MR. CHIEF JUSTICE EJAZ AFZAL KHAN.-(l). By this single judgment, we propose to decide Writ Petition Nos. 282, 1364, 1829, 1995, 2773, 3003, 3008, 3014, 3015, 3024 of 2009, 81, 82, 83 and 84 of 20.10 wherein vires of section 235 of the Income Tax Ordinance, 2001, and section 7A of the Sales Tax Act, 1990 and the rules framed there-under have been challenged.
2. Learned counsel for the petitioners contended that once under section 234-A(3) of the Income Tax Ordinance, 2001 (hereinafter referred to as "Ordinance"), the tax collected under the said provision is said to be final tax on income of CNG Stations, no further tax can be levied on the consumption of electricity under section 235 of the Ordinance. Such tax, the Learned counsel added, would be all the more illegal and tantamount to double taxation when it has been provided in section 234-A(3) of the Ordinance that the tax thus collected shall be final on the income of the CNG station. The Learned counsel next contended that where section 3 of the Sales Tax Act, 1990 (hereinafter referred to as "Act"), clearly provides that the sales tax shall be charged at the rate of 16% no rule which is an off-shoot of subordinate legislation can be held to override it.
3. As against that, Learned counsel appearing on behalf of the respondents contended that the tax collected under section 234-A(3) of the Ordinance shall no doubt be final on the income of a CNG Station arising from the consumption of the gas referred to in subsection (1) of section ibid, but levy of tax on consumption of electricity under section 235 of the Ordinance, beingan independent event, cannot be intermingled with the one levied under section 234(A)(3) of the Ordinance, that too when the rate of tax under either of the provisions is regulated by the Schedules framed thereunder. The Learned counsel next contended that the levy and collection of tax on value addition was not provided by Rules alone but by virtue of section 7A of the Act which is prefaced with non obstante clause. Therefore, neither section 7A of the Act nor the Rules made thereunder can be held to be ultra vires under any canons of interpretation. The Learned counsel to support their contentions placed reliance on the cases of Messrs Fauji Cement Co. Limited v. The Federation of Pakistan through Secretary Finance, Ministry of Finance and 4 others (Writ Petition No. 1553 of 2008), decided on 5-5-2009 by the Islamabad High Court and Indus Jute Mills Ltd. Through Chief Executive v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others (PTCL 2010 CL. 898).
4. We have gone through the record, the relevant provisions of the Statutes and the judgments cited at the bar by the Learned counsel for the parties carefully and also considered the submissions of the Learned counsel for the parties.
5. Before we proceed to discuss the arguments of the Learned counsel for the parties, it is worth to refer to Section 234-A of the Ordinance which reads as under:- "234A. CNG Stations.-Cl There shall be collected advance tax at the rate specified in Division VIB of Part-Ill of the First Schedule on the amount of gas bill of a Compressed Natural Gas station.
(2)The person preparing gas consumption bill shall charge advance tax under subsection (1) in the manner gas consumption charges are charged.
(3) The tax collected under this section shall be a final tax on the income of a CNG Station arising from the consumption of the gas referred to in subsection (1).
(4) The taxpayers shall not be entitled to claim any adjustment of withholding tax collected or deducted under any other head, during the tax year."
6. The other provision in this behalf is section 235 of the Ordinance which also merits a reference and thus runs as under:- "(235) Electricity consumption.-~(1) There shall be collected advance tax at the rates specified in Part-IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer.
(2) The person preparing electricity consumption bill shall charge advance tax under subsection
(1) in the manner electricity consumption charges are charged.
(3) Advance tax under this section shall not be collected from a person who produces a certificate from the Commissioner that his income during tax year is exempt from tax.
(4) Under this Section.-
(a) in the case of a taxpayer other than a company, tax collected upto bill amount of thirty thousand rupees per month shall be treated as minimum tax on the income of such persons and no refund shall be allowed;
(b) in the case of a taxpayer other than a company, tax collected on monthly bill over and above thirty thousand rupees per month shall be adjustable; and (c) in the case of a company, tax collected shall be adjustable against tax liability." 6A. A perusal of section 234-A(3) of the Ordinance would reveal that the tax collected under this Section shall be final tax on the income of a CNG Station arising from the consumption of the gas referred to in subsection (1). It is well worth remarking that the finality of this tax has been linked with the consumption of the gas alone. It, by no stretch of imagination, has touched any other tax to be levied on the consumption of electricity made by a taxpayer other than a company or any other commercial or industrial consumer. Each of these provisions being independent and envisaging different situations cannot be intermingled with each other. The Legislature in its wisdom has prescribed a Schedule for collection of tax under section 234-A which shall be 4% of the gas consumption charges. Similarly, it has provided a schedule under section 235 of the Ordinance giving rates on which such tax shall be levied. How the tax levied by these two provisions can be tantamount to double taxation is not understandable as far as the bare reading of above mentioned provisions and the Schedules given thereunder are concerned. There is also nothing in section 235 of the Ordinance as could, in any way, show that it runs counter to or is in any way repugnant to the provisions contained in Section 234-A of the Ordinance.
7. Now the question crops up whether any of the provisions cited above, can be held to be ultra vires. There is absolutely nothing before us or in the arguments of the Learned counsel for the petitioners as could even remotely suggest that either section 234-A or 235 of the Ordinance is beyond the legislative competence of the law maker. There is also nothing on the record to show that either of the provisions is discriminatory or violative of any Constitutional provision so as to justify its scratch from the statute. The rate of tax as per respective Schedule to the provisions being fair and far from being excessive cannot be termed confiscatory either. Therefore we do not feel inclined to declare any of the provisions as, ultra vires. We are rather supposed to lean in favour of their constitutionality, so long as they are within the legislative competence of the law making body. This aspect of the case has already been dealt with in a quite befitting and beautiful manner by the honourable Supreme Court in the case of Messrs Elahi Cotton Mills Ltd and others v.
Federation of Pakistan through Secretary M/O. Finance Islamabad and 6 others (PTCL 1997 CL. 260).
The honourable Supreme Court while upholding the presumption in favour of Constitutionality of the legislative enactments held as under:- "(44) Adverting to the above first reason, it may be observed that it is true that the power to tax cannot be used to embarrass and destroy the business/occupations which are sine qua non for the propriety of the people and the country. The object of the levy and recovery of taxes as pointed out hereinabove is to run the State and to make efforts for creation of an egalitarian society. If the rates of taxes are so high and disproportionate to the actual earnings or earning capacities that they destroy the taxpayers, the very object of their levy and recovery is defeated. It has, therefore, been held by the superior Courts of the foreign jurisdiction as well as of Pakistani jurisdiction including this Court that the taxes should not be expropriatory and confiscatory in nature and that the same should not be imposed in such a way so as to result in acquiring properties of those to whom the incidence of taxation fell and if that is so, then such legislation would be violative of fundamental rights to carry on business or to hold properties as guaranteed by the Constitution.
The Learned counsel for the appellants have heavily relied upon the judgment of this Court in the case of Government of Pakistan v. Muhammad Ashraf (supra), in which this Court accepted the above legal proposition that a tax, which is confiscatory in its nature, would be violative of the fundamental rights relating to carrying on business and holding properties, but remanded the case to the High Court to examine the question, as to whether the rate of regulatory duty on Soyabean Oil imposed was of confiscatory nature. We are inclined to reiterate the principle of law enunciated in the above report. However, we are unable to agree with the Learned counsel for the appellant that the rates of taxes imposed under the impugned sections 80-C, 80-CC and 80-D of the Ordinance are confiscatory and expropriatory in nature. Since there is a presumption in favour of legislative competence as held in a number of judgments referred to hereinabove, the burden to show that the impugned taxes are confiscatory or expropriatory, was on the appellants. In our view, they have failed to bring on record any reliable material on the basis of which it can be concluded that the same are confiscatory or expropriatory. Messrs Dr. Ilyas Zafar and Iqbal Naim Pasha, while arguing Civil Appeal No. 478 of 1995, submitted that the appellants in the above appeal declared Rs. 6,47,243 as the net profit for the assessment year involved but they were made to pay presumptive tax amounting to Rs. 66,00,282. Whereas Mr. Sikandar Hayat, who argued for the appellant (National Construction Company) in Civil Appeal No. 1496 of 1995, contended that the appellant suffered loss of Rs. 24,88,18,613 in the assessment year 1992- 93 but they were made to pay presumptive tax under section 80-C Rs. 1,35,29,726. The above two instances cannot be treated as sufficient for rebutting the presumption in favour of the competency of the Legislature. The question, as to whether a particular tax is confiscatory or expropriatory, is to be determined with reference to die actual earning or earning capacity of an average prudent successful entrepreneur in a particular trade or business. The fact that a particular assessee has suffered loss/losses during certain assessm ent years, is not germane to the above question. In this regard reference may again be made to the case of the Madurai District Cooperative Bank Ltd. v. Third Income Tea Officer, Madurai (supra) referred to hereinabove in para.28 (x), wherein taxable income of the assessee declared was Rs. 51,763; whereas the tax imposed was Rs. 76,674,07 including surcharge.
Indian Supreme Court sustained the above levy and inter alia held that what is not income under the Income Tax Act can be made income under the Finance Act or exemption granted by the Income Tax Act can be withdrawn by the Finance Act or its efficacy can be reduced."
8. The argument with regard to the levy of sales tax on value addition too has not moved us when it is clearly provided by section 7A of the Sales Tax Act which is pre-faced with non obstante clause.
9. When this being the position, we do not agree with the Learned counsel for the petitioners that any of the provisions of section 235 of the Income Tax Ordinance or section 7A of the Sales Tax Act is violative of the Constitutional provisions or in any way ultra vires. The judgments rendered in the cases of Zafar Ali Khan and another v. Government of N.-W.F.P, through Chief Secretary and 3 others (PLD 2004 Pesh. 263) and Indus Jute Mills Ltd. Through Chief Executive v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others (PTCL 2010 CL. 898) and Messrs Fauji Cement Co. Limited v. The Federation of Pakistan through Secretary Finance, Ministry of Finance and 4 others (Writ Petition No. 1553 of 2008), decided on 5-5-2009 by the Islamabad High Court may well be referred in this behalf.
10. Resultantly, all the petitions being without any substance are dismissed.