SHAHID KARIM , J. This constitutional petition brings a challenge to the order dated 10.07.2015 passed by the Registrar of Trade Unions, Lahore. This was done on a direction issued by this Court in W.P.No.17085/2015 in which on 22.06.2015 learned Single Judge of this Court directed the Registrar of Trade Unions to decide upon the objections as well as application of the petitioner in accordance with law through a speaking order. These objections relate to the registration of respondent No.2 trade union on 23.02.2015. Subsequently on 15.5.2015, on an application filed by respondent No.2, the union was certified as the collective bargaining agent in terms of Section 24(1) of the Punjab Industrial Relations Act, 2010 (PIRA). Petitioner seems to be aggrieved of the registration of trade union and was compelled to file a petition before this Court on which and direction was issued ad adumbrated.
2. The impugned order was passed by the Registrar by taking into consideration Section 1(3)(h) of the PIRA which states that: "in an establishment or institution providing education or emergency services excluding those run on commercial basis."
3. Thus the institutions providing education are exempt from applicability of PIRA but this excludes institutions which are running on commercial basis. Therefore, the question before the Registrar turned on the true interpretation of the term "commercial basis" which has not been defined in PIRA. The Registrar, however, turned his attention to the effect whether petitioner was earning profit or not. It is pertinent to mention and is admitted on all hands that the petitioner is a non-profit organization and is running and managing Crescent Model Higher Secondary School a charitable educational institution which was established on 18.01.1961. There is no denying the fact that the petitioner is a registered trust and the trust deed has been attached with this petition. The major source of income of the petitioner trust is donations from trustees and others and it is the case of the petitioner that surplus of income and funds over expenditures of the trust funds are solely used for the promotion of purposes and objects specified in the trust deed. No dividend/bonus from surplus funds of the trust can be given to any members of the trust or his relatives. Some of the purposes for which the trust was established have been spelled out in the following clauses of the trust deed:- "1. This trust is being created against an initial bank deposit of Rs.50000/-, for purpose of establishing and maintain a first class high school or school with Kindergarten classes residential or otherwise immediately at Lahore.
12. In case of dissolution of the trust, its assets shall be transferred to any other trust having identical aims and objectives and duly approved by the FBR/the then CBR. Report of such transfer of assets shall be forwarded to the FBR within three months of such transfer.
13. The funds and properties of the trust shall be solely used for the promotion and achievement of aims and objectives of the trust.
14. No portion of income or assets of the trust shall be transferred to any trust in the shape of profit, dividend, bonus etc."
4. It is evident from a reading of the various clauses set out above that the sole purpose of setting up the trust was to establish a first class high school or schools with the help of deposited amount mentioned in para 1 above. In case the amount was found to be insufficient, then further donations were to be made by the trustees. The purpose of establishment of high school was for spreading and dissemination of sound and healthy education based upon pure morality and the principles of Islam. It was further provided by para 13 that the funds and properties of the trust were to be solely used for the promotion and achievement of means and objects of the trust and no portion of the income or assets of the trust are to be transferred to any trust in the shape of profit, dividend, bonus etc. It was further provided that all moneys in excess of Rs.10,000/- which remain unutilized would be kept in Government securities in NIT. There is no rebuttal to the fact that the petitioner was created and established under the provisions of Trust Act, 1872 and carries out its functions in accordance with the provisions of the trust deed. Also there is no allegation that the petitioner trust has extended funds and properties of the trust in contravention of the objects mentioned in the trust deed or that any of the trustees have benefited out of surplus funds or profits accruing to the trust. These facts are being stated in order to lay a foundation for the proposition that the petitioner is not being run on commercial basis.
5. As explicated, the term commercial basis has not been mentioned in PIRA. The question whether the petitioner is indeed being running on commercial basis or not would turn upon the attending circumstances regarding petitioner and the status that has been conferred upon by different laws which are directly relevant to the question of profit and the income derived on that basis so as to return the answer to the primary question regarding commercial activity of the petitioner trust.
6. First and foremost there is no quarrel that the petitioner has been approved as a non-profit organization under Section 2(36) of the Income Tax Ordinance "Ordinance". The consequence would be that this income is subject to 100% tax credit in terms of Section 100C of the Ordinance and no income tax under Section 151 of the Ordinance read with Section 159(1)(c) is deductible in its case. An exemption certificate to this effect has duly been issued by the Commissioner Inland Revenue. Section 2(36) of the Ordinance defines a non-profit organization to mean that: "non-profit organization" means any person other than an individual, which is -
(a) established for religious, educational, charitable, welfare [purpose for general public] or for the promotion of an amateur sport;
(b) formed and registered [by or] under any law as a non-profit organization;
(c) approved by the Commissioner for specified period, on an application made by such person in the prescribed form and manner, accompanied by the prescribed documents and, on requisition, such other documents as may be required by the Commissioner; and none of the assets of such person confers, or may confer, a private benefit to any other person;"
7. It is clear from the definition set out above that a non-profit organization is one which is established for inter alia educational, charitable welfare purposes for general public which doubtless, is the purpose of the petitioner as well. Realizing that the petitioner had been established for educational and charitable purposes, an exemption certificate was validly issued by the Commissioner Inland Revenue. For all intents and purposes, therefore, petitioner is a non- profit organization under the Ordinance, 2001. The exemption certificate further provides that petitioner's income is subject to 100% tax credit in terms of Section 100C of the Ordinance. One of the persons to whom the provision of Section 100C applies is a trust and so the petitioner is covered by that provision. Sub-section (2) of Section 100C provides the category of income which is eligible for tax credit and includes income from donations, voluntarily contributions and subscriptions as also income from investment in the securities of the Federal Government etc. This provision thus pre-supposes that the income of a trust could be invested in the securities of the Federal Government and which income too is subject to tax credit. It is pertinent to mention that by sub- section (2)(f) of Section 100C, the eligibility of tax credit is subject to the condition that none of the assets of trust or welfare institutions confer a private benefit to the donors or family, children or author of the trust or any other person. Further a cumulative reading of sub-section (1A) and (1B) of Section 100C of the Ordinance would show that surplus funds of trust would only be taxed in case funds are not spent on charitable or welfare activities during the tax period. Once again there is no contention that the petitioner trust has not breached this condition and so its surplus funds are not to be taxed under the Ordinance 2001. Lastly, by sub-section 2(d) of Section 100C, incomes eligible for tax credit include income of an educational institution being run by a non-profit organization existing solely for educational purposes.
8. Further and in addition to the above, recently on 21.07.2020, petitioner trust has been issued NPO certificate by an NPO Certification Agency which has been authorized by the Government of Pakistan vide notification No.1116(I)/2003 and as a consequence thereof, petitioner trust is served as per NPO evaluation standards notified by the Federal Board of Revenue. Also in the report made by the external auditors accompanying the financial statement on 30.06.2014, following information was laid before Board of Trustees by the auditors:- "We are the statutory auditors of the Trust since last many years. The surplus of income over expenditures of the Trust and funds of the Trust are solely for the promotion of the purposes and objects specified in the Trust Deed."
9. The Registrar was swa yed by the fact that the financial statement/balance sheet for the year ended 30 June, 2014 reflected that the trust was in surplus of Rs.26.576 million in the financial year 2013-2014. On this basis the Registrar concluded that the trust was making profits as also that the infrastructure built in the school had not been developed out of the donations made by the trustees but was being made from the fee charged from the majority of students. This was a fallacious argument to premise the impugned order to say the least. There is no denial that the petitioner trust has surplus funds. The only question was whether these fund were being expended on a commercial basis and the benefits derived out of such investment was being enjoyed by the trustees for their private benefit. There is no evidence to establish that the surplus funds or profits accrued in the balance sheet of the petitioner trust were being spread out for the benefit of the trustees or persons making donations to the trust or their families. In the absence of such evidence, it would be unlawful to conclude that the petitioner trust was being run on commercial basis.
Certainly Registrar ought to have squared the status granted to the petitioner under the Ordinance, 2001 with the provision of PIRA and on that basis a decision could have been made whether the trust was subject to the applicability of these provisions or not. Doubtless the Registrar committed an error and misdirected himself in coming to a conclusion that the petitioner trust was not purely a charitable institution but was being run and managed on commercial basis.
10. Merriam-Webster's Dictionary of Law defines 'commercial' as 'relating to commerce' and "commerce' to mean the 'exchange or buying and selling of goods, commodities, property, or services esp. on a large scale'. In the context of PIRA, the term commercial has to be seen as connoting trade or business occupation carried on for profit. It imports commerce, trade or enterprise having financial profit as primary aim. The intrinsic nature of the activity of an organization and its purpose and consequence would be the determining factor. Any educational institution is bound to make profit but the real question is that that profit or surplus fund should not enrich a trustee or his family. It must be diverted back to charitable and welfare activities.
11. Learned counsel for respondent No.2 referred to various judgments of the superior courts to contend that an employer does not have standing to challenge the registration of trade union.
Suffice to say that the challenge here is not entirely to the registration of trade union but to a determination made by the Registrar on the directions issued by this Court. Secondly the petitioner trust is directly aggrieved of the determination of the Registrar, in that, it concluded that it was being run and managed on a commercial basis which has impacted the status of the petitioner as a charitable institution and its entitlement to benefits under various laws. The case law cited by the learned counsel for the parties are not relevant for the controversy in hand and there is no need for referring to the case law in detail. The question whether petitioner trust is a commercial or industrial organization within the meaning of PIRA and so a grievance petition is competent or not does not arise in these proceedings.
12. In view of the above, this petition is allowed and the impugned order dated 10.07.2015 passed by the Registrar, the certificate dated 23.02.2015 as well as certificate of Collective Bargaining Agent dated 15.05.2015 are declared without lawful authority and of no legal effect. They are quashed.