Khalilur Rehman Khan, J.-By this judgment I propose to dispose of the Constitutional petitions (which are thirty in number) calling into question the demand of advance Income-tax in respect of the leases granted by the Local Bodies for the collection of the octroi duty, toll, toll-tax and other fees The particulars of the taxes involved in each of the petitions .Are as follows
1. W.P. No. 4866 of 1982 Octroi duty
2. W.P. No. 2703 of 1983 99
3. W.P. No. 4016 of 1983
4. W.P. No. 1385 of 1983 99
5. W.P. No. 21 of 1984 99
6. W.P. No. 728 of 1984 99
7. W.P. No. 3148 of 1983 99
8. W.P. No. 2161 of 1983 99
9. W.P.No. 956 of 1983 9 9
10. W.P. No. 1119 of 1983 99
11. W.P.No. 916 of 1983 99 l2. W.P. No. 714 of 1983 Octroi duty, cattle (market fee and Adda fee)
13. W.P.No. 615 of 1983 Cattle market fee
14. W.P. No. 2802 of 1983 99
15. W.P. No. 5053 of 1983 99
16. W.P. No. 5054 of 1983 99
17. W.P. No. 3544 of 1983 99
18. W.P. No. 3265 of 1983 99
19. W.P. No. 3266 of 1983 99
20. W.P. No. 2514 of 1983 Toll tax and cattle market fee.
21. W.P. No. 3664 of 1983 Cattle market fee and (Slaughtering fee).
22. W.P. No. 5375 of 1983 Toll tax.
23. W.P. No. 127 of 1984 Octroi duty and toll tax.
24. W.P. No. 2689 of 1983
25. W.P. No. 2647 of 1983 Toll tax and cattle fee.
26. W.P. No. 4586 of 1982 Octroi duty.
27. W.P. No. 2806 of 1983 Toll tax and cattle fee.
28. W.P. No. 2838 of 1983 Octroi duty, cattle fee, bus-stand fee.
Sale of animals fee, tonga stand fee, slaughter fee and slaughter house fee.
29. W.P. No. 2981 of 1983 Octroi fee, bus stand fee.
30. W.P. No. 3170 of 1983 Octroi duty, toll tax and cattle fee.
These Constitutional petitions raise a common question of law, Whether the contractors who have been leased out by public auction the Collection of proceeds of octroi duty, toll tax and fees levied by Local Council or Cantonment Board under the Punjab Local Government Ordinance, 1979, or the Cantonment Act, 1924, are liable to pay advance income-tax under section 50 (7-A) of the Income-tax Ordinance, 1979."
2. Messrs Imtiaz Javid, Ijaz Hussain Batalvi, Malik Muhammad Nawaz, Advocates, argued the matter in detail on behalf of the petitioners, and the other learned counsel appearing for the rest of the petitioners adopted the arguments addressed by them. Mr. Muhammad Ilyas Khan presented the point of view of the Income-tax Authorities, the respondents, while Mr. Muhammad Amin Butt, Advocate, appeared as amicus curiae on the request of the Court.
3. The controversy subject-matter of these petitions arose as after the addition of subsection (7-A) to section 50 of the Income-tax Ordinance, 1979, by Finance Ordinance 1981 (Ordinance No. XXIV of 1981) 'with effect from lst of July, 1981, the Income-tax Officers advised the Local Bodies, namely, the Municipal Corporations, Municipal Committees, District Councils, Town Committees and Cantonment Boards in Punjab, the advance tax be got collected at the rate of 3 per cent of the amount for which a contract for collection of Octroi or cattle market fee etc. Was awarded, as auction or sale of these rights of property would attract provisions of subsection (7-A) of section 50 of the Income-tax Ordinance which obliges local authority to receive and collect advance tax from the successful bidders. (See D. O. No. J-9/IAC (S & C) 82-83/591 Lahore, dated 12-12-1982, Annexure 'B' with W.P. No. 3664/83. It appears that the Second Secretary of the Central Board of Revenue issued on 4th July, 1983, instructions to the Commissioner of Income-tax, Faisalabad, on the subject of withholding of tax under section 50 (7-A) in cases of Octroi/Toll Contracts awarded through public auction. The relevant part of these instructions reads as under :- "(1) For the sake of uniformity, deduction of tax under section 50(7-A) in all cases of awarding of contract for collection of octroi-tolls etc. May be ensured.
It has been noticed that departmental officials visit the site of suck auctions and make their presence felt. This practice being unnecessary, and detrimental to the interests of the contract awarding, authorities, may be given up- At times the sum for which contracts are awarded may be substantial, in such cases usually the party to whom the contract is awarded, deposits a certain percentage of the contract money as low payment. The balance being payable in instalments during the currency of the contract in case the Department insists on the withholding of advance tax on the total value of contract straightaway it may cause genuine hardship to the contractors.
It has therefore, been decided that collection of tax may be made as and when payments are received by the contract awarding authorities. This staggering of deduction would mitigate to a large extent the problem of cash flow of the contractors."
Similar instructions were admittedly issued to all the income tax authorities in the Province. As a follow up auction Government of the Punjab, Local Government Rural Development Department issued the memo, dated 9th July, 1983 to the Chairman of the Municipal Corporations, Municipal Committees, Town Committees and District Councils in the Punjab. This Memo. No. SOVI (LG) 1-6/83 dated 9-7-1983 reads as under :- "The question regarding payment of 3% advance tax by the Local Councils on Octroi/Toll Tax etc., to the Income-tax Department has been examined in consultation with the Federal Government. The Federal Government have shown its inability to abolish the condition of recovery of 3% advance tax on octroi/toll tax etc. They have, however, agreed that the payment of the advance tax may not be enforced in lump sum. The collection of tax be made as and when payment of instalments are received by the contract awarding authorities at the rate of 3% of each instalment. The Federal Government have also informed that the Income-tax Department have been directed not to send Income-tax Officials to the site of auction.
You are advised to act accordingly."
In compliance of the aforesaid instructions, the Income-tax Officers required the Chairman of the Local Bodies to collect advance tax and the contractors to pay advance income-tax alongwith the payment of instalments. It may be added that in some of the cases on account of non-payment and noncollection, the Chairman or the Chief Officers of the Local Body concerned were notified that they will be treated as assessee in default under section 92 (2-A) of the Income-tax Ordinance. These actions and the issuance of notices by the Income-tax Authorities lead to the filing of these constitution petitions by the Local Bodies and the contractors who were successful in obtaining leases for the collection of tax and fees by offering highest bids that the public-auctions.
4. According to Income-tax Authorities, any person making sale by public auction of any property belonging to Government or a Local Authority, is required under section 50 (7-A) of the Ordinance to collect advance tax computed on the basis of sale price of such property from the person to whom such property is sold, and in view of the definition of term ''property" adopted by the Supreme Court of Pakistan in the case of Hamdard Dawakhana v. Commissioner of Income tax, PLD 1980 SC 84, Octroi/Toll contracts are covered by the said provision. The Income-tax Officer, Sahiwal in his order, dated 16-6-1983 in the case of Municipal Committee, Pakpattan (Annexure 'A' of W.P.
No. 2689/83) remarked as under :- "The provisions of section 50 (7-A) are attracted when a local authority makes sale of any property by public auction. The word property has been explained in Chamber's the Twentieth Century Dictionary as under Property : "right of possession, employing ; and c : ownership."
Word property has been explained as under:-- "Owning, being owned, thing owned, possession (s)."
Webster's New Twentieth Century Dictionary Unabridged ; the word 'property' has been explained as under :- "(1) the right to possess, use, and dispose of something, ownership:
(2) the thing or things owned ; holding or possessions collectively."
Funk and Wagnalls Standard Dictionary : the word property has been explained as under :- "The legal right to the possession, use, enjoyment, and disposal of a thing."
The word property has very elaborately been explained in Black's Law Dictionary as under :- "Property:- In the strict legal sense, an aggregate of rights which are guaranteed and protected by the Government. Fulton Light, Heat & Power Co. v. State, 65 Misc. Rep. 263, 121 N. Ys. 536. The term is said to extend to every species of valuable right and interest. More specifically, ownership ; the right to dispose of a thing in every legal way to possess it, to use it, and exclude everyone else from interfering with it The exclusive right of possessing, enjoying, and disposing of a thing. The highest right a man can have to anything."
''The word is also commonly used to denote everything which is the subject of ownership, corporeal or incorporeal, tangible or intangible visible or invisible, real or personal everything that has an exchangeable value or which goes to make up wealth or estate. It extends to every species of valuable right and interest, and includes real and personal property, easements, franchises, and incorporeal hereditaments............
" Goodwill has also been held as property as it has been held in Howell v, Bowden, Tax Giv. App. 368 S.W. 2d 842, 848 : "Goodwill as Property."
The above clearly shows that rights of a local authority to collect octroi, fee etc. Through check, posts etc. Fall within the meaning of property. Such property was sold out by Municipal Committee, Pakpattan through public auction for a limited period of one year (financial year 1982-83). The provisions of section 50 (7-A) are attracted in such a case."
Mr. Muhammad Ilyas Khan, Advocate, for the Income-tax Authorities, besides relying upon the aforenoted definitions and the instructions issued by the authorities, referred to the meaning of the term "property" given in Black's Law Dictionary as quoted above. The precise argument of Mr. Ilyas Khan was that the beneficial interest vesting in the local bodies i.e. The power and the legal obligation to collect taxes and fees stands transferred in favour of the contractors through public auctions and such a transfer amounts to "sale of property by public auction", hence the provisions of section 50 (7-A) of the Ordinance fully and squarely apply. In support of this submission reliance was placed on Walter M. Hort v. Commissioner of Internal Revenue 313 U.S 28 and Commissioner of Internal Revenue v. P.G. Lake 356 U.S. 260 I have gone through these cases. These are of no assistance as the provision of law dealt with in these cases has nothing in common with section 50 (7-A) of the Ordinance.
5. Mr. Imtiaz Javed, Advocate, appearing for the petitioners argued that the mode of collection of a tax does not change the character of the amount collected. The amount collected by the contractors under the arrangement of lease is revenue of the Local Authority and is part of the local fund and as such, it cannot be termed as a "property" belonging to- local authority. Referring to section l2 (2) (b) of Income-tax Ordinance, lie emphasised that the term "property" has been used alongwith the term "estate and source of income." These terms carry distinct and separate meaning throughout the Ordinance and that "source of income" cannot be confused with the term "property" He also referred to the provisions of the Punjab Local Government Ordinance, 1979 to show that the property of the local bodies is dealt with separately from the local fund of the local bodies.
6- Malik Muhammad Nawaz, Advocate, appearing for the petitioners drew attention to the various rules framed under the Local Government Laws dealing with the "properties" held by the local bodies. Both the learned counsel referring to the rules framed under the Local Government Laws enforced from time to time argued that in these cases the contractors have been authorised to collect tax and fees on behalf of the local bodies and such an arrangement cannot be treated a "sale transaction" as one of the essential ingredients of sales is that the property or the interest sold passes to the buyer completely and absolutely which according to them is not the position obtaining in the present lease contracts granted in exercise of statutory powers.
7. Mr. Ijaz Hussain Batalvi appearing for the contractors argued that under the contracts granted to the highest bidders these bidders undertake a liability to pay irrespective of the fact that they make out a profit ultimately or run into a loss. Referring to the conditions and the covenants of the contracts executed between the parties and the relevant rules, he pointed out that the contracts are liable to be cancelled if the instalments are not paid or if there is any breach of the conditions of the contracts or the relevant rules. He added that income will arise alter adjustment of instalments paid and the expenses incurred in the amount collected over a period of one year, and as no income accrues at the time of execution or the contract, there is no question of demanding income-tax which is a tax on income. He argued that what is purchased by a highest bidder is a liability and not a property, so it would be illegal to charge tax on the liability incurred and that incurring of liability cannot be treated as a "sale of property". Reference was made also to Wharton's Law Lexicon wherein while defining property, it is mentioned that there must be a definite interest and a mere expectancy as distinguished from a conditional interest is not a subject of property. According to him, what a highest bidder purchases is a mere expectancy to earn income, so such a transaction would not fall within the mischief of subsection (7-A) of section 50 of the Ordinance.
8. Mr. Muhammad Amin Butt, amicus curiae, analysing section 50 (7-A) of the Ordinance argued that to attract the provisions of this subsection, there has to be (i) sale by auction in) of property the) belonging to local bodies and if these three things co-exist then advance tax on basis of sale of such property is recoverable from the person to whom such property was sold. He argued that as section l2 of the Ordinance is a modification of section 42 of Income-tax Act, 1922, it will be appropriate to refer to the cases on section 42 to determine the meaning to be assigned to the word "property" used in section l2 or section 50 (7 A) of the Ordinance. Reference was made to Commissioner of Income-tax v. Currimbhoy Embrahim and Sons Ltd: (1933) I ITR 341 wherein interpreting section 42 of Act 1922, it was observed as under : - "I am disposed to think that the word "property" should be confined to immovable property, and for this reason, that section 6 of the Act which deals with the various classes of income subject to tax includes income from "property" and ' business" and it seems to me that it is income arising under those two headings which are dealt with in section 42. It is clear from the provisions of section 9 that "property" as used in section 6 is confined to immovable property, and I am disposed to think that it ought to have the same meaning in section 42, but it is not essential for the purposes of my judgment to go as far as that. I am at any rate of opinion that "property" in section 42 means something tangible, and not a mere chose in action."
Relying on this observation he argued that the terms "asset or source of income" though used in section l2 of the Ordinance have not been added along with the term "property" in section 50 (7-A) and as such the intention of the law giver is manifest that the term "property" is not to be understood to mean "asset or source of income" as was explained by the Bombay High Court in the case of Currimbhoy Embrahim & Sons Id the opinion of the amicus curiae, a contractor by entering into a lease arrangement acquires a source of income or at best an asset or a right but does not acquire any property and that, in any case, the arrangement of acquiring a source of income does not amount to sale under which ownership in the property passes. To demonstrate his point of view reference was made to Calcutta Electric Supply Corporation Ltd. v. Commissioner of Income-tax West Bengal (1951) 191TR 406. He also made reference to the West Pakistan Octroi Rule, 1964 to demonstrate that the interest which is transferred under the contracts does not amount to "sale" as the local bodies retain complete control over the activity of collection of taxes to be carried out by a contractor. So such an arrangement cannot amount to conveying or transferring the interest absolutely as happens in the case of a sale. Mr. Muhammad Amin Butt argued that a tax is a compulsory extraction and the authorization or the adoption of a method to collect the revenue I e.
Taxes or fees cannot attract the concept of absolute transfer of property. Referring to Muhammad Amir Khan v. Controller of Estate Duty PLD 1962 SC 335 and Whitney v. The Commissioner of Inland Revenue, 10 Tax Cas. 88 (H L), it was submitted that there are three stages in the imposition of a tax, (/) declaration of a liability, (ii) assessment i.e. Quantification of the tax payable and (Hi) mode of recovery. This third stage i.e. The recovery may be arranged by the competent authority through its own agencies and arrangements or through other arrangements permitted by law. The recovery through grant of leases does not affect a change in the character or the nature of the amount collected. It remains a tax, a compulsory extraction and, as such, cannot be termed as a property belonging to a local body. He pointed out that the relevant rules talk of grant of leases as premises or the posts where the taxes are to be collected are handed over to the contractors. It will, therefore, be seen that according to Mr. Amin Butt, Advocate, leasing out the collection of taxes and fees does not amount to sale of property and, as such, the arrangements entered into by the local bodies with the contractors do not fall within the purview of section 50 (7-A) of the Ordinance.
9. From the arguments of the learned counsel for the parties it is apparent that the applicability of section 50 (7-Aj of the Ordinance in the instant cases depends on the meaning to be assigned to the terms "sale*', "property" and "belonging" used in the said subsection. This subsection reads as under:- "(7-A) Any person making sales, by public auction, of any property to the Government, a local authority, a public company, a foreign association declared to be a company under clause (16) of section 2, or a foreign contractor or consultant or consortium shall collect advance tax, computed on the basis of sales price of such property and at the rate specified in the First Schedule, from any person to whom such property is sold, and credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the payable by the person purchasing such property for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessm ent year, if any, in which the "said date" as referred to therein, falls, whichever is the later.'
The term "property" is not defined in the Income-tax Ordinance. The well- recognized principle as laid down by Rowlat, J. In Brandy Syndicate v. Inland Revenue Commissioner (1921) 1 K B 64 is "that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment.
There is no equity about a tax There is no presumption as to a tax nothing is to be read in, nothing is to be implied. One can only look fairly at the language used". Again, Romer L. J. Observed in the case of McKenni v. Eaton-Turner (1936) 1 KB 1, that "if the tax is clearly imposed, the omission of the Legislature to provide means for its collection must be regarded as an unfortunate omission and nothing else. It is only where a doubt arises whether the tax is chargeable by a certain section that the absence of machinery for collection becomes a relevant consideration."
It is also true that the historical background of a statute may serve as a useful guide in ascertaining the intention of the Legislature, but only if the words used are capable of more than one interpretation ; but it has never been held that Courts may depart from the plain meanings of the words employed in a statute because of its historical background. The Court remains under an obligation to adhere to the plain meaning of the words employed in it. These are some of the important relevant principles of interpretation of statutes and in the light of these, the true intention of the Legislature has to be ascertained. It is pertinent to point out at this stage that the observations of Beaumont, C. J. Of the Bombay High Court in the case of Currimbhoy Embrahim and Sons with regard to the term "property" were obiter dicta. This very case went to the Privy Council and the observations recorded by Sir George Rankin AIR 1936 PC 1 in this respect read as under :- "In their Lordships' opinion the word 'property' as it occurs in the subsection (1) of section 42 cannot be given so special a colour, but is used as an ordinary English word to be taken in its usual signification subject to the context provided by the rest of the subsection. There is nothing in the subsection to exclude from its scope any of the six classes of income mentioned in section 6 of the Act."
In the same judgment, on the question whether the interest income accrued or arose to the Nizam through or from property in British India, their Lordships agreed with the view expressed by the learned Chief Justice of the Bombay that word "property" as used in subsection 8 (1) of section 42 means something tangible ; though, for reasons therein given, they cannot accept his suggestion that it is confined to immovable property or to building or lands appertaining thereto.
The word "property" used in section 4 (3) of the Income-tax Act, 1922, was also considered in the case of Messrs Hamdard Dawakhana v. Commissioner of Income-tax, Karachi. The observations being instructive may be quoted.
"There is consensus of judicial opinion that the term' property', as used in clause (/), is a term of the widest import and subject to any limitation or qualification which the context might require, signifies every possible interest, which a person can acquire, hold and enjoy. It is comprehensive enough as to cover even business, cash deposits, securities and other such things. There is nothing in the language of the clause in question to restrict in any manner the normal and accepted meaning of the word 'property* so as to exclude business from its connotation. Although the restricted view of the term property was taken in the cases reported as In re : Lachman Das Narainda (AIR 1925 All. 115) and Commissioner of Income-tax v. Thevara Patasaia (AIR 1926 Mad.
949), in which it was observed that income derived from profits in trade or business, even though the income be dedicated to an idol or for other charitable purposes, was not income derived from trust property, yet this view was not approved in subsequent cases ; and the matter was set at rest by their Lordships of the Judicial Committee in Trustees of Tribune Press, Lahore v. Commissioner of Income tax (AIR 1939 PC 208) and All ladin Spinner's Association of Mirzapur v. Commissioner of Income-tax (AIR 1944 P C 88), by holding that even the stock and good will of business as well as its organization and undertaking, besides the fluctuating stock in trade, were covered by the terns 'property'."
It is true that the additional words "any estate or source of income" were inserted to fill in the lacuna arising from the Privy Council decision and section l2 of the Ordinance also uses all the three terms "estate, property and source of income" yet there appears no compelling reason for holding that the term "property" used in the subsection in question was intended to mean only tangible property, building or lands appertaining thereto and not intangible property or that the word "property" was not used in its ordinary and accepted meaning as pointed out in the case of Messrs Hamdard Dawakhana i.e. The term signifies any possible interest which a person can acquire, hold or enjoy.
10. The matter does not end here because even by giving the term its comprehensive meaning, can it be said that the revenues or the local fund of the local bodies is a property or an interest belonging to or a business of a local body and whether granting of the right to collect taxes and fees imposed by it amounts to sale. To my mind, the answer to be returned to this question must be in the negative. A tax is a compulsory extraction or a contribution imposed by a sovereign authority or required by the general body of the subjects or citizens. The power to levy a tax has to be founded in a statute whereby authority is given to levy and collect the compulsory contribution in the good of the citizens or for running the administration. Such a compulsory contribution in the modern times has to be distinguished from the extraction or realisation of valuable property money from the subjects by the despots for running the administration, or perpetuating their rules or spending the same at their whim or pleasure treating the valuables recovered as their absolute property. The power to impose taxes or fees, a sovereign attribute has been delegated to the local bodies under the Local Government Laws enforced from time to time and the rules framed thereunder. The Punjab Government Ordinance, 1979, in its section 136 (Chapter XIII) deals with Local Taxation. Section 137 provides that a local council subject to the provisions of any other laws may, and if directed by Government, shall levy all or any of the taxes enumerated behind second schedule. This schedule enumerates the items in respect of which taxes may be imposed by union councils, zilla councils and urban local bodies. The proceeds of art taxes, tolls, fees, rates and other charges levied by the local council under the Ordinance are to be placed to the credit of the local fund formed under subsection (1) of section 126. Rules have been framed detailing the rates of taxes, tolls and fees the leaving realisation and collection thereof. For instance octroi duty levied and realised is covered by West Pakistan Municipal Committee Octroi Rules, 1964. Cattle Market Fee is dealt ' with by the Cattle Market Rules, 1969 Likewise, cantonment board levies taxes under the authority of Cantonment Act, 1924, and the leasing out of the collection of any octroi, terminal tax, toll tax etc, is permitted by section 83 of the Act. The property of the local bodies is dealt with by section 134 of the Local Government Ordinance. Separate rules have been framed for dealing with the properties of the local bodies. Reference may be made to West Pakistan Local Councils (Property) Rules, 1962 and West Pakistan Municipal Committee (Property) Rules, 1962. The scheme of the Local Government Laws enforced from time to time and the Local Government Ordinance, 1979, clearly spell out that the sources of revenue constituting local fund cannot be confused with the properties held and owned by the local bodies. To my mind, the power and the right to impose tax, duty or fee and its collection cannot be termed as a property or a beneficial interest belonging to or vesting in a local body. It is pertinent to note that local bodies have the legal authority to collect taxes, fees imposed and levied under the law. These bodies can collect and recover these taxes by themselves and instead of collecting the same directly through their own arrangements, law permits the making of the other arrangement i.e. Collection through its appointed agents. The method of appointing the agents is through public auction to the highest bidder. Would this arrangement change the nature of the amount to be collected ? Can the revenues, source of local fund be termed as "property." To my mind, substance what is being assigned is the power to collect the tax imposed or the fee levied, on behalf of the local body. The substance of what is received is the present value or the presently assessed amount of the taxes payable which the contractor would otherwise obtain in the future. In short, consideration is paid for the right to receive future income. In other words, by entering into the arrangement of lease, contractor is involved in an activity yielding income.
11. Be that as it may, even if the realisation or collection of taxes, tolls and fees can be treated as a beneficial interest held by a local body, still the contracts awarded and the arrangement entered into cannot be termed as sale of such a beneficial interest. A sale contemplated by the subsection in question implies that there is a purchaser who buys and the local body which sells. "Sale"
Undisputedly in general implies an exchange for money and is corerlative to purchase. It signifies a substitution of the purchaser for the seller in that the title, rights and interest vesting in the thing sold come vest absolutely and for all intent and purposes in the purchaser. The purchaser is then the master of the thing sold in his own right without any interference from the seller. In Calcutta Electric Supply -Corporation Ltd. v. Commissioner of Income-tax. West Bengal the word "sale" was considered and it was held that compulsory acquisition of a1 plant by the Government can never be said to be a "sale" as that word is ordinarily used in the English language. In the case of King v.
England (1864) 33 L J Q B 145 (N S), the Court of Queen's Bench had to consider the meaning of the word "sale". Goods belonging to the defendant having been distrained for rent on a third person's premises, they were only apprised, and the landlord, instead of actually selling, took them at the condemned price in satisfaction of the rent and then handed them as a gift to the plaintiff, upon which the defendant took possession of them, It was held that there was no sale so as to divest the defendant of the property in the goods, and he had, therefore, a right to take them.'' In Commissioner of Income-tax Bombay v. Metro-Goldwyn Mayer {ladin) Ltd. AIR 1939 Bom. 257 the parties were referred to as vendor and vendee in the agreement executed by them. The agreement started by reciting that the vendor owned exclusive rights in India, among other places, of the motion pictures therein mentioned and that the vendee desired to purchase the vendor's motion picture right in the territory on terms and conditions thereinafter set forth. The vendor then sold to the vendee for a period beginning from the date thereof and ending on 31st August, 1982 sole and exclusive rights to re-sell exhibit, lease and otherwise exhibit throughout the territory all motion pictures productions controlled or purchased by the vendor. Then the vendor entered into contracts under which he had to perform various acts which were intended to have the effect of making the user of these productions by the vendee profitable. He had, for instance, to supply negatives and positives, to maintain a publicity department in New York and to supply news items, and so forth. Then the vendee entered into various contracts under which he had to provide sufficient sales force and had to pay seventy per cent of the takings to the vendor and had to deliver accounts and make remittance weekly with an allowance for bad debts. He was also to take necessary steps to protect the property of the vendor in respect of this arrangement. The leamed Judge observed that in his view the arrangement between the parties was not a partnership and that it was something in the nature of a licence and certainly not a "sale" out and out. It was observed that "taking the document as a whole, it seemed to me perfectly plain that there is a business connexion between these two companies, under which he non-resident company is to acquire seventy percent of the takings which, I think, must necessarily involve that profits or gains are made by him from or through this business connexion,"
The arrangement of collection of taxes awarded to the contractors, is specifically termed "a lease".
The word "lease" has been used, as rightly pointed out by Mr. Muhammad Amin Butt, Advocate, because the posts, the markets or the places where the revenue is to be collected are to be handed over to the successful bidder. The so-called beneficial interest and the power to collect taxes does not stand transferred to the contractors as they can neither increase the rate of tax nor can use the posts, the markets or the places handed over in the manner which they think more beneficial or proper for realisation of the taxes and fees. The activity undertaken by a contractor is kept under complete control as is apparent from the rules on the subject. To illustrate this point, reference may be made to rules 225 and 226 of the Municipal Committees Octroi Rules, 1964. Rule 225 (8) and Rule 226 may be quoted:- Rule 225(8).-"If the lessee fails to pay the ten percentum deposit or any instalment or within the time specified in sub-rule (7), or charges Octroi at a higher rate than that prescribed in the Octroi Schedule for the Municipal Committee, or commits any breach of the provisions of these rules or any term or condition of the agreement which may be entered into by him with the Municipal Committee in regard to the lease of Octroi, the Municipal Committee may, without prejudice to any other action which it may be entitled to take against the lessee under the law or these rules forfeit his security deposit and forthwith cancel his lease."
Rule 226 --Where the collection of Octroi in any municipality is leased under this Chapter :
(s) notwithstanding anything contained in these rules, all Octroi posts within the municipality shall operate under the control of the lessee and all amounts collected as octroi shall belong to the lessee;
(h) the lessee shall maintain an account of the receipts of the Octroi in the form prescribed by the Municipal Committee and such accounts shall at all reasonable times be open to inspection by the Chairman or any officer authorised by him in this behalf ; {c) the lessee and every person employed by the lessee as his agent for collecting the octroi shall be deemed to be persons appointed to collect the octroi under these rules and shall exercise all powers, and be subject to all responsibilities attaching to persons appointed to collect the octroi under these rules ;
(d) in respect of such municipality :
(i) the rules contained in Chapter III (except rule 13), Chapter XIX (except rules 146 and 147), Chapter XX, Chapter XXI (except rules 164, 166 and 169), Chapter XXII, Chapter XXVI and Chapter XXVIH (except rules 218, 219) shall not apply ;
(ii) the rules contained in Chapters XXIV, XXV and XXVII shall apply with such modifications as may be specified by the Controlling Authority with the approval of Government;
(iii) the powers and functions of the Municipal Committee in regard to the composition of octroi under Chapter XIV shall be exercised by the lessee ;
(iv) the refund of any amount (required to be made, under rule 219) charged in excess by the lessee shall be made by the lessee ; and
(v) the Controlling Authority shall make, in respect of any staff that may have been employed by the Municipal Committee for the collection of Octroi, such arrangements, as may appear to it necessary."
In view of these rules, it cannot be said that the power or the authority to collect taxes stands fully transferred to the buyer so as to bring into existence the relationship of a seller and a buyer. If the arrangement contemplated by the rules for the collection of taxes and fees through lease arrangement1 is treated as a sale transaction, that would be violative of the scheme contemplated in the rules and will result in putting the contractor out of the control of the local bodies.
12. Before parting with this judgment, the objection raised by the learned Advocate for the Income- tax Authorities that the constitutional jurisdiction cannot be invoked as the petitioners have the remedy of revision under section 138 of the Income-tax Ordinance, may be attended to. This objection is without merit and is hereby repelled. It is debatable in the circumstances of this case that the revision affords efficacious and adequate remedy. Even if the revision provided under section 138 provides an adequate remedy still where the impugned order is patently without jurisdiction a relief in constitutional jurisdiction cannot be refused on the ground that an alternate remedy is available. See Nagina Silk Mill v. Income-tax Officer PLD 1963 SC 322, Premier Cloth Mills v.
The Sales Tax Officer 1972 SGMR 257, The Murree Brewery Co v. Pakistan PLD 1972 SC 279, S.A. Haroon v. Collector of Customs, Karachi PLD 1959 SC 177, and Hydri Ship Breaking Industries Ltd v. Sind Government and others NLR 1982 Tax 65.
13. The net result of the above discussion is that the leases awarded for the collection of Octroi duty, tolls and fees do not amount to 'sale' and, as such, provisions of sections 50 {7-A) of the Income- tax Ordinance have no application to these contracts. The demand of advance tax made and sought X. Io be enforced by the Income-tax Authorities in each of these cases is, therefore, held to be without lawful authority and of no legal effect. These (petitions are, accordingly, accepted with costs.