JAWAD HASSAN, J. Through this judgment, instant writ petition as well as writ petitions mentioned in Schedule "A" shall be decided as common question of law and facts is involved therein. The Petitioners have assailed in these petitions under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973 (the "Constitution") the retrospective application of Section 4C of the Income Tax Ordinance, 2001 (the "Ordinance") and the vires of the First Proviso to Division IIB of Part I of the First Schedule of the "Ordinance", introduced through the Finance Act, 2022.
I. CONTEXT OF THE CASE
2. Precisely, all the Petitioners are taxpayers and for the purpose of regulating their tax affairs, some of the Petitioners operate and opt normal tax year commencing from 1st July and ending on 30th June, while the other Petitioners operate and opt special year commencing 1st January and ending on 31st December. Through these petitions, the Petitioners, at the one hand, have made challenge to retrospective application of Section 4C while on other hand, have called in question the vires of Section 4C First Proviso to Division IIB of Part I of the First Schedule of the "Ordinance" being discriminatory in terms of Article 25 of the "Constitution" and unlawfully vitiating vested rights accrued in past and closed transactions. This judgment will interpret the language of Section 4C of the "Ordinance" with anatomy of its Chapters and Parts, more specifically its charging provisions under Section 4C, the tax on taxable income under Chapter III read with Procedure under Chapter X, Part I & Part IV. The Court, while hearing the case, directed the parties to file report and parawise comments alongwith supporting documents explaining the basis of inclusion of Section 4C of the "Ordinance". In compliance, the Respondent No.2/FBR filed its reply through Mr. Khalid Ishaq, ASC on 13.10.2022, while Ms. Asma Hamid, ASC filed report and parawise comments on behalf of the Respondent No.3/CIR on 02.11.2022 alongwith supporting documents. In addition, counsel for most of the Petitioners filed written arguments alongwith gist of case laws in their support.
II. PROCEEDINGS BEFORE THIS COURT AND SUPREME COURT OF PAKISTAN
3. During the hearing of the petitions, the judgment of Sindh High Court cited in SHELL PAKISTAN LIMITED through Legal Counsel and others Versus FEDERATION OF PAKISTAN through Secretary Ministry of Finance and others(2023 PTD 607 Sindh) regarding Section 4C of the "Ordinance" was challenged before the Supreme Court of Pakistan wherein vide order dated 06.02.2023, interim relief was granted in the following manner: "In view of the above, the respondents have consented to deposit under protest with the tax authorities 50% of the liability claimed against them under the impugned provisions of Ordinance.
However, the amount of such deposit shall be reduced by the amount of any refund that has been determined by the tax authorities in favour of the respondents. Needful to be done within one week from the date of this order."
4. Pursuant to passing of aforesaid order, an application bearing C.M.No.01 of 2023 was filed on behalf of the Respondent No.3/CIR for modification of interim order granted on 27.12.2022. The Court on 16.02.2023 modified aforesaid order by observing that: "Since the prayer made in this petition is supported with the order of Hon'ble Supreme Court of Pakistan, there is no need to issue notice to the Writ Petitioner (in this petition or the other connected petitions/C.Ms. fixed for today). Keeping in view the afore-quoted directions of the Hon'ble Supreme Court of Pakistan, the interim order dated 27.12.2022 issued in the captioned writ petition and the interim orders issued by this Court from time to time in other connected writ petitions are hereby modified in terms that all the Writ Petitions (in this petition as well as the connected Writ Petitions) will now deposit under protest with the tax authorities 50% of the liability claimed against them under the Income Tax Ordinance, 2001, within seven days. However, the amount of such deposit shall be reduced by the amount of any refund that has been determined by the tax authorities in favour of the said Writ Petitioners. This order be placed in all the connected files and will be read accordingly for all the connected petitions".
5. On 16.02.2023, the Supreme Court of Pakistan heard the appeals and granted interim relief at one point by observing that "according to learned counsel for the petitioner, the accounting year of the respondents ends during the course of Tax Year 2022 to which the provisions of Section 4C are lawfully applicable". At second point, it was further observed that "the learned counsel for the petitioner submits that the said argument cannot form the basis of altogether striking down the impugned Super Tax because implicitly the respondents' arguments accepts liability to taxation at the rate of 4%. However, he is not able to explain to us the justification for charging super tax at higher rate for industries specified in the first proviso. We grant him time to prepare his case on that point". Finally, the following order was passed.
"Insofar as the interim relief is concerned, the respondents which are liable to pay Super Tax at the rate of 10% under the proviso shall deposit the same within one week at the rate of 4% which is applicable to assessee industries earing incoming exceeding Rs.300 million as provided in Division II B ibid but falling outside the proviso thereto. In the event that the respondents have furnished bank guarantees on the direction of the High Court then the same shall be en cashed by the petitioner to the extent of 4% tax".
6. Thereafter, while arguing the case from 09.03.2023 onward, the Court when confronted to learned counsel for the Respondent/CIR whether there are any document on the basis of which the judgment was passed by the other Courts, Mr. Khalid Ishaq, ASC for the Respondent No.2/FBR and Ms. Asma Hamid, ASC for the Respondent No.3/CIR stated that no such document was filed before other Courts. Consequently, this Court directed the Respondents to justify tax imposed through Section 4C of the "Ordinance" by filing proper documents. On 09.03.2023, Ms. Asma Hamid, ASC for the Respondent No.3/CIR stated that detailed reply has been submitted and requested that same may be treated as replies in all connected petitions. However, when parties again and again agitated illegalities in the documents, Ms. Asma Hamid, ASC sought further time to file supplemental reply. It is noted that when initial reply was filed on the directions of this Court, no proper document was annexed. On 22.03.2023, Ms. Asma Hamid, ASC filed C.M.No.01 of 2023 for placing on record some documents which includes Pakistan Economic Survey in 2021-2022, brief on Budget Making Process, Budget Speech, 2022-2023, policy statement and other documents by giving reasons for imposition of super tax through support of constitutional provisions.
III. PETITIONERS ARGUMENTS
7. Mr. Salman Akram Raja, ASC has mainly argued that the Petitioners' company is a limited company with listed stock exchange and special year has already ended in December, 2021, its AGM was held in April, 2022 and profit was distributed to all the shareholders in May, 2022, therefore, super tax imposed through Section 4C of the "Ordinance" is not applicable being past and closed transaction. He further argued that definition of "income" in Section 4C(2) of the "Ordinance" excludes adjustments from current year revenue on account of brought forward depreciation, brought forward business losses and brought forward amortization and for determination of the same, the Petitioners have already acted upon it at the close of tax year 2022.
He has relied on "MOLASSES TRADING & EXPORT fPVT.) LTD. Versus FEDERATION OF PAKISTAN etc"
8. Mr. Mansoor Usman Awan, ASC argued that the Petitioners are seeking declaration regarding exemption of super tax on the ground that Section 4C is ultra vires to the "Ordinance". He added that imposition of super tax hit by principle of past and closed transaction because in some companies, special year completed from 1st January to 31st December (the "Special Year") with cutoff date and in other set of cases the Financial year, which is a normal year starts from 1st July to 30th June (the "Normal Year"). Hence, no tax can be agitated as the Special Year as well as the Normal Years has already been ended. He further argued that imposition of supertax is based on discrimination and thus is not applicable to the case of the Petitioners.
9. Mr. Shazib Masud, ASC and Barrister Waqas Mir, ASC argued that general rates of super tax for all sectors except mentioned in first proviso to Division IIB to Part I of First Schedule to the "Ordinance" declaring income over 300 million is 4% whereas proviso to Division IIB states for year 2022, the persons engaged, whether partly or wholly, in the business of airlines, automobiles, beverages, cement, chemicals, cigarette and tobacco, fertilizer, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles the rate of tax shall be 10% where the income exceeds Rs.300 million therefore, applicability of different rates of taxes on different sectors is discriminatory and violative to Article 25 of the "Constitution".
10. Barrister Haroon Dugal, ASC argued that super tax under Section 4C of the "Ordinance" is a tax and Section 4B of the "Ordinance" till date has occupied the same field and incidences of both the taxes under above said sections are same therefore, two charging sections for the same tax are neither permissible under the law nor the same can be imposed through two charging sections. He further argued that there is no machinery provision for the collection of super tax as no rules in terms of Section 4C(6) of the "Ordinance" have been framed.
11. Mr. Hassan Kamran Bashir, Advocate argued that Section 4C of the "Ordinance" was added through the Finance Act, 2022 with effect from 01.07.2022 after the close of Petitioners' tax year 2022 on 31.12.2021 and 30.06.2022 hence, for the purpose of tax affairs, it becomes a past and closed transaction before the Finance Act, 2022 became effective. He added that Section 4C of the "Ordinance" is a charging section, hence cannot be applied retrospectively to transactions that have become past and closed. He next argued that retrospective application of the section ibid would create a new tax obligation for a tax year that has already been closed as the liability of the Petitioners had attained finality on the last date of tax year.
12. Mr. Muhammad Mansha Sukhera, Jahangir Ahmad, Muhammad Zulqarnain, Hassan Kamran Sheikh, Asfandyar Khan Tareen and Zoe K. Khan, Advocates adopted the arguments advanced by above mentioned learned counsels and also filed their written arguments alleging discrimination.
Learned counsels in other connected petitions also adopted the same arguments.
IV. RESPONDENTS ARGUMENTS i. Arguments of Respondent No.2-FBR
13. Mr. Khalid Ishaq, ASC for the Respondent No.2/FBR filed report and parawise comments and objected qua maintainability of the petitions. He argued that the Petitioners are liable to pay tax under Section 4C of the "Ordinance" and cannot take advantage of the benefit granted to them under Section 74 of the "Ordinance". He further argued that Section 2(68) of the "Ordinance" defines "tax year" as tax year defined in sub-section (1) of Section 74 and in relation to a person, includes a special tax year or a transitional tax year that the person is permitted to use under Section 74 of the "Ordinance". He pointed out that many a Petitioners adopted a special tax year in terms of Section 74(3) of the "Ordinance" which extends from 1st January to 31st December and mere objecting to applicability of Section 4C of the "Ordinance" based on doctrine of past and closed transactions is of no avail as payments of dividends and purported investments, do not constitutes as events that render the finalization of accounts therefore, the reliance on the entire doctrine of past and closed transaction is misplaced and has wrongly been stretched by many a Petitioners just to obtain exemption from their tax obligations. ii. Arguments of Respondent No.3-CIR
14. Ms. Asma Hamid, ASC for the Respondent No.3/CIR filed report and parawise comments and objected qua maintainability of the petitions. She argued that most of the Petitioners were permitted to pay their tax liability by using a special year in terms of Section 74 of the "Ordinance" which is only a concession and distinct from normal tax year i.e. from 1st July of any given year to 30 June of the next year hence does not alter the liability to be taxed at the rate of tax to be announced through Finance Act, 2022 on 30.06.2022 and its liability to pay tax through filing returns by or on 30.09.2022. She added that audited accounts and paid dividends relate to internal accounting principles and thus have no nexus with liability to pay income tax on its computed taxable income at the rate enacted by the legislature. She argued that previously the Petitioners have been used to pay super tax in terms of Section 4B of the "Ordinance" which is identical in language and retrospective in operation and effect than that of Section 4C of the "Ordinance" thus the Petitioners are estopped by conduct to challenge it on the ground of retrospectivity when Section 4B of the "Ordinance" levies super tax with retrospective effect. She, by relying on a chain of judgments, argued that past and closed transactions can be disturbed through legislation where retrospective application is expressed through unambiguous, clear language. Moreover, she has also placed on record policy considerations for enactment of Section 4C of the "Ordinance", the competency of the legislature to impose super tax with retroactive and retrospective effect alongwith policy statement of Member (FBR), policy guidelines of Annual Budget Statement 2022.
V. DETERMINATION BY THE COURT i. History and legal anthropology of Super Tax
15. From the arguments advanced by learned counsel for the parties alongwith documents and case law, grounds viz.a.viz retrospective application of Section 4C of the "Ordinance" based on the past and closed transaction, discrimination with respect to imposing super tax on a particular class of persons and its vires, have been agitated. Before proceeding further, it would be advantageous to highlight brief history and legal anthropology of the super tax. It is an additional tax which is typically levied on high-income individuals or corporations as a means to generate additional revenue and promote income redistribution. The history of super tax can be traced back to various countries and different time periods. During World War-I (1914-1918), several countries including United Kingdom, Australia and Canada introduced super taxes on wealthy individuals and corporations, imposing higher tax rates on their income and profit, with the sole purpose to finance the war efforts and cover the increased government spending. Super taxes were also implemented, during the great depression of 1930s, when many countries faced economic crises and sought ways to address income inequality and fund social welfare program, as a measure to redistribute wealth and support government initiative. For example, the United States introduced the Wealth Tax Act of 1935, imposing a surtax on high-income individuals. After World War II, super taxes continued to be utilized in various forms. In the United Kingdom, a supertax was introduced in 1949 to address post-war economic challenges. The tax primarily targeted high-income individuals and aimed to fund reconstruction efforts and social welfare programs. In Indian sub- continent, levy of super tax was introduced through Super Tax Act of 1917. Thereafter, the Legislative Council of India enacted the Super Tax Act of 1920 which repealed the Super Tax Act of 1917. Till this period, the impost of tax in addition to income tax (i.e., super tax) was being made through separate legislative enactments until the Legislative Council of India, on the recommendations of the All-Indian Income Tax Committee, consolidated income tax and tax in addition to income tax (i.e., super tax) in the Indian Income Tax Act, 1922. Even though the Income Tax Act, 1922 dealt with both income tax and super tax, it still maintained the distinction and identities of the two categories of taxes, and designated a separate chapter for super tax, i.e., chapter IX of the Indian Income Tax Act, 1922, which contained a distinct charging provision, and specified the definition of income and the exemptions applicable with respect to the computation of super tax. In other words, Chapter IX of the Indian Income Tax Act, 1922 was a self-contained chapter dealing with the charge, assessm ent, collection, and recovery of super tax. It is also worth noting that even though the Indian Income Tax Act. 1922 defined super tax as tax in addition to income tax, it did not include the same within income tax; the legislature, in its wisdom, clearly kept the separate identity of super tax maintained.
16. After its independence, the Islamic Republic of Pakistan adopted, as is, the Income Tax Act of 1922 as its code on direct taxation. However, from time to time, through parliamentary enactments and ordinances, the charges levied, definitions, and computation and recovery methods were amended. Thereafter, the Income Tax Act of 1992 was repealed by the Income Tax Ordinance 1979 which, with respect to the levy of super tax, adopted a similar scheme and maintained the super tax's distinct and self-contained identity. Thereafter, the promulgation of the "Ordinance" repealed the Income Tax Ordinance, 1979 and super tax was reintroduced in the "Ordinance" through the Finance Act, 2015, by adding section 4B (super tax for rehabilitation of Temporarily Displaced Persons) that imposed a super tax on certain persons with retroactive effect on tax year 2015.
Recently through the Finance Act of 2022, the Parliament inserted Section 4C in the "Ordinance" which imposed a super tax on certain high-earning persons with retroactive effect for the tax year 2022 and onwards; except for the banking companies which were liable to pay super tax from the tax year 2023. ii. Legality of Section 4C of the "Ordinance"
17. The Petitioners have agitated the applicability of Section 4C of the "Ordinance" retrospectively. It has been settled in plethora of judgments by the Superior Court that legislature is competent to give retrospective effect to an Act and can also take away the vested rights of the parties but to provide for such consequences, the Legislature must use words which are clear, unambiguous and not capable of any other interpretation or such interpretation follows as a necessary implication from the words used in the enactment. In order to narrow down the question of retrospectively, it is imperative to reproduce Section 4C of the "Ordinance" which reads as follows: 4C. Super tax on high earning persons. (1) A super tax shall be imposed for tax year 2022 and onwards at the rates specified in Division IIB of Part I of the First Schedule, on income of every person: Provided that this section shall not apply to a banking company for tax year 2022.
(2) For the purposes of this section, "income" shall be the sum of the following:--
(i) profit on debt, dividend, capital gains, brokerage and commission;
(ii) taxable income (other than brought forward depreciation and brought forward business losses) under section 9 of the Ordinance, excluding amounts specified in clause (i);
(iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and
(iv) income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedules.
(3) The tax payable under sub-section (1) shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply.
(4) Where the tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the tax payable, and shall serve upon the person, a notice of demand specifying the tax payable and within the time specified under section 137 of the Ordinance.
(5) Where the tax is not paid by a person liable to pay it, the Commissioner shall recover the tax payable under sub-section (1) and the provisions of Part IV, X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of tax as these apply to the collection of tax under the Ordinance.
(6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.] Division IIB Super Tax on high earing persons The rate of tax under section 4C shall be-- Sr.No.Income under section 4c Rate of tax (1)(2) (3)
1. Where income does not exceed Rs.150 million 0% of the income
2. Where income exceeds Rs. 150 million but does not exceed Rs. 200 million1% of the income
3. Where income exceeds Rs. 200 million but does not exceed Rs. 250 million2% of the income
4. Where income exceeds Rs. 250 million but does not exceed Rs. 300 million3% of the income
5. Where income exceeds Rs. 300 million 4% of the income Provided that for tax year 2022 for persons engaged, whether partly or wholly, in the business of airlines, automobiles, beverages, cement, chemicals, cigarette and tobacco, fertilizer, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles the rate of tax shall be 10% where the income exceeds Rs. 300 million: Provided further that in case of banking companies for tax year 2023, the rate of tax shall be 10% where the income exceeds Rs. 300 million.] Plain reading of above section reveals that it imposes a super tax for the "tax year 2022 and onward" at the rates specified in above Division IIB on income of every high earning person. While Division IIB of the First Schedule provides the slabs of income brackets that will be put to progressive rates of super tax under section 4C; the proviso to Division IIB provides for a onetime levy of super tax at 10% for the tax year 2022 on those persons involved in specific sectors/businesses subject to their income exceeding Rs.300 million in tax year 2022 only; and the second proviso to Division IIB subjects the banking companies to a one time levy of super tax at rate of 10% for the tax year 2023 subject to their income exceeding Rs. 300 million. The said section also defines "income" as the sum of four heads listed in subsection 2(i) to (iv) of Section 4C of the "Ordinance" and proviso to the section ibid excludes the imposition of super tax on banking companies only for the tax year 2022. It further reflects that entire distinct mechanism for assessm ent, collection and recovery of super tax has been provided within the newly inserted section.
18. Pertinently, the word "person" is defined under Section 2(42) which means a person as defined in Section 80, Chapter V, Part-I, Division-I of the "Ordinance" which reads as:
80. Person. --(1) The following shall be treated as persons for the purposes of this Ordinance, namely: --
(a) An individual;
(b) a company or association of persons incorporated, formed, organised or established in Pakistan or elsewhere;
(c) the Federal Government, a foreign government, a political sub-Division of a foreign government, or public international organisation.
(2) For the purposes of this Ordinance --
(a) "association of persons" includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;
(b) "company" means --
(i) a company as defined in the [Companies Act, 2017 (XIX of 2017)];
(ii) a body corporate formed by or under any law in force in Pakistan;
(iii) a modaraba;
(iv) a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies;
(v) a co-operative society, a finance society or any other society;] [(va) a non-profit organization;] [(vb) a trust, an entity or a body of persons established or constituted by or under any law for the time being in force;]
(vi) a foreign association, whether incorporated or not, which the [Board] has, by general or special order, declared to be a company for the purposes of this Ordinance;
(vii) a Provincial Government;
(viii) a [Local Government] in Pakistan; [or] [(ix) a Small Company as defined in section 2;]
(c) "firm" means the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all;
(d) "trust" means an obligation annexed to the ownership of property and arising out of the confidence reposed in and accepted by the owner, or declared and accepted by the owner for the benefit of another, or of another and the owner, and includes a unit trust; and
(e) "unit trust" means any trust under which beneficial interests are divided into units such that the entitlements of the beneficiaries to income or capital are determined by the number of units held.
A bare reading of above quoted section shows that it has wider amplitude and used in broad sense and all the Petitioners fall within the definition of a 'person' under Section 2(42) read with Section 80(1)(b) of the "Ordinance" and their liability to pay tax for income tax arises under Chapter II, Section 4 of the "Ordinance". Their liability to pay tax, even if created by charging provision, materialized upon filing of return in terms of Section 114 of the "Ordinance" which is treated as an assessm ent order under Section 120 of the "Ordinance" and procedure and method to file return is provided under Section 118(2) of the "Ordinance" which reads as
118. Method of furnishing returns and other documents. -- (1) A return of income under section 114, a wealth statement under section 116 [or a foreign income and assets statement under 116A, if applicable] shall be furnished in the prescribed manner.
(2) A return of income [under section 114 of a company shall be furnished --
(a) in the case of a company with a tax year ending any time between the first day of January and the thirtieth day of June, on or before the thirty-first day of December next following the end of the tax year to which the return relates; or
(b) in any other case, on or before the thirtieth day of September next following the end of the tax year to which the return relates.
Underlying for emphasis
19. Plain reading of above section reveals that the Petitioners are at liberty to file their return at any date on or before the thirtieth day of September following the end of the tax year to which the return relates. The word Tax Year is defined in Section 74(1) of the "Ordinance" which reads as under:
74. Tax year.-- (1) For the purpose of this Ordinance and subject to this section, the tax year shall be a period of twelve months ending on the 30th day of June (hereinafter referred to as 'normal tax year') and shall, subject to sub section (3), be denoted by the calendar year in which the said date falls.
2) Where a person's income year, under the repealed Ordinance, is different from the normal tax year, or where a person is allowed, by an order under sub-section (3), to use a twelve months' period different from normal tax year, such income year or such period shall be that person's tax year (hereinafter referred to as 'special tax year') and shall, subject to sub-section (3), be denoted by the calendar year relevant to normal tax year in which the closing date of the special tax year falls.
(3) A person may apply, in writing, to the Commissioner to allow him to use a twelve months' period, other than normal tax year, as special tax year and the Commissioner may, subject to sub-section (5), by an order, allow him to use such special tax year.
(4) A person using a special tax year, under sub-section (2), may apply in writing, to the Commissioner to allow him to use normal tax year and the Commissioner may, subject to sub- section (5), by an order, allow him to use normal tax year.
(5) The Commissioner shall grant permission under sub-section (3) or (4) only if the person has shown a compelling need to use special tax year or normal tax year, as the case may be, and the permission shall be subject to such conditions, if any, as the Commissioner may impose.
20. Perusal of above provision of law indicates that two types of tax years have been defined; one is normal tax year while the other is special tax year whereas period of both of tax years in terms of above referred section would be twelve months as held in the case of "LOTTE PAKISTAN PTA Ltd. through Chief Financial Officer and Company Secretary Versus FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Islamabad and others" (2011 PTD 2229), where it has been held that "normal tax year shall be a period of twelve months' ending on the 30th day of June and where the tax year of a person changes as a result of subsections (2), (3) or (5), the period between the last full tax year prior to the change and the date on which the changed tax year commences shall be treated as a separate tax year, to be known as the "transitional year". The same view was later on reaffirmed by the Supreme Court of Pakistan in the case of "FBR through Chairman, Islamabad and others Versus Messrs WAZIR ALI AND COMPANY and others" (2020 SCMR 959) by holding that "tax year is specifically defined in section 74 of the 2001 Ordinance which means a period of twelve months. This period normally ends on 30th June and may also end on any other date in case the same is allowed by the competent authority to be adopted.
Nevertheless, a tax year under section 74 of the 2001 Ordinance has to be of twelve months. It is for this reason that section 114 of the 2001 Ordinance under which return of income is required to be filed covers entire tax year".
21. From the aforesaid observation, it would be quite easy to understand that normal tax year denotes a period of twelve months ending on 30th day of June i.e. the financial year and also denoted by the calendar year in which the said date falls. For instance, tax year for the period of twelve months from 01.07.2020 to 30.06.2021 shall be denoted by calendar year 2021 and the period of twelve months from 01.07.2021 to 30.06.2022 shall be denoted by calendar year 2022. Likewise, a special tax year would also mean a period of twelve months and is denoted by the calendar year relevant to the Normal Tax Year in which closing date of the Special Tax Year falls. For instance, Tax Year for the period of twelve months from 01.01.2019 to 31.12.2019 shall be denoted by calendar year 2020 and the period of twelve months from 01.10.2019 to 30.09.2020 shall be denoted by calendar year 2020. The case of many of the Petitioners is that as their normal and special years ended on 30.06.2021 and 31.12.2021 therefore, super tax imposed through Section 4C of the "Ordinance" is not applicable under the principle of past and closed transaction. It is an admitted position between the parties that many a Petitioners operate under normal tax year in terms of Section 74(1) of the "Ordinance" while others operate under Section 74(3) of the "Ordinance" availing special tax year and availing of such special year is subject to applying in writing to the Commissioner to use a twelve months' period other than normal tax years and that permission is further subject to Section 74(5) of the "Ordinance" therefore, availing any special tax year for payment tax liability is just to accommodate that category of Petitioners and not for the purpose to evade the payment of income tax due in a normal tax year. Moreover, the liability to pay tax crystalizes on the day when the returns are filed while the mode and manner is further specified under Section 137(1) and all provisions of Chapter X of the "Ordinance" which states that "The tax payable by a taxpayer on the taxable income of the taxpayer [including the tax payable under section [113 or] 113A] for a tax year shall be due on the due date for furnishing the taxpayer's return of income for that year".
Notably, Section 4C Division IIB was inserted in the "Ordinance" through the Finance Act 2022 passed on 30.06.2022 effective from 01.07.2022. The sole ground as agitated by the Petitioners is that this amendment does not apply retrospectively as their tax year 2022 ended on 30.06.2022 and 31.12.2022 thus becomes absolute and past and closed transaction. It is observed that computation of any taxable income as self-assessed and declared by a taxpayer, is subject to scrutiny and assessm ent in terms of Section 111 and 122 of the "Ordinance" and may further be reassessed and amended for a period of five consecutive tax periods/years. In this regard, section 122(2) of the "Ordinance" empowered the Respondents to amend taxpayers' assessment upto five successive years and mere reflecting the internal accounting income that is worked out as per International Accounting Standards and is reported in annual accounts is different from computation of taxable income. Therefore, the return of income can only be considered a past and closed transaction after the lapse of statutory five years limitation period. So, the conclusion can easily be drawn that the effective date of Section 4C of the "Ordinance" i.e. 01.07.2022 includes the tax period 01.07.2021 to 30.06.2022 during which the tax liability accrued and same was to be paid till thirtieth day of September as per normal tax year and that of 31st December if availed as concession with regard to special tax year.
22. In view of above, while applying Doctrine of Textualism which envisages a method of statutory interpretation that asserts a statute should be interpreted according to its plain meaning and not according to the intent of the legislature, the statutory purpose, or the legislative history. If we examine Section 4C of the "Ordinance", under the Doctrine of Textualism it clearly means that the intent of Section 4C be looked into rather than the intent of legislature because the wording used are defined under Section 2 and cross-referred to other sections which is very comprehensive with Part, Chapters to the "Ordinance". Keeping in view the plain text of Section 4C of the "Ordinance", supported tax documents, examining of constitutional provisions more specifically Article 80, 140 read with Article 260 which defines "financial year", the relevant charging sections of the "Ordinance" and Chapters and Parts, the policy statement as well as the judgments of Supreme Court of Pakistan, mentioned above, the Petitioners are only liable to pay Super Tax at the rate mentioned in Division IIB of Part I of the First Schedule of the "Ordinance", and 4% as reduced by the Supreme Court in its order dated 16.02.2023. Learned counsel for the Respondents, when confronted with situation, were unable to satisfy the Court regarding 10% rate of super tax. iii. Discrimination
23. So far as the argument of the Petitioners with regard to discrimination is concerned, it is noted that while imposing super tax under Section 4B of the "Ordinance", it appears that uniform rate of super tax upon the same class of person i.e. (i) Banking Companies @ 4% and (ii) Person, other than a banking Company having income equal to or exceeding to Rs.500 Million (Rupees Five Hundred Million) @ 3% has been imposed without any discrimination within the same class. But from perusal of Division IIB, Column 5, reveals that maximum rate of super was fixed at 4% where the income exceed Rs.300 million while in 1st Proviso, added to Division IIB of Part I of the First Schedule of the "Ordinance", which create a further sub classification, the persons engaged, wholly/partly, in the businesses of airlines, automobiles, beverages, cement, chemicals, cigarette and tobacco, fertilizer, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles, were held liable to pay super tax at the rate of 10% where the income exceeds Rs. 300 million which, of course, is more than the double rate as compared to column No.5 of Division IIB of Part I of the First Schedule. Therefore, the said proviso is found to be prima facie discriminatory and the learned counsel for the Respondents remained unable to demonstrate any intelligible differentia therein, having rational nexus with the object of classification.
24. It is by now well settled law that although Article 25 of the Constitution allows for differential treatment of persons who are not similarly placed under a reasonable classification but it is also equally settled that in order to justify this difference in treatment the reasonable classification must be based on intelligible differentia that has a rational nexus with the object being sought to be achieved. This means that any distinct treatment meted out to a class of persons can only be sustained under Article 25 if the aforesaid test is satisfied as held by Supreme Court in the case of "HADAYAT ULLAH and others Versus FEDERATION OF PAKISTAN and others" (2022 SCMR 1691).
Earlier in the case of "Dr. MOBASHIR HASSAN and others Versus FEDERATION OF PAKISTAN and others" (PLD 2010 Supreme Court 265) the Supreme Court held that in order to establish a reasonable classification based on intelligible differentia, the differentiation must have been understood logically and there should not be any artificial grouping for specific purpose causing injustice to other similarly placed individuals. Similarly in the case of "Syed AZAM SHAH Versus FEDERATION OF PAKISTAN through Secretary Cabinet Division, Cabinet Secretariat, Islamabad and another" (2022 SCMR 201) the Supreme Court observed as follows: "The catchphrase "intelligible differentia" connotes dissimilarity or disparity capable of being comprehended. The classification must be based on an intelligible differentia which should distinguish the persons that are grouped together from others left out of the group and the differentia or categorization/ cataloguing must have a logical and commonsensical nexus with the object sought to be achieved. The concept of reasonableness is rationally a fundamental component of equality or non-arbitrariness." It was further held in the case of "GOVERNMENT OF KHYBER PAKHTUNKHWA through Chief Secretary and others Versus Syed SADIQ SHAH and others" (2021 SCMR 747) that "It must always rest upon some real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved by the authority. It is now well-established law that persons may be classified or further sub-classified into entities and such entities may be treated differently if there is a reasonable basis for such difference. Article 25 forbids class legislation but it does not forbid classification or differentiation which rests upon reasonable grounds of distinction.
The classification however must not be arbitrary, artificial or evasive but must be based on some real and substantial bearing, a just and reasonable relation to the object sought to be achieved by the legislation." The Court further held that "In order to pass the test for permissible classification two conditions must be fulfilled i.e. (i) the classification must be founded on an intelligible differentia which distinguishes persons or things those are grouped together from others left out of the group, (ii) the intelligible differentia must have a rational nexus with the object sought to be achieved. However it must disclose that there must be a substantial basis for making the classification and there should be a nexus between the basis of classification and the object of action under consideration based upon justiciable reasonings."
25. Keeping the aforesaid pronouncements of Supreme Court of Pakistan, the said proviso is found to be prima facie discriminatory and the learned counsel for the Respondents remained unable to demonstrate any intelligible differentia therein, having rational nexus with the object of classification. Moreover, the creation of said separate category/sub-classification of persons under the 1st proviso to Division IIB of Part I of the First Schedule of the "Ordinance" tantamount to creation of artificial grouping leading to arbitrariness.
26. It is also pertinent to mention here that the super tax imposed for persons other than banking company having income equal to or exceeding Rs.500 million were gradually reduced between years 2018 to 2022 from 3% to 0% as per Division IIA of the "Ordinance" while at the same time, a new super tax was imposed through Section 4C of the "Ordinance" and as per Division IIB, an exorbitant and sudden increase in super tax @ 10% (which is equal to 250% increase from normal maximum rates of super tax) was imposed which is unreasonable and unjustified as compared to super tax earlier imposed through Section 4B of the "Ordinance". The Sindh High Court in "SHELL PAKISTAN LIMITED through Legal Counsel and others Versus FEDERATION OF PAKISTAN through Secretary Ministry of Finance and others" (2023 PTD 607 Sindh) while relying on "Messrs LUCKY CEMENT LTD. through General Manager, Peshawar Versus KHYBER PAKHTUNKHWA through Secretary Local Government and Rural Development, Peshawar and others" (2022 SCMR 1994) observed in paragraph No.38 observed that "So as a consequence of the Proviso, a person subject to tax at the designated rate would automatically become liable to a tax rate two hundred and fifty percent (250%) higher simply because of being partly/wholly engaged in the business listed therein". This Court is also in agreement with the observation made by the Supreme Court of Pakistan in the case of "Lucky Cement" supra whereby the differentiation was struck down on the basis of observation made herein below:
6. Article 25 of the Constitution mandates equality before the law and Article 18 of the Constitution secures the right to conduct any lawful trade or business. If both these Articles are read together and applied to the present case it means that the appellant cannot be made to face a more onerous tax regime than its competitors. It would be appropriate to reproduce applicable extracts from the five-member Bench decision of this Court in the case of I.A. Sharwani v. Government of Pakistan.6 '(i) that equal protection of law does not envisage that every citizen is to be treated alike in all circumstances, but it contemplates that persons similarly situated or similarly placed are to be treated alike;
(ii) that reasonable classification is permissible but it must be founded on reasonable distinction or reasonable basis;'
'(v) that a law applying to one person or one class of persons may be constitutionally valid if there is sufficient basis or reason for it, but a classification which is arbitrary and is not founded on any rational basis is no classification as to warrant its exclusion from the mischief of Article 25;
(vi) that equal protection of law means that all persons equally placed be treated alike both in privileges conferred and liabilities imposed;
(vii) that in order to make a classification reasonable, it should be based-
(a) on an intelligible differentia which distinguishes persons or things that are grouped together from those who have been left out;
(b) that the differentia must have rational nexus to the object sought to be achieved by such classification.'
27. Keeping in view the history of super tax, it is observed that although super tax imposed through Section 4A of the "Ordinance" yet it was later on withdrawn, while the rate of super tax imposed under Section 4B, was gradually reduced from 2018 to 2022 as mentioned in Division IIA, hence following the above said disparity regarding imposition of super tax over the recent years, rate of 10% super tax is held to be discriminatory hence is reduced to 4%.
28. When confronted to learned counsel for the Respondents what is the basis of imposing 10% super tax because already the Supreme Court of Pakistan in its order dated 16.02.2023 in paragraph No.4 has reduced the rate of super tax from 10% to 4% and the Sindh High Court in paragraph No.38 of its judgment also observed the increase in super tax @ 10% i.e. two hundred and fifty percent higher than the ordinary maximum rate of super tax for all other categories, the counsel for the Respondents could not give any satisfactorily reply and the same was the situation before the Supreme Court of Pakistan as is evident from order dated 16.02.2023 whereby it was observed that "the learned counsel for the Petitioner submits that the said agreement cannot form the basis of altogether striking down the impugned Super Tax because implicitly the respondents' argument accepts liability to taxation at the rate of 4%. However, he is not able to explain to us the justification for charging super tax at a higher rate for industries specified in the first proviso".
29. In view of the determination made above and relying on the judgments of the Supreme Court of Pakistan, doctrine of textualism, relevant charging provisions of the "Ordinance", and the documents examined by this court through C.M.No.01 of 2023 including budget speech, policy statement, writ petitions are partially allowed to the extent that First Proviso to Division IIB of Part I of the First Schedule of the "Ordinance" is declared to be discriminatory, hence, ultra vires to the "Constitution" and thus the rate of super tax is reduced to 4% from 10%. Rest of the prayers made in the petitions are declined being super tax as valid. (Schedule-A)
Sr. No.W.Ps. No.
1. 93/2023
2. 108/2023
3. 112/2023
4. 163/2023
5. 200/2023
6. 206/2023
7. 250/2023
8. 304/2023
9. 312/2023
10. 323/2023
11. 379/2023
12. 403/2023
13. 404/2023
14. 436/2023
15. 460/2023
16. 497/2023
17. 518/2023
18. 530/2023
19. 556/2023
20. 557/2023
21. 567/2023
22. 571/2023
23. 577/2023
24. 627/2023
25. 653/2023
26. 655/2023
27. 820/2023
28. 829/2023
29. 930/2023
30. 990/2023
31. 1012/2023
32. 1043/2023
33. 1137/2023
34. 1195/2023
35. 1211/2023
36. 1285/2023
37. 1339/2023
38. 1404/2023
39. 1409/2023
40. 1837/2023
41. 1851/2023
42. 1989/2023
43. 1998/2023
44. 1999/2023
45. 2040/2023
46. 2067/2023
47. 2237/2023
48. 2345/2023
49. 2251/2023
50. 2359/2023
51. 2362/2023
52. 2399/2023
53. 2403/2023
54. 2415/2023
55. 2423/2023
56. 2429/2023
57. 2452/2023
58. 2483/2023
59. 2531/2023
60. 2630/2023
61. 2636/2023
62. 2639/2023
63. 2715/2023
64. 2726/2023
65. 3237/2023
66. 3261/2023
67. 3302/2023
68. 3397/2023
69. 3423/2023
70. 3431/2023
71. 3434/2023
72. 3442/2023
73. 3455/2023
74. 3704/2023
75. 3707/2023
76. 3743/2023
77. 3746/2023
78. 3750/2023
79. 4119/2023
80. 4198/2023
81. 4359/2023
82. 4615/2023
83. 4659/2023
84. 4736/2023
85. 4839/2023
86. 4958/2023
87. 5291/2023
88. 5297/2023
89. 5299/2023
90. 5347/2023
91. 5427/2023
92. 5454/2023
93. 5545/2023
94. 5550/2023
95. 5576/2023
96. 5803/2023
97. 5832/2023
98. 5913/2023
99. 5916/2023
100. 6293/2023
101. 6300/2023
102. 6347/2023
103. 6549/2023
104. 6560/2023
105. 6645/2023
106. 6708/2023
107. 6925/2023
108. 6960/2023
109. 7096/2023
110. 7192/2023
111. 7868/2023
112. 7869/2023
113. 7872/2023
114. 7874/2023
115. 8111/2023
116. 8245/2023
117. 8371/2023
118. 9221/2023
119. 9493/2023
120. 9824/2023
121. 9825/2023
122. 9987/2023
123. 10273/202
124. 11364/2023
125. 11525/2023
126. 11635/2023
127. 11646/2023
128. 12198/2023
129. 12485/2023
130. 12761/2023
131. 12768/2023
132. 12800/2023
133. 12858/2023
134. 13154/2023
135. 13276/2023
136. 13416/2023
137. 13464/2023
138. 13559/2023
139. 13615/2023
140. 13955/2023
141. 14272/2023
142. 14472/2023
143. 14746/2023
144. 14899/2023
145. 15259/2023
146. 15958/2023
147. 16149/2023
148. 17747/2023
149. 18117/2023
150. 18716/2023
151. 20124/2023
152. 20606/2023
153. 56758/2023
154. 58672/2023
155. 58689/2023
156. 59133/2022
157. 59245/2022
158. 59251/2022
159. 59809/2022
160. 59911/2022
161. 60005/2022
162. 60340/2022
163. 60348/2022
164. 60425/2023
165. 64130/2022
166. 64237/2022
167. 64994/2022
168. 65025/2022
169. 65256/2022
170. 65917/2022
171. 66055/2022
172. 66560/2022
173. 66678/2022
174. 66716/2022
175. 66883/2022
176. 66898/2022
177. 66947/2022
178. 67096/2022
179. 67221/2022
180. 67781/2022
181. 67867/2022
182. 67937/2022
183. 67979/2022
184. 67998/2022
185. 68017/2022
186. 68018/2022
187. 68023/2022
188. 68129/2022
189. 74076/2022
190. 74210/2022
191. 75186/2022
192. 75277/2022
193. 75528/2022
194. 75811/2022
195. 75861/2022
196. 75869/2022
197. 75893/2022
198. 76770/2022
199. 78120/2022
200. 78738/2022
201. 78882/2022
202. 79612/2022
203. 79617/2022
204. 80573/2022
205. 80898/2022
206. 81376/2022
207. 81380/2022
208. 81384/2022
209. 81390/2022
210. 81772/2022
211. 81874/2022
212. 81884/2022
213. 81930/2022
214. 82101/2022
215. 82131/2022
216. 82187/2022
217. 82192/2022
218. 82221/2022
219. 82260/2022
220. 82264/2022
221. 82265/2022
222. 82277/2022
223. 82305/2022
224. 82378/2022
225. 82420/2022
226. 82429/2022
227. 82430/2022
228. 82670/2022
229. 82692/2022
230. 82705/2022
231. 82706/2022
232. 82708/2022
233. 82716/2022
234. 82721/2022
235. 82727/2022
236. 82749/2022
237. 82753/2022
238. 82769/2022
239. 82788/2022
240. 82791/2022
241. 82805/2022
242. 82816/2022
243. 82897/2022
244. 82899/2022
245. 82903/2022
246. 82905/2022
247. 82908/2022
248. 82910/2022
249. 82917/2022
250. 82935/2022
251. 82941/2022
252. 82969/2022
253. 82980/2022
254. 83019/2022
255. 83023/2022
256. 83025/2022
257. 83033/2022
258. 83035/2022
259. 83048/2022
260. 83051/2022
261. 83062/2022
262. 83079/2022
263. 83098/2022
264. 83106/2022
265. 83126/2022
266. 83133/2022
267. 83141/2022
268. 83149/2022
269. 83154/2022
270. 83156/2022
271. 83166/2022
272. 83181/2022
273. 83182/2022
274. 83185/2022
275. 83189/2022
276. 83217/2022
277. 83223/2022
278. 83224/2022
279. 83231/2022
280. 83547/2022
281. 83256/2022
282. 83260/2022
283. 83262/2022
284. 83289/2022
285. 83293/2022
286. 83294/2022
287. 83295/2022
288. 83297/2022
289. 83298/2022
290. 83299/2022
291. 83301/2022
292. 83302/2022
293. 83307/2022
294. 83308/2022
295. 83310/2022
296. 83311/2022
297. 83313/2022
298. 83315/2022
299. 83316/2022
300. 83318/2022
301. 83319/2022
302. 83320/2022
303. 83321/2022
304. 83322/2022
305. 83323/2022
306. 83331/2022
307. 83332/2022
308. 83335/2022
309. 83341/2022
310. 83349/2022
311. 83356/2022
312. 83357/2022
313. 83358/2022
314. 83371/2022
315. 83384/2022
316. 83392/2022
317. 83396/2022
318. 83400/2022
319. 82588/2022
320. 83401/2022
321. 83410/2023
322. 83411/2022
323. 83412/2022
324. 83413/2022
325. 83414/2022
326. 83417/2022
327. 83418/2022
328. 83419/2022
329. 83422/2022
330. 83424/2022
331. 83425/2022
332. 83426/2022
333. 83428/2022
334. 83430/2022
335. 83433/2022
336. 83434/2022
337. 83435/2022
338. 83436/2022
339. 83437/2022
340. 83439/2022
341. 83442/2022
342. 83444/2022
343. 83446/2022
344. 83473/2022
345. 83476/2022
346. 83477/2022
347. 83479/2022
348. 83480/2022
349. 83482/2022
350. 83484/2022
351. 83485/2022
352. 83486/2022
353. 83497/2022
354. 83503/2022
355. 83505/2022
356. 83507/2022
357. 83508/2022
358. 83510/2022
359. 83514/2022
360. 83541/2022
361. 83546/2022
362. 83613/2022
363. 83548/2022
364. 83549/2022
365. 83571/2022
366. 83590/2022
367. 83610/2022
368. 83615/2022
369. 83223/2022
370. 83617/2022
371. 83619/2022
372. 83620/2022
373. 83624/2022
374. 83665/2022
375. 83667/2022
376. 83668/2022
377. 90/2023
378. 23807/2023
379. 27871/2023
380. 29126/2023
381. 29457/2023
382. 34367/2023
383. 39958/2023
384. 40689/2023
385. 42604/2023
386. 26935/2023
387. 27007/2023 [1]Jacob D. Nielsen, TEXTUALISM WITHOUT TAX SHELTERS: A PROPOSAL FOR INTEGRATING JUDICIAL ANTI-ABUSE DOCTRINES WITH TEXTUALISM, BOSTON UNIVERSITY LAW REVIEW [Vol. 101, Number 4 (September 2021) P 1471)] In this Article the author has written that "to preserve that right, textualists maintain that it must be legitimate for taxpayers to rely on the plain meaning of the tax laws when ordering their affairs. Textualist jurisprudence becomes controversial, however, when taxpayers, through evidently literal compliance with the law, produce results that are unexpected, quite plainly unreasonable, and appear to conflict with congressional intent. In such cases, the government's interest in the equitable administration of tax law is pitted against the taxpayer's right to lawfully minimize his tax liability. The resulting tension plays out in opposing theories of statutory interpretation; textualist judges tend to protect the taxpayer's reliance on the tax laws at the expense of their reasonable and equitable administration, while intentionalist judges do just the opposite".