' On 30-6-1991, the Parliament by enacting Finance Act, 1991 levied a tax known as Corporate Assets Tax, on the assets held by incorporated Companies. The vires of the aforesaid section and the validity of the tax have been questioned by the petitioners by filing all these petitions, a list of which is attached, which are being disposed of by this judgment.
2. Before proceeding further, it appears to be appropriate to reproduce section 12 of the Finance Act, 1991 which reads as under:-- "12. Corporate Assets Tax.--(1) There shall be charged a tax, hereinafter referred to be Corporate Assets Tax, in respect of value of assets held by a Company on the specified date, in an amount and in the manner specified hereunder.
(2) A company shall file a return in the prescribed form accompanied by the balance-sheet as on the specified date prepared, audited and certified in accordance with the provisions of the Companies Ordinance, 1984 (XLVII of 1984).
(3) The return referred to in subsection (2) shall be filed within six months from the specified date: ' Provided that the Wealth Tax Officer may, on sufficient cause being shown, extend the date for delivery of the return so, however, that no extension of time for a period or periods amounting in all to more than one month shall be allowed.
(4)
(5)
(6)
(7) Where the Company has, without reasonable cause failed to furnish within the time allowed for the purpose, the return under subsection (2) or subsection (4), the Wealth Tax Officer may impose upon such company a penalty at the rate of one thousand rupees for every day during which the default continues.
(8) Where the company fails to pay tax under subsection (5) or the tax so paid is less than the tax payable under this section, it shall be liable to pay additional tax at the rate of 24% per annum on the amount not paid or the amount by which the tax paid falls short of the tax payable, calculated from the date it was payable to the date it is paid or to the date of an order under subsection (6) whichever is earlier.
(9).
(10).
(11)
(a) .........
(b)
(c) ..
(d)
(12).
(a)
(b) 'Specified date' means the date for which the balance-sheet is made up, being the last date on which accounts of the Company are closed but not being any date preceding the 30th June, 1991, or following the 30th day of June, 1992.
(c)..
(d) 'value of assets' means the value of all fixed assets held by the company and shown in its balance-sheet as on the specified date; (e)
(13)
3. On behalf of the petitioners, the case was argued in main by Mr. Imtiaz R. Siddiqui, Advocate. I have also heard Mian Ashiq Hussain, Advocate as also Mr. Sulman. Akram Raja, Advocate, who appeared for some of the petitioners.
4. In reply Mr. Muhammad Ilyas Khan, Advocate and Mr. Shahbaz Butt, Advocate addressed the Court.
5. The learned counsel for the petitioners have contended that under Item No,50 of the Federal Legislative List contained in 4th Schedule to the Constitution, a tax can only be levied on the capital value of assets and not on net assets, and, therefore, the Corporate Assets Tax which imposes tax on "net value" of the assets was ultra vires the Constitution. It was elaborated that the words "capital value of assets" as given in the list means "net value of assets" arrived at after deducting liabilities from the gross value. The learned counsel mainly relied upon the pronouncement of Sindh High Court in the case of Haji Muhammad Shafi and others v. Wealth Tax Officer and others PLD 1989 Kar.
15.
6. The learned counsel maintained that in view of Article 2A of the Constitution and the Enforcement of Shari'ah Act, 1991 while interpreting any Statute, the Islamic concepts and principles must be kept in view. It was elaborated that Islam envisages taxation on "net assets" and as such "gross assets" could not have been taxed.
' In the last it was urged by the learned counsel that the impugned legislation was discriminatory and confiscatory in nature.
7. On the other hand, the learned counsel for respondents defended the impugned legislation by pointing out that there is no limitation on the power of the Parliament to legislate on the subject of capital value of assets.
8. Section 12 of the Finance Act, 1997 by virtue of which corporate assets tax has been levied has been reproduced in paragraph 2 above. From its perusal, it will be seen that salient features of levy which become apparent are that it imposes onetime tax on the value of the assets held by a Company. The words "value of assets" have been defined in section 12(12)(d) of the Finance Act, 1991, as the value of fixed assets held by the company and shown in its balance-sheet as on the specified date. "Specified date" means, the last date on which the accounts of the company are closed which fall between the period 30-6-1991 and 30-6-1992. The tax is leviable only on such companies which hold the assets of the value of Rs,50 million or more. The rate of tax is at a sliding scale and depends upon the valuation of the assets. The Central Board of Revenue has been authorised to frame rules under this section. The companies falling within the ambit of this section have to file return on the prescribed form accompanied by audited and certified balance-sheets within 6 months of the specified date. The tax has to be paid at the time of filing of the return. In case of failure to pay tax, penalty can be levied at the rate of Rs,1,000 for every day during which the default occurred. It, however, the tax is paid less than the tax payable under this section, the company is required to pay additional tax at the rate of 24% per annum on the amount not paid. It is further provided that provisions of sections 23, 24, 25 and 35 of the Wealth Tax Act, 1963 shall apply to the calculation of tax and to the appeal or revision against the orders passed under this section.
9. In the above background, now the contention of the learned counsel for the petitioners may be examined. Their main thrust was that expression "capital value of assets" as appearing in Item No,50 of Fourth Schedule to the Constitution means "net assets" which are arrived at after deducting liabilities from the gross value of the assets and, as such, no tax could be levied by the Parliament on the gross value of those assets.
10. There is, however, no warrant for such a restrictive interpretation. The Constitution does not define the words "capital value of assets" nor does it place any restriction on the meaning of the aforesaid phrase. While interpreting the entries or items in the Federal Legislative Lists, the rule of law is well-settled that entries are to be interpreted in the widest possible manner and should not be given any restrictive, narrow or pedantic meanings. See Haider Automobile Ltd. v. Pakistan PLD 1969 SC 623; Brig. (Retd.) F.B. Ali and another v. The State PLD 1975 SC 506 and Fauji Foundation and another v. Shamim-ur-Rehman PLD 1983 SC 457 and Messrs Elahi Cotton Mills Ltd. And others v.
Federation of Pakistan and others PLD 1997 SC 582. In the last-mentioned judgment, it was held that while interpreting the laws relating to economic activities the Courts should view the same with greater latitude than the laws relating to civil rights and that the efforts of the Courts should be to save the laws rather than to destroy it.
11. The question as to whether the liabilities are to be deducted while determining the value of assets came up for consideration before the Supreme Court of Pakistan in Sanaullah Woollen Mills Ltd. And another v. Monopoly Control Authority PLD 1987 SC 202. The dispute in that case arose in the context of section 2(2)(1)(c) of the Monopolies and Restrictive Trade Practices (Control and Prevention) Ordinance, 1970. Two questions which were considered by the Supreme Court of Pakistan were whether expression "value of assets" in the aforesaid section connotes assets which are "net assets" or it relates to "gross assets" and secondly whether in computing the value of assets, the liabilities have to be taken into consideration or not. The Sindh High Court held that the value of assets both under the Monopolies and Restrictive Trade Practices (Control and Prevention)
Ordinance, 1970 as also in ordinary parlance means value of total gross assets after deducting the liabilities. This view of the High Court was upheld by the Supreme Court of Pakistan. At page 211 of the report, it was observed as under:-- "In this background I will dwell on the meaning of the term 'value of assets' appearing in the definition clause. The word 'means' has no other significance but that, that the word 'assets' has to be given its ordinary meaning, and not to be understood as having any extended meaning which the word 'includes' conveys. The word 'asset' is generally used in collective plural, and is commercial law it denotes the aggregate of available property, stock-in-trade, cash etc. Belonging to a merchant or mercantile company. (Black's Law Dictionary, Revised Fourth Edition, page 151). It is also used to signify the means which a person or a bank or a corporation has as compared with his/its liabilities, that is, its identity is separate and is not inclusive of debts or liabilities but is only comparable to them. It is in this sense that the word 'assets' has been used to denote a 'complete whole' of the property. Any other meaning given to it will be against the verbal expression of the legislature and would defeat the very purpose of the legislation."
' Again at page 212 it was laid down that: "As for the alternative argument, again assets cannot refer to net assets, that is, gross assets less liabilities as that is not discernible from the language of the definition clause. Moreover, this method of calculation is adopted in determining profit and loss, which is not the case here as it is only the value of assets which has to be taken into consideration.
' The definition of the term 'value of assets' in the Indian Law is substantially the same. In this connection I would refer to the comments by Sengupta in his book on 'The Monopolies and Restrictive Trade Practices Act', at page 41, as under:- 'It should be noted that all the entries which occur in the assets side in the books of account of the company should be taken into account in determining its assets. Liabilities of an undertaking should not be taken into account while determining the value of assets for the purposes of the Act.
The object is to prevent to situations where a large Company with assets of over Rs,20 crores and with liabilities equal to the assets may escape the regulatory provisions of the Act, even though it may be in possession of considerable economic power'."
12. The decision of the Sindh High Court in Muhammad Shafi's case (supra), on which the learned counsel for the petitioners has heavily relied upon, was taken to the Supreme Court and was decided by it In re: Haji Muhammad Shafi and others v. Wealth Tax Officer and others 1992 PTD 726.
In that case the vires of Wealth Tax Act, 1963 was challenged by the appellant by filing a Constitutional petition on the ground that the Wealth Tax Act purported to levy tax on the net wealth though under Item No,50 of the Federal Legislative List, only tax on gross value could be levied. It will be seen that the stand of the appellant in the aforesaid case was quite contrary and opposite to what is being contended before me in the present case. The petition was dismissed by the Sindh High Court, as so was the appeal by the Supreme Court of Pakistan which came to the conclusion that value of assets was a part of capital value of assets and, therefore, by levying a tax on that part of assets, no Constitutional mandate has been violated.
13. A close reading of the judgment of the Supreme Court clearly shows that their lordships were of the view that "capital value of assets" means the whole value of assets. It was further observed that the question as to under what method the assets are to be valued relates to mechanism and can well be decided by the Legislature. The observations appearing in para.4 of the judgment may usefully be reproduced below:-- "We are in full agreement with the observation made by the learned Judges of the High Court. Item 50 of the Fourth Schedule provides for tax on capital value of the assets not including taxes on capital gain on immovable property. Therefore, tax on capital value of assets can be levied which is not disputed at all. Wealth tax is one of those taxes which intends to subject the assets to taxation. It is nobody's case that the Wealth Tax Act does not charge the assets. The Act has provided a mechanism for imposing and calculating the tax on capital assets. The provision for calculating such tax is provided by the Act. Section 3 denotes which part of the capital value shall be taken into consideration for the purpose of charging wealth tax. It is nobody's case that the net value of assets is not a part of the capital value. The capital value of the assets includes the net value of the assets. The definition of the net wealth under section 2(m) clearly provides that first the aggregate value of all the assets belonging to the assessee, has to be taken into consideration.
This is the basis for charging the tax. Now, in order to calculate the tax the aggregate value of liabilities and debts are to be deducted from the aggregate value of assets and the excess so calculated has been termed as 'net wealth' on which tax is calculated at the specified rate. This process of calculating the tax does not exclude the capital value of assets from wealth tax charged under section 3."
14. The judgment of the Sindh High Court, which was the main stay of the arguments of the learned counsel for the petitioners again goes against what was being canvassed by the learned counsel for the petitioners rather than helping him. Though the Division Bench of the Sindh High Court was pleased to remark that according to the dictionary meanings, the words "capital value of assets" would mean "net value of assets also but the High Court went on to hold that in matters of commerce the capital value of assets, means the total value as such. The discussion in para. 5 of the report is instructive and may usefully be reproduced below: "Reading the above dictionary meanings of the words 'Wealth and Assets' together, it cannot be doubted that they are similar in concept and import. The concept of aggregation of different kinds of properties belonging to a person is common in the meaning of both the words. We are, therefore, of the view that the .Legislature when promulgating the Act and providing for levy of tax on wealth in its preamble were in fact intending to tax the 'assets' of a person. The contention of the learned counsel for the petitioner, however, it that 'net wealth' as defined in the Act is different in concept from the 'Capital value of the assets' as envisaged in Entry No,50 of the Federal Legislative List. The argument of the learned counsel has not impressed us. We have already pointed out above that on the basis of dictionary meaning of words 'Capital Value of Assets' would mean the value expressed in terms of money of the properties of all kinds possessed by a person and it is in this sense that this expression is also commonly understood in commercial and business parlance." (Underlining is mine).
15. Again the learned Judges of the Sindh High Court observed as under:- "Firstly, we are unable to find any material difference between the concept of taxation under section 3 of the Act and Entry No 50 of the Federal Legislative List of Constitution and on the above ground. The underlying object of aggregation of all the properties of an assessee for the purpose of levy of tax is common both in section 3 of the Act as well as under Entry No 50 of the Federal Legislative List of the Constitution. The fact that the authorities while providing for determination of tax liability of an assessee under the Act, allowed deduction of all his outstanding liabilities from the aggregate value of his assets has no bearing on the character or nature of the tax. This feature of the Act only indicates a mechanism or method provided under the Act for calculation of the tax liability of an assessee under it which certainly cannot affect or change the character or nature of the tax. There is no justification for the above reasons to hold that the tax levied under section 3 of the Act on the 'net wealth' is in any manner different from the tax on the capital value of the assets as contemplated by Entry No,50 of the Federal Legislative List of Constitution. There are no words in Entry No,50 of the Federal Legislative List of Constitution which could be interpreted as placing any fetter on the power of Legislature while providing for tax on the capital value of assets of a person, to allow deduction of liabilities outstanding against him from the value of the assets."
16. It is obvious from the above reproduced paras. That the learned Judges were of the view that there is no limitation placed on the use of word "assets" in Rem No 50 of 4th Schedule and the question as to whether "gross assets" or "net assets" are to be taxed was relatable to mechanism and could be determined by the Federal Legislature while further legislating on the subject. I am, therefore, unable to agree with the learned counsel on the interpretation being placed on Item No,50 of 4th Schedule to the Constitution. No doubt tax can only be levied by the Parliament as ordained by Article 77 of the Constitution but as by promulgating section 12 of the Finance Act, 1991, the tax is being levied on the capital value of assets, no valid exception can be taken thereto.
17. There is no cavil with the proposition that while interpreting a law, Islamic provisions have to be kept in view but there is nothing in Islam which prohibits the Legislature for levying any tax on the gross value of the assets held by it. Although while determining Nasaab for the purpose of Zakat, the liabilities are to be excluded but that does not mean that same principle has to be applied even in respect of other taxes.
18. Coming now to the question as to whether the provision is discriminatory or confiscatory in nature, suffice it to say, that the tax has been levied on the Corporations which hold capital value whose assets as given in the balance-sheet is more than Rs,50 million. Such Corporations are a class apart and, therefore, the question of any discrimination does not arise. The Supreme Court of Pakistan in its recent judgment in Mehram Ali v. Federation of Pakistan 1998 SCM R 1156 has laid down the following principles in order to find out whether a provision is discriminatory-- "(i) that equal protection of law does not envisage that every citizen is treated alike in all circumstances, but if contemplates that persons similarly situated or similarly placed are to be treated alike;
(ii) that reasonable classification is permissible but it must be founded on reasonable distinction or reasonable basis;
(iii) that different laws can validly be enacted for different sexes, persons of different age groups, persons having different financial standard and persons accused of heinous crimes;
(iv) that no standard of universal application to test reasonableness of a classification can be laid down as what may be reasonable classification in a particular set of circumstances, may be unreasonable classification in a particular set of circumstances may be unreasonable in the other set of circumstances:
(v) that a law applying to one person or one class of persons may be Constitutionally valid if there is sufficient basis or reason for it, but a classification which is arbitrary and is not founded on any rational basis is no classification as to warrant its exclusion from the mischief of Article 25;
(vi) that equal protection of law means that all persons equally placed be treated alike both in privileges conferred and liabilities imposed;
(vii) that in order to make a classification reasonable, it should be based.
19. In the present cases, it will be seen that the levy of tax is on the valuation of the assets and is based upon intelligent differentia relatable to the object of Act. As already observed, Corporations which hold assets of the value of Rs,50 million or more, form different and distinct class and the question of any discrimination does not arise. Similarly, there is nothing on the record to sustain the contention that the impugned law is confiscatory, indeed, it has not been so demonstrated before this Court. In Messrs Elahi Cotton Mills (Pvt.) Ltd. v. Federation of Pakistan and others 1997 SCM R 582, it was observed that tax can be levied on sliding scale.
' For all these reasons, these petitions are found to be without any force and are hereby dismissed with no order as to costs.