FAQIR MUHAMMAD KHOKHAR, J.-- The petitioners seek leave to appeal against judgments, dated 5- 8-2003, passed by a learned Division Bench of the High Court of Sindh at Karachi, in Constitutional Petition No. D-468 of 2003.
2. The petitioner No.1, a company, incorporated under the Companies Ordinance, 1984, is engaged in the business of selling prepaid cards for telephones. The petitioners No.2, a citizen, claims to have purchased two prepaid cards of the value of Rs. 250 each. The petitioners filed Constitutional Petition No.D-468 in the High Court of Sindh at Karachi calling in question the validity and workability of the provisions of section 236 of the Income Tax Ordinance XL1X of 2001 (hereinafter referred to as the Ordinance) whereby advance tax was required to be collected on prepaid cards for telephones. The Writ Petition was dismissed by the impugned judgment, dated 5-8-2003. Hence this petition for leave to appeal.
3. Mr. Muhammad Akram Sheikh, Sr. Advocate Supreme Court learned counsel for the petitioners submitted that the High Court had disregarded the principles enunciated by this Court in the case of Elahi Cotton Mills Limited Vs. Federation of Pakistan (PLD 1997 SC 582 at pages 676 to 679), whereby the scope of legislative powers of the State to impose taxes particularly the income-tax examined in depth. The impugned judgment would tantamount to legitimating the future legislative powers through which the advance income tax could be imposed on purchasers of all consumer items such as medicines and vegetables. There was no convenient mechanism to refund an advance tax to its payers who would not otherwise be liable to pay any income tax. Ln other words, the advance envisaged by the provisions of section 236 of the Ordinance could not be legally collected from the purchaser of prepaid cards who had no taxable income. The exaction of advance tax from the purchasers of the prepaid cards would deprive the citizens of their rights to property. The learned counsel pointed out that the Chief Automation (D.T.), Data Processing Centre, Income Tax Department, Karachi, by letter, dated 15-8-2002, had pointed out that it was not practicable or humanly possible to provide names and addresses, NTN etc., for the purpose of collection of income- tax. Lt was lastly contended that the Central Board of Revenue had failed to provide any structure for the workability, and collection of tax. Therefore, this Court was required to lay down necessary guiding principles by applying doctrine of reading down a statute so as to make the provisions of section 236 of the Ordinance workable and practicable. Reliance' was placed on the cases of Elahi Cotton Mills Limited (supra), Rauf Bakhsh Qadri Vs. The State (2003 MLD 777) and Sunil Batra Vs. Delhi Administration (AIR 1978 SC 1675).
4. The other hand, Mr. Makhdoom Ali Khan, the learned Attorney-General for Pakistan submitted that the other companies dealing with the prepaid telephone cards were, collecting and paying tax without any difficulty as required under section 236 of the Ordinance, lt was pointed out that letter dated 15-8-2002 by the Chief Automation (DT.) had nothing to do with the workability or otherwise of the provisions of section 236 or the Ordinance or the collection of advance tax on the pre paid cards. The charging provisions of the tax did not suffer from any taint of invalidity. Therefore, the machinery provisions of the statute providing the manner and method for collection of such a tax were to be construed so that it would not defect a tax. Ln this regard, the learned Attorney-General relied on the cases of Commissioner of Income Tax Bengal Vs. Mahaliram Ramjidas (AIR 1940 PC 12) and Khan Abdul Ghafoor Khan DAHA Vs. Controller of Estate Duty, Government of Pakistan (1969 PTD 128). Lt was brought to our notice that as against 4.6 million P.T.C.L, line phones and three million mobile phones there were only one million taxpayers in the country. As may as 279 companies had been authorized by the Pakistan Telecommunication Authority to extend the facility of Public Call Offices, me amount of advance tax deducted from the value of the prepaid telephone cards was automatically collected by the petitioner and other companies for onward payment to the Income Tax Department. The inter-city telephone cards were used, through the PTCL lines, lt was argued that the plain duty of the Court was to ascertain the intention of the Legislature and to carry it out. Lt was not for the Courts to question the policy or motive of the Legislature or to refuse to give effect to a statute merely because it appeared to be harsh or unreasonable. Reference was made to the cases of the Punjab Province Vs. Malik Khizar Hayat Khan Tiwana (PLD 1956 Federal Court 200) and Air League of PIA Employees Union and another Vs. Federation of Pakistan/The President/Chief Executive and another (2003 PLC (C.S.) 145). Lt was lastly argued that the questions of validity of collection of advance income-tax or withholding; tax on "deemed income" were examined and upheld by this Court in cases of Elahi Cotton Mills Limited (supra) and Commissioner of Income Tax Vs. Asbestos Cement Industries Limited and others (1993 PTD 343).
5. We have heard the learned counsel for the petitioners as well as the learned Attorney General for Pakistan at length. The withholding income-tax on telephone bills and prepaid telephone cards and mobile phones was firstly introduced by the Finance Act, 1996, whereby subsection (F) was inserted in section 7 of the Income Tax Ordinance, 1979 (since repealed). The collection of advance tax on the telephone bills of subscriber and prepaid cards for telephones was reintroduced by the .Provisions of section 236 of the Ordinance, 2001 as under:-- "266. Telephone users. (I)- Advance tax at the rates' specified in Part IV of the First Schedule shall be collected on the amount of---
(a) telephone bill of a subscriber; and
(b) prepaid cards for telephones.
(2) The person preparing the telephone bill shall charge advance tax under subsection (1) in the manner telephone charges are charged.
(3) The person issuing of selling prepaid cards for telephones shall .Collect advance tax under subsection (1) from the purchasers at the time of issuance of sale of cards.
(4) Advance tax under this section shall not be collected from Government, a foreign diplomat, a diplomatic mission in Pakistan, or a person who produces a certificate from the Commissioner that his income during the tax year is exempt from tax."
The rates of the tax have been laid down in Schedule I, Part IV Division V of the Ordinance as follows:-- "Rates of collection of tax under section 236"
(a) ln the case of telephone subscriber other than mobile telephone, subscriber where the monthly bill---
(i) exceeds Rs.2000 but does not exceed Rs. 2000 Rs.50
(ii) exceeds Rs.2000 but does not exceed Rs.3000
(iii) exceeds Rs. 3000 but does not exceed Rs. 5000
(iv) exceeds Rs. 5000
(b) ln the case of subscriber of mobile telephone and prepaid telephone card.
10% of the amount of bill or sale price of pre-paid telephone card."
6. The learned counsel for the petitioners could not point out any specific provision of the Constitution which could be said to have been violated or offended by the Legislature in enacting the provisions of section 236 of the Ordinance, lt was not shown as to how the said provision of the Ordinance was beyond the legislative competence if tested on the touchstone of the Constitution or the Provisional Constitution Order, 1999. As to the practicability and workability of the said provisions, Mr. Wakeel Ahmed Khan,' Member (D.T.), Central Board of Revenue, who was present in Court, stated in no uncertain terms that there was no difficulty in the matter of collection and payment of advance tax from the consumers by the authorized companies.
7. The question of Constitutional validity of advance tax was 31 exhaustively considered and upheld by this Court in the case of Elahi Cotton Mills Limited (supra) while interpreting the provisions of sections 80-C, 80-CC and 80-D of the-Income Tax Ordinance, 1979. Lt will be useful to reproduce, in extenso, the relevant portions of the aforesaid judgments:-
(17) We may now refer to the background which necessitated the enactment of the impugned sections. Ln this regard, it may be pertinent to refer to the final report of the National Taxation Reforms Commission, hereinafter referred to as the NTRC, of December, 1986, which mostly comprised the representatives of . Business community representing various trade associations.
NTRC in the above report commented upon the corruption obtaining in the Government and semi- Government department as under:- "So far as corruption is concerned, there is no doubt in the mind of the public that most Government and semi-Government departments are corrupt;, many know it from personal experience, while others have just to look at the standard of living of the comparatively low-paid officials, their cars, their houses, the type of parties they give, the expensive schools their children attend and the clothes and jewelry their wives wear to realize that all this costs a lost of money and that such expenses could not be covered by the emoluments of the officials concerned. Inquiries, suspensions and periodic wholesale removals have been tried but the basic weapon against corruption is confiscation of the ill-gotten gains. This has not been practised so far."
The menace of tax evasion is not a new discovery but it has been so since the imposition of the same but the degree of tax evasion has alarmingly increased and so also the malpractices in the Income Tax Department entrusted with the levy and collection of tax. Lord Green in the case of Lord De Walden VIR TC 134(CA) (1942) 10 ITR Suppl 90, 94 touched upon the question of tax evasion as follows:-- "For years a battle of manoeuvre has been waged between the Legislature and those who are minded to throw the burden to 'taxation off. Their own shoulders on to those of .Their fellow subject, ln that battle the Legislature has often been worsted by the skill, determination and resourcefulness of its opponents, of whom the present appellant has not been the least successful, lt would not shock us in the. Least to find that the Legislature has, determined to put an end to the struggle by imposing the severest of penalties, lt scarcely lies in the mouth of the tax-payer who plays with fire to complain of burnt figures."
(31) from the above case-law and the treatises, inter alia the following principles of law are deducible:--
(vii) That the policy of a tax, in its operation, may result in hardships or advantages or disadvantages to individual assesses which are accidental and inevitable, Simpliciter this fat will not constitute violation of any of the fundamental rights.
(viii) That while interpreting Constitutional provisions Courts should keep in mind, social setting of the country, growing requirements of the society/nation. Burning problems of the day and the complex issue facing the people which the Legislature in its wisdom through legislation seeks to solve. The judicial approach should be dynamic rather than static, pragmatic and not pedantic and elastic rather than rigid.
(ix) That the law should be saved rather than be destroyed and the Court must lean in favour of upholding the constitutionality of a legislation keeping in view that the rule of Constitutional interpretation is that there is a presumption in favour of the constitutionality of the legislative enactments unless ex facie it is violative of a Constitutional provision.
(xii) That what is not "income" under the Income Tax Act can be made "income" by a Finance Act.
An exemption granted by the Income Tax Act can be withdrawn by the Finance Act or the efficacy of that exemption may be reduced by the imposition of a new charge, of course, subject to Constitutional limitations.
(xvii) That generally the effect of a deeming provision in 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 the impugned statute - as unconstitutional.
(xxxii) That the rule of interpretation that while Interpreting an entry' ..In a Legislative List it should be given widest possible meaning does not mean that Parliament can choose to taxes income as item which in no rational sense can be regarded as a citizen's income. The item taxed should rationally be capable of being considered as the income of a citizen.
(xxxiii) That before charging tax, an assessee must be shown to have .Received income or the same has arisen and accrued or deemed, to be so under the statute. Any amount which cannot be treated as above is not an income and, therefore, cannot be subject to tax.
(xxxiv)That there is a marked distinction between a tax on gross revenue and a tax on incorr which for taxation purposes, means gains and profits. There may be considerable gross revenues, but no income taxable by an income-tax in the accepted sense.
(32) We have summarized hereinabove in para. 31 the ratio decided of the above discussed cases and certain pertinent observations made therein. A perusal of above sub-paras (i) to (xxx) of para. 31 indicates that the same does not advance the case of the appellants on the contrary, they reinforce the principle 0 law that the Legislature, particularly in economic activities, enjoys a wide latitude in the matter of selection of person, subject-matters, events etc., for taxation. The presumption is ln favour of the validity of the legislation. The burden to prove that the same is invalid is on the person who alleges it.
However, one can urge that the general observations contained in sub-paras, (xxxi) to (xxxiv) of para. 31 lend support to some extent to the appellants case. However, it should not be overlooked that in none of the cases from the judgments of which the above observations have been lifted the questions, as to whether there can be presumptive tax or the minimum tax, in .View of Entries 47 and 52 of the Legislative List, was in issue, ln this view of the matter, it would be inappropriate to apply the tests traditionally prescribed by the Income Tax Act and/or any other statute.
(34) Keeping in view the above case law and the treatises and the aforesaid legal inferences drawn therefrom, we may now revert to the question of vires of impugned sections, lt may again be observed that the power to levy taxes is a sine qua non for a State, ln fact it is an attribute of sovereignty of State, lt fs mandatory requirement of a State as it generates financial resources which are needed for running a State and for achieving the cherished goal, namely, to establish a welfare State, ln this view of the matter, the Legislature enjoys plenary power to impose taxes within the framework of the Constitution, lt has prima facie power to tax whom it chooses, power to exempt whom it chooses, power to impose such conditions as to liability or as to exemption as it chooses, so long as they do not exceed the mandate of the Constitution, lt is also apparent that the entries in the Legislative List of the Constitution are not powers of legislation but only fields of legislative heads. The allocation of the subjects to the lists is not by way of scientific or logical definition but by way of mere simple enumeration of broad catalogue. A single tax may derive its sanction from one or more entries and many taxes may emanate from one single entry, lt is needless to reiterate that it is a well-settled proposition of law that an entry in the Legislative List must be given a very wise and liberal interpretation. The word "income" is susceptible as to include not only what is in ordinary parlance it conveys or it is understood, but what is deemed to have arisen or accrued. Lt is by working out the net income tax after adjusting admissible expenses and other items, but the same may also believed on the basis of gross receipts, expenditure etc. There are new species of income tax, namely, presumptive tax and minimu8m tax.
(42) We may again point out that the NTRC, which mostly comprised the representatives of business community representing various trade associations, in its report of December, 1986, quoted hereinabove in para. 17, highlighted the corruption obtaining in Government and semi- Government departments and so also to dishonest tendency on the part of the taxpayers to evade the payment of lawful taxes by using unfair means, ln such a scenario, the Legislature is bound to adopt modern and progressive approach with the object to eliminate leakage of public revenues and to generate revenue, which may be used for running of the State and welfare of its people. The imposition of minimum tax under section 80-D is designed and intended to achieve the above objectives. The rate of half per cent of minimum tax adopted under section 80-0' seems to be on the basis of the minimum rate of tax suggested by the Exports Enhancement Committee, ln our view the above provision falls within the Legislative competence under Entry 47 read . With Entry 52.
The approach of this Court while interpreting the Constitution should be dynamic, progressive and oriented with the desire to meet the situation effectively which has arisen keeping in view the requirement of ever changing society. Applying the above rule of interpretation, we do not find any infirmity in the impugned section 80-D of the Ordinance." a somewhat similar view was taken by this Court in the case of Commissioner of Income Tax Vs. Asbestos Cement Industries Ltd. And others, (supra).
8. The learned Judges of the High Court of Sindh came to the following conclusions in para 11 of the impugned judgment that:-- "The advance tax impugned in this petition does not fall within the purview of presumptive tax regime. The advance tax collected by the petitioner No.1 from the petitioner No.2 and all other buyers of the prepaid telephone cards shall be merely credited with the Government which can. Be utilized and adjusted to the extent found necessary towards the ultimate liability of income tax due, after it has been determined and the excess amount if any is to be refunded to the purchasers of prepaid telephone cards"
In our view, the impugned judgment by the High Court of Sindh is in conformity with the ratio laid down by this Court in the case of Elahi Cotton Mills Limited (supra) and the same does not suffer from any legal infirmity so as to warrant interference by this Court.
9. For the foregoing reasons, we do not find any merit in this petition which is dismissed and leave to appeal is refused accordingly.