AJMAL MIAN, J.-By this common Judgment, we intend to dispose of 179 Income-tax References/Income-tax Cases, the detail of which is given hereinbelow as common questions of law is involved; "income-tax Cases Nos. 51, 55, 59, 104, 105, 134 to 146, 149 to 153, 156, 158, 159, 221 to 246, 249. 250, 275, 277 to 296, 298, 305, 306, 307, 315, 316, 324, 346, 348 to 352, 357, 359, 398, 400, 407 to 412, 422, 424 to 449, 451 to 457, 459 to 469, -483 to 493, 495 to 501, 637 to 642, 644, 650, 651, 653, 672, 673, 674, 704, 728, 733, 735 of 1972."
The relevant facts for the disposal of the above references/cases are that the respondent in each case is an assessee and at the relevant time held certain shares in a company/companies exempted from payment of income---tax under section 15-BB of the Income-tax Act. The assessee received dividends from such companies. The Income-tax Officer concerned while computing the income of each of the assessee for the purpose of computing the income-tax for the relevant year included the above dividends as income subject to levy of income-tax. However, finally the Income-tax Appellate Tribunal on the basis of the decisions given by it inter alia in I. T. A. Nos. 670 and 688 of 1968-69 dated 20-10-1969, held that dividends received by the assessee from a company covered under section 15-BB are not subject to the levy of the income-tax. The Commissioner of Income-tax through the above references/cases has sought opinion of this Court under section 66(1) of the Income-tax Act, 1922, on the following question "Whether on the facts and in the circumstances of the case the Income--tax Appellate Tribunal was justified in holding that dividends received by the assessee on shares of Companies enjoying the benefit of section 15-BB of the Income-tax Act are exempt from tax and not liable to be included in the total income of the shareholder?"
3. It seems that after filing of the above references/cases in this Court the President of Pakistan through the Finance Ordinance, 1972 (XXI of 1972) purported to make amendments, inter alia, in section 15-BB of the Income--tax Act by incorporating a new subsection (4-AA) to it providing retrospectively that nothing contained in this section shall be deemed to exempt tax any dividends, paid, credited or distributed by a Company to its shareholders out of the profits or gains exempt from tax under the aforesaid section. The above Ordinance was gazetted in the Gazette of Pakistan, Extraordinary, dated 17th June, 1972 and was enforced with effect from 1st July, 1972. It further seems that the above Ordinance was placed before the National Assembly on or about 16th August, 1972 for converting it into an Act by the National Assembly in view of Article 94 of the Interim Constitution of 1972: It also seems that the National Assembly did not enact the above Ordinance as an Act but the then President of Pakistan issued a Post---Constitution (President's Order 5 of 1972) on 26th September, 1972 in purported exercise of power under clause (1) of Article 279 of the Interim Cons-- titution (1972) providing that Finance (Supplementary) Ordinance, 1972 (XVII of 1972) and the Finance Ordinance (XXI of 1972) and any other Ordinance, which may be made by the President at any time before 31st day of December, 1972 for amending either of the Ordinances or giving effect to the financial provisions to the Federal Government shall continue in force until it is altered, repealed or amended by Ordinance made by the President or by an Act of the Federal Legislature and shall have the like force of law as such an Act.
4. When the above references/cases came up for hearing Mr. Ali Athar, learned counsel for the respondents in most of the above references/cases pointed out that he had raised certain contentions as to the validity of the Finance Ordinance (XXI of 1972) and the amendment brought about by it in the form of subsection (4-AA) in section 15-BB of the Income-tax Act, which were noted in the order dated 21-I1-1979 in I. T. C. No. 101/1972. It was also submitted by him that in pursuance of the above order, a notice was issued to the learned Attorney- General of Pakistan, in response to which the learned Deputy Attorney-General had appeared. We accordingly, ordered the issuance of notice to the learned Deputy Attorney-General.
5. (a) Messrs Aziz Munshi and Haider Ali Pirzada in support of the above references/cases have made the following submissions :-
(i) That under section 15-BB of the Income-tax Act, the income of companies covered by the above section in their hands was exempted from the payment of income-tax and not the dividends declared from such income in the hands of the shareholders of such companies.
(ii) That in any case in view of the amendment in section I5-BB in the form of insertion of subsection (4-AA), by Ordinance No. XXI of 1972 no exemption from payment of the income-tax can be claimed by the shareholders on the dividends declared by the Companies covered under section I5-BB.
(b) On the other hand Mr. Nasim Ahmed Khan learned counsel for some of the respondents in references Nos. 55, 104, 105 and 156 of 1972 has urged the following contentions
(i) That under section 15-BB it is the income of the companies covered under the said section is exempted irrespective of the fact, whether it is in the hands of the companies or in the hands of the shareholders in the form of dividends.
(ii) That the amendment brought about by the Finance Ordinance (XXI of 1972) in the form of subsection (4-AA) in section 15-BB does not affect the exemption expressly granted to the incomes of the companies covered by the above section.
(c) Whereas Mr. Ali Athar has made the following submissions (which were adopted by Messrs Iqbal Naim .Pasha and Naim-ur-Rehman Advocates)
(i) That it is the income of the companies covered by section 15-BB is exempted from the levy of the income-tax irrespective of the fact, whether it is in the hands of the companies or in the hands of the shareholders in the form of dividends.
(ii) That the Finance Ordinance, 1972 (XXI of 1972) lapsed on the expiry of 6 weeks from the date of re-assembly of the National Assembly in the absence of approval by it in terms of Article 94 of the Interim Constitution, 1972.
(iii) That the Post-Constitution (President's Order 5 of 1972) issued under Article 279 of the Interim Constitution of Pakistan (1972), purporting to extend the period of Finance Ordinance XXI of 1972 is beyond the ambit of the above Article of the Constitution.
(iv) That in any case by virtue of sub-Article (4) of Article 279 of the Interim Constitution (1972), no amendment even in the Constitution could have been made retrospectively to any date earlier than 20th day of December, 1971 and that purported amendment in section 15-BB in the form of subsection (4-AA) with retrospective effect from the time of its enactment i.e. in the year 1959 is beyond the scope of the above Article 279 of the Interim Constitution.
6. (a) In order to appreciate the respective contentions of the learned counsel for the parties, it may be advantageous to reproduce hereinbelow subsection (1) of section 15-BB, subsection (4- AA) brought about by Finance Ordinance (XXI of 1972). Articles 94 and 279 of the Interim Constitution 1972 and the Post-Constitution (President's Order 5 of 1972).
"Section 15-BB. Tax holiday for new industries.-(1) Subject to the provisions of this Act, the income, profits and gains of an industrial undertaking set up in Pakistan between the first day of April, 1959, and the thirtieth day of June, 1965 (both days inclusive) shall be exempt from the income-tax and super-tax payable under this Act for a period of four years beginning with the month in which the undertaking is set up or the commercial production is commenced, whichever is the later ; Provided that in the case of an Industrial undertaking set up in such areas as may be specified in this behalf by the Central Government, by notification in the official Gazette, this subsection shall have effect as if for the words "four years", the words "six and eight years", were substituted."
(2) .;------------------------------..
Section 4-AA. Nothing contained in this section shall be deemed to exempt from tax any dividend paid, credited or distributed or deemed to have been paid, credited or distributed by a company to its share--holders out of the profits or gains exempt from tax under this section.
Article 94.-(1) The President may, at a time when the National Assembly stands dissolved or is not in session, make and promulgate Ordinances for the peace and good Government of Pakistan or any part thereof, and any Ordinance so made shall have the like force of law as an Act of the Federal Legislature, but the power of making Ordinances under this Article is subject to the like restrictions as the power of the Federal Legislature to make laws, and any Ordinance made under this Article may be controlled or superseded by any such Act.
(2) Notwithstanding any restrictions imposed by the preceding clause, an Ordinance made under this Article may authorize expenditure from the Federal Consolidated Fund.
(3) An Ordinance promulgated under this Article-
(a) shall be laid before the National Assembly and shall cease to operate at the expiration of six weeks from the re-assembly thereof, or if before the expiration of that period, a resolution disapproving it is passed by the Assembly, upon the passing of that resolution ;
(b) may be withdrawn at any time by the President.
(4) In clauses (1) and (3), references to the time when the National Assembly is not in session and to the re-assembly thereof shall be deemed to include references respectively -
(a) to the time following immediately upon the dissolution of the Assembly ; and
(b) to the first assembly of the next."
"Article 279.-(1) The President shall, by Order, make such provisions as appear to him to be necessary or expedient-
(a) for bringing the provisions of this Constitution into effective operation ;
(b) for removing difficulties arising in connection with the enforcement of this Constitution ;
(c) for making omissions from, additions to, modifications of and amendments in this Constitution.
(2) No Order shall be made under this Article after the thirty-first day of March, 1973.
Amended by Constitution Amendment Act, 1973.-(2) The power to make an Order under this Article may be exercised at any time before a Constitution for Pakistan enacted under Chapter 4 of Part III has come into force.
(3) Power to take any Order under this article includes power to revoke or vary any Order Previously made in the exercise of that power.
(4) Any Order made under this Article may be made so as to be retrospective to any date not earlier than the twentieth day of December, 1971.
"POST-CONSTITUTION PRESIDENT'S ORDER 5 OF 1972FINANCIAL LAWS ORDER, 1972 [Gazette of Pakistan, Extraordinary, 26th September, 19721 No. E-24(1),172-Pub.--The following Order made by the President on the 8th September, 1972, is hereby published for general information :- Whereas it is necessary to make provision for continuing in force Ordinances made for giving effect to the financial proposals of the Federal Government ; And whereas clause (1) of Article 279 of the Interim Constitution of the Islamic Republic of Pakistan, hereinafter referred to as the Constitu--tion, provides that, for making modifications of the Constitution the President shall make such provisions as appear to him to be necessary or expedient ; Now, therefore, in pursuance of the said clause (1) of Article 279 of the Constitution, the President is pleased to make the following Order :-
1. Short title and commencement.-(I) This Order may be called the Financial Laws Order, 1972.
(2) It shall come into force at once.
2. Certain Ordinances to continue in force.-Notwithstanding anything contained in the Constitution the Finance (Supplementary) Ordinance, 1972 (XVII of 1972), and the Finance Ordinance, 1972 (XXI of 1972), and any other Ordinance which may be made by the President at any time before the 31st day of December, 1972, for amending either of the Ordinance or for giving effect to the financial proposals of the Federal Government, shall continue-in force until it is altered, repealed or amended by an Ordinance made by the President or by an Act of the Federal Legislature and shall have the like force of law as such an Act."
(b) It may be noticed that under subsection (t) of section 15-BB, the income, profits and gains of an industrial undertaking set out in Pakistan between 1st day of April, 1959 and 30th day of June, 1965 were exempted from the payment of income-tax and super-tax payable under the Income-tax Act. Furthermore, the Federal Government was given the power by a notification to extend the period to 6 years or to 8 years.
(c) It may further be noticed that newly enacted subsection (4-AA provided that nothing contained in section 15-BB shall be deemed to exempt from tax any dividend paid, credited or distributed by a Company to its shareholders out of the profits or gains exempt from tax under the above section. The above amendment was retrospective in effects reverting back to the date when section 15-BB was enacted i.e. in the year 1959 by Ordinance No. XV of 1959 (with effect from 1-4- 1959).
(d) It may also be pointed out that under Article 94 of the Interim Constitution, 1972, the President of Pakistan was given the power when the National Assembly stood dissolved or was not in session to make and promulgate Ordinance for the peace and good Government of Pakistan or any part thereof. Whereas sub-Article (3) provided that an Ordinance promulgated under the said Article shall be laid before the National Assembly and shall cease to operate at the expiration of 6 weeks from the re-assembly thereof or before the expiration of that period, a resolution disapproving it was passed by the Assembly,, upon passing such resolution. Furthermore, sub-Article (4) provided that reference in clauses (1) and (3) to the time when the National Assembly was not in session and to the re-assembly thereof shall be deemed to include references respectively in the two situations mentioned in the said clause.
(e) It may further be pointed out that Article 279 gave the President's power for bringing the provisions of the Constitution into effective operation or for removing difficulties arising in connection with the enforcement of the Constitution or for making omissions from, additions to, modifications of and amendments in the Constitution through a Presidential Order. Further--more, sub-Article (2) of the above Constitution provided that the power under this Article could be exercised at any time before a Constitution for Pakistan was enacted under Chapter 4 of Part III and came into force. Whereas sub-clause (4) of Article 279 provided that any order made under the said Article might be made so as to be retrospective to any date not earlier 'than 20th day of December, 1971.
(f ) It may also be noticed that the Post-Constitution President's Order (5 of 1972) quoted hereinabove provided that notwithstanding anything contained in the Constitution, the Finance (Supplementary) Order, 1972 (XXI of 1972) or any other Ordinance which may be made by the President at any time before the 31st December, 1972 for amending either of. The above two Ordinances or for giving effect to the financial. Proposals of the Federal Government shall continue in force unless it was altered, repealed or amended by an Ordinance made by the President or by an act of the Federal Legislature. The above order was purported to have been passed under clause (1) of Article 279 of the Interim Constitution:
7. (a) Reverting back to. The contention of the learned. Counsel for the parties, namely, as to whether the income in the hands of the companies covered under section 15-BB of the Income-tax Act was exempted or whether the above exemption was to apply even in respect of the dividends declared from such income in the hands of the shareholders, it may be observed that it has been vehemently contended by Messrs Aziz Munshi and H. A. Pirzada that the income of a company convered under section 15-BB is exempted and not dividends declared from such income in the hands of the shareholders. On the other hand converse has been urged by Messrs Ali Athar and Naseem Ahmed. Mr. Azia Munshi in support of his above contention has referred to the case of Mrs. Bacha F. Gazdar, Bombay v. Commissioner of Income-tax Bombay (AIR 1955 SC 74whereas Messrs Ali Athar and Naseem Ahmed, Advocates have referred to the case of Commissioner of Income- tax, Punjab, N: W. F. P: & Bahawalpur v. Mrs. E. V. Miller (represented by heirs) (PLD 1959 SC, 219) and the case of Com--missioner of Income-tax, Lahore Zone, Lahore v: Mst. Gulzarinu Multan- ((1973) 28 Taxation 61
(i) With reference to AIR 1955 SC 74, it may be observed that the question for consideration before the Supreme Court of India was .As follows; "Whether 60-Y. Of the dividend amounting to Rs. 2,750 received by the assessee from the two companies is agricultural income and as such exempted under section 4(3)(viii) of the Act?"
The Bombay High Court from the judgment of which the above appeal had arisen answered the above question in the negative. Upon an appeal, the Supreme Court concurred with the judgment of the High Court. It was held by the Supreme Court that agricultural income as defined in section 2(l)(a) is intended to refer to the revenue received by direct assessment with the land which is used for agricultural purposes and not by indirectly extending it to cases where the revenue or part thereof changes hands either by way of distribution of dividend or otherwise. It was further held that dividend is derived from the investment made in the shares of the company, the foundation of which rests on the contractual relations between the company and the shareholder. It was also held that the dividend is not derived by a shareholder by his contractual relationship. With . The land. It may be pertinent to mention that under the above provision 40 % of the income of a company was subject to levy of income-tax on account of manufacturing and sale of tea but 60 - -/ of such income was exempted from tax as agricultural income by virtue of rule 40 of the Income-tax Rules. On the above basis the assessee had claimed exemption from the payment of income-tax to the extent of 60 % on dividend received from the company, covered under the above provision of the Income-tax Act, which was not allowed.
(ii) As regards PLD 1959 SC 219, it may be stated that the Supreme Court of Pakistan was considering the following question ; "Whether, in the circumstances of the case, the sum of (different amounts in each case) declared as dividend by the company out of its agri--cultural income and received by the assesses, a shareholder in the said company, is agricultural income in the hands of the assessee, so as to be exempt from the tax under section 4(3)(viii) of the Act."
It was held by the Supreme Court that agricultural income received by a shareholder in the form of dividend was exempted by virtue of section 16(2) read with section 4(3)(viii) of the Income-tax Act.
It may be advantageous to quote hereinbelow the relevant observations of the Supreme Court; "We may now turn to the question whether dividends received by a share-holder out of the agricultural income of a company are themselves agricultural income and thus not liable to inclusion in his own total income. On this point the learned counsel for the Revenue has referred to two Indian cases in which the question has been answered in the negative and the arguments addressed to us are largely based on the ratio decidendi of those cases. The first of these is the Bombay case in Bacha F. Guzdar v. Commissioner of Income-tax, Bombay City decided by Chagla, C. J., and Tendolkar, J. And affirmed by the Supreme Court of India in the case of the same name reported in 1955 SCMR 876. The second is from Patna, reported as Vishweshwar Singh v.
Commissioner of Income-tax. The reasoning underlying these decisions is that a company is an entirely different entity from its shareholders ; that a shareholder though entitled to share in the profits of the company has no interest in the property of the company that his right to receive his share in the profits of the company is derived from the declaration of dividends by the company. ; that the income of. The company is not the income of its shareholders that the position of the partner of a firm materially differs from that of a shareholder ; that the dividend which a shareholder receives is a return on his investment and not revenue from land and that his position is similar to that of a person who receives interest on a loan advanced by him to an agriculturist.
Dividends are not specifically mentioned in any of the categories of income enumerated in section 6, and whether they fall under clause (iv) or clause (v) of that section, and whether they are governed by section 10 or by section 12, the essential question that presents itself for decision is whether, when they are received by a share-holder, irrespective of whether the shareholder is an individual, a company, a firm, a Hindu undivided family or an association of persons, out of the agricultural income of a company, they retain the character of agricultural income. Under the repealed subsection l(a) of section 14 tax was not payable on any sum which a shareholder received as dividend from a company whose profits and gains had been assessed to income-tax, but this provision was not applicable to a company whose profits had not been assessed to income-tax and the contention that the Act intended to tax the dividends even where the company had not been assessed` was emphatically repelled by the Privy Council, with the observation that on that construction dividends paid by a company which had derived profits from agricultural income or earned income from interest on tax-free securities would be liable to tax.
Subsection (2) has now been repealed, but' the provision that has taken its place, namely, subsection (2) of section 16, does not in any way alter the position because as we have already pointed out it does not have the effect of declaring that all dividends, irrespective of the income out of which they are declared, have got to be included by an assessee in the return of his total income. Thus there being no specific provision in the Act, the question is whether a shareholder of a company whose business is exclusively agriculture is bound to include in his total income the dividends received by him from the company. In India the question has been approached from a standpoint which we say with respect, is different from what we consider to be . The right approach.
Put in a nutshell, the ratio decidendi in the Indian. Decisions is that since the receiver of a dividend, 'be it a company,. An individual, a partner in a firm, a member of an undivided Hindu family or other association of persons receives it as a return on capital and since the receiver is itself or himself an assessable entity different- from the dividend-paying company, the payment of dividends does not amount to receipt by him of "agricultural income" within the meaning of clause (viii) of subsection (3) of section 4 and that such receipt is in the nature of an interest paid by a borrowing agriculturist out of his income from agriculture. We feel that the correct form in which the question arises is whether the agricultural income of a company is divested of its character of agricultural income, when what happens is merely the distribution of that income by payment of dividends to the shareholder. Do the dividends so paid continue to be revenue from land or do they assume a different character and to the hands of the shareholders become exclusively returns on capital? Of course, the income-earning company is a different assessable entity from the receiver of the dividend, but does the character of the income change merely by that circumstance ? To this question we proceed to address ourselves now."
(iii) With reference to (1973) 28 Taxation 61, it may be observed that a D. B. Of the Lahore High Court while considering the question in issue held that the income declared out of the companies profit covered under section 1S.*BB in the hands of shareholders is also exempted. It may be advantageous to reproduce the relevant passage from the above judgment; "14. Section 15-BB exempts the "incomes, profits and gains of an industrial undertaking" falling within the limits given in section 15-BB. The Question that we have to answer, therefore, is whether the incomes, profits and gains of such an industrial undertaking cease to be income, profits and gains of that industrial undertaking no sooner they are distributed to the shareholders in the shape of dividend. If the answer be in the affirmative, the dividend in the hands of the shareholder shall be liable to tax. But, if it is in the negative, then, it continues to enjoy the exemption granted by section 15-BB. In Miller's case, the Supreme Court observed that; "Income which is agricultural income in the hands of a joint stock company does not cease to be agricultural income when it is distributed to the shareholders by way of dividends. The extent of the shares held by each shareholder merely determines his share in the income, but the shares themselves are neither the source nor the producer of the income."
In the context of the case before us therefore, it would be correct to say that the dividend received by the assessee from a Company enjoying a tax-holiday is merely his determinate share in the income of the undertaking. The whole matter is clinched by the observation of the Supreme Court that follows; "To hold to the contrary would make the exemption of agricultural income of a Company entirely illusory."
It is not denied by the Department that the purpose -of section 15-BB is to - grant q tax-holiday to new-comers in the industries within a certain period with a view to attracting capital for industrial enterprise which has all along been in this country. The capital is contributed by the shareholders and the attraction in the shape of a tax-holiday has also been offered to the share-holders because unless they get some benefit out of the tax-holiday, how is the purpose of the grant of the tax-holiday served. The mere fact that the Company is allowed a tax-holiday would not confer any benefit upon the share-holders because the moment the dividend goes in their hands, they will find that they have to pay tax upon it. Reference in this connection may be made to Maxwell on the Interpretation of Statutes, Eleventh Edition, page 19, where the following observation occurs "To arrive at the real meaning, it is always necessary to get an exact conception of the aim, scope, and object to the whole Act . . . . . : "
'The true meaning of any passage, it is said is to be found not merely in the words of that passage, but in comparing it with other parts of the law, ascertaining also what were the circumstances with reference to which the words were used, and what was the object appearing from those circumstances which the Legislature had in view."
"I now approach the construction of the Truck Act, bearing in mind that in the words of Lord Lindley, regard must be had not only to the words used, but to the history of the Act and the reasons which held to its being passed . . . . ."
"Even where the usual meaning of the Act falls short of the whole object of the Legislature, a more extended meaning may be attributed to the words, if they are fairly susceptible of it (page 66). . . : "
Thus, the Legislature having intended when passing the Workmen's Compensation Act, 1897 (c. 37), that every workman in the prescribed rates should be entitled to compensation, it was held that the Act ought to be construed, so far as possible to give effect to its primary provisions."
There is, therefore, enough authority to support the observations made above that in construing the provisions of an Act, the object with which they were enacted should not only be not lost sight of but should, as far as possible consistently with the language used, be interpreted with a view to advancing the aforesaid object.
15. As for the argument that the Legislature specifically mentioned dividends when it wanted to exempt them from tax as it did in section 15-BB one may just refer to Miller's case which has been adverted to above already. The law exempted only agricultural income, but there is no specific provision exempting the dividend from agricultural income. The Supreme Court, however "held that the dividend was exempt for the reasons which have already been mentioned above.
(b) It is evident that our Supreme Court in de above-cited case dissented from the view found favour with the Bombay High Court and the Supreme Court of India in the case referred to hereinabove. However, it was vehe--mently urged by Mr. Aziz Munshi that the above Supreme Court of Pakistan case is distinguishable from the instant cases inasmuch as in the present cases the income in the form of dividends was not received from an agri--cultural company, but from the companies covered under section 15-BB of the Income-tax Act. To re-enforce the above argument, it was also urged that the agricultural income as a whole was exempted under the Income-tax Act, whereas the income of the limited companies was not exempted as a class generally but only income of those companies which were covered by section 15-BB were exempted. In our view the above distinction is not material as to warrant -non-application of the principle enunciated by the Supreme Court of Pakistan in the above case. The income of agricultural companies declared in the form of dividends can be equated with the income declared in the form of dividends by a company covered under section 15-BB as both incomes enjoy exemption from the payment of the income-tax. The factum of exemption from the payment of the income-tax in respect of the aforesaid two kinds of income establishes nexus between them.
Furthermore, the above Lahore case is on all fours and applicable to the instant cases. We are in respectful agreement with the view found favour with the Lahore High Court in the aforesaid case.
8. Before taking up the contentions of the learned counsel for the parties as to the effect of the amendment brought about by the Finance Ordinance (XXI of 1972) in the form of subsection (4-AA) and by the President's Post --Constitutional Order (5 of 1972), it may be pertinent to take up the conten--tion of Nasim Ahmed Advocate that the above subsection (4-AA) does not affect the express exemption from the levy of income-tax granted under section 15-BB, but it relates to those exemptions which could have been impliedly claimed by virtue of the above section, it may be observed that the above contention seems to be devoid of any force. It may be pointed out that under section 15-BB (1) the express exemption from the payment of income-tax was granted in respect of the incomes, profits, and gains of an industrial undertakings referred to in the above subsection and not expressly in respect of dividends received by the. Shareholders from the income of such companies. In this view of the matter,. The amendment brought about by subsection (4-AA) in fact intended to take away the right to claim exemption on the dividends received by the shareholders from the incomes of the companies covered by section 15-BB. 9. (a)
Reverting to Mr. Ali Athar's contentions that the Finance Ordinance (XXI of 1972) had lapsed by virtue of sub-Article (3) of Article 94 of the Interim Constitution of 1972 on the expiry of 6 weeks from the date of re-assembly of the National Assembly, that post-Constitution (President's Order 5 of 1972) did not amend any provision of the Constitution and therefore, it did not extend the period of the Finance Ordinance (XXI of 1972) and that in any case the amendment could not have been retrospective for a period prior to 20th December, 1972, it may be observed that it was vehemently urged by Mr. Aziz Munshi, learned Deputy Attorney General that the above post-Constitution (President's Order 5 of 1972) is an instrument of the nature of supra-constitutional and, therefore, anything repugnant/contained in the Interim Constitution, 1972 would give way to the provisions of the above order. He has further pointed out that clause (2) of the above President's order begins with the words "notwithstanding any-- thing contained in the Constitution". It has been further contended by him that the effect of clause (2) of the above President's Order is that the provision of sub-Article (3) of Article 94 of the Interim Constitution to the effect that an Ordinance shall cease to operate on the expiration of six weeks from the re-assembly was no longer applicable to the Finance Ordinance (XXI of 1972). On the other hand it was contended by Mr. Ali Athar that in fact Article 297 of the Interim Constitution contemplates amendments in the Constitution and since no amendment was made in the Constitution by the President's Order (5 of 1972) it could not have by implication under sub-Article (3) of Article 94 of the Interim Constitution.
(b) Messrs Aziz Munshi and H. A. Pirzada have referred to the cases of Kamakahya Narain v.
Commissioner of Incometax, Bihar (AIR 1947 FC 48), Naztr Mohammad v. A. Briganza (PLD 1957 Kar. 907), Abdul Aziz alias Labha v. The District Magistrate, Lahore (PLD 958 Lah. 104), Income-tax Officer (Investigation) Circle 1, Dacca and another v. Sulaiman Bhai Jiwa (PLD 1970 SC 80), Province of East Pakistan and another v. Shamsui Hay and others (PLD 1966 SC 858), Federation of Pakistan through the Secretary, Establishment Division, Govern--ment of Pakistan, Rawalpindi and others v. Saeed Ahmed Khan (PLD 1974 SC 151), The Commissioner of Sales-tax (West), Karachi v. Messrs Kruddsons Ltd. (PLD 1974 SC 180), Com--missioner of Sales Tax Karachi v.
Neonsfgns (Pakistan) Limited (1974 PTD 164), Shaikh Kardmat Ali v. State (PLD 1976 SC 476), Mohammad Din and others v. State (PLD 1977 SC 52), Mst. Saeeda Begum and others v.
Government of Pakistan and another (PLD 1977 Kar. 226 On the other hand Mr. Ali Athar and Mr. Nasim Ahmad .Have referred to the case of Motilal Padmpat Sugar Mills Ltd. v. State of Utter Pradesh and others ((1981) 44 Taxation 105 (SC India
(i) With reference to AIR 1947 FC 48, it may be observed that the facts of the above case were that the assessee, who was a resident of Chotanako Division of Bihar, a partially excluded area was assessed by the Income-tax Officer an the date when the Finance Act, 1939 was not extended to the aforesaid area. During the pendency of the appeal before the Income--tax Tribunal, the law was amended and according to the amended law the above assessment was validated. The appellate tribunal as well as the High Court upon reference decided the case in accordance with law obtaining at the time of the above decision. The matter went before the Federal Court of India.
It was urged before it that the order passed by the Income-tax Officer should be judged on the basis of the law obtaining on the date of passing of the above order. He, however, it was held by the Federal Court that the amending law i.e. Regulations Nos. 1 of 1941 and 4 of 1942 were valid in view of the legislative power of the Governor under section 92 of the Constitution Act and that when Regulation No. 4 of 1942 was made the assessment proceedings had not come to an end as the appellant had kept the proceedings alive by filing appeals. It was further held that the Appellate Tribunal as well as the High Court decided the case correctly in accordance with the law obtaining at the time of passing of the above order.
(ii) Referring to PLD 1959 Kar. 907, it will suffice to observe that a D. B. Of the erstwhile High Court of West Pakistan, Karachi Bench, while construing the provisions of Passport Act, 1920 observed that it is an elemen--tary principle of construction that the intention of the Legislature is to be gathered from the language used and import of the language used must be given full effect to unless there is something in the context to the contrary.
(iii) As regards PLD 1958 Lah. 104, it may be stated that a Full Bench of the erstwhile High Court of West Pakistan, Lahore Bench while constru--ing section 3 of the West Punjab Public Safety Act (XVIII of 1949) observed that "Courts normally lean in favour of constitutionality of statutes and if two interpretations of constitutional provisions are possible, one which would invalidate a statute while the other would support its validity, the second inter--pretation should be preferred."
(iv) Reverting to P I, D 1970 SC 80, it may be stated that the Supreme Court while interpreting section 34 (2-D) read with Finance Act, 1964 pointed out that the use by the Legislature of words such as "shall" or "hereinafter" is taken to indicate an intent that the statute is to be construed as prospective. But the use of the word denoting past time such as "has been" or "hereto--fore" constitute an explicit declaration that the act is to be construed retrospectively. It was held that the use of words "has been" in subsection (2-D) of the Income-tax Act was indicative of the fact that the amendment was retrospective in effect.
(v) With reference to PLD 1966 SC 858, it may be observed that the Supreme Court while construing the provisions of the Basic Democracies Order (18 of 1959) held that the above Order was of "supra-constitutional" nature and that section 57 of the Electoral College Act, 1964 read with Article 158 (4) of the Constitution of Pakistan, 1962 was not ultra vires the National Assembly. It may be advantageous to reproduce hereinbelow two passages from the above judgment "Pages 910.11. Speaking generally, the view I have formed of the intention underlying Articles 131 to 134 of the Constitution is that the validity of laws made by the various Legislatures is not to be tested by reference to power derived from these provisions, as a theoretical proposition. - A law made in proper form is to be accepted as a fact, and is to prevail, unless its operation is frustrated, by reference to one or more of the accepted rules by which conflicts of laws, under a Federal Constitution, are to be resolved. There is, for instance, the rule of "pith and substance", which is applicable to the protection of an exclusive legislative power. Recourse could be had to this rule if a Provincial Legislature were to legislate substantively and directly on a subject reserved to the Centre by the Third Schedule, for the Centre's power is declared to be, in that field "exclusive". In such a case, there would be no occasion for application of the rule of the "occupied field". But where the Centre has legislated on a subject outside the Third Schedule, a Provincial law on the same matter would risk invalidation for repugnancy, not only through being in an "occupied field, but also by reason (1) of the superiority conferred on Central legislation by Article 134, and (2) that no exclusive powers are reserved to the Provinces. A third rule is that which validates a law of a Legislature making incidental and necessary encroachments on the exclusive powers of another Legislature. I conceive that a law of a Province making such incidental and necessary encroachments into the exclusive legislative fields of the Centre could claim the benefit of this rule, unless the field were already occupied by a Central law. There are other rules of construction applicable to such conflicts between laws made by Legislatures with desparate and unequal jurisdictions, besides those mentioned above, which may also be called in aid. What I have bad to stay to be understood to be said in support of my view that, within the meaning of the Constitution, the validity of any law pro--perly made by a Legislature is not to be judged wholly by reference to the source of power to make that law, as indicated in the Constitu--tion, but for the most part, by reference to other existing laws, and by application of well-accepted rules by which conflicts between laws are to, be resolved in a Federal Constitution."
"Page 954.4 I am thus of the view that the High Court has not acted upon correct principles in declaring section 57 to be ultra vires the Constitution. Before striking down a law which forms the basis of the structure of local self-Government in the country, I say so with respect, a greater amount of caution and care was necessary, for it was bound to result, of necessity, in completely, upsetting the system of local self-Government prevailing in the Province. One of the cardinal principles of interpretation is that a law should be interpreted in such a manner that it should rather be saved than destroyed. The Courts should lean in favour of upholding the constitutionality of a legisla--tion and it is, therefore, incumbent upon Courts to be extremely reluctant to strike down laws as unconstitutional. This power should be exercised only when absolutely necessary, for injudicious exercise of this power might well result in grave and serious consequences as had actually happen in this case."
(vi) Referring to PLD 1974 SC 1$1, it may be stated that the above case is very relevant to the facts of the instant cases inasmuch as inter alia in the above case the Supreme Court was considering the scope of section 279 of the Interim Constitution of Pakistan, 1972, which has been pressed into service by the learned counsel for the respondents. It will be constructive to quote hereinbelow the passage containing the discussion on the scope of the above Article "Before we proceed to interpret the provisions of Article 281 of the Interim Constitution as amended by President's Order No. 3 of 1973 we must deal with a preliminary objection raised to the validity of the amendment itself. It is contended on behalf of the respondents that these amendments are ultra vires the power of the President under Article 279 of the Interim Constitution. Clauses (1) and (2) of Article 279 read as follows :-
279. Transitional powers of the President.-(1) The President shall, by Order, make such provisions as appear to him to be necessary or expedient-
(a) for bringing the provisions of this Constitution into effective operation ;
(b) for removing difficulties arising in connection with the enforcement of this Constitution ; .
(c) for making omissions from, additions to, modifications of and amendments in this Constitution.
(2) No Order shall be made under this Article after the thirty-first day of March, 1973." '
It will be observed that sub-clause (c) of clause (1) gives to the Presi--dent for a short period of less - than one year powers, of even making amendments in the Constitution but, it is contended that tis power is only ancillary -to the powers given by sub-clauses (a) and (b) thereof. These pro- -visions have been modelled on the lines of some of the relevant provisions of section 9 of the Indian Independence Act, 1947. Clause (c) of the said section 9 (I) also gave a similar power to the Governor-General to make, inter alia, modifications in the Government of India Act, 1935 but no Court has held that this power was controlled by the other clauses of the said section. The decisions cited by the learned counsel himself take the view that the powers of the Governor- General were co-equal to those of the British Parliament itself in that behalf (vide Moulvi Tamizuddin Khan v. Pakistan. This Court also held in the case of Dawarkadas v. The State that the Governor-General had. In exercise of his power to make additions validly incorporated section 92- A in the Government of India Act, 1935: This contention, therefore, cannot be accepted. The power given by sub--clause-(c) of clause (I) of Article 279 of the Interim Constitution was in no way controlled by the other clauses. The amendment was competently made.
The further contention that in any event no amendment under Article 279 of the Interim Constitution would be intra vires if it had the effect of repealing the Constitution or destroying it does not fall to be considered in this case, because, the amendment under challenge has by no means done that. The amendment, as already pointed out, merely added some words to the existing Article 281 of the Interim Constitution by way of clarification which may well come within sub-clause (b) of clause (1) of Article 279. '
Let us now examine as to what exactly has been done by President's Order No. 3 of 1973 and Article 269 of the permanent Constitution. The President's Order No. 3 of 1973 has merely added in the last but one line of clause (2) of Article 281 of the Interim Constitution after the words "shall be deemed" the words "notwithstanding any judgment of any Court" and then in the last line after the words "taken or done" added "and shall not be called in question in any Court" and provided that the above-mentioned two additions "shall be deemed always to have been so inserted". It will be noticed that no change has been made in the earlier provisions of this clause at all.
What then is the result? Does the clause,. As now amended, mean anything more than this that the ouster of jurisdiction will operate with regard to those acts which under the earlier provisions shall be deemed, notwithstanding any judgment of any Court, to be and always to have been validly made"? If so, then obviously the ouster will not apply to any act, order, proceeding or thing done which is not to be so deemed to have been validly made. The question, therefore;' still remains as to what is to be deemed under these provisions of clause (2) to have been validly done, taken or made. The words "notwithstanding any judgment of any Court" were, it appears, introduced to take away the effect of the decision of this Court in the case of Miss Asma Jilani under which these acts would have been invalid. This does not affect the decision in Zia-ur-Rehman's case, because, there, the interpretation of these very, words came up for consideration, and it was held that the validity sought to be conferred by these words did not extend to acts done, orders made or proceedings taken without jurisdiction, coram non judice or mala fide, because, such acts, orders or proceedings could neither be done. In the exercise of powers derived from President's Orders, Martial Law Regulations, Martial Law Orders, Enact--ments, Notifications, Rules, Orders or Bye-Laws, or even in the purported exercise of those powers."
It may be observed that the above-quoted passage is from the judgment of the majority view comprising of Hamoodur Rehman, C. J., Muhammad Yakoob Ali and Waheeduddin Ahmed, JJ.
Whereas the dissenting judgment was given by Salahuddin Ahmed, J. The view found favour with the minority was that Article 279 relates to transitional power of the President and must be construed strictly with reference to the matters directly connected with the transition.
(vii) With reference to PLD 1974 SC 180, it may be stated that the facts of the above case were that a manufacturer of metal utensils had collected certain amount from his customers on account of the sales tax on the sales of his manufactured items. He also under mistake paid sales tax to the department, but later on discovering that the articles manu--factured by him were exempt from the sales tax claimed refund of the amount from the Department. The Department refused to refund on the ground that having collected the amount from the customers, he could not be permitted to retain the same and to enrich himself unjustly. Ultimately the matter was taken up to the High Court in reference under section 17(1) of the. Sales Tax Act, 1951. The High Court answered the reference in favour of manufacturer, whereupon the Department filed a certificated appeal before the Supreme Court. Pending appeal section 30-A was inserted in the Sales Tax Act, 1961 by the Finance Act, 1967 and the same was further amended by Finance Act, 1968. The effect of the above amendments was that under section 30 A the amount collected from customers of articles exempt from the levy of the sales tax was to be refunded to the Government. The question inter alia for consideration before the S. C. Was the effect of the above amendment during the pendency of the appeal before the Supreme Court. It may be pertinent to reproduce hereinbelow the discussion contained o n the above aspect in the above judgment of the Supreme Court ; "By `section 8(12), Finance Act, 1967-Act (XII of 1967) section 33-A was inserted to the Act which by a further amendment by section 8(8) of the Finance Act of 1968 was given retrospective operation.
For the material purpose the section as amended reads; "30-A. Collection of excess tax, etc.-(1) Every person who has collected at any time before the commencement of this section or collects at any time thereafter any amount byway of tax, whether for misapprehension of the provisions of this Act or otherwise, which is not payable as tax or which is in excess of the tax shall pay the amount so collected to the Central Government within such time and in such manner as may be prescribed, and in default of such payment shall also pay an additional amount calculated at the rate of fifty rupees for every day after the date before which he is required to pay the amount so calculated.
(2) . , ---------------------------------------.
The result therefore, is that if any licensed manufacturer or wholesale dealer has collected any amount from his customer on the pretence of collecting it as sales tax, he is bound to pay the amount to the Federal Government, although in law no tax was chargeable from the customer. The languageof the section is clear and needs no elaboration. The only question that needs to be considered is whether the amendments affect this appeal also.
Basing himself on the wording of the above provisions, learned counsel for the department urged that the Legislature in its wisdom having given the amending statute retrospective operation, it will govern the instant appeal also. In support of his .Argument, learned counsel referred to monograph 284 at page 580 of the "Statutory Construction" by Crawford, 1940 Edition which reads; "While pending litigation may be exempted from the operation of curative .Statutes, m many instances it is not. But, in either case, however, a number of problems arise. Moreover, there is also consider--able confusion in the decisions pertaining to their solutions. For instance where pending litigation is not exempt, some Courts have held that the curative act will apply even after the case has been appealed, and others that it will not apply to any case wherein judgment has been rendered in the lower Court. Perhaps the best rule is that. a final judgment cannot be affected. Or stated conversely, until, the judgment is final, it is subject to the power of the Legislature to enact curative legislation."
(viii) As regards 1974 PTD 162, it may be mentioned that in the above case a subsection to section 28 of the Sales Tax Act, 1951 was added to section 28 to take effect from 31-3-1955. The object of the above amendment was to save the assessments in cases which had been made beyond the limitation period originally fixed by the Act and to enable the department to make assessments in cases which had become barred by limitation. On the basis of the amendment the High Court answered the reference in favour of the Income-tax Department and held the above amendment validated the assessm ents made beyond the limitation period.
(ix) Referring to PLD 1976 SC 476, it will suffice to observe that the Supreme Court in the aforesaid case held that Article 281(2) of the Constitution of Pakistan, 1973 gives a blanket protection against the challenge to the validity of the President's Order 14 of 1972, but it does not protect or validate proceedings or action taken without jurisdiction or mala fide or orders of judicial or quasi judicial nature which are coram non judice.
(x) As. Regards PLD 1977 SC 52, it may. Be stated that the Supreme Court while considering the effect of Article 281(2) of the Constitution of Pakistan, 1973 held that orders passed by the Martial Law Authority were fully protected by the above Constitutional provision unless the same were ab initio, without jurisdiction and mala fide.
(xi) Reverting to PLD 1977 Kar. 286, it may be stated that in the above case a D. B. Of this Court was considering the effect of the amendment brought about by Finance Ordinance No. XI of 1972 by the inserting of subsection 4-AA and by substituting section 4-C in section 15-BB of the Income-tax Act.
It was urged by the learned counsel appearing for the assessee that the amendment through subsection (4-AA) was given retrospective effect from the date of the inception of the Act which was not legal. It may be advantageous to reproduce hereinbelow a passage from the above judgment; "Subsection (4-AA) was given retrospective effect from the date of the inception of the Act by the use of the words "deemed always to have been so inserted" while the re-enacted subsection (4-C) was given retrospective effect as from the Ist day of July, 1971. Mr. M. A. Pesh Imam, learned counsel for the petitioners invited our attention to the words "for the peace and good Government of Pakistan" in Article 94 of the Constitution to stress that they did not include the subject of tax and therefore, the Finance Ordinance of 1972 by which subsection (4-AA) and the re-enacted subsection (4-C) were introduced in section 15-BB of the Income-tax Act could not be promulgated as it was ultra vires the powers of the President. The same phrase occurs in sections 72 and 79 of the Government of India Act, 1915. We asked the learned counsel as to what was meant by the phrase "for the peace and good Government of Pakistan" but he was unable to clarify it. The word 'good' prefixed before the word 'Government' is defined in Wharton's law Lexicon, Fourteenth Edition, as "the technical term applied to pleading to express, soundness or validity" while the word 'Government' denotes "that form of fundamental Tules and principles by which a nation or a State is governed". The Judicial Committee in the case of Raja Jogendra Narayan Deb and another AIR 1942 P C 44 held that this expres--sion has reference to the scope and not the merits of legislation. In Abdul Rahman v. Abdul Rahman 85 1 C 51 a Full Bench of the Allahabad High Court held that the scope of expression is very wide and therefore the Legislature has been given.
The general power to make laws for the peace and good Government of the territories for the time being constituting the province. The very absence of the subjects on which the Legislature can legislate in the Government of India Act, 1915 provides an instance of an embarassing scope subject however to the limits imposed in the sections themselves. Therefore this power must include the power to exact tax as without money no good Government can function. The subject of tax therefore must be included within the scope of the phrase. The only limitation that is placed on the power of the President to promulgate Ordinance is that it is subject to the like restrictions as the powers of the Federal Legislature to make laws and the Ordinance so promulgated may be controlled or superseded by any such act. In other words the President can promulgate an Ordinance on any subject in regard to which the Federal Legislature can legislate which impliedly defines the scope of the Legislation by the use of the phrase "peace and good Government" Again Article 89 of the Constitution authorises the levy of tax under the authority of an Act of the Federal Legislature. -Sub-clause (2) of Article 290 of the Interim Constitution, lays down that any reference to Federal Act shall be construed as including the reference to the Ordinance made by the President. Hence Article 89 would also include. The levy of tax by an Ordinance promulgated by the President. As such the power to levy tax stands beyond dispute. Learned counsel also invited our attention to sub-clause (2) of Article 94 as one placing restriction on the powers of the President to promulgate such Ordinance but we see no relevancy of this sub-- clause as to how by it language it purports to put any restriction on the power of the President to levy tax by the Ordinance. The use of the word restriction in clause (2) of Article 94 has reference to the words "like restrictions" in clause (1) of Article 94 which refers to the scope of legislation only in respect of those matters on which the Federal Legislature cannot legislate. The contention has no substance."
(xi) In the above case it was held that the concession which was granted by the notification under section 15-BB of the Income-tax Act could be validly withdrawn by a legislative action such as an Ordinance and that no exception can be taken to the retrospective operation of section 4-AA and subsection (4-C) as it is a settled principle of law that the authority to legislate includes the authority to legislate with retrospective effect.
(xiii) Reverting to (1981) 44 Taxation 105 (Supreme Court of India), it may be observed that in the above case the Supreme Court. Of India, inter alia, has held that the doctrine of Promissory estoppel can be pleaded against the Government after the promissoree acted upon the premises, but no such plea can be raised or invoked to compel the Government to do an act prohibited by law.
10. From the above-cited cases the following principles are deducible :-
(i) That though there is divergence of opinion as to the scope of the operation of curative statutes, but the best rule is that a final judgment cannot be affected by such a statute and that until the judgment is final, it is subject to the power of the legislature to enact curative legislation.
(ii) That an assessm ent order without jurisdiction can be validated during the pendency of an appeal or other proceedings arising therefrom by retrospective legislation.
(iii) That an assessm ent proceeding is not concluded or closed as to make it a past and closed transaction if an appeal or other competent proceedings, remains pending.
(iv) That the Courts normally lean in favour of constitutionality of statutes and if the two interpretations of a constitutional provision are possible, one which validates such provision would be preferred.
(v) That the use by the Legislature of words such as "shall" or "here--inafter" in a statute is taken to indicate an intent that the statute is to be construed prospectively. However, the use of the words such as "has been" or "heretofore" constitutes an explicit declaration that the Act has to be construed retrospective.
(vi) That the Basic Democracies Order (18 of 1959) issued by the then Chief Martial Law Administrator was an order of supra-constitu--tional nature.
(vii) That one of the cardinal principles of interpretation is that a law should be interpreted in such a manner that it should rather be saved than be destroyed and that the courts should lean in favour of up--holding the constitutionality of a legislation and should be reluctant to strike down laws as unconstitutional, unless when absolutely necessary and if not done might well result in grave and serious consequences.
(viii) That the majority view of the Supreme Court of Pakistan in the case, reported in PLD 1974 SC 151 referred to hereinabove, while construing the provisions of Article 279 of the Interim Constitution, 1972 was that the above provisions empowered the President for a short period of less than one year the power to make amendments in the Constitution and that sub-clause (c) of the aforesaid Article 279(1) was not controlled or restricted to the objects mentioned in the preceding clauses (a) and (b) of the above provision (c).
(ix) That a Article 279 of the Interim Constitution, 1972 was akin to the relevant provision of section 9 of the Indian Independence Act, 1947, of which clause (c) empowered the Governor-General to make modifications in the Government of India Act, 1935.
(x) That the retrospective amendment made through President Order No. 3 of 1973 in clause (2) of Article 281 of the Interim Constitution, 1972 was intra vires the power contained in Article 279 of the above Interim Constitution.
(xi) An amendment in the Sales Tax Act, 1951 validating the recovery of Sales Tax on sales though not leviable when recovery was made is intra vires the legislative power of the Federal Legislature.
(xii), That the assessm ent made beyond the limitation period originally fixed under the . Sales Tax Act, 1951, can be validated by retrospective legislation during the pendency of proceedings arising from such agssessm ent order.
(xiii) That Article 281(2) of the Constitution of Pakistan, 1973, gave a blanket protection against challenge to the validity of the President Order 14 of 1972, but it did not protect or validate the proceedings or action taken without jurisdiction or mala fide or which were coram non judice.
(xiv) That Article 281(2) of the Constitution of Pakistan, 1973, protected the orders passed by the Martial Law Authorities. Except those which were ab initio without jurisdiction or mala fide.
(xv) That the retrospective enactment of subsection (4-AA) of sec--tion 15-BB of the Income-tax Act, from the date of the inception of the Act through the Finance Ordinance XXI of 1972 disentitling the recipients of the dividends to claim exemption from the levy of the income-tax on such dividends declared by the companies covered under section 15-BB of the Income-tax Act was intra vires the power of the Legislature.
(xvi) That the concession, which vas granted by the notification under section 15-BB of the Income- tax Act could be validly withdrawn by a legislative action such as an Ordinance and that no exception can be taken to retrospective operation of subsection 4(AA) and/or subsection 4-C of section 15-BB of the Income-tax Act.
(xvii) The Indian Supreme Court in the case reported in 1981 (44 Taxa--tion 105) was of the view that the doctrine of promissory estoppel can be pleaded against the Government if the promissory acted upon the promise.
11. From the principles deduced from the case-law discussed herein above, it is evident that the Legislature has the power to enact curative legislation and to validate orders/actions, which were not valid or were without jurisdic--tion when passed or taken in cases when some proceeding arising from such order or action remains pending. In the instant case the Finance Ordinance No. XXI of 1972 was enacted during the pendency of the .Above references/ cases containing inter alia enactment of subsection (4-AA) to section 15-BB of the Income-tax Act disentitling the recipients of the dividends from the Com--panies covered under section 15-BB of the Income-tax Act from the incometax exemption. The above provision was enacted with retrospective effect, i. e. Reverting back to the date when section 15-BB was enacted by Ordinance No. XV of 1959 (with effect from 1- 4-1959). The above enactment including sub--section 4-AA was a valid piece of legislation. If subsection 4-AA would have held the field with retrospective effect as was, originally enacted the assessm ent orders of the Income-tax Officers which are the subject-matters of the above references/cases, including the dividends received by the assessee from the Companies covered under section 15-BB would have been validated, even if such dividends could not have been included as a part of the income at the time of making of the assessment orders by virtue of the exemption granted under section 15-BB. It may be pertinent to point out herein that a Division Bench of this Court in the case reported in PLD 1977 Kar. 286=(1970) 35 Taxation 180, has held that the insertion of subsection (4-AA) and sub--stitution of section 4-C in section 15-BB of the Income- tax Act with retrospec--tive effect was intra vires the power of the Legislature. But the constitutional grounds urged before us were not canvassed in that case. If the Finance Ordinance No. XXI of 1972 would have been converted into an Act by the National Assembly, when it was placed before it nothing could have been argued against the above Ordinance nor it could have been urged that this Court should not take into consideration the above insertion of subsec--tion (4-AA) to section 15-BB with retrospective effect during the pendency of the above references/cases. As observed hereinabove that there cannot be any cavil to the proposition that an original invalid or an order/action without jurisdiction can be validated by the Legislature while some proceeding arising therefrom remains pending and that the transaction does not become past and closed.
It was urged by Mr. Naseem Abmad, Advocate that after the passing of the orders by the learned Income-tax Appellate Tribunal, the proceedings stood concluded and, therefore, retrospective amendment could not have affected the past and closed transactions. On the other hand, it was fairly conceded by Mr. Ali Athar, Advocate that an order of the Income-tax Appellate Tribunal is subject to the order passed by the High Court in a reference and, therefore, while the above references/cases were pending the assessment proceedings had not been finally concluded and hence the Legislature could bring about an amendment with retrospective effect in, order to validate the original assessm ent orders of the Income-tax Officers. The above contention of Mr. Naseem Ahmad seems to be devoid of any force, whereas the above concession made by Mr. Ali Athar, Advocate seems to in consonance with section 66 of the Income-tax Act, which enjoins the income-tax Appellate Tribunal to make modifications in its order in terms of the references answered by the High Court.
12. The main contentions of Mr. Ali Athar as noted hereinabove in para. 5(c)(ii), (iii) and (iv) are that the Finance Ordinance No. XXI of 1972 had lapsed on the expiry of six weeks from the date of re- assembly by virtue of Article 94 of the Interim Constitution, 1972, that the Post-Constitution (President Order 5) of 1972 issued under Article 279 of the Interim Constitu--tion of Pakistan purporting to extend period of Finance Ordinance No. XXI of 1972 is beyond the ambit of the above Article, and that in any case no amendment could have been made in the Constitution or in an enactment under the above Article retrospectively to a date earlier than 20th day of December, 1971 as provided by sub-clause (4) of above Article 279 itself. There is no doubt that on the expiry of 6 weeks from the date of the re-assembly of the National Assembly in the absence of the approval by it, the Finance Ordinance No. XXI of 1972 would have lapsed and that was the reason that before the expiry of the above period of 6 weeks, the Post-Constitution. (President's Order 5) of 1972 in question issued on 26th September, 1972 in order to save/extend inter alia the Finance Ordinance No. XXI of 1972.
13. It was vehemently urged by Mr. Ali Athar that the Post-Constitution (President's Order 5) of 1972 does not ' in. Fact amend any provision of the Constitution and, therefore, it is beyond the ambit of Article 279 of the Interim Constitution, 1972. To re-enforce the above argument, he has invited our attention to some of the Post-Constitutions President Orders, whereby the amendments were made in the Constitutional provisions expressly and the caption of the Orders themselves indicate that, the amendments were made in the Constitution. In this regard reference has been made to Post-P. O. 1 of 1972, Constitutional Amendment Order, 1972 (PLD 1972 Central Statutes 631), Post- Constitution President's Order 6 of 1972, Constitution Second Amendment Order, 1972 (PLD 1963 Central Statutes 59), Post-Constitution President's Order 7 of 1972, Constitution Third Amendment Order, 1972 (PLD 1973 Central Statutes 136). On the other hand, it was vehemently urged by Messrs Aziz Munshi and Haider Ali Pirzada that Article 2 of the Post-- Constitution (President's Order 5) of 1972 clearly provided that notwithstanding anything contained in the Constitution, the Finance (Supplementary) Ordinance, 1972 (XVII of 1972) and the Finance Ordinance (XXI of 1972) shall continue in force until it was altered, repealed or amended by an Ordinance made by the President or by an Act of the Federal Legislature and, therefore, it was in fact an amendment in the Constitution in Article 94 which provided the lapse of an Ordinance on the expirty of six weeks from the re-assembly of the National Assembly though there was no express reference to the amendments of the above Article or any other Article of the Constitution in the aforesaid President's order.
The scope of the power of the President under Article 279 of the Interim Constitution was considered by our Supreme Court in the case of the Federation of Pakistan through the Secretary, Establishment Division, Government of Pakistan, Rawalpindi v. Saeed Ahmad Khan PLD 1974 SC 151,referred to hereinabove in para. 9(b)(vi) and the view found favour with the majority was that sub--clause. (c) of Article 2790) was not controlled or restricted with the objects mentioned in the preceding sub-clauses (a) and (b) of Article 279 (1) and, therefore, the President by .An order could make any omission, addition to, modifications of and amendments in the Constitution in respect of an object other than covered by sub-clauses (a) and (b) of the above Article. It may again be pointed out that President's Order No. 5 of 1972 does not make any express reference to amend any specific provision of the Constitution, but purported to keep in force inter alia the Finance Ordinance No. XXI of 1972 till the time it was altered/repealed by the President or by the National Legislature. Even if we were to hold that the above President's Order 5 of 1972 is a Supra- Constitutional Legislation, the fact remains that sub- Article (4) of Article 279 provides that any order made under the above Article may be made so as to be retrospective not earlier than 20th day of December, 1971. In other words even amendment in Article 94 or any other provision of the Constitution could not have been made retrospectively to date prior to 20th December, 1971. The effect of the President's Order No. 5 of 1972 is to keep in force inter alia the Finance Ordinance No. XXI of 1972, which infer alia contained provisions having retrospective effect reverting back to 1959.
In our view the President through the above President's Order 5 of 1972 in pith and substance purported to re-enact the Finance Ordinance No. XXI of 1972 instead of getting it converted into an Act by the National Assembly (which was in a session since 15-8-1972 though) the same was placed before the National Assembly according to the record on 16-8-1972, as per para. IV of the National Assembly Secretariat's memo. No. F. 24(1) 80--Legis.. Dated 7-1-1980 (annexure B to the affidavit of evidence, dated 10-3-1980 of Mr. Kamal Ahmad Nomani, the Income-tax Officer), filed in I. T. C. 104 of 1972. Even if we were to hold that under Article 279 the President could re-enact the Finance Ordinance, 1972 by keeping it in force, his power was subject to the proviso contained in sub-Article (4) of Article 279, namely, that no amendment could have been made retrospectively to any date earlier than 20th December, 1972. In this view of the matter the provisions which were enacted in the Finance Ordinance No. XXI of 1972 with retrospective effect could not have retrospective effect from a date prior to 20th December, 1971 on the expiry of 6 weeks from the date of the re-assembly of the National Assembly and upon the issuance of President's Order No. Of 1972.
13. In our view, it is not necessary for us to hold that the Finance Ordinance XXI of 1972 as a whole is ultra vires the power of the President contained in Article 279 of the Interim Constitution, 1972 as for the purpose of disposal of the above references/cases, it will suffice to hold that by virtue of the President's Order 5 of 1972, purporting to keep alive or to re-enact the above Ordinance. Subsection (4-AA) inserted in section 15-BB of the Income--tax could not have been given retrospective effect from a date prior to 20-12-1971.
14. In view of the above discussions our answer to the question framed in the references is that the assessm ent orders relating to a period prior t 20th December, 1971 including the dividends received by the assessee from the Companies covered under section 15-BB as a part of the income wet not validated by the Finance Ordinance No. XXI of 1972 during the pendency of the present references/cases and on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that the dividends received by the assessee on the shares of the Companies enjoying the benefit of section 15-BB of the Income-tax Act are exempt from tax and not liable to be included in the total income of the share-holders.