WIQAR AHMAD, J. Through this judgment, we intend to dispose of W.P. No. 890-M/2019, W.P. No. 705-M/2019, W.P. No. 865-M/2019, W.P. No. 888-M/2019, W.P. No. 892-M/2019, W.P. No. 954- M/2019, W.P. No. 959-M/2019, W.P. No. 1102-M/2019, W.P. No. 1116-M12019, W.P. No. 1122-M/2019 and W.P. No. 287-M/2020. Petitioners in all the respective petitions have been employe es of the provincial government of Khyber Pakhtunkhwa posted, serving and receiving their salaries in the former Provincially Administered Tribal Areas (hereinafter referred to as "Ex-P ATA"). The area forming part of Ex-P ATA was merged in the province of Khyber Pakhtunkhwa by promulgation of the Constitution (Twenty-fifth Amendment) Act, 2018 (hereinafter referred to as "Twenty -fifth Amendment"). All the petitioners have a common grievance arising out of deduction of income tax from the salaries which they have been receiving from the provincial government. On merger of area of Ex- PATA Federal Government had provided tax relief to the inhabitants of the area vide SRO No. 1213 (1)/2018 issued by the Federal Board of Revenue Government of Pakistan on 5 October , 2018 (hereinafter referred to as "SRO No. 1213"). Petitioners have been claiming that they being residents of the area of Ex-P ATA would also be entitled to the benefit of tax relief as granted by Federal Government vide SRO No. 1213.
2. Respondents on the other hand have contended in their comments that employees of Federal or Provincial governments have not been granted any exemption from payment of income tax deductible from their salaries and therefore they were not entitled to any tax exemption under SRO No. 1213.
3. Learned counsel appearing on behalf of petitioners submitted during the course of their arguments that petitioners, being domiciled as well as serving in Ex-P ATA, would be entitled to tax exemptions under SRO No.th 1213, like rest of people of the area and deduction of income tax from their salaries would amount to depriving them of a vested right. In support of their assertions, the learned counsel placed reliance on the judgment of this Court in the case of "Messrs Taj Packages Company (Pvt.) LTD. through Manager v/s The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others" reported as 2016 PTD 203 .
4. Counsel for respondents submitted in rebuttal that petitioners have been employees of the provincial government and the source of their salaries has mainly been provincial consolidated fund. He further added that they were liable to serve anywhere in the province and that because of the fact of their posting in this specified area they could not claim exemptions from payment of income tax deductible from their salaries.
5. We have heard arguments of learned counsel for petitioners in all these connected petitions, learned Deputy Attorney General appearing on behalf of the Federation and perused the record.
6. Perusal of record reveals that petitioners have been receiving their salaries from the provincial budget. Thus their source of funding has been the provincial consolidated fund (either directly or indirectly). As civil servants of the province they were bound to serve anywhere in the province but presently they have been posted in different areas forming part of Ex-P ATA. Article 240 of the Constitution of Islamic Republic of Pakistan, 1973 (hereinafter to as "the Constitution") provided for appointments to service of Pakistan. Service of Pakistan had also included service of the province according to Article 260 of the Constitution. Clause (b) of Article 240 of the Constitution required that appointments to and conditions of service of person in the service of Pakistan should be regulated in case of the services of a province and posts in connection with the affairs of a province, by or under Act of the provincial assembly . The province of Khyber Pakhtunkhwa has accordingly passed the Khyber Pakhtunkhwa Civil Servants Act, 1973 (hereinafter referred to as "the Act") Sub-section (2) of section 1 of the Act provides that it applies to all the civil servants wherever they may be. Similarly section 10 of the Act provides that every civil servant shall be liable to serve anywhere within or outside the province, in any post under the Federal Government, or any Provincial Government or Local authority , or a corporation or body set up or establ ished by any such Government.
Merely on the basis of posting of a civil servant in this specified part, he cannot claim exemption from payment of income tax unless such an exemption is granted to him under section 53 of the Income Tax Ordinance 2001 (hereinafter referred to as "the Ordinance"). It is an admitted legal position that no specific exemption has been provided to employees of the provincial government serving in Ex-PATA from payment of income tax, in the Second Schedule maintained under section 53 of the Act.
7. Cases of the petitioners have mainly been based upon the tax exemptions provided vide SRO No. 1213. Said SRO being relevant is reproduced hereunder for ready reference; Government of Pakistan Revenue Division Federal Board of Revenue Islamabad, the 5th October, 2018 NOTIFICATION (Income Tax)
S.R.O.1213(1)/2018.- WHEREAS prior to the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018), the Income Tax Ordinance, 2001 (XLIX of 2001) was not in force in the Tribal Areas as defined in Article 246 of the Constitution of the Islamic Republic of Pakistan, hereinafter called as the Constitution, and the levy of income tax was not attracted to the said Tribal Areas; AND WHEREAS Article 247 of the Constitution stood omitted on commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) with effect from 31st day of May, 2018 and the Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) stood merged in the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution; AND WHEREAS on commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018), the Income Tax Ordinance, 2001 (XLIX of 2001) is in force in the said Provinces including the erstwhile Tribal Areas forming part thereof; AND WHEREAS a phased approach was needed for the full application of fiscal laws to the said erstwhile Tribal Areas, a decision was made to exempt all persons from levy of income tax which was not applicable to the said areas by virtue of said Article 247 and accordingly Notification No. S. R.0 887(1)/2018, dated the 23rd July, 2018, was issued by the Federal Government granting exemption from income tax as aforesaid; AND WHEREAS concerns were raised by the trading community of the said erstwhile Tribal Areas to the effect that the aforesaid Notification did not restore the position as existed prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018); NOW THEREFORE in order to address the concerns so raised and to restore the position in relation to levy of income tax to the said erstwhile Tribal Areas, and in exercise of the powers conferred by sub- section (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the said Ordinance, namely:-- In the aforesaid Schedule-
(a) In Part I,- i. clauses (144) and (145) shall be omitted; and ii. after clause (145), omitted as aforesaid, the following new clause shall be added, namely:-- "(146) Any income which was not chargeable to tax prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Baluchistan under paragraph (d) of Article 246 of the Constitution with effect from the 1" day of June, 2018 to the 30th day of June, 2023 (both days inclusive); and
(b) In Part IV,- i. clause (106) shall be omitted; ii. after clause (109), the following new clause shall be added, namely;-- "(110) The provisions of sections in Division III of Part V of Chapter X and Chapter XII of the Ordinance for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) shall not apply to individual domiciled or company and association of person resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Baluchistan under paragraph (d) of Article 246 of the Constitution with effect from the 1" day of June, 2018 to the 30th day of June, 2023 (both days inclusive).
Vide the operative part of SRO clause 146 has been added to Part-1st of the Second Schedule and clause 110 has been added to Part-IV of the Second Schedule of the Ordinance. Both these new insertions do not provide any specific exemption from payment of income tax on the salaries paid to a provincial government employee.
The petitioners have however been trying to construe wordings of clause 146 of Part-1s of the Second Schedule in their favour. This clause no doubt mentions that any income which was not chargeable to tax prior to the commencement of the Twenty-fifth Amendment, of any individual domiciled or company and association of persons resident of Ex-PATA shall be exempt from payment of income tax with effect from 1 day of June 2018 to the 30 day of June 2023, but it is important to be noted here that incomes of those persons, which had not been chargeable to tax prior to Twenty-fifth Amendment, had been given exemptions. The litmus test provided for checking whether a person shall get benefit of such exemption under clause 146 of Part-1s of Second Schedule, would be that whether his income had earlier been chargeable to tax prior to Twenty-fifth Amendment or not. After lying down the test, cases of the petitioners can easily be discerned on the touchstone. Incomes of the petitioners have not been exempt from payment of income tax prior to Twenty-fifth Amendment. Similarly benefit of clause 110 of Part-IV of the Second Schedule would not be available to the petitioners, as well. Clause 110 also providest st th t immunity from operation of provisions of the Ordinance mentioned therein, only in those cases where such provisions had not been applicable prior to promulgation of the Twenty-fifth Amendment.
8. We find a clear description of the state of law, existing on the subject, in an earlier judgment of this Court given in the case of "Employees Action Committee v/s Government of Pakistan & others" reported as 2006 PLC (C.S.) 1311. In said case a number of employees had raised a similar objection to deductions of income tax from their respective salaries, on the ground that Income Tax Ordinance had not been applicable in the area as it had not been extended under sub-article (3) of Article 247 (repealed) of the Constitution. This Court had not agreed with contention of the petitioners raised in those petitions and had dismissed their plea by observing; "For what has been discussed above, all the Government servants whether serving in the Federal or Provincial Government or under the local authorities which are funded by the government exchequer are liable to pay income tax within the meaning of section 12 on account of income derived through salaries, therefore, the assessment order/notices issued by the Income Tax Inspector/Officer of the Circle concerned for charging and levying income tax on their salaries is held to be lawful and valid. Resultantly this petition is dismissed but for different reasons as discussed above along with the C.M. while C.R.
593/98, C.R. 387/2001, C.Rs. 485 to 489 of 2000 are allowed and the impugned judgments of the two Courts below decreeing suit of the respondents are set aside with no order as to costs."
Said judgment of this Court was also main tained by Hon'ble Supreme Court of Pakistan by dismissing civil appeals No. 1573 & 1574 of 2006 as well as civil petition No. 653-P of 2006, vide its order dated 07.10.2009, where in the Honble Apex Court had also recorded the following observations; "A bare reading of the section would indicate that the term salary would include which would be chargeable under the head salary and shall be deemed to accrue or arise in Pakistan. The salary aforesaid shall be chargeable if accrued in Pakistan and any salary which is paid by government or local authority in Pakistan remains chargeable provided such person is in the service of such government. As the territory of PATA fall within Pakistan, any civil servant would be liable to pay income tax as and when it accrues. The learned Judge in chambers of Peshawar High Court has given as elaborate and correct interpretation of section 12 of the Income Tax Ordinance."
We have not only been borrowing a principal of law enunciated in the abovemen tioned judgments, but we have also been relying thereon to hold with clarity that income of the petitioners have never been exempt from payment of income before promulgation of the Twenty-fifth Amendment. In such a situation, the petitioners would not be able to claim exemption under SRO No. 1213.
9. Learned counsel for petitioners have though been trying to carve out a new case for the petitioners, by stating that they have been residents of Ex-P ATA while the petitioners in earlier cases had not been domiciled here.
Perusal of the above cited judgments as well as another judgment of Hon'ble Baluchistan High Court rendered in the case of "Sanaullah Khan v/s Province of Balochistan " reported as 1995 PTD 360 reveals that whether employees of the Federal or provincial governments had been residents of the special areas of FATA or PATA or rest of the country posted in such specified areas, had never been treated as exempt from payment of income tax.
When incomes of the petitioners had not been exempt from payment of income tax earlier then benefit of newly added clause 146 of Part 1s of the Second Schedule cannot be extended to the petitioners. For said reason benefit of clause 110 of Part-IV of the Second Schedule shall not be available to the petitioners, also. The latter clause 110 also gives immunity from operation of provisions of the Ordinance mentioned therein, in cases of such persons to whom such provisions had not been applicable prior to promulgation of the Twenty-fifth Amendment.
10. The judgment rendered in the case of Messrs Taj Packages Company (Pvt.) LTD. through Manager v/s The Government of Pakistan through Federal Secretary Finance and Revenue Division and 6 others" reported as 2016 PTD 203, relied upon by learned counsel for petitioners had been rendered in the case of exemption sought by private parties thereto, from deduction of advance income tax and sales tax on consignments of raw material plants and machinery for consumption or installation in Ex-FATA or Ex-PATA. Their cases have always been dealt differentially by High Courts as well as by Hon'ble Supreme Court of Pakistan from cases of those salariedt employees who had claimed exemption from payment of income tax. This fact is also evident from earlier judgment of this Court given in the case of "Employees Action Committee" Supra as well as judgment of Hon'ble Apex Court in the case of Dr. Inayat Yar's Supra. It had though been held by this Court while giving its judgments in the case of "Fazal Ghafar & others v/s Govt: of Pakistan & others" (W.P. No. 25-M/2010), in the case of "Hamid Ullah & others v/s Federation of Pakistan & others" (W.P. No. 507-M/2012) and the case of "Dr. Muhammad Riaz Khan & others v/s District Account Officer Swat & others" (W.P. No. 845- M/2017) that salaries of employees working in Ex-PATA would be exempt from payment of income tax, but during hearing of said cases earlier judgment of this Court in the case of "Employees Action Committee v/s Government of Pakistan & others" reported as 2006 PLC (C.S.) 1311 as well as that of Hon'ble Supreme Court of Pakistan in the case of Dr. Inayat Yar Supra had not been brought in notice of this Court. Neither have said judgments been discussed, nor differentiated in the referred judgments, same cannot therefore be relied.
11. In light of what has been discussed above, all these connected writ petitions were found to have been lacking substance and same are accordingly dismissed.