MIAN NAZIR AKHTAR J. -This judgment will dispose of Writ Petitions No.1199 of 1987, 1411 of 1987, 1553 of 1987, 332 of 1988, 333 of 1988, 334 of 1988, 335 of 1988, 336 of 1988 and 519 of 1988 as common questions of law are involved in all the cases.
2. The petitioners have assailed memorandum No. F.10 (12)-NS.3/83-II dated 29.12.1986 issued by the Central Directorate of National Saving, Islamabad, respondent No3, and memorandum No. DM(A & A)-87-7635 dated 16.6.1987 issued by the Assistant Director (.H.Q.), Directorate of National Savings, Multan Region, Multan, respondent No.4, pertaining to compulsory deduction of Zakat from the petitioners-market committees.
3. The learned counsel for the petitioners contends that the market committees constituted under the Punjab Agricultural Produce Markets Ordinance, 1978, are local authorities within the meaning of the law. Hence, they are exempt from payment of Zakat by virtue of the provisions of section 2 (xxiii) of the Zakat & Ushr Ordinance, 1980. He submits that the functions being performed by the market committees are essentially those of the Government which were to be performed by the local authorities under the Punjab Local Government Ordinance, 1975, but by a special statute have been assigned to market committees. He submits that the market committees are not trading organizations but have been set up for the better regulation of sale and purchase of agricultural produce and are local authorities within the meaning of section 3(28) of the General Clauses Act.
He places reliance on the Deputy Managing Director, National Bank of Pakistan etc. Vs Ata ul Haq (PLD 1965 S. C. 201) and Chief Secretary, Government of Punjab, Lahore, versus Commissioner Income Tax (PLD 1976 Lahore 258) in support of his contention. On the other had, Sheikh Muhammad Hanif, learned counsel for the respondents submits that the market committees are not local authorities visualized under section 2 (xxiii) of the Zakat Ushr Ordinance, 1980. He submits that the bar contained under section 4 regarding establishment of Market Committees in the notified area indicates that the Market Committees are not local authorities. Lastly, he submits that the Market Committees have to pay property tax and other taxes under section 21 sub-sections
(16) and (17) of the Ordinance 23 of 1978. According to the learned counsel, Zakat, being a tax, is covered by the provisions of section 21 sub-section (17) of the Ordinance.
4. Zakat is payable, under the law, by a person who is Sahib-e-nisab as defined under section 2 clause (xxiii) of Zakat & Ushr Ordinance, 1980. The relevant part is reproduced below: - S.2 "(xxiii) 'Sahib-e-Nisab' means a person who is liable to pay Zakat or Ushr under this Ordinance, but does not include-
(a) the Federal Government, a Provincial Government or a local authority:...."
The expression "local authority" has not been defined in the Ordinance. Hence, we have to fall back upon the definition of local authority contained in section 3 clause (28) of the General Clauses Act, which reads as follows:- "local authority" shall mean a municipal committee, district board, body of port commissioners or other authority legally entitled to, or entrusted by the Government with, the control or management of a municipal or local fund; "
The above definition Takes it clear that any authority entitled to, or entrusted with, the control or management of a local fund qualifies to be called a local authority The Market Committees have their own local funds and are entitled to control or manage it. The relevant provision relating to the Market Committees' fund is section 20 of the Ordinance No. IV of 1980, which is reproduced as under:- "20. Market Committee funds: (1) All moneys received by a market committee shall be deposited into a fund to be called the market committee fund. All expenditure incurred by a market committee under or for the purposes of this Ordinance shall be defrayed out of the said fund and any surplus remaining after meeting such expenditure shall be invested in such manner as may be prescribed.
(2) (a) Every market committee shall, out of its fund, pay to the Government the cost of any special or additional staff employed by the Government in consultation with the market committee for giving effect to provisions of this Ordinance in the notified market area.
(b) The Government shall determine the cost of such special or additional staff and shall where the staff is employed for the purposes of more market committees than one, apportion such cost among the committees concerned in such manner as they think fit. The decision of the Government of determining the amount payable by any market committee shall be final.
(3) Every market committee shall, out of its fund pay to the Government such percentage of its income as may be prescribed, to be credited to a fund maintained and operated upon by the Government for purposes common to or in the overall interests of the market committees."
A Market Committee can adopt its annual budget under Rule 25 of the Agricultural Produce Markets (General) Rules 1979 to utilize the Market Committee Fund for various purposes specified under section 21 of the Ordinance. The sum left over is invested in accordance with the rule 44 of the Rules which provides that the balance shown in the balance sheet shall, after audit, be transferred to the reserve fund of the market committee, or be invested in such manner as may be approved by the Government. The purposes essentially relate to the maintenance and improvement of the market area. The market committee's funds, being local funds, are subject to audit by the Examiner, Local Fund Account, Punjab.
5. The market committees were originally constituted under the Agricultural Produce Markets Act, 1939. The object of the said Act was stated in these words:- "Whereas it is expedient to provide for the better regulation of the purchase and sale of agricultural produce in the Province of West Pakistan and for that purpose to establish markets and make rules for their proper administration, in the manner hereinafter appearing."
Under the said Act, market committees were established under section 7 of the Act, within the notified area declared under section 4 of the Act. Every market committee was to be a body corporate by such name as the Government may specify in the notification establishing it, having perpetual succession and a common seal, may sue and be sued in its corporate name and be competent to acquire property, to lease, sell or transfer the property. It could also appoint salaried officers and servants who were deemed to be public servants within the meaning of section 21 of the P.P.C. All moneys received by the market committees were to be paid into a fund called "market committee fund" as laid down under section 20 of the Act, which could be expended for the purposes specified under section 21 of the Act. The fund established under the Act of 1939 was a local fund falling within the purview of rule 7-17, Civil Service Regulation (Punjab), Volume II, as intimated by F.D.U.O. No.3109/1046-S. F.r-44, dated 13th September, 1944. For purposes of investment in cash certificates, market committees established under the old law were declared as "local bodies" in terms of clause (d) of the exemption to sub-rule (5) of rule 2 of the Post Office 10 years Defence Saving Certificate Rules, vide letter No. F-23-3/43, dated the 30th August, 1943, issued by the Deputy Director General, Posts and Telegraphs Department to the Secretary to the Government of the Punjab, Revenue Department. Thus, the committees established under the old Act have been performing their functions as local authorities within the meaning of law.
6. In the year, 1975, the Punjab Local Government Ordinance was enforced on 3rd of April, 1975. The functions of establishing farm markets, market areas, market committees etc. Were to be performed by the local councils under the said Act. The market committees were to be constituted under section 159 of the said Ordinance. Section 156 provided that all moneys received by the market committees should be paid into a fund called the market fund. The market committees already established under the Act of 1939 were deemed to have been constituted under the Punjab Local Government Act, 1975. However, sections 156 to 163 contained in chapter 18 of the Punjab Local Government Ordinance were repealed by virtue of section 39 of the Punjab Agricultural Produce Markets Ordinance, 1978, enforced on 13.12.1978. Thereafter, the market committees could be established under the provisions of the Ordinance. The said Ordinance contains almost similar provisions with some variations here and there as were contained in the Act of 1939. The preamble in the new Ordinance is similar to the one contained in the old Act. Section 4 of the Ordinance relates to declaration of certain areas as notified areas by the Government through a proper notification. Sub-section (3) of section 4 provides that after the date of issue of such notification and on the establishment of market committees under Sec.7, no local authority shall, within the notified market area, set up, establish or use any place for the purchase or sale of the agricultural produce except under and in accordance with the terms and conditions of a licence granted under the provisions of this Ordinance: Section 5 says that the market committee concerned shall be the authority to issue licence to a dealer under this Ordinance and to renew such a licence subject to such rules as the Government may make in this behalf. Section 7 provides that the Government shall by notification establish a market committee for every notified market area. It further stays that the market committees constituted under the Agricultural Produce Markets Act, 1939, and the Punjab. Local Government Act, 1975, shall be deemed to have been constituted under this Ordinance. Section 8 relates to constitution and section 9 to the duties of the market committees.
The market committees are charged with the duty of enforcing the provisions of the Ordinance and the rules and bye-laws made thereunder in the notified market area and when required by the Government to establish a market providing such facilities for persons visiting it in connection with the purchase, sale, storage, weighment, pressing and processing of agricultural produce as the Government may from time to time direct. The market committee is authorised under this section to issue licences to brokers, weighmen, measurers, surveyors, warehousemen etc. For carrying on their occupation in the market area in respect of the agricultural produce and to renew, suspend or cancel such licences. Section 10 relates to the period of office of the members, which is three years from the date of appointment. Section 14 provides that every market committee shall be a body corporate by such name as the Government may specify in the notification establishing it, shall have perpetual succession and a common seal may sue and be sued in the corporate name, and shall, subject to the provisions of section 26, be competent to acquire and hold property, both moveable and immoveable, to lease, sell or otherwise transfer any property vested in it, and to enter into contracts for purposes for which it is established. By virtue of section 16 of the Act, a market committee, subject to any rules made by the Government, is competent to employ such persons as may be necessary for the management of the market, including seasonal and part- time staff and to pay such persons their salaries and wages as it may think fit with powers to control, remove and punish them. Section 20 relates to the market committee funds, which has been reproduced in para 4 above. Section 21 relates to the purposes for which the fund may be expended. The same is reproduced below: -
21. Purposes for which the fund may be expended:Subject to the provisions of Section 20 the market committee fund shall be expended for the following purposes only:-
(i) acquisition of land for the establishment of market or markets;
(ii) maintenance and improvement of the markets including construction of storages, plat-forms, small pullies, culverts and roads;
(iii) construction and repair of buildings which are necessary for the purposes of establishing such markets and for the health, convenience and safety of the persons using them;
(iv) collection and dissemination of information regarding all matters relating to marketing in respect of the agricultural produce and propaganda in favour of agricultural improvement and thrift;
(v) providing conforts and facilities, such as light, sanitation, shelter, shade, parking accommodation and water for the persons, draught cattle, vehicles and pack animals coming to the market and similar other purposes;
(vi) provision of facilities such as cleaning sets, plants for grading, standardisation packing and processing of agricultural produce;
(vii) construction of cold storages, warehouses and godowns for the benefit of growers;
(viii) establishment of feeder markets;
(ix) provision and maintenance of standard weights and measures;
(x) pay, leave, compassionate and medical allowances, gratuities, pensions, honoraria and contributions towards leave allowances or provident fund of the persons employed by market committee;
(xi) payment of interest on loans that may be raised for purposes of the market and the provisions of sinking fund in respect of such loans;
(xii) expenses incurred in auditing the account of market committees;
(xiii) payment of travelling allowances to the members and employees of market committees and members of the Board of Arbitrators as prescribed;
(xiv) payment of allowances and honoraria to the Administrator of the superseded market committee;
(xv) contribution towards the market committees fund subject to rules framed thereunder;
(xvi) payment of property tax and houses tax;
(xvii) payment of other taxes as covered bv appropriate Acts/Ordinance: (xviii) engagement of a lawyer;
(xix) subject to previous sanction of the Government:-
(a) purchase of load carrying vehicles for bringing agricultural produce of farmers to the market;
(b) agriculture implements and machinery to be distributed amongst growers of the market area;
(xx) holding of agriculture melas, fairs, exhibitions and shows for agriculture publicity and propaganda amongst farmers for improved production;
(xxi) advance of loans on interest to other market committees in the district for carrying out development projects, with the previous sanction of the Government.
(xxii) training of members and staff of market committees and members of the Board of Arbitrations; (xxiii) purchase/sale of essential agricultural commodities; (xxiv)any other purpose that may be declared by notification by the Government for improvement of agriculture and agriculture marketing, which is calculated to promote the general interest of the farmer."
7. From the above provisions of the law, it is evident that the functions performed by the market committees are essentially those of the Government, which originally were performed through the market committees under the Agricultural Produce Markets Act, 1939 and later entrusted to local councils under the Punjab Local Government Ordinance, 1975. Thereafter these functions were again entrusted to the market committees through a special statute known as the Punjab Agricultural Produce Markets Ordinance, 1978. To all intents and purposes, the market committees are local authorities enjoying powers to appoint officers and servants, regulate their services, levy tax, acquire property, maintain its. Own independent fund adopt its budget and expend money therefrom the fund for the purposes specified in the Act. Hence, it clearly falls within the definition of the local authorities as given under section 3 clause (28) of the General Clauses Act.
8. In the case of the Deputy Managing Director, National Bank of Pakistan, Principal Office, Jinnah Avenue, Dacca and others versus Ataul Haq (PLD 1965 S.C. 201), it was held that the National Bank of Pakistan was not a local authority. While dealing with the meaning of the expression "local authority", it was held as under:- "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 local fund. Local authorities are bodies exercising within limited territories included in a Province, powers which belong 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 power of making bye-laws, of imposing taxation, and of maintaining and administering a local fund."
Judged from the above standard laid down by the Hon'ble Supreme Court, the "market committees definitely qualify to be called local authorities. In the case of Chief Secretary, Government of the Punjab, Lahore versus Commissioner of Income Tax, Lahore Zone, Lahore (PLD 1978 Lahore 258), Thai Development Authority was declared to be a local authority within the meaning of the definition contained under section 7 (28) of the General Clause Act, 1897. After referring to the provisions of the Thai Development Act, 1949, the Court came to the conclusion that the Thai Development Authority was competent to maintain its own fund known as the authority fund and to utilize it to meet charges in connection with its function under this Act including salary or other remunerations of the employees of the authority. It was noted that the Thai Development Authority was competent to levy taxes within its local area with the previous sanction of the Provincial Government. It was also noted that the Thai Development Authority was body corporate having perpetual succession, could sue and be sued. Thereafter it was held as under: - "Within its own local area, it exercises considerable powers of local Self-Government. It may frame schemes for the development of a local area under its control and provide of civic amenities for the inhabitants of the area. It has its own local fund to manage. It prepares its own annual budget for submission to the Provincial Government. It may levy taxes in its own local area with the sanction of the Provincial Government. It may also make bye-laws. We have, therefore, no hesitation in holding that the Thai Development Authority is a local Authority as defined in section 3
(28) of the General Clauses Act."
The reasoning contained in the above quoted precedents leaves no manner of doubt that the market committees are also local authorities for the purposes enumerated in the Ordinance.
9. The argument raised by the learned counsel for the respondents that the bar contained in sub- section (3) of section 4 of the Ordinance implies that the market committees were not local authorities is wholly misconceived. It rather impliedly says that the market committees are local authority. The expression "no local authority" shall, within the notified area, set up, establish or use any place for the purchase or sale of the agricultural produce or purchase, sell store or process such agricultural produce except in accordance with the terms and conditions of a licence granted under the provisions of this Ordinance clearly means that no other local authority except the market committee shall do the needful. The other argument raised by the learned counsel for the respondents that the market committees being liable to pay property tax as well as the other taxes are also liable to pay Zakat is equally devoid of force. Market committees, being local authorities, do not fall within the purview of "Sahib-e-nisab" as laid down under section 2 (xxiii) (a) of the Zakat & Ushr Ordinance, 1980, and may be liable to pay other taxes covered by the appropriate Act or Ordinance, but are not liable to pay Zakat.
10 For the foregoing reasons, the writ petitions are allowed and it is declared that the market committees are local authorities within the meaning of section 2 clause (xxiii) (a) of the Zakat & Ushr Ordinance, 1980, and are not liable to pay Zakat. Consequently, memorandum Nos F.10 (12)- NS.3/83-II dated 29.12.1986 and DM (A & A)-87-7635 dated 16.6.1987 issued by respondents No.3 and 4 respectively are declared to be without lawful authority and of no legal affect. The parties are left to bear their own costs.