' MUHAMMAD HALEEM, J -This order will govern Petitions Nos. 619, 620, 621, 622, 623, 624, 625, and 626 of 1973 as facts are common and the question for determination identical. The relief seeks to assail the provisional assessm ent order and so also the consequential order involving penal action on the basis that the amendment in section 15-BB of the Income-tax Act introduced by the Finance Ordinance, 1972 authorizing levy of tax on the income, profits and gains for the previous years ended 31st of August 1970 and 30th of June 1971 is without lawful authority.
2. The petitioners in Petitions 619, 620, 621, 622, 623, 624, 625 and 626 of 1973 hold 5,000, 12,800, 10,000, 10,000, 10,000 5,500, 5,000, and 7,000, shares respectively in Model Steel Mills Limited, hereinafter known as the Company. This was later known by the name of the Pioneer Steel Mills Limited as it was taken over by the Central Government. It is the case of the petitioners that to attract capital for the industrial undertaking established in Pakistan between 1st April 1959 and 30th June 1969, the tax holiday scheme was introduced for a period of 8, 6 and 4 years depending on the area in which the undertakings were located. Such benefit was admissible under section 15-B of the Income-tax Act on condition that the industrial undertakings fulfill the conditions laid down therein but such benefit was not automatically granted as the undertakings had to apply for the exemption under clause (e) of subsection (2) of that section. The company before being taken over applied for exemption from payment of tax to the Central Board of Revenue in 1964, which by Notification No, S. R.
0. 432 (K)/64, dated 5th of June 1964 granted the exemption with the result that the petitioner had not to pay any tax on the individual dividends up till 30th of June 1971. Thereafter a new subsection (4-C) was introduced in section 15-BB of the Income-tax Act by the Finance Ordinance of 1971.
According to this subsection the exemption was withdrawn for the previous year ending at any time after the 30th day of June 1970 and before the 1st of July 1971 and the income, profits and gains for that previous year was liable to tax. However by the proviso appended to subsection (4- C) the company was entitled to credit for any tax, income-tax and super tax paid pursuant to this subsection. Again by the Finance Ordinance of 1972, subsection (4-AA) was introduced in section I5-BB and subsection (4-C) was re-enacted and substituted for the original subsection (4-C). The effect of subsection (4 A4) was that the dividends paid on the shareholding no longer remained exempt from the payment of tax and by the re-enacted subsection (4-C) the exemption was withdrawn with retrospective effect as from 1st day of July 1971. Thus the company was liable to pay tax on its income, profits and gains for the previous years ended 31st of August 1970 and 30th of June 1971. The petitioners are also liable to pay tax on the dividends received with retrospective effect.
3. The petitioners had assailed the validity of these provisions by which the exemption was withdrawn. Mr. M. A. Pesli Imam urged firstly, that no Ordinance imposing tax could be promulgated by the President under Article 94 of the Interim Constitution; secondly that the Notification which granted exemption was acted upon and hence the vested rights which accrued thereunder cannot be taken away by the retrospective operation of subsection (4-AA) and the re-enacted subsection (4-C) and thirdly, that the benefit which accrued by the operation of the proviso appended to subsection (4-C) as it originally stood could not be taken away by the re-enacted subsection (4- C). The last two contentions are in the alternate. In the context of the submissions it will be relevant to reproduce Articles 89 and 94 of the Interim Constitutions and so also subsection (4-AA), subsection (4-C) as it originally stood and the re-enacted (4-C) of section 15-BB t- "Article 89.-No tax shall be levied for the purpose of the Federal Government except by or under the authority of an Act of the Federal Legislature.
Article 94.-(1) The President may, at a time when the National Assembly stands dissolved or is not in session, make and promulgate Ordinances for the peace and good Government of Pakistan or any part thereof, and any Ordinance so made shall have the like force of law as an Act of the Federal Legislature, but the power of making Ordinances under this Article is subject to the like restrictions as the power of the Federal Legislature to make laws, and any Ordinances made under this Article may be controlled or superseded by such Act.
(2) Notwithstanding any restrictions imposed by the preceding clause, an Ordinance made under this Article may authorise expenditure from the Federal Consolidated Fund.
(3) An Ordinance promulgated under this Article- (a)shall be laid before the National Assembly and shall cease to operate at the expiration of six weeks from the reassembly thereof, or if before the expiration of that period, a resolution disapproving it is passed by the Assembly, upon the passing of that resolution.
(b)may be withdrawn at any time by the President.
(4) In clauses (1) and (3), reference to the time when the National Assembly is not in session and to the reassembly thereof shall be deemed to include references respectively- (a)to the time following immediately upon the dissolution of the Assembly; and (b)to the first assembly of the next.
"(4-AA) Nothing contained in this section shall be deemed to exempt from tax any dividend paid, credited or distributed or deemed to have been paid, credited or distributed by a company to its shareholders out of the profits or gains exempt from tax under this section.";
(b) for subsection (4-C), the following shall be substituted and shall be deemed to have been so substituted on the first day of July 1971, namely:- "(4-C) (a) Nothing contained in this section shall apply to the income, profits and gains of any previous year ending at any time after the thirtieth day of June 1970; and such Income, profits or gains shall be computed and subjected to tax in accordance with the other provisions of this Act;
(b) Nothing contained in this section or any other law for the time being in force shall be deemed to revive, maintain or continue any notification or order made or any approval or exemption granted by or under the provisions of this section;
(c) Without prejudice to the generality of clauses (a) and (b)-,
(i) No loss sustained by an industrial undertaking to which this section applies prior to the previous year for the assessm ent year beginning on the first day of July 1971, shall be carried forward and set off against the incomes, profits or gains of the said previous year, and any subsequent previous year; and
(ii) any tax paid by any such undertaking before the first day of July 1972, in respect of the assessm ent for the year ending on the thirtieth day of June 1972, shall be adjusted against the tax payable under this subsection."
"(4-C) Nothing contained in subsection (1), subsection (4) and subsection (4-A) shall apply to the income, profits and gains of any previous year ending at any time after the thirtieth day of June 1970 and before the first day of July 1971; and such income, profits and gains computed in accordance with the provisions of subsection n (3) or clause (c) of subsection (4-A), as the case may be, shall be subjected to tax in accordance with the other provisions of this Act: ' Provided that, in making an assessme nt for the year for which the income, profits and gains of the industrial undertaking became liable to tax for the first time after the expiry of the period for which such income, profits, and gains are exempt under the provisions of subsection (1), subsection (4) or subsection (4-A), credit shall be given for any income-tax and super tax paid in respect of the income, profits and gains to which this subsection applies; and where no income-tax or super tax is payable for such year or the amount of the income-tax and super tax so paid exceeds the amount of the income-tax and super tax payable for such year, the income-tax and super tax so paid or, as the case may be, the amount so in excess shall be carried forward to the following year : ' Provided further, that nothing in this subsection shall apply to any case where the computation of such income, profits and gains discloses a loss."
' Subsection (4-AA) was given retrospective effect from the date of the inception of the Act by the use of the words "deemed always to have been so inserted" while the re-enacted subsection (4-C) was given retrospective effect as from the 1st day of July 1971. Mr. M. A. Pesh Imam, learned counsel for the petitioners invited our attention to the words "for the peace and good Government of Pakistan" in Article 94 of the Constitution to stress that they did not include the subject of tax and therefore, the Finance Ordinance of 1972 by which subsection (4-AA) and the re-enacted subsection (4-C) were introduced in section 15-BB of the Income-tax Act could not be promulgated as it was ultra vires the powers of the President. The same phrase occurs in sections 72 and 79 of the Government of India Act, 1915. We asked the learned counsel as to what was meant by the phrase "for the peace and good Government of Pakistan" but he was unable to clarify it The word 'good' prefixed before the word 'Government' is defined in4 Wharton's Law Lexicon, Fourteenth Edition, as "the technical term applied to pleading to express soundness or validity" while the word 'Government' denotes "that form of fundamental rules and principles by which a nation or a Stat. Is governed." The Judicial Committee in the case of Rail Jogendra Narayan Deb and another (1) held that this expression has reference to the scope and not the merits of legislation. In Abdul Rahman v. Abdul Rahman (2) a Full Bench of the Allahabad High Court held that the scope of expression is very wide and therefore the Legislature has been given the general power to make laws for the peace and good Government of the territories for the time being constituting the province. The very absence of the subjects on which the Legislature can legislate in the Government of India Act, 1915 provides an instance of an all embarrassing scope subject however to the limits imposed in the sections themselves. Therefore this power must include the power to exact tax as without money no good Government can function. The subject of tax therefore must be included within the scope of the phrase. The only limitation that is placed on the power of the President to promulgate Ordinances is that it is subject to the like restrictions as the powers of the Federal Legislature to make laws and the Ordinances so promulgated may be controlled or superseded by any such act. In other words the President can promulgate an Ordinance on any subject in regard to which the Federal Legislature can legislate which impliedly defines the scope of the Legislation by the use of the phrase "peace and good Government." Again Article 89 of the Constitution authorizes the levy of tax under the authority of an Act of the Federal Legislature. Sub-clause (2) of Article 290 of the Interim Constitution lays down that any reference to Federal Act shall be construed as including the reference to the Ordinance made by the President.
Hence Article 89 would also include the levy of tax by an Ordinance promulgated by the President.
As such the power to levy tax stands beyond dispute. Learned counsel also invited our attention to sub-clause (2) of Article 94 as one placing restriction on the power of the President to promulgate such Ordinance but we see no relevancy of this sub-clause as to how by its language it purports to put any restriction on the power of the Press dent to levy tax by the Ordinance. The use of the word restriction in clause (2) of Article 94 has reference to the words "like restrictions" in clause (1) of Article 94 which refers to the scope of legislation only in respect of those matters on which the Federal Legislature cannot legislate. The contention has no substance.
4. Adverting now to the second contention, the learned counsel relied on the case of Income-tax Officer, Central Circle H, Karachi and another v. Cement Agencies Limited (3) and in particular on the observations at page 331 of the report as under:- "This Court in the case of Octavtious Steel & Company Ltmited v. The Commissioner of Income-tax, Dacca, however, took a different view. After the decision of this Court in the above case the second set of notices were issued to the respondent. The question that arises is whether this was permissible. In my view such a course is not sanctioned by law. I do not see how on the basis of the judgment of this Court in Octavious Steel & Company Ltd.'s case past and closed transactions could be reopened. The proceedings in respect of the disputed years were finally disposed of in favour of the respondent and until they are set aside in accordance with law, no fresh proceedings could be initiated in respect of these years. The view that I have taken receives support from the decision of this Court in Civil iliac. Petition No, K-21 of 1968 (Works Cooperative Housing Society and another v. The Karachi Development Authority,
(I) AIR 1942 P C 44 (2) 85 I C 51
(3) PLD 1969 SC 322 #TBS (1) PLD 1970 SC 439 (2) PLD 1969 SC 623 #TBE ' decided on the 20th January 1969. In this case my Lord the Chief Justice, in his judgment referred to the decision of the Privy Council in the case of Lern v. Mitchel. The Privy Council observed that even a legislative measure like an Ordinance expressly given retroactive effect could not operate so as to annul a valid and existing judgment as between parties whose rights had been duly determined and according to the law which existed before the new Ordinance was passed. To the same effect is, the decision in the case of Eyre v. Wynu Mackenzi. The decision of the Privy Council in the case of Commissioner of Income-tax v. Tribunal Trust clearly supports the contention of the respondent."
' The ratio of the decision will have no application to the facts of the instant case as there was no existing judgment wherein the rights of the parties had been duly determined according to the law which existed before the new Ordinance was passed. The learned counsel also relied on Collector of Central Excise and Land Customs v. Azizuddin Industries, Ltd., Chittagong (1). In that case exemption was granted by the Central Board of Revenue which was later withdrawn or curtailed by another Notification. In holding that the subsequent Notification was without lawful authority and of no legal effect, it was held that where vested rights accrued to the assesse then they cannot be taken away by an "executive action." The ratio of this case is also distinguishable for in the instant case it was by a legislative action that exemption was withdrawn. In this connection we would refer to the observations of their Lordships of the Supreme Court in Messrs Haider Automobile Ltd. v.
Pakistan (2) at page 641 of the report "Learned counsel has secondly argued that in any event Ordinance No, II of 1964 could not take away a right which had become vested in Mr. Manzoor Qadir as both when he was appointed and when he resigned, President's Order No, 21 of 1962 held the field and under that he had an absolute right of resuming his practice. I would entirely agree with him that a vested right cannot be taken away save by express words or necessary intendment. The Legislature, however, which is competent to make a law, has full and plenary powers in that behalf and can even legislate retrospectively or retroactively. There is no such rule that even if the Legislature has, by the use of clear and unambiguous language, sought to take away a vested right yet the Courts, must hold that such a legislation is ineffective or strike down that Legislation on the ground that it has retrospectively taken away a vested right."
In the face of these observations the exemption which was granted by the Notification under section 15-BB of the Income-tax Act could avidly be withdrawn by a legislative action such as the Ordinance. No exception can be taken to the retrospective operation of subsection (4-AA) and subsection (4-C) as it is a settled principle that the authority to legislate includes the authority to legislate with retrospective effect. The second contention is also without substance. The third contention equally has no force in view of what has been observed above.
5. The petitions have no substance and are accordingly dismissed but with no order as to costs.
' JamaLuDom H. AHMED, J.-I agree.