IMAM ALI G. KAZI, J.--The Income-tax Officer, Salary Circle XI, Central Zone-D, Karachi, the respondent No. 1 herein, did not consider the Karachi Dock Labour Board to be a Local Authority' to be entitled to exemption from payment of Income-tax under Item No. 88 of the Second Schedule to the Income Tax Ordinance, 1979. He, therefore, issued them a notice to file return of their income earned by them by way of interest on their fixed deposits.
2. The Government of Pakistan, in exercise of their powers conferred by section 3 of the Dock Labour Workers (Regulation of Employment) Ordinance, 1973 prepared a scheme for Regulation of dock workers for the Port of Karachi and notified it in the official Gazette on 3rd December, 1973. The scheme was entitled as the "Karachi Dock Workers (Regulation of Employment) Scheme, 1973".
3. Para 2 of the Scheme contains the objects of the Scheme viz. To ensure "greater regularity of employment for dock workers and to secure that adequate number of dock workers is available for the efficient performance of dock work, expeditious is and economic turn round of ships and speedy transit of the goods through the Port". In order to implement the Scheme, the Federal Government was authorised to constitute a Board to be called as the Karachi Dock Labour Board.
The Board was to be constituted of 14 members to be appointed by the Federal Government, four members, out of them representing the Federal Government, five members representing the Dock Workers to be nominated by the Collective Bargaining Agents of such workers, two members representing the Karachi Stevedore Conference Limited to be nominated by the said Conference, two member representing Pakistani Ship Owners to be nominated by their Association recognised by the Federal Government and one member representing foreign shipping interest to be nominated by the Overseas Investors of Chamber of Commerce and Industries. The Board under clause 7 of the Scheme was required to perform the following functions;
(a) ensuring the adequate supply and the full and proper utilization of the registered dock workers for the purpose of facilitating the rapid and economic turn-round of vessels and the speedy transit of goods through the Port;
(b) regulating the recruitment and entry into and the discharge from this Scheme of dock workers and the allocation of registered dock workers in the register and those in the reserve pool to the registered employers;
(c) determining and keeping under review, in consultation with the Administrative Body, the number of registered employers and registered dock workers from time to time on the registers or records and the increase or reduction to be made in the numbers in any such register or record;
(d) keeping and maintaining the employers' register, entering or re-entering therein the name of any employer and, where circumstances so require, removing from the register the name of any registered employer either at his own request or in accordance with the provisions of this Scheme;
(e) keeping and maintaining from time to time such registers or records as may be necessary of dock workers, including any registers or records of dock workers who are temporarily not available for dock work and whose absence has been approved by the Administrative Body and, where circumstances so require, removing from any register or record the name of any registered dock worker either at his own request or in accordance with the provisions of this scheme;
(f) grouping or re-grouping of all registered dock workers into such groups as may be determined by the Board in consultation with the Administrative Body and thereafter reviewing the grouping of any registered dock worker on the application of the Administrative Body or of the registered dock worker;
(g) making provision for the training and welfare of registered dock workers including medical services in so far as such provision does not exist apart from this Scheme;
(h) fixing and recovering from registered employers and other beneficiaries contributions in respect of the expenses of this Scheme;
(i) making provision for health and safety measures in places where registered dock workers are employed in so far as such provision does not exist apart from this Scheme;
(j) maintaining and administering the Dock Workers Welfare Fund and recovering from all registered employers contribution towards the fund in, accordance with the rules of the Funds made under clause 51;
(k) maintaining and administering a provident fund and a gratuity fund and any other welfare schemes for the registered dock workers; and
(l) borrowing or raising money and issuing debentures or other securities and; for the purpose of securing any debt or obligation, mortgaging or charging all or any part of the property of the Board."
According to clause 8 of the Scheme, the Board so constituted is made responsible for dealing with all matters of policy and in particular to deal with the allowing; "(a) fix the number of dock workers to be registered under various categories;
(b) increase or decrease the number of registered dock workers in any category on the register from time to time as may be necessary after a periodical review of the registers and anticipated requirements;
(c) sanction the temporary registration of a specified number of dock workers in any category for a specified period;
(d) accept registration of newly, licensed stevedores on the employers register;
(e) prescribe forms, records, registers and statements required to be maintained under this Scheme;
(f) determine the wages, allowances and other conditions of service, and refix the guaranteed minimum wages in a month after review;
(g) fix the rate of levy under sub-clause (1) of clause 50;
(h) fix the rate of contribution to be made by the registered employers to the various welfare schemes and measures administered, operated or adopted by the Board;
(i) appoint, abolish or reconstitute committees under clause 34;
(j) sanction the annual budget;
(k) appoint officers and staff as required for the furtherance of this scheme; .
(l) make recommendations to the Federal Government about any modifications in this Scheme;
(m) endeavour to settle disputes about which a request for adjudication has been made by the parties concerned;
(n) issue directions for the speedy out put by the registered dock workers and turn-round of ships;
(o) sanction the opening of accounts in such scheduled banks as it may direct and the operation of such accounts by such persons as it may from time to time nominate;
(p) appoint before the commencement of each financial year a recognised team of auditors to audit its accounts; and
(q) delegate such of its powers or functions to the Chairman and other officers as it may deem fit."
4. The petitioners by their letter dated 8-1-1986 addressed to the Commissioner of Income-tax Central Zone-D, Karachi applied for the grant of exemption certificate under section 14(2) of the Income Tax Ordinance, 1979. The Income-tax Officer Salary Circle-XI, Central Zone-D, Karachi by his letter dated 7-10-1986 did not treat the petitioners as non-profit making organization and refused to treat them as a `Local Authority. Accordingly, he intimated them that he intended to bring the income derived by the petitioners from interest on their fixed deposits for the purpose of levying and collecting taxes under section 30 of the Income Tax Ordinance, 1979. The petitioners then approached the Government of Pakistan, Ministry of Communications (Ports and Shipping Wing) to grant them a certificate declaring them as `Local Authority' so as to seek exemption from payment of tax. The Director of Port and Administration, Government of Pakistan, Ministry of Communication (Ports and Shipping Wing) by his letter dated 12th October, 1987 (Annexure C-6) addressed to the Commissioner of Income-tax Central Zone-D, Karachi requested that the action in the matter be deferred as that Ministry was trying to sort out the difficulties. Further, he also issued a certificate, dated 6th July, 1987 certifying that the petitioners were established for the purposes of regulating employment of dock workers to ensure their efficient, expeditious and economic turn-round of ships and vessels and speedy transit of goods to the Port. It was also certified that the petitioners enjoyed maximum autonomy in their activities, their accounts required to be scrutinised by the Government and the Board was not a profit earning organization. The Income-tax Department granted them sometime to resolve such dispute at the Government level but ultimately the Income-tax Officer by his letter dated 11-10-1987 informed the petitioners that no further extension would be granted and directed them to file return for the assessment years 1983-84 to 1986-87 and issued notice under section 61 of the Income-tax Ordinance for compliance by 22-10-1987. The petitioners took exception to such notice and filed the present petition under Article 199 of the Constitution of Islamic Republic of Pakistan.
5. Mr. Liaquat Merchant, the Advocate for the petitioners contended that the petitioners can be considered to be a "Local Authority" as they are required to perform functions like those mentioned in sub-clauses (g) to (k) of clause 7 of the Scheme. The Board is also empowered to deal with certain matters as are enumerated in sub-clauses (g), (h) and (j) of clause 8 of the Scheme which clearly establishes that the petitioners are required by law to operate a fund which is in the nature of "Local Fund".
PLD 1964 Dacca 721, PLD 1965 Dacca 122, AIR 1970 Calcutta 176; PLD 1977 Kar. 152 and AIR 1963 SC 1890.
6. Mr. SA. Sarwana, Advocate appearing for Government of Pakistan, the respondent No. 3 herein, supported the contentions of Mr. Liaquat Merchant Advocate for the petitioners and further relied on a case reported in 1930 Pakistan Labour Cases 476 and contended that the petitioners are required by clause 52 of the Scheme to manage the Karachi Port and Dock Workers Welfare Fund which can be treated to be. "Local Fund" and on that account too the petitioners who have to administer such fund are to be taken to be a `Local Authority'.
7. Nobody appeared for the Income-tax Officer and Commissioner for Income-tax, the respondents Nos. 1 and 2 in the petition.
8. The short point that needs consideration in this case is whether the petitioners are a "Local Authority" and entitled to exemption from levy and collection of income-tax.--- Both the Advocates who have appeared for some of the parties as mentioned above have contended that the petitioners in view of performance of their duties and functions under the statutory regulations are in fact a "LOW Authority" as defined in the General Clauses Act, 1897.
9. In order to appreciate the contentions of the Advocates of the patties, it is necessary to examine clause (28) of section 3 of the General Clauses Act, 1897 that reads as follows: "Local Authority" shall mean a Municipal Committee District Board, body of Port Commissioner or other Authority legally entitled to or entrusted by the Government for the control or management of a Municipal or a Local Fund."
"652. The expression local fund denotes:
(i) revenues administered by bodies which by law or rule having the force of law come under the control of the Government, whether in regard to the proceedings generally, or to specific matters such as sanctioning of their budgets, sanction to the creation or filling of particular appointments, the encashment of leave, pension or similar rules;
(ii) the revenues of any such body which may be specially notified by the Government as such."
PLD 1965 SC 201 while dealing with such aspect of the case, it was observed as follows: "The expression `Local Authority' has been used in statutory phraseology in the Indian Sub- continent for a great many years, and is always understood to mean an Authority which is entrusted with the administration of a local fund. Local Authorities or bodies exercising within limited territories including in a Province, powers which belonging to the Province but which by statute are delegated to the Local Authority. A Local Authority is ordinarily charged with functions of self-Government and has powers of making bye-laws, of imposing taxation, and of maintaining and administering a local fund:'
10. In view of above a "Local Authority" shall be an Authority that performs certain functions within the frame-work of their jurisdiction which are in the nature of a Local Government, under a statute or under powers delegated to it by a Government; an authority that is able to frame its own bye- laws and is competent to levy and collect taxes and administer its fund so generated.
11. Mr- Liaquat Merchant, the Advocate for the petitioners as it will be seen from his arguments mentioned hereinabove wants us to hold the petitioners to be a "Local Authority" as by sub-clauses
(g) to (k) of clause (7) of the Scheme which enumerates the functions of the Board (petitioners) are required to perform functions of a local Government. These functions relate to making of suitable provision for training and welfare of registered dock workers; fixing and recovering contributions from employers and beneficiaries to meet the expenses; making provision of health and safety measures in places where the dock workers are expected to work; maintaining and administering a welfare fund for dock workers and maintaining and administering provident and gratuity funds for the registered dock workers. None of the functions of the petitioners mentioned above are in the nature of functions of any Government.
12. The other argument that the petitioners are empowered to deal with fixation of rate of levy in respect of contribution to be made by the beneficiaries and contributions required to be made and registered employers and sanctioning of their budget and, therefore, they are controlling the "Local Fund" and are entitled to be treated as "Local Authority" is also not tenable in view of the decisions relied upon by him. Such powers clearly do not contemplate imposition of any taxes which will constitute a fund to be administered by the Board. The fund that maybe raised by the petitioners is not a "Local Fund" as defined in the Treasury Rules.
13. The petitioners being conscious of situation as is mentioned hereinabove had themselves applied to the Government of Pakistan for being notified as a "Local Authority" and filed this petition before any decision was taken by the Government in this respect.
14. No other ground has been advanced in support of this petition and in view of the above, we dismiss this petition with no order as to costs. This decision shall, however, in no way cause any impediment to the Government of Pakistan in exercise of their powers under section 14(2) of the Income Tax Ordinance, 1979 to add and include the petitioners in Schedule 11 of that Ordinance.