' The appellants have instituted present I.C.A. Against the judgment dated 7-4-2004 passed by the learned single Judge whereby Writ Petitions Nos.1974 of 2001 and 121 of 2004 were allowed and the proposed act of the appellants in deducting income tax from the deposits of respondent No,1 lying with respondent No,2 was declared to be void and without lawful authority.
2 . Brief facts of the case are that Board of Intermediate and Secondary Education, Rawalpindi respondent No,1 has been established and constituted by Government of Punjab under section 3 of the Punjab Board of Intermediate and Secondary Education Act (XIII) 1976. Respondent No,1 is entrusted with the functions to organize, regulate, develop and control Intermediate Education in the institutions falling within the administrative jurisdiction of Rawalpindi Division Rawalpindi. The Board also holds and conducts all examinations pertaining to Intermediate Education, Secondary Education Pakistani and Classical languages, prescribes courses of studies for its examinations, lays down conditions for recognition of institutions and conditions for admission to its examinations etc. Respondent No,1 has its funds and accounts/ deposits in the Habib Bank Limited respondent No,2. The petitioner No,2 issued letter dated 7-6-2001 to the respondent-Board whereby a direction was issued that the Board does not strictly fall within the meaning of Provincial Government Department, therefore, withholding tax under section 50(2A) of Income Tax Ordinance, 1979 is leviable upon it. Accordingly Board was required to furnish requisite detail of accounts and provide receipt from it w,e,f, 1-7-1994 update and that the bank accounts of respondent No,1 were liable to deduction of the above tax by the Income Tax Authority. This action of the appellant was challenged by respondent No,1 through Writ Petition No, 1974 of 2001 before this Court which was heard by a learned single Judge and was accepted vide judgment dated 7-4-2004. It may be necessary for reference purpose also that a similar Writ Petition No, 121 of 2004 by Federal Board of Intermediate arid Secondary Education, Islamabad was instituted against whom the Income Tax Authority of Islamabad issued similar notice for the deduction of the tax under Income Tax Ordinance. Both writ petitions were heard together by a learned Single Judge of this Court as common question of law and facts were involved and both the writ petitions were disposed of through a consolidated judgment dated 7-4-2004. The learned Single judge held that the Board is an institution established for the educational purposes and its deposits are exempt from the deduction of tax envisaged by the Income Tax Ordinance, 1979. It may also be important to submit that the authorities of. Income Tax Department Islamabad who were respondents in Writ Petition No, 121 of 2004 did not further assail the judgment dated 7-4-2004.
3. It is contended by the learned counsel for the appellants that the impugned judgment passed by the learned single Judge is not sustainable in the eye of law. Learned counsel elaborated that the respondent Board is not an educational institution or University, therefore, the exemption allowed to educational institutions under Clause 86 of Part-I of Second Schedule of Income Tax Ordinance, 1979 and Clause 92 of Part-I of Second Schedule of Income Tax Ordinance, 2001 was not extendable to the respondent and that deposits and income of the said Board are liable to tax deduction. It was further argued that in order to avail of the exemption under the Ordinances of 1979 and 2001 it was obligatory for respondent No,1 to procure an exemption certificate entitling the Board to the exemption from the tax. It is lastly argued that the learned Judge has not construed the relevant provisions of law correctly in passing the impugned judgment.
4. Conversely, learned counsel for the respondent-Board has opposed the contention of the learned counsel for the appellants and has argued that the educational board constituted under the provisions of Act XIII of 1976 is an educational institution and its deposit and income is not amenable to the deduction of tax, therefore the impugned order has been rightly passed.
5. We have considered the arguments of the learned counsel for the parties and perused the documents annexed with the petition.
6. The provisions of section 14 of Income Tax Ordinance No,XXXI Tax Ordinance, 1979 are equivalent to the provisions incorporated in section 53 or the Ordinance No, XLIX 2001. Both the Ordinances create statutory exemptions of income or classes of income, persons or classes of person specified in Second Schedule attached to the Ordinance. The Second Schedule forming part of Income Tax Ordinance, 1979 provides in Part-I Clause (86) the following income exempt from the tax:-- "Any income of any university or other educational institutions established solely for educational purposes and not for the purpose of profit."
7. A similar provision is incorporated in Clause 92 of Part-I of Second Schedule of Income Tax Ordinance, 2001. The concept of an educational institutions can further he highlighted by making reference to provisions of Act, XIII of 1976, under which statute the Government of Punjab has established the Board of Intermediate and Secondary Education Rawalpindi respondent No,1.
Section 10 of the Act No,XIII of 1976 lays down the function and powers of Board as under:-- Powers of a board.---(1) Subject to the provisions of this Act a Board shall have power to organize, regulate, develop and control Intermediate Education and secondary Education.
(2) In particular and without prejudice to the generality of the powers conferred by the preceding subsection a Board shall have the power;
(i) to hold and conduct all examinations pertaining to Intermediate education, Secondary education, Pakistani and Classical language and such other examinations as may be determined by Government.
(ii) to prescribe course of study for its examinations;
(iii) to lay down conditions for recognition of institutions.
(iv) to accord, refuse or withdraw recognition, wholly or partly;
(a) in the case of schools maintained by the Govt. Of Pakistan after considering inspection reports from the officer on special duty, Ministry of Education Government of Pakistan or any other authority appointed for the purpose by the said Ministry;
(b) in the case of other schools, after considering inspection reports from the director of education concerned and
(c) in the case of Intermediate colleges and institutions preparing candidates for languages examinations, after considering reports from an Inspection Committee appointed by a Board in this behalf.
(v) to inspect and arrange for inspection of recognized institutions and call for inspection reports in respect of such institutions other than the institutions run by the Govt. Of Pakistan;
(vi) to lay down conditions for admission to its examination to determine the eligibility of candidates and to admit them to such examination;
(vii) to grant certificates and diplomas to persons who have passed its examinations and to withdraw such certificates and diplomas; (viii)to fix, demand and receive such fees as may be prescribed;
(ix) to supervise the residence, health and discipline of the students of recognized institutions with a view to promoting their general welfare;
(x) to institute and award scholarships, medals and prizes in the prescribed manner;
(xi) to organize and promote extra-mural activities in and for recognized institutions;
(xii) to hold, control and administer its property and fund; (xiii)to enter into and carry out contract in exercise of its powers and . In the performance of its duties under this Act and the regulations;
(xiv) to pass its annual budget;
(xv) to transfer any movable and immovable property belonging to it;
(xvi) to hold and manage endowments;
(xvii) to regulate and decide all administrative matters including the creation and abolition of posts under the Board: ' Provided that a post carrying an initial pay of Rs,1,000 or more per mensem shall not be created without the prior approval of the Controlling Authority; (xviii) to appoint such officers and staff as may consider necessary for the performance of its functions and define their duties and conditions of service;
(xix) to make provision for buildings, premises, furniture, apparatus, books and other means required for carrying out the purposes of this Act;
(xx) to sanction or incur such expenditure as may be necessary for carrying out the purpose of this Act and
(xxi) to do all other acts necessary for carrying out the purposes of this Act.
(3) a Board may delegate any of its powers to its Chairman or any officer of the Board or to a Committee or sub-Committee appointed by it as it may deem fit."
8. The necessary function of respondent-Board is thus to organize, regulate, develop and control intermediate and secondary education. The process of education necessarily includes the granting of educational certificates which are commonly known as educational degrees. No education is complete unless its completion is formally authenticated by a University or Educational Board established for that purpose. As provided in section 10(1) of the Act, 1976 the Educational Board constituted under the said Act is the only institution which organize, regulates, develops and controls intermediate education and secondary education. Thus respondent No, 1/Board falls within the definition of educational institution as envisaged in the exemption clauses of the Income Tax Ordinances referred to above. It will be advantageous to cite AIR 1968 SC 662 wherein the term educational institution has been elaborated in the following words:-- "There is a good deal in common between educational institutions which are not universities and those which are universities. Both teach students and both have teachers for the purpose. But what distinguishes a university from any other educational institutions is that a university grants degrees of its own while other educational institutions cannot. It is this granting of degrees by a university which distinguishes it from the ordinary run of educational institutions."
9. The term "educational institution" had been defined in Concise Oxford English Dictionary in the following words:-- "The process of educating or being educated, the theory and practice of teaching; information about or training in a particular subject."
Similarly the term "educational institution" has been defined in Bank Law Dictionary in the following way in its Fifth Edition at page 461:-- "A school, seminary, college, university or other educational establishment, not necessarily a chartered institution. As used in a zoning ordinance, the term may include not only buildings, but also all grounds necessary for the accomplishment of the full scope of educational instructions, including those things essential to mental, moral and physical development."
10 The learned Single Judge of this Court while describing the functions of the Board in the impugned judgment has founded following valid reasons for holding the respondent-Board to be an institution engaged in educational activities:-- "Upon a reading of the said provisions the Act of 1976 it is but apparent that the petitioners have been constituted by the Federal and the Provincial Government respectively for the sole purpose of organizing, regulating, developing and controlling Intermediate education and secondary education in the Islamabad Capital Territory and the Rawalpindi Division respectively.
' Now as already stated by me above, the said Income Tax Ordinance exempts any income of a university or an educational institution established solely for educational purposes and not for purposes of profits. I have examined the University of the Punjab Act, 1973 and the Quaid-i-Azam University (erstwhile university of Islamabad) Act, 1973. I find that section 3 of the said two Acts are almost in paramateria. Under the said provisions of the said two Acts, the Universities reconstituted respectively at Lahore and at Islamabad, under section 4 of the said Acts, shall have the powers, inter alia, to provide for instruction in such branches of learning as the University may deem fit and to make provision for research and for the advancement and dissemination of knowledge in such manner as the University may determine, to prescribe courses of studies to be conducted by it and the Colleges to hold examinations and to award and confer degrees, Diplomas, certifications and other academic distinctions to and on persons who have been admitted to and have passed its examinations under prescribed conditions."
' It will be thus seen that one of the primary power functions of the said universities is to hold examinations in the manner prescribed and as a result to confer the said awards upon successful candidates."
11. The above quoted observations of the learned Single Judge in the impugned judgment correctly interpret the term educational institutions as embodied and incorporated in Clause 86 of Part-I of Second Schedule of Income Tax Ordinance, 1979. The Education Board respondent No,1 is thus fully covered by the exemption Clause 86 referred to above of the Income Tax Ordinance of 1979 and is not liable to tax deduction as being claimed by the appellants. The contention of the learned counsel for the appellants that in order to avail of the exemption embodied in the exemption part of the Ordinance, 1979, the respondent Board must obtain an exemption certificate is without any substance and is thus not sustainable.
' In view of the above, this I.C.A. Being devoid of any merits is dismissed.