1. ' ABDUL QADEER CHAUDHRY, J.--The petitioner is a statutory trust responsible for managing the affairs of Karachi Port. The petitioner was constituted under Karachi Port Trust Act, 1886. The petitioner frequently has to get hold unserviceable and surplus stores belongings to it disposed of.
2. For this purpose the petitioner appoints auctioneers under contracts who sell the goods by public auction. During the period from 1-7-1981 to 30-6-1983 articles and goods belonging to the petitioner were sold by the auctioneers engaged by the petitioner. According to the petitioner the auctioneers paid to the petitioner the sale price of the goods sold by them after deducting their commission. At the instance of the Respondent No,2 the petitioner submitted a list of auctioneers to the respondent. The Respondent No,2 by letter dated 22-11-1983 required the petitioner to deposit the tax under Section 50(7A) of the Income Tax Ordinance 1979 (hereinafter referred to as the Ordinance) calculated at 3% of the amounts of sale price of the goods belonging to the petitioner which were auctioned by the auctioneers after 1-7-1981. The case of the petitioner is that the auctions were held by the auctioneers and not by the petitioner and the responsibility for collecting the tax under Section 50(7A) of the Ordinance lay on the auctioneers and not on the petitioner. The Respondent No,2 did not accept this contention of the petitioner and the petitioner had to made a representation to the Respondent No,1 who also rejected the representation of the petitioner on the ground that the legal obligation to deduct and deposit taxes remains on the petitioner. The petitioner has therefore filed this Constitutional Petition.
2. We have heard the learned counsel for the parties. Learned counsel for the petitioner submits that the plain reading of Section 50(7A) of the Ordinance makes it clear that the petitioner was not responsible and it was the liability of the auctioneer. In order to appreciate the contention of the petitioner it is necessary to refer to the relevant section 50(7A) which reads as under:- "Any person making sale, by public auction of any property belonging 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 sale mice 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 tax payable by the person purchasing such property for the assessment year commencing on the 1st 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.
3. ' At first sight the contention of the learned counsel appears to be sound as the words are quite clear which lays down that any person making sale by public auction of any property belonging to the Government etc. Shall collect advance tax computed on the basis of sale price of such property, but learned counsel for the Respondent has submitted that the interpretation is to be made in such a way as not to negate the intention of the main Act itself. It is contended by the learned counsel for the Respondent that the principal is liable if his agent has not deducted any amount. Section 50 of the Ordinance is to be read with Sections 51 and 52 of the Ordinance.
4. According to Section 51 every person deducting or collecting tax under section 50 shall, at the time of making payment of the sum from which tax has been deducted, or at the time of the collection of the tax, as the case may be, furnish to the person, to or from whom such payment or collection has been made, a certificate to the effect that tax has been so deducted or collected and such other particulars as may be prescribed.
5. ' A bare perusal of this Section would show that an auctioneer has to furnish to the person to or from whom such payment or collection has been made a certificate to the effect that tax has been so deducted. According to Section 52 where any person fails to deduct or collect or having deducted or collected, as the case may be, fails to pay the tax as required by, or under, section 50, he shall, without prejudice to any other liability which he may incur under this Ordinance, be deemed to be an assessee in default in respect of such tax.
6. ' The cumulative effect of these provisions is that any person who sells by public auction any Government property must deduct advance tax and then he would issue a certificate from whom such deduction has been made and if he fails to deduct then he would be deemed to be an assessee in default in respect of tax.
7. ' Learned counsel for the petitioner has stated that all these provisions would show that only the auctioneer is responsible. On the other hand learned counsel for the respondent has stated that these provisions would be interpreted in a way so that the machinery of the Income Tax Act may be workable and nobody could avoid the income tax.
8. ' In order to elucidate further we would revert to the definition of person given in Section 2(32) of the Ordinance and it includes an individual, a firm, an association of persons, a Hindu undivided family, a company, a local authority and every other artificial juridical person prescribed by rules under this Ordinance and 'principal officer' used with reference to a local authority, or a company or any association of persons, includes managing director, secretary, treasurer, manager, agent or accountant by whatever designation known, of the authority, company or association and any person connected with the management or administration of the local authority, company or association upon whom the Income Tax Officer has served a notice of his intention of treating him as the principal officer thereof (Section 2(34)). Under Section 50(4)(a) of the Ordinance any person responsible for making any payment in full or in part including a payment by way of an advance to any person on account of supply of goods or for service rendered to or the execution of a contract with the Government, or a local authority or a company or any foreign contractor or consultant or consortium shall, where the total value in any financial year, of goods supplied or contract executed exceeds fifty thousand rupees, or of service rendered exceed ten thousand rupees deduct advance tax at the time of making such payment, at the rate specified in the First Schedule and credit for the tax so deducted in any financial year subject to the provisions of Section 53 be given in computing the tax payable by the recipient for the assessment year....
9. ' The reasonable conclusion would be that the principal would deduct the advance tax and he would be liable if his agent has not deducted the amount. Auctioneers were appointed by the petitioner company. They were agents of the company and therefore if their agents have not deducted the amount then they would be liable for the payment of the same. They cannot escape the liability because the Income Tax Act itself provides to collect the income tax and make all possible means to recover the income tax which has escaped their notice or an assessee has failed to make the payment. The provisions of the Ordinance cannot be frustrated by shifting the burden on the agent if the principal has failed to perform his legal duties. Even in this petition the petitioner has not named its agents who had auctioned the goods. It was the duty of the petitioner to instruct the auctioneers to collect the advance tax so that the mechanism of taxation could be workable. The petitioner who was the principal cannot be permitted to defeat the provisions of law.
10. As stated above the petitioner was duty bound to instruct his agent to deduct the tax in advance and if the auctioneers have not deducted the advance tax, the petitioner would be liable. An explanation was added in Section 50(7A) and the explanation reads as under: "For the purposes of this subsection, sale of any property includes the awarding of any lease to any person, including a lease of the right to collect octopi duties, tolls fees or other levies, by whatever name called."
11. ' Learned counsel for the respondent has referred to judgment given in C.P. No,D-462 of 1984 wherein it has been observed that this explanation is in the nature of a declaratory provision and these provisions are not charging section. They only provide a mechanism for collection of revenue but the liability for payment of tax has to be determined in independent proceedings under the Income Tax Act and the amount so collected is liable to be refunded partly or wholly in case it is found to be in excess of liability or where no liability to pay tax is incurred. As such it was observed that the explanation shall have retrospective effect.
12. ' Learned counsel for the respondent has referred to the case of Messrs Escorts Ltd. v. Income Tax Officer, Lahore reported in 1975 PTD 50 which lays down that in interpreting a section of a Taxing Act which deals merely with the machinery of assessment and does not impose a charge on the subject, that construction should be preferred which makes the machinery workable.
13. ' Similar view was taken in AIR 1940 Privy Council 124.
14. ' In Income Tax Reports Vol. 36 (1959) page 449 it has been held that in the case of payments of income chargeable under the head 'salaries' the expression "person responsible for paying" in Section 18 of the Income Tax Act, Section 50 of the Ordinance, if the employer is a company, means the company itself including the principal officer thereof. The fact that the explanation to section 18 to that effect was included in the section by an amendment does not mean that the expression did not have that meaning before amendment.
15. ' For the aforesaid reasons I am of the opinion that the petition has no force. The same stands dismissed with no order as to costs.
16. ' MAMOON KAZI, J.--I have had the advantage of going through the udgment proposed to be delivered in this case, but I regret my inability to agree with the conclusions of my learned brother, Abdul Qadeer Chaudhry, J. Before I state my reasons for the same, the facts of the case may first be summarised as follow: ' The petitioner is a statutory trust and is responsible for managing the affairs of Karachi Port. It was constituted under the Karachi Port Trust Act, 1886 and is a body corporate. The petitioner has to appoint auctioneers for disposal of its surplus and unserviceable goods. It is averred in the petition, that between 1st uly, 1981 and 13th June, 1983, some articles and goods belonging to the petitioner were sold by their auctioneers. The auctioneers paid to the petitioner the sale price of the goods after deducting their commission. Thereafter, the Central Board of Revenue, the respondent No,2 asked the petitioner to submit a list of auctions held on their behalf during the four years ending 30th June 1983 which was duly furnished by the petitioner. The respondent No,2 then wrote a letter dated 22nd November 1983 which required the petitioner to deposit tax under section 50, subsection (7A) of the Income-tax Ordinance, 1979 (hereinafter referred to as "the Ordinance") which was calculated at the rate of 3% on the amounts recovered from sales conducted by the petitioner after the 1st July, 1981. The petitioner sent reply to the respondent No,2 denying its liability to pay the tax since the auctions were held by the petitioner's auctioneers and not by the petitioner. It was stated by the petitioner in the reply that the responsibility to collect tax under section 50 (7A) of the Ordinance lay on the auctioneers and not on the petitioner. The petitioner then sent its representation to the Member (Income-Tax), Central Board of Revenue, Government of Pakistan on 8-3-1984 which also failed to find favour as according to the respondent, obligation to deduct and deposit tax was on the petitioner. Under such circumstances this petition was filed.
17. ' The contention of Mr. All Athar, the learned counsel for the petitioner before us, was that according to sub-section (7A) of section 50 of the Ordinance, the responsibility to collect tax from purchaser of the goods clearly lay on the person making sales by public auction and not on the person to whom the goods belong. To appreciate the argument, it is necessary to reproduce subsection (7- A) which reads as under:- "(7-A) Any persons making sale, by public auction, of any property belonging 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 sale 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 tax 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 8 applies, the assessm ent year, if any, in which the "said date" as referred to therein, falls, whichever is the later."
18. ' A plain reading of subsection (7-A) makes it clear that this subsection refers to three persons, namely, (1) the person making sale by public auction, (ii) the person to whom the goods auctioned belong and (iii) the person to whom the goods have been sold. The liability to pay tax is on the purchaser of the goods and the responsibility to collect such tax has been placed clearly on the person who makes a sale by public auction and not on the person to whom the goods belong.
19. Besides subsection (7-A) of section 50 section 52 of the Ordinance is also relevant as according to this section "where any person fails to deduct or collect, or having deducted or collected, as the case may be, fails to pay the tax as required by, or under section 50, he shall, without prejudice to any other liability which he may incur under this Ordinance, be deemed to be an assessee in default in respect of such tax". A perusal of section 52 of the Ordinance shows, that section 52 cannot be read in isolation but it has to be read together with section 50 of the Ordinance which is clear even from the language used in section 52. The language used by the Legislature clearly suggests that the liability under section 52 has been placed on the person who fails to deduct or collect tax, or having deducted or collected, fails to pay the same as required by section 50. Now, referring again to section 50, subsection (7-A) thereof, which alone is relevant here, shows, that the person required to collect, deduct or pay tax is the person making sale by public auction. Such person, according to section 52 of the Ordinance, shall be deemed to be an assessee in default in respect of such tax. The argument advanced by Mr. Ali Athar, therefore is not without force.
20. ' The contention of Mr. Shaikh Haider, the learned counsel for the respondents, however, has been that the object of section 50 of the Ordinance is to prevent persons, earning income from escaping assessm ent of tax. The counsel has further argued, that section 50 is a machinery and not a charging section since it only provides for mechanism for collection of tax and the liability to pay tax is to be determined under separate and independent proceedings. The learned counsel, therefore, has further contended that the provisions of section 50 should get a liberal construction to achieve the object of the Income Tax Ordinance. The learned counsel has also referred to the words "payer" and "person responsible" occurring in section 50 of the Ordinance and has sought to derive support from the meaning assigned to them in the said section. Reliance in this respect has also been placed by the learned counsel on the case-law. The cases cited by him are, Messrs John Patterson and Co., (India) Ltd. v. Income-tax Officer, District V(A), Calcutta and others 36 I T R 449, Commissioner of Income-tax Bengal v. Messrs Mahaliram Ramjidas AIR 1940 P.C. 124 and Messrs Escorts Ltd. v. Income-tax Officer, Lahore 1975 PTD 50. Reliance was also placed on an unreported D.B. Judgment of this Court in Rehman Corporation v. Income-tax Con- missioner Circle A, Mirpurkhas and another C.P. No,D-462 of 1984.
21. ' Although there cannot be any cavil with the contention raised by Mr. Shaikh Haider, but the intention of the Legislature is always gathered from the language it uses in the enactment, whatever be the consequences which may ensue. As I have already said, according to the language used in subsection (7-A) of section 50, the responsibility to collect advance tax is on the person making sale by public auction and not on the person to whom the auctioned goods belong, it, therefore, cannot be understood as to how the language of subsection (7A) can stretched so as to make the petitioner liable. Reference in this respect may be made to the Interpretation of Statutes and General Clauses Act, by Bindra, fourth edition, page 324, where it is said: "Where the language of an Act is clear and explicit, we must give effect to it, whatever may be the consequences, for in that case the words of the statute speak the intention of the Legislature. If any statutory provision is capable of only one construction then it would not be open to the Court to put a different construction upon the said provision merely because the alternative construction would lead to unreasonable or even absurd consequences. The question of consequences and consideration of policy would be relevant only where the provision sought to be constructed is capable of two constructions. In such a case the Court is not concerned with the results which may ensue from giving to the plain meaning of the words used by the Legislature. If these results are unfortunate, it is for the Legislature to take action to remedy the defects of the law as enacted, it is not for the Courts to usurp the functions of the Legislature and by straining the meaning, and ignoring the clear terms, of the law to seek to evade consequences which, in the opinion of the Court, may prove illfraught. The effect of the words is a question of law.
22. ' The argument of Mr. Shaikh Haider is, therefore, very hard to accept.
23. ' The learned counsel for the respondents, next, referred to clause (a) of subsection (4) of section 50 of the Ordinance and further argued that subsection (7-A) must be interpreted together with subsection (4) (a). It is necessary to reproduce subsection (4)(a) which reads as under: "(4) Notwithstanding anything contained in this Ordinance,- "(a) any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person (hereinafter referred to respectively as "payer" and "recipient"), on account of the supply of goods or for service rendered to, or the execution of a contract with the Government, or a local authority, or any foreign contractor or consultant or consortium shall, where the total value exceeds fifty thousand rupees, or deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessm ent year commencing on the first day of July next following the said fmancial 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."
24. ' The learned counsel also referred to the words "payer" and person responsible" used in section 50 which according to him place the responsibility to collect tax under sub-section (7A) on the petitioner.
25. ' According to clause (a) of subsection (4) of section 50, "payer" and "recipient" respectively, is the person responsible for making any payment and the person receiving the payment. The provisions of subsection (4)(a) only refer to person who is responsible for making payment to any other person on account of the supply of goods or for service rendered or the execution of a contract etc According to the said provisions, the "payer" has been made responsible to deduct advance tax while making payment to the "recipient". A perusal of the said provisions clearly makes the distinction between subsection (4)(a) and sub section (7A) of section 50. In case of the former, the liability to pay advance tax on the person receiving the payment and the responsibility to deduct or collect t is on the person making the payment, but in the case of the latter, the liability to pay tax is on the person purchasing the goods and the responsibility to collect t is on the person making sale of such goods by auction. Similarly, the meaning assigned to the words "person responsible" in sub-section(9) of section 50 is with reference to the context in which they have been used. Since such words do not appear in subsection (7-A), any reference to them in the instant case would be wholly irrelevant.
26. ' Next, coming to the cases referred to by Mr. Shaikh Haider, in the case of John Patterson & Co.
27. (India) Ltd., the question was as to the interpretation of the words "person responsible for paying" appearing in section 18 of the Indian Income-tax Act. It was held by the Calcutta High Court that such words occurring in section 18 of the Income-tax Act, if the employer is a company, would mean, the company itself including the principal officers thereof. It was accordingly held, that the notices and certificates for recovery of tax from the company, which had failed to deduct tax from salaries paid to an employee, issued to the principal officers of the company without the name of any particular officer being given were valid. In the Privy Council case, referred to by Mr. Shaikh Haider, the question was as to the interpretation of section 34 of the Indian Income-Tax Act. It was held by the Privy Council, that section 34, although it is part of a taxing Act, imposes no charge on the subject and deals merely with the machinery of assessment, therefore, in interpreting provisions of this kind, the rule is that that construction should be preferred which makes the machinery workable, ut res valeat potties Quam preheat. The same rule was reaffirmed in the case of Messrs Escorts Ltd., decided by the Lahore High Court. Similar observations can also be found in the unreported case decided by the Division Bench of this Court reference to which has already been made above. The question before the D.B. In that case was whether the "Explanation" which was added to subsection (7-A) of section 50 was to be given retrospective effect ' Although it cannot be denied that subsection (7-A) of section 50 is a machinery provision and the Courts should always prefer that interpretation which makes the machinery workable, but such a rule would apply only when the language used in a statute is capable of more than one interpretation. The acceptance of the interpretation as proposed by Mr. Shaik Haider, would clearly amount to doing violence to the clear and unambiguous language of subsection (7-A).
28. ' My learned brother in the judgment proposed to be delivered has also sought support from the definition of the term "person" in clause (32) of section 2 of the Ordinance which says: "Person" includes an individual, a firm, an association of persons, a Hindu Undivided family, a company, a local authority and every other artificial juridical person."
29. ' With utmost respect, it may be said, that "person" no doubt, includes and individual, a firm, an association of persons, a company, etc., but clause (32) when read with sub-section (7A) makes only such person responsible for collection or deduction of advance tax, who makes sale by public auction of any property belonging to another person. The former may be an individual, a firm, a company, etc., therefore, in my view, the definition of "person" does hardly make any difference vis- a-vis the responsibility fixed by the Legislature to collect or deduct tax under sub-section (7A) of section 50. Such responsibility has clearly been placed on the person making sale by public auction of property belonging to another. Such person, therefore, cannot be the petitioner.
30. ' I am, therefore, of the view that the notice issued by the respondent No,2 against the petitioner under subsection (7A) of section 50 of the Ordinance is without lawful authority and of no legal effect.
31. ' In view of the difference of opinion, this matter may be placed before the Humble Chief Justice for referring it to the third judge. SALEEM AKHTAR. J.--On difference of opinion between the two learned Judges of this Court this petition has been referred to me. The only question involved is the interpretation of Section 50 (7-A) of the Income Tax Ordinance 1979 which reads as follows:- "Any person making sales, by public auction, of any property belonging 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 provision of Section 53 be given in computing the payable by the person purchasing such property for the assessm ent 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."
32. ' The petitioner is a statutory Trust managing the affairs of the Karachi Port as provided by Karachi Port Trust Act, 1886. Respondent No,2 drawing attention of the Chief Account's Officer K P T to the provision of section 50 (7-A) of the Ordinance asked him to furnish particulars of sale of non- serviceable goods belonging to the petitioner by public auction or public tender between 1-7-1982 and 30-6-1983. After collecting this information from the petitioner, respondent No,2 by his letter dated 6-12-1983 demanded Rs,2,47,740 as advance tax which the petitioner ought to have collected from persons who purchased by public auction and by public tender the goods belonging to the petitioner. The petitioner refuted its liability on the plea that auction was held by the auctioneer and not by the petitioner. In this regard the petitioner made representation to the Central Board of Revenue but without any favorable result.
33. ' The two ably written judgments have taken contrary views inasmuch as according to my learned brother Abdul Qadeer Chaudhry, J., section 50 (7-A) is a machinery section therefore, it should be interpreted to ensure realization of tax. From this point of view it was held that the auctioneer was the agent of the petitioner and as he failed to recover tax, the principal will be liable for the default of its agents. On the other hand my learned brother Mamoon Kul, J., has held that section 50 (7-A) has fixed liability to collect tax on the auctioneer and not on the petitioner therefore, it is not liable.
34. ' A perusal of section 50 (7-A) makes it clear that its object is to ensure recovery of Income Tax in respect of sale of property by public auction which belongs to the Government, local authority, a public company, a foreign association or consortium. This provision indicates that the property should have been sold by public auction belonging to the aforestated specified persons and that the duty of collecting advance Income Tax is on the person making the sale. Mr. Shaikh Haider the learned counsel for the respondent has contended that as section 50 (7A) is not a charging but machinery provision it should be liberally interpreted to ensure that recovery of tax is made and no part of it escapes. It is true that the machinery provision of a fiscal statute should be interpreted in such a manner that recovery is not frustrated or adversely affected. But it does not mean that to achieve this object one can travel beyond the realm of law and do violence to language and intention of the statute. The machinery can be extended only to the extent it is permissible under law. In this attempt one cannot override the rights of other parties only because a recovery has to be made. Such provisions have their own limitations and they are to be found within the statute itself. Mr. Shaikh Haider has referred to Commissioner of Income Tax Bengal v. M/s. Mahitram Ranjidas AIR 1940 PC 124 and M/s Escort Ltd. v. Income Tax Officer Lahore 1975 PTD 50. There can be no cavil with the rule of interpretation of a machinery provision of a fiscal statute as enunciated by these authorities that it should be liberally construed to ensure recovery. In this regard reference can be made to West Punjab Province v. K. B. Amiruddin and others PLD 1953 Lah. 433 where Kaikaus, J. (as he then was) laid down the principles of interpretation as follows:- "The provisions of a taxing Act may be broadly divided into two categories those that determine the liability to be taxed and those that provide the machinery for its assessment and realization.
35. With respect to the first category the rule of interpretation is that the charge must be imposed by clear and unambiguous language and in cases of doubt a construction beneficial to the subject should be adopted. With respect to the second category, however, the rule of construction is entirely different. If the liability to be taxed be clear the machinery sections ought to be interpreted so as to enable the Crown to realize the tax unless there be compelling reasons to the contrary. In Drummonds v. Collins 6 TC 525 Lord Parker of Waddington, dealing with a machinery section said, "This section is a collecting section and not a taxing section and there is no reasons in principle why it should not receive a liberal interpretation." In Commissioner of Income Tax, Bengal v. Messrs Mahaliram Ramjidas AIR 1940 PC 124 their Lordships were dealing with section 34 of the Income Tax Act, which relates to a case where income had escaped assessment and they said, "Section 34, although it is part of a taxing Act, imposes no charge on the subject, and deals merely with the machinery of assessm ent. In interpreting provisions of this kind the rule is that that construction should be preferred which makes the machinery workable, UT res vale at potties quam pereat." In M. S. Gopalaswa mi Chettiar v. Secretary of State AIR 1933 Mad. 748 there was an apparent difficulty in the realization of the tax if the relevant section was literally construed. Curgenven, J., said: "I think that the liability to duty being clear, it would be improper to conclude that no means exist of realizing it unless the language of the Act compelled such a view." Even if a case arose which in fact was not in the contemplation of Legislature, if the words used in the Act be capable of covering the case the provision should be so interpreted as to include that case. For this we may refer to Scott v. Legg (1876) 2 Ex. D 39 relied upon by Curgenven, J., in the abovementioned case, where Cleasby, J., said "It seldom happens that the framer of an Act of Parliament or the Legislature has in contemplation all the cases which are likely to arise, and the language therefore, seldom fits every possible case. Whenever the case is clearly within the mischief, the words must be read so as to cover the case, if by any reasonable construction they can be read so as to cover it, though the words may point more exactly to another case; this must be done rather than make such a case a causus omissus under the statute". The object of a taxing statute must always be to provide a machinery for realization of tax in all cases in which a liability in fact exists and to say that though liability exists the means of enforcing the liability are inadequate is to create a caususomissus which ought, as far as it is reasonably possible, be avoided."
36. ' This judgment was confirmed in K. B. Amiruddin v. West Punjab Province PLD 1956 FC 220.
37. ' Again in Lt.-Col. Nawabzada Muhammad Amir Khan v. The Controller of Estate Duty and others PLD 1%1 SC 119 Kaikaus, J, upheld the same principle and observed:- "Stress was laid during argument on the rule that statutes imposing taxes should be strictly construed. Any effort to invoke the aid of this rule in the present case is misconceived. There is a distinction between provisions which impose taxes and those which provide for the machinery by which tax is assessed and realized. The provisions relating to imposition of tax are to be strictly construed in favour of the subject so that if there be any substantial doubt it has to be resolved in his favour. But the machinery sections are to be liberally construed. If the incidence of tax be clear the machinery sections should be so construed as to make the realization of the proper tax possible. They should not be so construed as to defeat the intention of the legislature and to prevent the realization of the tax that is in fact due. The distinction stated above was recognized by the Federal Court of Pakistan in Khan Bahadur Amiruddin and others v. West Punjab Province PLD 1956 FC 220, where the learned Judges while dealing with a case under the Punjab Immovable Property Tax Act said: "The Act in question is no doubt a Taxing Act and unless the liability to be taxed is clear the interpretation should be in favour of the subject. But no question of interpretation arises regarding section 3, which, in unambiguous terms, determines the liability of the lands to be taxed. The provisions that have'to be interpreted are those relating to the machinery of the assessment and in respect of such provisions of a taxing Act the Privy Council in Income-Tax Commissioner v. Mahabi Ramjidas AIR 1940 P C 124, observed that that construction should be preferred which makes the machinery workable."
38. ' A taxing statute usually contains charging and machinery provisions. The former fixes the liability to pay tax and has to be construed strictly and where two reasonable interpretations are possible one which favours the subject should be accepted. Once the liability to tax is fixed the machinery provision comes into play. This has to be construed liberally and in a manner that the recovery is ensured. Where more than one reasonable interpretation of such provision is possible one which favours recovery should be adopted. Such extended meaning can be given only on the basis of reasonable construction of the language of the statute. Section 50 (7A) contemplates sale by public auction by a person who may be an auctioneer, the property belonging to Government, local authority, a public company and other specified persons. The subsection fixes the responsibility of the person selling such goods by public auction to collect advance tax. In case of failure to deduct tax under section S2, he shall be deemed to be an assessee in default. He would therefore, be liable to pay that tax. Where any public company, local authority, Government or persons specified in section 50 (7A) sell their goods by public auction or public tender through their officers or employees they will be responsible to collect tax and in case of failure the employer will be held liable. However the situation will be completely different where the owner of the goods employs or appoints a professional auctioneer who is completely independent from the owner and acts in his own individual professional capacity.
39. ' Mr. Shaikh Haider the learned counsel for the respondent has contended that as the auctioneer was the agent of the petitioner its failure to deduct the tax will amount to petitioner's failure and therefore, it would be responsible for the default of its agent a perusal of section 50 will show that it deals with payment of tax before assessment. There are several subsections out of which sub section (1) to subsection (7A) specifically prescribe the persons by description or designation who are required under law to collect advance Income Tax. Under subsection (1) any person responsible for payment of salary should deduct advance tax before payment of salary.
40. Subsection (2) requires the person who pays interest and securities, which income is chargeable to tax, to be responsible for collecting advance tax. Subsection (3) casts a duty on the person paying any amount to a non-resident chargeable to tax under the Ordinance to deduct the tax provided he is not covered by subsections (1) and (2) and is not liable to pay tax as an agent. Subsection (4) deals with cases where payment is made on account of the supply of goods or for services rendered or the execution of a contract with the Government or local authority, public company or foreign association declared as company foreign contractor or consultant or consortium. In such cases advance tax is to be collected by the person making payment. Under subsection (5) the Collector of Customs is authorized to collect advance tax from the importer on every import of goods. Under subsection (6) any person who collects motor vehicles tax should also collect Income Tax at the time of collecting the motor vehicle tax. Subsection (7) makes principal officer of any domestic company responsible to pay to the credit of the Federal Government tax before the company issues bonus sharps or bonus to the shareholders. Subsection (7A) makes responsible any person making sale by public auction any property belonging to the Government or local authority, a public company a foreign association foreign contractor or consultant to collect advance tax from any person to whom such property is sold. Subsection (8) deals with the effect of collection while subsection (9) defines the term "person responsible". In cases of company, local authority or association of person the principal officer and all other cases the "payee" is the person responsible. It seems clear that all those sources from where advance tax could be collected have been specified. Each subsection deals with different nature of persons from whom or by them the tax is to be collected. Subsection (7A) is also one of those cases in which the person who sells the property of Government or any local authority has been held responsible for collecting advance income tax. The definition of the word 'person' as provided in section 2 (32) and section 52 which holds the persons responsible to collect advance tax liable in case of default do not in any manner suggest that under section 50 (7A) if the auctioneer defaults to collect the tax the owner of the goods shall be held responsible to pay such tax.
41. ' In my humble view due consideration to facts of the case which will determine the applicability of section 50 (7A) has not been given. From the correspondence filed on behalf the respondents with their counter-affidavit it is clear that respondent No,2 was asking for particulars of sale by public auction and public tender. A public auction can be held through an auctioneer or by calling public tender. If sale by public auction or public tender was carried out by the officers or employees of K P T then it is the responsibility of K P T to collect advance tax. But where public auction was held by the auctioneer appointed by K P T, the auctioneer is responsible to collect the tax. Since the factual position has not been determined which seems to be confusing and disputed we declare the impugned auction of respondent No,2 as without lawful authority and direct respondent No,2 to hold inquiry whether the sale was by public auction or public tender and was it conducted by the petitioner itself or the auctioneer independently who was responsible for sale and collection of the sale price. These facts should first be determined upon which depends the liability for payment of advance income-tax. This inquiry is necessary as the letters of the petitioner filed by the respondents give a contradictory and confusing picture. After ascertaining these facts the liability for payment of advance tax may be determined in the light of the above observation.