COMMISSIONER OF INCOME TAX, COMPANIES-II And Another vs HAMDARD

1. SALEEM AKHTAR, J.---We propose to dispose of these appeals by this judgment as the facts and questions of law involved and the parties are common.

2. These appeals, with the leave of the Court, challenge the judgment of the High Court of Sindh passed in Constitution petitions filed by the respondents which were allowed and the orders of assessment passed by the I.T.O. And the orders of the 1st Appellate Authority for the assessment years 1980-81 to 1988-89 holding that the respondents were not entitled to exemption under clause 93 of the Second Schedule to the Income Tax Ordinance on estimate of the income which is derived through the sale of Sharbat-e-Rooh Afza as without lawful authority and of no legal effect.

2. 3.The brief facts are that Hakim Muhammad Saeed as sole proprietor, established the business in the name and style of `Hamdard Dawakhana' for manufacturing Tib medicines including `Sharbat' known as Sharbat-e-Rooh Afza. He created a trust on 26th September, 1953, known as Hamdard Dawakhana Trust and transferred to it his entire running business under the name of Hamdard Dawakhana with its assets and liabilities as shown in the balance-sheet as on 31st March, 1953, w.e.f. Ist April, 1953. Under the trust deed 3/4 of net profit received from the business was to be spent on development of arts and science pertaining to Tib and other charitable work while remaining 1/4 of the income was reserved by the donor himself during his lifetime and after his death to his legal heirs. For the assessment year 1954-55 Hakim Muhammad Saeed claimed exemption of 3/4 income of the trust from the charge of income tax under section 4(3)(i) of Income Tax Act, 1922. The Income Tax Officer rejected this claim. The respondent succeeded in obtaining relief from the Income Tax Appellate Tribunal and thus 3/4 income derived from commercial undertaking namely Hamdard Dawakhana Trust was exempted from charge of income tax.

3. 4.For the subsequent assessm ent years 1955-56, 1956-57 and 1957-58 the I.T.O. Refused to grant exemption. However, the Tribunal allowed the appeal in respect of these assessment years partially and held:- that Sharbat-e-Rooh Afza was not manufactured in the course of carrying out of a religious or charitable purpose, as this product was not a medicine pure and simple. The income from the sale of Sharbat--e-Rooh Afza was, therefore, not entitled to any exemption.

4. (ii)that the difference between the income returned by the assessee and the income determined by the ITO was not entitled to exemption as the same was not spent on charitable objects.

5. On all other points the Tribunal agreed with its earlier findings in respect of assessment year 1954- 55 and held that 3/4 of the assessee's income other than derived from the two items mentioned above was exempt from tax under section 4(3)(i) of the Income Tax Act, 1922. At the instance of both the parties who applied separately, the following two questions were referred to the High Court:-

(1) Whether in the facts and in the circumstances of the case the Tribunal was justified in holding that the income of the assessee is exempt from tax in view of the provisions as contained in section 4(3)(i) of the Income Tax Act? (Referred at the instance of the Department).

(2) Whether under the facts and circumstances of the case the Tribunal was justified in holding that income arising from manufacture and sale of Sharbat-e-Rooh Afza is hit by the First Part of the First Proviso of section 4(3)(i) of the Income Tax Act, 1922, and is liable to tax? (Referred at the instance of the respondent).

6. The High Court held that although the main object of Hamdard Dawakhana Trust was the promotion of Unani medicines which was undoubtedly an object of general public utility within the meaning of the explanation appended to subsection (3) of section 4 of the Act, and that the word `property' mentioned in clause (1) includes business, the proviso appended to the said clause applies in all cases where the exemption is claimed for income arising out of business. It was further held by the High Court that the exemption is available only if both the conditions laid down in the proviso are satisfied, namely, `that the business is carried on behalf of a religious or charitable institution and that the income is applied solely for a charitable purpose. The assessee in this case did not qualify for exemption as 1/4th of the income of the business was reserved for the author of the trust.' The respondent was granted leave to appeal and the appeal was allowed.

7. Hamdard Dawakhana v. Commissioner of Income Tax PLD 1980 SC 84, in the following manner:-- .

8. "The position emerging from the foregoing discussion may be summed up by saying that the term `property' as used in clause (i) of subsection (3) of section 4 of the Income Tax Act includes business; that this clause deals with property including business held wholly or partly under trust for religious or charitable purposes, and that income derived from such property or business is exempt from taxation to the extent of its dedication and application; that there is a clear distinction between' business held under trust and business carried on behalf of a religious or charitable institution, as where business itself is held under trust, it is the business of the trust, as the trustees represent and act for the trust and it is not a business carried on behalf of a religious or charitable institution, that notwithstanding the generality of its opening words, the proviso, on its true construction, applies on to income derived from business which is not itself held under trust, but is carried on behalf of a religious or charitable institution, and that it would not be correct to apply the proviso to income squarely falling under clause (i), simply because of a presumption that the proviso was enacted for this specific purpose on the recommendation of the Lahore High Court, as the proviso does not embrace the subject-matter of the clause; that even otherwise. The requirements spelt out in the proviso for income derived from business to qualify for exemption from taxation are neither relevant nor necessary in the case of business which is itself held under trust, for to the extent of dedication income derived from such business must, as of legal necessity.

9. He applied wholly (or partly) for the purposes of the trust. On this view of the matter, it appears that the proviso must be construed as being in the nature of a substantive clause applying to a category of business distinct from the one mentioned in clause (i) and it is only in this manner that an invidious distinction between income derived. From business held under trust, and from property other than business similarly held, can be avoided. Finally, the maintenance of the Waqif and his family or descendants being a charitable or religious purpose under the Hanafi Law, the explanation to subsection (3) of section 4 of the Income-tax Act, illustrating the meaning of the expression `charitable purpose' cannot negative or destroy the accepted nature of this particular purposeof a Muslim Wakf.

10. For these reasons, I am of the view that the case of the Hamdard Dawakhana Trust falls squarely within the ambit of clause (i) of subsection (3) of section 4 of the Act, as the business constituting the trust is property held in part for religious or charitable purposes, and, therefore, the income applied or finally set apart for application to such purposes, namely 75% of the total income would be exempt from taxation under the second part of the said clause. This income being from business held under trust, the first proviso to clause (i) has no application to this case. I would, accordingly, accept this appeal and answer in the affirmative the question referred to the High Court at the instance of the Income-tax Department under section 66(i) of the Act.

11. In view of the legal questions involved, I would leave the parties to bear their own costs.

12. I may observe that in view of the construction that I have placed on the relevant provisions of law, the question referred to the High Curt at the instance of the assessee, namely whether on the facts and circumstances of the case the Tribunal was justified in holding that income arising from manufacture and sale of Sharbat-e-Rooh Afza is hit by the first part of the first proviso to section 4(3)(i) of the Income-tax Act, 1922, and is liable to tax, will need to be answered by the High Court, and the case will, accordingly, go back to it for this purpose."

13. It may be mentioned that although Muhammad Afzal Zullah, J. (as he then was) agreed with the conclusion, by a separate judgment, expressed his inability to concur with the reasoning and his Lordship was not in favour of changing the law laid down by this Court in Muhammad Abdur Rauf Khan PLD 1963 SC 209. The High Court reconsidered the matter and answered the question in the negative as follows: "Since the manufacture and sale of Sharbat-e-Rooh Afw was part of the business donated to and held under the Trust, the same considerations which apply to income from business held under the Trust are applicable. The question is, therefore, replied in the negative and it is held that the income arising from the manufacture and sale of Sharbat-e-Rooh Afza is not hit by the first part of first proviso to section 4(3)(i) of the Income Tax Act, 1922, and the liability to tax is only after allowing exemption under the second part of clause (i) of subsection (3) of section 4 of the Act."

14. 5.Again for the assessm ent years 1976-77 to 1979-80 the Income Tax Officer assessed the respondents without granting them exemption under section 4(3)(i) of the Act. In 1979 the Income Tax Ordinance was promulgated and all the returns submitted for the years 1980-81 to 1988-89 were dealt with under this Ordinance. Originally clause 61 of the Second Schedule to the Ordinance was applied for exemption. However, by Finance Ordinance of 1981 instead of clause 61 clause 93 provided for exemption applicable to the respondents. The department claimed that in view of the change in the language of clause 93 of the Second Schedule to the Ordinance the respondents were not entitled to any exemption. The Income Tax Officer upheld this plea. For the assessment years 1981-82 to 1988-89 assessm ent orders were passed on different dates and although the matters were proceeding before the Income Tax Appellate Authorities and/or the Tribunal, the respondents filed Constitution petitions against the assessments and the orders passed by such authorities. The particulars of such petitions and the orders passed by the Income Tax Officer and the Appellate Assistant Commissioner have been summarised by the High Court in the impugned judgment in the following manner:- Petition No,Date of filing the petition in High CourtAsstt.

15. YearDate of order of ITODate of order of Assistant Appellate Commissioner.Proceedings pending in the Department.

16. 02/87 1-4-1987 1980-81Nil 27-7-86 Appeal before I.T Appellate Tribunal 69/85 31-12-1984 1981-82Nil 27-7-86 -do- 301/87 1-4-1987 1982- 8315-6-85 27-7-86 -do- 303/87 1-4-1987 1983- 8416-9-85 27-7-86 -do- 328/87 8-4-1987 1984- 8524-3-87 8-12-87 -do- 327/87 8-4-1987 1985- 8624-3-87 8-12-87 -do- 497/87 17-5-1987 1986- 87Nil 8-12-87 -do- 406/87 27-4-1988 1987- 8831-3-88 29-5-88 Nil 1361/88 28-12-88 1988- 8930-11-88 Appeal pending Nil By the impugned judgment the High Court observed as follows: It is quite clear from the judgment in Civil Reference No.5/1966 that the manufacture and sale of Sharbat-e-Rooh Afza was considered as part of the business donated to and held under the Trust.

17. It was also found in the said judgment that same considerations were applicable to the income arising from the business held under the Trust as to the income arising from the sale of Sharbat-e- Rooh Afza. There being a categorical finding of this Court that the manufacture and sale of Sharbat-e-Rooh Afza was part of the business donated to and held under the Trust, it was not open to the department to have treated that income differently."

18. While dealing with the contention that the language of clause 93 of the Second Schedule is differently worded from section 4(3)(i) of the Act it was observed as follows: On comparison of the 1st Proviso of clause 93 of the Second Schedule of the Ordinance with the 1st Proviso of section 4(3)(i) of the Act, it is quite clear that except for the addition of words `itself is the subject or and which were added between the words `business' and `is' in the proviso, the rest of the 1st Proviso to clause 93 of the Second Schedule to the Ordinance is identical to the 1st Proviso of section 4(3)(i) of the Act. The addition of words `itself is the subject of in the 1st Proviso to Clause 93 of the Second Schedule to the Ordinance, in our view, has not in any manner, affected the availability of the exemption to the petitioner, under the decision of Supreme Court and of this Court in Civil Reference No.5 of 1966 in the case of petitioner wherein it was ,categorically held that manufacture and sale of `Rooh Afza' Sharbat waspart of the business donated to and held under the Trust. It is nobody's case that the income arising to the petitioner from the sale of `Sharbat-e- Rooh Afza' was not applied for or finally set apart for advancing the object of the petitioner's Trust.

19. In these circumstances we are clearly of the view that the income arising to the petitioner from the sale of `Sharbat Rooh Afza' was also entitled to exemption under clause 93 of the Second Schedule to the Ordinance as an income arising from the business carried on behalf of the petitioner's Trust.

20. We accordingly allow the above petitions and declare the orders passed by the I.T.O. And the 1st Appellate Authority holding that the petitioner was not entitled to exemption under clause 93 of the Second Schedule to the Income Tax Ordinance, 1979, on so much of the income which it derived through the sale of `Sharbat-e-Rooh Afza' for the assessment years 1980-81 to 1988-89 as without lawful authority and of no legal effect."

21. The same contention has been raised by the learned counsel for the appellant that clause 93 has been differently worded and, therefore, the judgment m PLD 1980 SC 84 is not applicable. It would be. Proper to reproduce both the provisions which read as follows:- "Section 4(31.---Subject to the provisions of this Act, any income, profits or gains falling .Within the following classes shall not. To such extent as may be specified in this subsection or prescribed in this behalf, be included in the total income of the person receiving them:

(i) any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto: Provided that in the case of income derived from business this clause shall not apply unless the business is carried on behalf of a religious or charitable institution and the income is applied solely for a religious or charitable purposes of the institution, and either-

(i) the business is carried on in the course of the carrying out of a religious or charitable purpose of the institution; or

(ii) the work in connection with the business is mainly carried on by the beneficiaries of the institution: Provided further that nothing in this clause shall apply to so much of the income, profits and gains as is not expended during the previous year or set apart for being expended within Pakistan; Provided further that if any sum out of the amount so set apart is expended outside Pakistan, it shall be included in the total income of the previous year in which it was set apart, whichever is the greater, and the provisions of subsection (2) of section 34 shall not apply to any assessment or reassessm ent, as the case may be, made or to be made in pursuance of this proviso.

(ii) Any income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purposes: Provided that nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the total income of a private religious trust which does not enure for the benefit of the public.

22. Explanation---The expression 'charitable purpose' as used in clauses (i) and (ii) includes relief of the poor, education, medical relief and the advancement of any other object of general public utility."

23. Clause 93 of the Second Schedule to the Income Tax Ordinance reads as follows:- "93.Income of religious or charitable trusts etc. Any income which is derived from property or business held under trust or other legal obligations wholly, or in part only, for religious and charitable purposes and is actually applied or finally set apart for application thereto: Provided that in the case of business this clause shall not apply unless the business itself is the subject of and is carried on behalf of such trust or a religious or charitable institution and the income derived from such business is applied solely for religious or charitable purposes of the trust or institution and either:--

(i) the business is carried on in the course of carrying out of the religious or charitable purposes of the trust or the institution; or

(ii) the work in connection with the business is mainly carried on by the beneficiary of the trust or the institution"

24. Explanation:---Notwithstanding any provision contained in the instrument or relating to the trust or the institution, if any amount is set apart, expended or disbursed for the maintenance and support wholly or partially of the family, children or descendants of the author of the trust or the donor or the maker of the institution or for his own maintenance and support during his lifetime or payment to himself or his family, children, relations .Or descendants or for the payment of his or their debts out of the income, profits and gains of the property decided, or if any expenditure is made other than for charitable purposes, in each case such expenditure, provision, setting apart, payment or disbursement shall not be deemed, for the purposes of this clause, to be for religious or charitable purposes."

25. 6.According to Mr. Sheikh Haider, the learned counsel for the appellant, the Supreme Court had not considered the question whether the income arising from manufacture and sale of Sharbat-e- Rooh Afza was exempted under section 4(3)(i) of the Income Tax Act, 1922 and was not liable to tax.

26. This question was considered by the High Court in Civil Reference No.5 of 1966, Hamdard Dawakhana v. Commissioner of Income Tax, and it was answered in the negative with the observation reproduced earlier.

27. 7.The contention of the learned counsel for the appellant is that considering the proviso to clause 93 for claiming exemption, besides the conditions that income is derived from property or business held under the trust and is subject of such trust which is carried on, on behalf of such trust and the income derived from such business is solely applied for religious or charitable purposes of the trust, one of the following conditions should also be satisfied:

(1) The business is carried on in the course of carrying out the religious or charitable purposes of the trust or institution, or

(2) the work in connection with the business is carried on by the beneficiaries. ---The learned counsel vehemently argued that the first additional condition is lacking in the present case as the manufacture of Sharbat-e-Rooh Afza is not carried on for the religious or charitable purposes of the trust. From this argument what the learned counsel intends to impress is that the business carried on should be of a nature which may be in consonance with the charitable and religious purposes of the trust.

28. 8.A comparison of the provisions of-the Act and the Ordinance brings out change in the language.

29. In clause 93 after the word "property" words "or business" have been added. The other change has been made in the first proviso by adding "itself is the subject of after the words "unless the business". The addition of the words in clause 93 and the first proviso has been made in view of the judgment in Hamdard Dawakhana v. CIT PLD 1980 SC 84 where controversy raged whether the word "property" as used in clause (i) of subsection (3)(a) of section 4 included business as well. In this judgment, after a review of the historical background and judgments of various Courts it was observed (page 96) as follows: "There is consensus of judicial opinion that the term `property' as used in clause (i), is a term of the widest import and subject to any limitation or qualification which the context might require, it signifies every possible interest, which a person can acquire, hold and enjoy. It is comprehensive enough so 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 .............

30. The same view was taken in the case of Muhammad Abdur Rauf Khan on which reliance has been placed by the High Court in the judgment under appeal, and it was reiterated that the term property as used in clause (i) included business ........................ It follows, therefore, that clause (i) exempts from taxation any income derived from business held, as property under trust or other legal obligation wholly for religious or charitable purposes and if the business is so held in part only for such purposes, the exemption would apply only to the income applied or finally set apart for application to such purposes. In other words, the clause deals with income accruing from property, including business, dedicated or donated to the trust either wholly or partly. It is clear that to the extent of dedication the income must be devoted to the purposes of the trust and any diversion to other purposes would be in breach of the trust. It is for this reason that the legislature allows complete exemption without stipulating any further condition, to the income of such property which is permanently tied up for application to the religious or charitable purposes. The clause, as it stands, does not contain any reference to business or property which is not itself the subject- matter, of dedications..."...........................

31. In view of the preponderance of judicial opinion as to there being a real distinction between business as property held under trust wholly or partly for religious or charitable purposes and business carried on behalf of a religious or charitable institution, it does not appear to be necessary to pursue the matter any further. However, it must be stated that if. Indeed, the intention of the legislature was to include business held under trust in the phraseology used in the proviso, then it would have been redundant to provide that its income should he applied soley for religious or charitable purposes, as in the case of business held under trust it is a requirement of law that income derived therefrom must be applied to the purposes of the trust. Similarly, it appears that in the case of business which itself is the subject-matter of dedication, and whose income is permanently tied to the purposes of the trust, it would hardly be necessary to prescribe that the business should be one carried on in the course of the carrying out of the religious or claritable purposes of the institution or that the work in connection with the business is mainly carried on by beneficiaries of the institution. These conditions clearly have reference to a business which is not itself the subject-matter of the trust, as in such a case it would be necessary to provide safeguards before exemption from tax could be granted .........................................................

32. I am, therefore, of the view that the proviso does not apply to a business which is itself held under trust or other legal obligation for a religious or charitable purposes. As the proviso stands, it has clearly failed to bring within its ambit income derived from business which is itself held under trust ..........................

33. I have already commented upon the fact that even though the opening words of the proviso appear to deal generally with income derived from all kinds of business, yet these words stand qualified by the phrase `carried on behalf of a religious or charitable institution', which destroys the generality of the opening words .......

34. Viewed in the light of these consideration and principles, I am of the opinion that it is not permissible in the present case, to interpret the proviso in such a manner as to import into the substantive clause (i) an additional category of income derived from business carried on behalf of 'a religious or charitable institution, and then to apply the proviso so as to take away the exemption granted by the substantive clause even to income derived from business held under trust. The two kinds of business being distinct from each other, the substantive clause (i) and the first proviso thereto must be read together with the result that the proviso in question must be regarded as being not in the nature of an exception to clause (i), but as itself embodying a substantive clause regarding income derived from business carried on behalf of a trust. In such a case, the conditions contemplated in the proviso for the purpose of earning exemption from taxation would appear to be based on reason and necessity. On this view of the matter, I am unable to adopt the construction placed on the proviso by the learned Judges, who decided the case of Muhammad Abdur Rauf Khan."

35. 9.While interpreting clause 93 the historical background up to the judgment in Hamdard Dawakhana PLD 1980 SC 84 must be kept in mind. The additions in clause 93 are with a purpose.

36. Now clause 93 distinguishes between "property" and "business". Previously the use of the word "property" alone compelled the Court to interpret it in a wide manner and give effect to its general meaning and connotation as understood in the jurisprudence. Now it clarifies and distinguishes between income derived from property and income from business. The applicability of the first proviso to clause 93 is restricted to the business only. The business income which qualifies for exemption should be the income of a business which is subject of the trust, should be carried on on behalf of the trust and further that the income or as set apart is applied solely for religious or charitable purposes. This Court distinguishing between the business held under the religious or charitable trust and business carried on behalf of the religious or charitable trust held that the proviso to section 4(3) of the Act applied to income derived from business falling under the latter category and not to the former category. The first proviso to clause 93 is a deviation from the proviso to section 4(3) of the Act. It purports to overcome the distinction drawn by this Court in the business held by charitable or religious trust and the business carried on, on behalf of such trust.

37. Now inter alia unless the business is itself subject of trust and is carried on behalf of such trust it cannot qualify for exemption. The words "business itself is subject of trust" are intended to meet the observation of this Court in Hamdard Dawakhana PLD 1980 SC 84. Therefore, now the proviso covers income from business held under the trust. The first proviso to clause 93 contemplates that ilk order to claim benefit of exemption, business should be controlled and be subordinate to the trust and is carried on behalf of the trust. Further that the income deprived from the trust is entirely or in part applied for religious or charitable purpose. In other words, the business of the trust may form corpus of the trust, is under the control of the trust and its business is carried on behalf of the trust. However, the income which is to be expended for religious or charitable purposes should be solely applied thereto. Thus the application of income will refer to that income which is dedicated or set apart to be applied for religious or charitable purposes.

38. 10.The first proviso also imposes additional condition which requires that the business is carried on in the course of carrying out other religious and charitable purposes of the trust. Therefore, the business should have some nexus, relation or connection of any nature with the purposes of the trust. This aspect has been exhaustively dealt with in Muhammad Abdur Rauf Khan's case PLD 1963 SC 209. The purpose of the Hamdard Trust was to expend the income for the good and the development of `the art and science pertaining to the Tib' and on other religious or charitable work subject to the terms of the `WAQF' deed. The `Tib' purposes have been enumerated in the Waqf Deed. It inter alia proposes to establish research institute to study the constituents, properties and characteristics of medicinal plants and simple drugs and to establish and run commercial industrial concerns for medicines in order to develop the efficiency, relief and popularity of the herbs and medicines under the Islamic and Unani system of medicine. The Tribunal had earlier found that Sharbat-e-Rooh Afza is not `pure and simple medicine'. It does not say in specific terms that it does not have any medicinal value. While considering medicinal value it is to be taken into consideration that it refers only to the Unani Tib practised under the Islamic system of medicines. In this system the herbs have a very important part to play. No doubt in other medicinal and pharmaceutical systems herbs are the main ingredients but with the recent scientific inventions chemicals are replacing herbs in abundance. The Islamic and Unani system is still in practice which mainly relies and prepares medicines from herbs. The question therefore is whether Sharbat-e-Rooh Afza is manufactured in the course of carrying out the religious and charitable purpose of the trust. This question has not been decided in the proceeding under the Act. After this Court remanded the reference for consideration of similar question, the High Court, holding that same considerations which apply to the business held under the trust will be applicable and answered in the negative. In the assessment year 1980-81 and onwards the Income Tax Officer refused to grant exemption to sale proceeds of Sharbat-e-Rooh Afza as Rs.10,000 1'.M. Was paid to Hakim Muhammad Saeed, the manufacture and sale of Sharbat-e-Rooh Atza was not covered by clause 93 because "it did not fall within the ambit of religious and charitable purposes" as stipulated in clause 93. This order was upheld by the Commissioner of Income Tax (Appeals) in all the assessm ent years except 1988-89 in which appeal is pending. The respondents filed appeals before the Tribunal in respect of assessment years 1980-81 to 1986-87. No appeal seems to have been filed in respect of assessm ent year 1987-88. The petitions filed before the High Court cover assessm ent years 1980-81 to 1988-89.

39. 11.Now reverting back to finding given by the ITO and the Income Tax Commissioner, it seems that due considerations to the facts have not been given and the provisions of clause 93 have been repeated. If the matter Would have proceeded before the Tribunal, the controversy may have been thrashed out but the respondents filed constitution petition ignoring all the statutory remedies and proceedings which in most of the cases were pending. The question whether manufacture and sale of Sharbat-e-Rooh Afza is carried on in the course of carrying out the religious or charitable purposes of the trust or institution requires factual investigation as well which was not adverted to by any authority at any stage. The finding is not based on any fact or evidence. Reproduction of clause 93 is not sufficient to justify the finding. There can be no controversy that the business of manufacture and sale of Sharbat-e-Rooh Afza is held under the trust but the question whether it is carried out in the course of carrying out of the religious and charitable purposes of the trust requires proper determination. In case finding is in the affirmative, the respondents will be entitled to exemption. In the circumstances the cases relating to assessment years 1980-81 to 1986-87 are remanded to the Tribunal to consider and decide this question amongst others if any, in the appeals pending before it. As regards cases relating to assessment years 1987-88 and 1988-89 the Appellate Authority will rehear the appeals after the Tribunal has decided the appeals relating to the earlier assessm ent years. It would be open to the parties to lead evidence before the Tribunal or the-appellate authority as the case may be.

40. 12.Before parting with the judgment we may observe that in cases where any party resorts to a statutory remedy against an order he cannot abandon or bypass it without any valid and reasonable cause and file Constitution petition challenging the same order. Such practice, in cases where statute provides alternate and efficacious remedy upto High Court, cannot be approved or encouraged. In a recent judgment of this Court in CA. No.79-K of 1991, one of us (Ajmal Mian, J.) in similar situation observed as follows: "We may now revert to the question, whether the appellant was justified to file above Constitution petition against the order of the Tribunal instead of invoking section 136 of the Ordinance for making a reference to the High Court. According to Mr. Rehan Naqvi, a reference under the above provision would not have been adequate and efficacious remedy as it would have taken years before it could have been heard. The same could be true for a Constitution Petition.

41. The tendency to bypass the remedy provided under the relevant statute and to press into service Constitutional jurisdiction of the High Court has developed lately, which is to be discouraged.

42. However, in certain cases invoking of Constitutional jurisdiction of the High Court instead of availing of remedy provided for under the relevant statute may be justified, for example when the impugned order/action is palpably without jurisdiction and/or mala fide. To force an aggrieved person in such a case to approach the forum provided under the relevant statute may not be just and proper.

43. In the present case, the appellant had opted to avail of the hierarchy of forums provided for under the Ordinance upto the stage of filing of appeal before the Tribunal and, therefore, it would have been proper on the part of the appellant to have invoked section 136 of the Ordinance for making a reference to the High Court instead of filing a Constitutional petition. In our view, once a party opts to invoke the remedies provided for under the relevant statute, he cannot at his sweet will switch over to Constitutional jurisdiction of the High Court in the mid of the proceeding in the absence of any compelling and justifiable reason."

13. We therefore allow the appeal and remand the cases in the aforestated terms.

44. The parties shall bear their own costs.

45. AJMAL MIAN, J.---l agree subject to note appended hereto: (S.d)

46. Sajjad Ali Shah and Saleem Akhtar, JJ AJMAL MIAN, J.---I have had the advantage of reading the draft of the proposed judgment of my learned brother Saleem Akhtar, J. I am in agreement with the proposed order. However, I would like to add a few lines as to the import of clause 93 of the Second Schedule to the Income Tax Ordinance particularly about its proviso 1.

47. The above clause exempts from the payment of income-tax, any income which is derived from property or business held under trust or ,other obligation wholly or in part for religious or charitable purposes to the extent of the income which is actually applied or finally set apart for application thereto. The proviso to the above clause provides embargo to the effect that in case of business, the above clause shall not apply unless the business itself is the subject of and is carried on behalf of such trust or religious or charitable institution and the income derived from such business is applied solely for religious or ,charitable purposes of the trust or institution and that either;

(1) The business is carried on in the course of carrying out the religious or charitable purposes of the trust or institution, or

(2) The work in connection with the business is carried on by the beneficiaries.

48. To put it precisely in order to qualify for exemption from payment of income-tax within the ambit of the above clause inter alia the following are the requirements:

(i) That the business itself is subject of and is carried on behalf of trust or religious or charitable institution.

(ii) The business is carried on id the course of carrying out of the religious or charitable purposes of the trust or institution or the work in connection with the business is mainly carried on by the beneficiaries of the trust or institution.

(iii) That the income derived from such business is solely applied for religious or charitable purposes of the trust or institution.

49. In other words, if production and sale of Sharbat-e-Rooh Afza itself projects one of the objects of the trust namely, `Tib' it may fall within the ambit of the above clause but if it does not project the above object of the trust and its production and sale predominantly projects, a soft drink and not a Sharbat having medicinal benefit, it may not fall within the purview of the above clause. The judgment of this Court in the case of Muhammad Abdur Rauf Khan PLD 1963 SC 209 touches upon the above aspect to some extent, while construing section 4(3)(i), proviso of Repealed Income Tax Act, 1922. However, since the cases are being remanded, I would not like to express my definite view on the above controversy in issue at this stage.

50. (Sd.)

51. Amjad Mian, J