BISMILLAH & Co. vs SECRETARY, FINANCE, GOVERNMENT OF PAKISTAN and 4

{{TABLE}} This judgment shall dispose of Writ Petitions Nos.15429/96, 7819/96, 20907/96, 20760/96, 20201/96, 20759/96, 19511/96, 18246/96, 19991/96, 20063/96, 13474/96, 18247/96, 15426/96, 15428/96, 19512/96, and 19513/96 as common questions of law and facts arise therein.

2. The petitioner in these petitions obtained leases for collection of various taxes under the Punjab Local Government Ordinance, 1979 from the Local Council in the Province of Punjab. According to section 50(7-A) of the Income Tax Ordinance, 1979 any person entering into agreement with the Local Councils shall collect advance tax at the rate of 5% of the amount of lease. The petitioners feeling aggrieved of the deduction of the tax have come to this Court by filing these Constitutional petitions.

3. Two main contentions have been raised by the petitioners' learned counsel, firstly, that the petitioners have not obtained lease of any property, as such, section 50(7-A) has no applicability and secondly, that in any case, the petitioners cannot be asked to pay tax on the entire value of the contract which is not their income.

4. The learned counsel for the respondents has, however, pointed out that in the agreements for the leases executed between parties, the petitioners have specifically undertaken to pay/deposit the advance income-tax.

5. The fate of these cases depends upon the interpretation of section 50(7-A) of the Income Tax Ordinance, 1979 which was inserted by Finance Ordinance, 1981 w,e,f, 1-7-1981, and reads as under:- -- "Any person making sale, by public auction of any property belonging to the Government, a Local Authority, a public company, a foreign association declared to be a Company under clause (16) of section 2, or a foreign Contractor or consultant or Consortium shall collect advance tax, computed on the basis of sales price of such property and at the rate specified in the First Schedule, from any person to whom such property is sold, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the person purchasing such property for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessm ent year, if any, in which the 'said date' as referred to therein, falls, whichever is the later."

6. As is obvious from its bare reading, this provision postulates deduction of advance tax at the rates specified in the First Schedule on the sale price of the property sold by the Government, Local Councils or a A Public Company. There might have been some force in the contention of the petitioners that the grant of leases of octroi to collect the taxes and duties would not amount to sale of property but for the fact that by Finance Ordinance, 1984, section 50(7-A) was amended and an explanation was added to it which is in the following terms:--- "Explanation.--For the purposes of the subsection, sale of any property includes the awarding of any lease to any person, including a lease of the right to collect octroi duties, tolls, fees or other levies, by whatever name called."

7. The explanation being clear and explicit does not leave any room for doubt that so far as section 50(7-A) is concerned, the sale of property would include lease for collection of octroi duties, tolls, fees and other levies. Ordinarily, meaning of the word "sale" having been extended by the Legislature by inserting the explanation specifically, this argument as longer remains available to the petitioners.

8. Faced with this situation, the learned counsel for the petitioners asserted that under the Punjab Local Councils (Lease) Rules, 1990, notwithstanding the agreement between the contractor and the Local Council, the tax has to be collected by the Local Council itself which is later on passed on to the contractor and as such, this argument on the face of it, is fallacious and misconceived. The manner of collection of tax has no significance. What is important is to see as to whether the petitioners have been granted right to retain the proceeds collected on account of taxes, octroi etc. A perusal of the agreements and the contents of the petitions clearly show that the petitioners have been granted that right.

9. The other contention raised by the learned counsel is equally unfounded. Even though it is true that the entire amount for which the lease has been obtained by the petitioners may not constitute their income but section 50(7-A) only provides a mode for recovery of tax in advance and in anticipation of assessm ent which has to be made in due course. Any deduction made as advance tax is subject to adjustment. After the liability of the petitioners has been ascertained and quantified by assessm ent, if the tax assessed is more than the advance tax recovered, the assessee shall be liable to pay the difference. Similarly, if the liability is less than the advance tax, the excess amount shall have to be refunded. It cannot, therefore, be said that the petitioners are being asked to pay tax on something other than their income.

' In view of above, I find no force in these petitions which are dismissed leaving the parties to bear their own costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.