2004) 4 SCC 766) wherein it was held that "It is not permissible to assign the heading or title of a section a limited role to play in the construction of statutes. They may be taken as very broad and general indicators of the nature of the subject matter dealt with thereunder . The heading or title may also be taken as condensed name assigned to indicate collectively the characteristics of the subject matter dealt with the enactment underneath; though the name would always be brief having its own limitations. In case of conflict between the plain language of the provision and the meaning of the heading or title, the heading or title would not control the meaning which is clearly and plainly discernible from the language of the
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provision thereunder ." In order to strengthen the contentions, the counsel for the Petitioner , Chaudhary Muhammad Ali has relied on "PAKIST AN BROADCASTERS ASSOCIA TION & 10 others Versus PEMRA" (PLD 2014 630), "VAGINA SILK MILL LYALLPUR Versus INCOME TAX OFFICER etc" (PLD 1963 SC 322), "COMMISSIONER OF INCOME TAX Versus ELI LILLY PAKIST AN LIMITED & others" (2009 SCMR 1279 ), "GATRON (INDUSTRIES) LIMITED Versus GOVERNMENT OF PAKIST AN and others" (1999 SCMR 1072 ), "KHALID MEHMOOD Versus COLLECT OR OF CUST OMS" (1999 SCMR 1881 ), "AL AHRAM BUILDERS (PRIV ATE) LIMITED Versus Income Tax Tribunal " (1993 SCMR 29), "MARI PETROLEUM COMP ANY LIMITED Versus FEDERA TION OF PAKIST AN & 3 others" (2019 PTD 1774 ), "COLLECT OR OF SALES TAX Versus KHURSHID SPINNING MILLS LIMITED & another" (2017 PTD 196), "RAFIQ UR REHMAN Versus FEDERA TION OF PAKIST AN etc" (2017 PTD 1178), "MUHAMMAD ASLAM Versus FEDERA TION OF PAKIST AN & Others" (2017 PTD 803), "ZAVER PETROLEUM CORPORA TION Versus FEDERAL BOARD OF REVENUE & another" (2016 PTD 2332 ), "CHAUDHAR Y SUGAR MILLS LIMITED Versus CHIEF COMMISSIONER & 2 others" (2016 PTD 527), "OIL AND GAS DEVELOPMENT COMP ANY LIMITED Versus Federal Board of Revenue and 2 others" (2016 PTD 1675 ), "KK OIL AND GHEE MILLS (Private) Limited Versus FEDERAL BOARD OF REVENUE and others" (2016 PTD 2601 ), "Messers J.K. BROTHERS PAKIST AN (PRIV ATE) LIMITED Versus The Additional Commissioner Inland Revenue and another" (2016 PTD 461), "DAEWOO PAKIST AN EXPRESS BUS SERVICE LIMITED Versus Federation of Pakistan etc" (2016 PTD 152), "KASHMIR SUGAR MILLS LIMITED Versus FEDERA TION OF PAKIST AN etc" (2016 PTD 1649 ), "MUSLIM COMMERCIAL BANK LIMITED Versus DEPUTY COMMISSIONER OF INCOME-T AX & others" (2004 PTD 1901 ), "MURREE BREWER Y CO LTD Versus PAKIST AN Through the Secretary to Government of Pakistan Works Division and 2 others" (PTD 1972 SC 279), "MESSERS USMANIA GLASS SHEET FACTORY LIMITED, Chittagong Versus Sales Tax Officer, Chittagong" (1971 PTD 1), "JAMAL SALAM Versus DEPUTY COLLECT OR CUST OMS" (2012 PTD 1471 ), "Ocean Pakistan Limited Versus FEDERAL BOARD OF REVENUE & Others" (2012 PTD 1374 ) and" IRAM SHAHDAI Versus PRINCIP AL SCHOOL OF NURSING MAYO HOSPIT AL & others" (2017 PLC (C.S.) 943). He also relied on W.P. No. 10477 of 2017 titled "Maple Leaf Cement Factory Limited V ersus Additional Commissioner Inland Revenue etc". I. RESPONDENT'S ARGUMENTS 5. Learned counsel for the Respondents, FBR, Malik Zafar Ali Thaheem has controverted the arguments of learned counsel for the Petitioner and stated that the Commissioner Inland Revenue, Corporate Zone, RTO, Multan has delegated his powers and functions under Section 122(5A) vide order No.CIR( Corp.Zone)/R TO-MN/272 dated 29.07.2016 in accordance with the provision of section 210 of the Ordinance therefore, the proceedings under section 122(5A) have been initiated as per law. He argued that section 4B of the Ordinance provides for determination of tax liability under said provision which essentially involves amendment of return of income and sub-section 3 of Section 4B clearly indicates that super tax payable shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of Section 137 of the Ordinance and provisions of Chapter X of the Ordinance, which deals with returns, assessment, appeals and collection and recovery of tax, can be applied. He further argued that Section 122 of the Ordinance is applicable to supe r tax as the Commissioner may amend an assessment order treated as issued under Section 120 or issued under Section 121 by making such alteration or additions as the Commission er considered necessary . He next argued that sub section 4 of Section 4B of the Ordinance empowers the Commissioner to determine the super tax liability and to serve order to taxpayer regarding determination of liability to taxpayer . He next argued that Section 4B relates to super tax imposed for rehabilitation of temporarily displaced persons which itself is a charging section with definition of recovery procedure & assessment mechanism and the rate for calculation of tax have been specified in Division IIA of Part I of the First Schedule of the Ordinance. Lastly Malik Zafar Ali Thaheem Advocate argued that writ against show cause notices is not maintainable and relied on "D.G. KHAN CEMENT COMP ANY LIMITED Versus FEDERAL BOARD OF REVENUE and others" (2018 PTD 287), "MUHAMMAD ASLAM Versus FEDERATION OF PAKIST AN and others"( 2017 PTD 803),"Messrs OCEAN PAKIST AN LTD Versus FEDERAL BOARD OF REVENUE, ISLAMABAD and others"( 2012 PTD 1374 ), and "Messrs NOBLE (PVT) LTD through Manager
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Finance and Administration Versus FEDERAL BOARD OF REVENUE through Chairman and 4 others"( 2009 PTD 841 ). IV. FISCAL ANTHROPOLOGY 6. Legal anthropology examines the relationship amongst society , culture, and law (taxes levied) in societies at various levels of political, economic, and social complexity . Legal anthropology is a sub-field of the discipline of anthropology . In the case at hand, it is the fiscal anthropology , which needs to be explored. In Murray & Carter 's Guide to Income Tax Practice at page 3, Earl Cairns of the House of Lords said: "as I understand the principle of all fiscal legislation it is this: if the person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to the judicial mind....In other words, if there be admissible in any statute what is called an equitable construction, certainly such a construction is not admissible in a taxing statute, where you can simply adhere to the words of the statute." In 1916 the Lord Stanley Buckmaster of the House of Lords remarked, "...if the words of the statute can only reasonably bear one meaning, it is not, in my opinion, within the competence of the Courts to consider the fairness or the unfairness of the result that ensues. That is a matter for Parliamen t and not for H.M's judges." The words of Mr. Justice Rowlatt in the case of Cape Brandy Syndicate vs. Inland Revenue Commissioners, [1921] 1 KB 64 also need to be mentioned when he said, "there is no room for any intention, there is no equity about a tax, there is no presumption of parties to a tax, you read nothing in, you imply nothing, but you look fairly at what is said and at what is said clearly and that is the tax." 7. If we were to quickly stroll through the history of taxation, it would emerge that taxation in some form was present since ancient Egypt and Greece. The Romans also introduced the concept of customs duties on imports and exports, and the Great Britain inherited its tax history from the Roman Empire. If we look at the history of the sub-continent, the Income Tax was introduced by the British Government through the Income Tax Act 1860 (which was replica of the then respective British law) to overcome the financial difficulties after the 1857 war of independence. Subsequently , four Income Tax Acts of 1886, 1918, 1922 and 1939 were introduced in British India which were important developments to the tax system. After independence in 1947, Pakistan adopted the Income Tax Act, 1922 as its official income tax law, which was modified several times. This was replaced by the Income Tax Ordinance, 1979. Subsequently , the current Income Tax Ordinance, 2001 was introduced and FBR has also notified the Income Tax Rules, 2002. 8. The Finance Act, 2015 (the "Act") was passed by the National Assembly of Pakistan on June 29, 2015 which, inter alia, amended the Ordinance by inserting Section 2(28A) and Section 4(B) in the Ordinance, vide Section 9(2) of the Act. Through Section 4B of the Ordinance, an additional tax in form of Super Tax has been levied in terms of which a levy has been imposed for rehabilitation of temporarily displaced persons at the rates specified in Division IIA of Part I of the First Schedule, on income of every person specified in the said Division. The present dispute in the instant proceedings relates to this legal development regarding its mode and manner of being applied. V. CONSTITUTIONAL MOOT POINTS 9. In order to resolve the controversy in the matter , this Court deems it appropriate to frame the following constitutional moot points: 1. What is the scope of Section 4B of the Ordinance and whether it is a complete comprehensive section with its own mechanism of charging, definitions, recovery , assessment, procedure? 2. Whether Section 4B can be applied to recover any amount without framing the rules by the Board under sub- section 6 of Section 4B? 3. Whether Section 122 of the Ordinance is applicable to super tax under Section 4B of the Ordinance in absence of its notified rules? 4. Whether Additional Commissioner Inland Revenue has powers to issue show cause notice of Section 4B(1) read with Section 122 of the Ordinance? 5. Whether writ is maintainable against show cause notice under the Ordinance, without filing reply to show cause notice? VI. DETERMINA TION BY THE COURT (AS PER ARTICLE 201 OF THE CONSTITUTION)
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A. LEGAL ANA TOMY OF SELF-CONT AINED CODE 10. As stated earlier , super tax has been imposed for the rehabilitation of temporarily displaced persons for the tax year 2015 and has been extended till 2017. Section 4B of the Ordinance reads as under:- 4B. Super tax for rehabilitation of temporarily displaced persons.--- (1) A super tax shall be imposed for rehabilitation of temporarily displaced persons, for tax years 2015 to 2017, at the rates specified in Division IIA of Part I of the First Schedule, on income of every person specified in the said Division. (2) For the purposes of this section, "income" shall be the sum of the following:-- (i) profit on debt, dividend, capital gains, brokerage and commission; (ii) taxable income 4[(other than brought forward depreciation and brought forward business losses)] under section 9 of this Ordinance, if not included in clause (i); (iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and (iv) income computed under Fourth, Fifth, Seventh and Eighth Schedules. (3) The super tax payable under subsection (1) shall be paid, collected and deposited on the date and in the manner as specified in subsection (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply . (4) Where the super tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the super tax payable, and shall serve upon the person, a notice of demand specifying the super tax payable and within the time specified under section 137 of the Ordinance. (5) Where the super tax is not paid by a person liable to pay it, the Commissioner shall recover the super tax payable under subsection (1) and the provisions of Parts IV, X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance. (6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section. (emphasis added ). 11. With regard to the limb concerning the features of independence, stand alone, self-executory and self- contained nature of the provision, it is instructive to glean through the case of "PAKIST AN INDUSTRIAL DEVELOPMENT CORPORA TION Versus PAKIST AN THROUGH THE SECRET ARY, MINISTR Y OF FINANCE" (1992 SCMR 891) where a challenge to super tax levied by virtue of Section 55 of the Income Tax Act, 1922 was made on the basis of double taxation. The Hon'ble Supreme Court had observed at para 15 as follows: "Section 55 clearly provides that super -tax will be in addition to the income-tax on the total income of the previous year at the rate laid down for that year by the `Central Act'. According to section 56 total income as assessed for the purposes of income-tax shall be the total income for purposes of super -tax. Section 58 applies the provisions of Income Tax Act relating to charge, assessment, collection and recovery of income-tax to super -tax as well. Super- tax is, therefore, independent, separate and-quite distinct from income-tax . It is a tax in addition to income-tax on the total income of the assessee. Super -tax has been levied in addition to income-tax by a clear and independent provision for whose charge, assessment and recovery procedure has been provided by section 58. The Legislature by clear unambiguous and in definite terms levied super -tax on the total income determined for purposes of income-tax". 12. Going by the ratio decidendi of the afore referred case, suffice it to observe that the super tax, by its very nature, relates to an additional duty of income tax and this charge has been recognized to exist independent of the income tax. Hence, in so far as the charge/levy of the super tax is concerned, Section 4B definitely emerges as an independent provision. This Court has held in a case titled "D.G. KHAN CEMENT COMP ANY LIMITED Versus FEDERAL BOARD OF REVENUE and others" (2018 PTD 287) that "evidently if the legislature has enacted a separate provision for the charge of super tax, the intention and mood of the legisla ture is very clear and no further expression is required to hold that the legislature intended for separate charge in the nature of super tax". This view has been ratified by the Division Bench of this Court on 28.2.2020 and in a case reported as "DG KHAN CEMENT Versus FEDERA TION OF P AKIST AN etc" ( 2020 LHC 1066 ). 13. However , that said, the flip side is with regard to the applicability of machinery provisions of the Ordinance to this particular section. It has been argued on behalf of the Petitioner that Section 4B clasps its own machinery
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provisions for assessment and recovery and exclude the machinery provisions of the Ordinance i.e. Section 122(5A) read with Section 122(9) of the Ordinance. 14. It is noteworthy to mention that apparently sub-section (3) of 4B of the Ordinance envisages application of all provisions of Chapter X. This Chapter happens to contain Section 122 of the Ordinance. Further Section 4B also finds specific reference to Section 137(1) of the Ordinance with regard to payment, collection and deposit. Similarly sub-section (5) of 4B imports the provisions of Part IV, X, XI and XII of Chapter X and Part 1 of Chapter XI with regard to recovery of super tax and finds mention of the following words, "so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance". Thus, Section 4B encapsulates and makes direct reference to the above-referred provisions of the Ordinance suggesting their applicability while interpreting Section 4B of the Ordinance. B. SCHEME OF INTERPRETING A TAXING ST ATUTE 15. Devouring Section 4B might give an enigmatic impression in terms of being a self-contained code yet encompassing within its ambit other provisions of the Ordinance with regard to assessment and recovery i.e. the so-called machinery provisions. In order to grapple with the real construct of the section and to cast aside clouds of doubt, reference will have to be made to the principles of construction/interpretation of a fiscal statute. I shall turn to that in the proceeding part of the judgment. 16. Firstly , a momentary peep into the self-executing provisions relating to fiscal legislation is in order . With advantage, reference is made to the case of "NESTLE PAKIST AN LTD. and others Versus FEDERAL BOARD OF REVENUE and others"( 2017 PTD 686) wherein the Court discussed self-executing provisions at para 7 in the following words: A passage, in the 10th Edn. of NS Bindra's Interpretation of Statues, has dealt with self-executing provisions relating to fiscal legislations, which is also reproduced being relevant to the subject of this judgment:- "A constitutional provision authorising the levy of a tax is without effect, unless provision for such levy is made by the legislature, but, it fully supplemented by legislation in force at the time of its adoption, it takes effect at once. A provision requiring the legislature to levy a tax at a certain rate has been held self-executing. Provisions that property shall be assessed for taxes under general law and by uniform rules according to its value are self- executing. Moreover , a provision has been held self-executing, which authorised the levy by local officers of a tax to an amount and for purposes specified, subject to compliance with conditions fully stated therein. A constitutional provision limiting the rate of taxation does not require legislative action to enforce it and goes into effect at once, unless it appears from a consideration of the whole instrument that it was the intent of the framers to postpone the operation of the provision until action by the legislature. Provisions authorising municipal authorities to levy taxes, providing for an increase in the rate in taxation on submission to a vote of the taxpayers, or for assessments by a jury or by commissioners, requiring the legislature to provide a uniform system of taxation, declaring that all taxes shall be uniform to be collected under general laws, declaring that all property shall be taxed in proportion to its value, 'to be ascertained as provided by law,' providing for the payment of certain taxes into the common school fund and for their distribu tion, declaring that certain kinds of property shall…
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