SYED ARSHAD ALL J.- Dr. Shah Alam Khan, Professor & Chairman, Department of Plant Protection and Dr. Sartaj Alam, Associate Professor, Department of Plant Pathology ("Petitioners"), University of Agriculture Peshawar ("University"), who also claim to be the office bearers of Agricultural University Teachers Association of the University of Agriculture Peshawar have filed instant Constitutional petition praying that:- "It is therefore most humbly prayed that on acceptance of this petition a Writ to the effect may please be issued as, Declared The letter No.533/S-I/UAP dated 15.10.2021 and letter No.543/S-I/UAP dated 20.10.2021 issued by the respondents as illegal, unconstitutional and void ab initio and the same be set aside/quashed in favour of petitioners.
Direct i. The respondents not to deduct the Tax up to 25% from the personal salaries of the petitioners and their colleagues appoint for additional duties who performed or performing additional duties. ii. Return the Tax up to 25% if already dedicated from them are their personal salaries and, iii. The petitioners along with their colleagues select for additional duties be treated like other teachers in the University. iv. Any other suitable direction and decelerations if this Hon'ble Court deem it proper.
Claim of the Petitioners
2. It is the precise claim of the petitioners that they had entered into University of Agriculture Peshawar as full time faculty members i.e. as teachers and they shall also retire from the service in such capacity. By insertion of clause (2) in Part-III of the Second Schedule to the Income Tax Ordinance, 2001, the tax payable by a full time teacher, employed in a university recognized by Higher Education Commission shall be reduced by an amount equal to 25% of tax payable on his income from salary. The said slab was then enhanced to 40% rebate on income tax payable to full time teachers on their income received on salary with effect from financial year 201011 to the full time faculty members. The petitioners had availed the said concession, however, through impugned letter dated 15.10.2021 and subsequent letter dated 20.10.2021, respondents No.1 to 3, the officers of the University have initiated the recovery proceedings of an amount of Rs.12.690 million from the teachers of the University which, according to the respondents-university, was withdrawn from its account by the Federal Board of Revenue ("FBR") on the ground that the said 40% rebate was not applicable to certain teachers of the University who were assigned administrative posts.
Precisely it is the contention of the petitioners that according to the legal dispensation under the Universities Act, 2012 ("Act"), the teachers are also assigned additional charge of Dean/Chairperson of a department for which an extra allowance is paid to them, however, by acquiring the additional administrative charge their principal status being teacher remains the same.
Stance of the University
3. The University does not dispute the status of the petitioners being full time teachers despite being offered an additional charge of Dean, Chairperson or Director of teaching departments. It is precisely stated in the comments that the University from time to time has been assigning various administrative duties to faculty members and has been extending tax rebate as per FBR rules prevailing at that time. Essentially all the faculty members who are even assigned additional duties in administrative capacity still draw their salaries from their substantive position i.e. Professor, Associate Professor, Assistant Professor and Lecturer, nevertheless, in budget book the post of Dean, Chairperson or Director of teaching departments does not exist.
4. It was in the year 2015, the University received notice from the FBR that the 40% rebate is not allowed to Deans / Chairpersons / Directors and other faculty performing additional duties as per the Income Tax Ordinance, 2001 and as such the FBR had issued an order for withdrawal of Rs.12.69 million from the University account. The said order was contested and at one point of time the matter was remanded to the Deputy Commissioner Inland Revenue, however, the Deputy Commissioner-IR did not agree to the legal dispensation and has passed an order for recovery of the amount.
5. Furthermore, during the DAC meeting the audit team did not agree with the explanation of the University and had directed that the amount should be recovered from the employees of the University. Therefore, the matter was placed before the Syndicate in its 104th meeting as agenda No.4 and the University keeping in view the directions of the FBR and the DAC has passed the order for recovery of the disputed amount from the petitioners as it has already paid the said amount to the FBR.
Stance of the FBR
6. It is the contention of the FBR in its comments that since the petitioners/employees of the University are not full time teachers of the University, therefore, they are not entitled to the said rebate in terms of the relevant provision of law.
7. Arguments heard and record of the case was perused with the able assistance of both the parties.
8. Before embarking upon the legal discourse we would like to reproduce the relevant provisions of law.
Clause (2) in Part-HI of the Second Schedule to the Income Tax Ordinance, 2001 The tax payable by a full time teacher or a researcher, employed in a non profit education or research institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government research institution, shall be reduced by an amount equal to 25% of tax payable on his income from salary.
Circular No.3 of 2006 Dated 11.07.2006 GOVERNMENT OF THE PAKISTAN (REVENUE DIVISION) CENTRAL BOARD OF REVENUE C.No.4(5)ITR/06 Islamabad, July 11, 2006 Circular No.03 of 2006 (Income Tax)
Subject. COMPUTATION OF INCOME TAX PAYABLE BY THE SALARIES TAXPAYERS FOR TAX YEAR 2007 AND DEDUCTION OF ADVANCE TAX FROM SALARY FOR THE TAX YEAR COMMENCING 1sT JULY 2006 Tax in the case of a salaried taxpayer shall be computed in accordance with sections 12, 13 and 14 of Income Tax Ordinance 2001, read with rules 2 to 7 of Income Tax Rules 2002. A salaried taxpayer means where salary constitutes more than 50% of the total income. All perquisites allowances or benefits, [excepting those covered under Part-I of the Second Schedule to the Ordinance], are to be included in the salary and rate of tax prescribed in Part-I of the First Schedule shall be applied for the tax year 2007 on the gross figure. The taxation of salaried taxpayer is explained as under:
2. REBATE FOR TEACHERSANDRESEARCHERS POSTED IN GOVERNMENT INSTITUTIONS.
A full time teacher or a researcher, employed in a non-profit education or research institution recognized by Higher Education Commission (HEC), a Board of Education or a University was entitled to a benefit, under Part-III of Second Schedule to the income Tax Ordinance 2001 and his tax liability stood reduced by an amount equal to 75% of tax payable on his income from salary.
This concession has now been extended to full time teachers and researchers employed in government training and research institutions also.
Circular No.6 of 2013 Dated 19.07.2013 GOVERNMENT OF THE PAKISTAN (REVENUE DIVISION)
CENTRAL BOARD OF REVENUE C.No.4(36)ITP/2013 Islamabad, the 19 July, 2013 Circular No.6 of 2013 Income Tax Subject. FINANCE ACT. 2013 -- EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001 Salient features of the amendments made in the Income Tax Ordinance, 2001 through Finance Act, 2013 are explained as under:- 2.
43. AMENDMENTS IN SECOND SCHEDULE In Second Schedule to the Income Tax Ordinance, 2001 some of the amendments made are as follows: (a)
(b)
(c)
(d) In Part-III in clause (2) reduction in tax liability of the tax payable on income from salary equal to 75% has been reduced to 40% in the case of N a full time teacher employed in a non profit educational institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission, including government training institutions.
(ii) a full time researcher employed in a research institution duly recognized by Higher Education Commission, a Board of Education or a university recognized by the Higher Education Commission, including government research institution.
(iii)It is further clarified that a full time teacher means a person employed purely for teaching and not performing any administrative or managerial jobs e.g. principals, headmasters directors, vice chancellors, chairmen, controllers etc. similarly a full time research means a person purely employed for research job only in a research institution and such institution is purely performing research activities.
Clarificatory Letter Dated 18.05.2005 issued by the CBR now FBR GOVERNMENT OF THE PAKISTAN CENTRAL BOARD OF REVENUE INCOME TAX DEPARTMENT MTU/2005/ May 18, 2005 District Accounts Officer Sheikhupura Subject. Clarification of additional 50% tax reduction in the case of full time teachers.
Reference Several applications No(s). Nil Dated May 18, 2005 by the District Sheikhupura Head Masters.
It is to clarib, that according to clause (2) part III of second schedule of income tax ordinance 2001, is reproduced as under: "In addition to the reduction specified in sub-clause (i), the tax payable by a full time teacher or a researcher, employed in a non profit education or research institution including government training and research institution duly recognized by a Board of Education or a university or the University grants commission, shall be further reduced by an amount equal to 50% of the tax payable after the aforesaid reduction"
In order to qualify forfor tax reduction under the above noted provision, the following conditions have to be fulfilled: I. A full time teacher which means A regular employee (full time faculty member): Not a part time teacher (visiting faculty member): According to code of action "Dastoor-ul-Amaal" issued by Education Department of Punjab."
2. Non profit education institution which means An institution which has been established not to earn profit.
Since both of these conditions are met with in their cases. Hence, Head Masters are eligible for this additional 50% tax reduction.
(Ashraf Ahmed Ali)
Commissioner Income Tax"
Chapter-III of the Khyber Pakhtunkhwa Universities Act, 2012 Chapter-III Officers of the University
8. Officers of the University. -- The following shall be the officers of the University, namely:
(a) the Chancellor,
(b) the Pro-Chancellor,
(c) the Vice-Chancellor; [(c-i)] the Pro-Vice-Chancellor;
(d) the Deans;
(e) the Directors;
(f) the Chairperson of Teaching Departments;
(g) the Registrars;
(h) the Treasurer;
(i) the Controller of Examinations;
(j) the Provost;
(k) the Principals of constituent colleges;
(1) the Librarian; and
(m) such other persons as may be prescribed to be officers of the University."
9. The essential issue before the Court to adjudicate upon is as follows:- Whether by being assigned to additional administrative positions, the petitioners stopped being full time teachers, and thus not entitled to the concession of tax rebate?
In other words, whether the additional administrative assignment converted the official designation of the petitioners from being full time teachers, to officers of the University?
10. The Act draws a distinction between the two group of employees i.e. faculty members or teachers and officers. Definition clause i.e. section 2(n) of the Act defines an officer as that "Officer" means Officer of the University whereas section 2(y) of the Act defines teachers as "Teachers" include Professors, Associate Professors, Assistant Professors, Lecturers and Research staff and such other persons as may be declared to be teachers by the Regulations. The definition clause thus clearly suggests that teacher is an academic who has mastered in a particular field of knowledge and imparts his / her knowledge to students. The University in its comments does not deny the stance of the petitioners that they are full time teachers and would retire from service as teachers, however, while posted as full time teachers they are also assigned the additional duties of the officer of the University as provided in Chapter-III, section 8 of the Act. On assigning additional duties, the petitioners still remain members of teaching faculty and for this additional assignment, they are paid honoraria ranging from Rs.700/- to Rs.2000/- per month in addition to their salary. In the budget book their sanctioned post is of a full time teacher.
11. It is thus clear from the above that the faculty of the University are being assigned administrative post and as a result of the said statutory dispensation; their academic and research work have never been compromised. Therefore, the opinion of the FBR that the petitioners while working against the additional administrative post are not entitled to the income tax rebate is misconceived. Indeed it is settled law that the tax laws are to be construed strictly and that any ambiguity is to be interpreted in favour of taxpayer. In this regard reliance can be placed on "Messrs Raibv Industries Karachi and others vs. Federation of Pakistan and others" (2023 SCMR 1407).
12. In view of what has been stated above, neither the finding of the Public Accounts Committee
(PAC) as mentioned in letter dated 15.10.2021 nor the impugned decision of the Syndicate; directing for recovery of the amount which the petitioners had received as a tax rebate are an accordance with law. Similarly, it is also apparent from record that the University administration had failed to pursue their legal remedy before the hierarchy established under the Income Tax Ordinance, 2001 whereby the amount was illegally withdrawn by the FBR from the account of the University.
13. In view of the above, the instant petition is allowed, the impugned letters dated 15.10.2021 and 20.10.2021 are accordingly declared without lawful authority and any amount so deducted from the present petitioners pursuant to the impugned letters shall be refunded to them.