SARDAR SAID MUHAMMAD KHAN, C.J.---The above entitled appeals have been directed against the judgments of the High Court, dated 29-1-1999 and 26-2-1999, whereby the writ petitions filed by the respondents were accepted. As common questions of law are involved in the above entitled appeals, we propose to dispose of the same through this single judgment.
2. The facts giving rise to Civil Appeal No.74 of 1999 are that respondents Nos. l and 2 are Government contractors and were allotted various construction works between 1991 to 1995. The Income-Tax Ordinance, 1979, in force in Pakistan which was adapted in Azad Kashmir vide Act No. IX of 1979, was amended through the Finance Act, 1995, whereby an amendment was brought in paragraph E, clause (i), sub-para. (i), clause (iii) in Ist Schedule of the Income Tax Ordinance, 1979, and the rate of advance income-tax to be deducted was increased from 3 % to 5 % . It may be observed that initially the Income Tax Ordinance, 1979, was adapted by the Azad Jammu and Kashmir Council with effect from 1-7-1979 with all its amendments and orders etc. Which were made in Pakistan till the date of its adaptation and those which might be made in future.
Consequently, the increase in the advance income-tax from 3 % to 5 % by the Finance Act, 1995, also stood adapted in the State According to the appellants, a genera; circular was issued on 5-7- 1995 for information of the concerned to comply with the statutory provisions contained in the Finance .Act, 1995. Respondents Nos. 1 and 2 assailed the demand of the advance income-tax at the enhanced rates on the following grounds:---
(i) That the increase in the advance income-tax by 2% could not be demanded because the agreements between the concerned parties were executed prior to the said increase;
(ii) that the Finance Act, 1995; is prospective in nature and, thus, the aforesaid circular which indirectly postulates to give retrospective effect to the said Act was illegal:
(iii) that the Legislature was not competent to make the amendment which adversely affects the vested rights accrued to the petitioners-- respondents as a result of the relevant agreements;
(iv) that the amendments brought through the Finance Act on 5-7-1995 are violative of Fundamental Right No.14, guaranteed by the Azad Jammu and Kashmir Interim Constitution Act, 1974;
(v) that the deduction of income-tax was violative of section 31(5) ofthe Azad Jammu and Kashmir Interim Constitution Act, 1974;
(vi) that Ordinance No.1 of 1998 was promulgated during the pendency of the writ petition in -the High Court so as to bring the relevant law in consonance with the judgment given by the Supreme Court in Spintex case was of no legal effect so far as the same operates retrospectively; and ,
(vii) that in view of dictum of the Supreme Court in case entitled M/s. Spintex Limited, Mirpur v.
Income-tax Officer Government of AJ&K, Mirpur 1998 PTD 2567, the amendments made in terms 'amendment made in law in future' are of no legal consequence as being hit by the doctrine of 'abdication and self-effacement'.
3. The High Court accepted the writ petition, inter alia, on the ground that the fiscal law cannot be made operative retrospectively and, thus, Ordinance No. 1 of 1998 (which was subsequently approved by the Azad Jammu and Kashmir Council and became an Act) was of no legal consequence so far as the same makes the respondents-petitioners liable to the payment of advance income-tax at enhanced rates; and that the aforesaid Ordinance and Circular dated 5- 7-1995 are violative of Fundamental Right No. 14.
4. The facts of Civil Appeal No.75 of 1999 are that M/s. Cade Creets Associates who were given the contract for the construction of the State Bank Building, Muzaffarabad, vide agreement, dated 13- 6-1995 filed a writ petition assailing the legality of Finance Act 1995, and Circular issued on 5--7- 1998 more or less on the same grounds was done by respondents Nos. l and 2 in Civil Appeal No.85 of 1999, entitled above. The High Court, after taking necessary proceedings, accepted the writ petition on the short ground that in view of the dictum of the Supreme Court in case entitled M/s. Spintex Limited, Mirpur v. Income Tax Officer Government of AJ&K, Mirpur 1998 PTD 2567, and the dictum given by the High Court in the judgment which is subject of Civil Appeal No.74, entitled above, deduction of 5% advance income-tax prior to 13-7-1998, when Ordinance No. 1 of 1998 was promulgated, was not warranted by law for the reasons enumerated in the aforesaid judgment of the High Court. The Commissioner of Income-tax has come up in appeals against the aforesaid judgments of the High Court.
5. Ch. Muhammad Afzal, Advocate, the learned counsel for the appellants, has argued that the impugned judgment of the High Court is based upon the assumption that fiscal laws cannot be given retrospective effect. He has argued that there is no bar in the Azad Jammu and Kashmir Interim Constitution Act. 1974, to give retrospective effect to a fiscal statute; he has maintained that only the Constitution can place such an embargo on the powers of the Legislature. He has submitted that there is no such bar even in the Constitutions of India and Pakistan; the learned counsel has submitted that statutes have been frequently given retrospective effect by most of the Legislatures of the World. The learned counsel has contended that the authorities on which the learned Judge in the High Court has relied in support of the view that a fiscal law cannot be given retrospective effect do not say so; rather the same deal with different propositions of law and have no relevancy to the facts of the cases In hand. The learned counsel has taken us through, some of the authorities which were referred to by the High Court and contended that the said authorities do not support the view that a fiscal law cannot be given retrospective effect. Thus, the learned counsel has vehemently argued that Ordinance No. 1 of 1998 whereby the Finance Act of 1995 was made operative from the date of its enforcement in Azad Kashmir and which was also a validating legislation, did not suffer from any legal infirmity. The learned counsel for the appellants has strenuously argued that there was no justification to declare that the aforesaid Ordinance and circular issued in pursuance of the same, were ineffective so far as the demand of advance income-tax at the increased rates from the respondents was concerned. He has also submitted that the High Court has committed an error in holding that as the increase in the rates of advance income-tax was made after the agreements between the parties had been executed, the demand at the increased rates cannot be made from the respondents; the same can be done only in cases where the transactions took place after 13-7-1998, the date of promulgation of Ordinance No. 1 of 1998. He has also maintained that the contention of the respondents-petitioners that the tax cannot be realised in cases where the agreements were executed before 13-7-1998 is devoid of any force because the agreements between the parties cannot place such an embargo on the powers of the Legislature in derogation of the Interim Constitution Act. The learned counsel has cited following authorities in support of his contentions:---
6. In reply, Mr. Ghulam Mustafa Mughal, Advocate, the learned counsel for the respondents, has controverted the arguments advanced by the learned counsel for the appellants that the High Court has committed an error in holding that retrospective effect could not be given to the law whereby advance income-tax was being demanded from the respondents on the basis of Finance Act, 1995, which stood adapted in Azad Kashmir with retrospective effect by Ordinance No. 1 of 1998.
The learned counsel has argued that when the parties entered into the agreement, they were to pay advance income-tax at the rate of 3 % but the rate was enhanced to 5 % by the concerned authorities to the detriment of the respondents-petitioners which could not be done. He has submitted that a law could not be given retrospective effect so as to take away a vested right of a party. According to the learned counsel for the respondents, it was a vested right of the respondents-petitioners to pay advance income-tax at the rates which were prevalent at the time when they entered into the agreement regarding the construction work indicated in the beginning of this judgment. The learned counsel has argued that as adaptation of Finance Act, 1995, with retrospective effect by virtue of Ordinance No. 1 of 1998 was illegal, the subsequent circular issued on 5-7-995 was also rightly held to be of no legal consequence by the High Court. The learned counsel has cited following authorities in support of his contention:--- "In case reported as Azad Government of the State of Jammu and Kashmir v. Syed Muhammad Akbar Shah 1996 PLC (C.S.)) 838, the facts were that the provisions of Civil Servants Act were retrospectively amended by the appellants with the result that legal defect in the order of retirement of respondents stood removed and the same became valid. It was observed that when the order of Government was passed it was without any legal cover, and therefore, void but stood validated by way of the aforesaid amendment in the Civil Servants Act.' matter had become past and closed transaction as was held by the Supreme Court in case of Al- Samrez Enterprise v. The Federation of Pakistan (1986 SCMR 1917).
7. We have considered the arguments of the learned counsel for the parties on the point as to whether the High Court was justified in holding that a fiscal statute cannot be made operative retrospectively. It is evident from the case law, referred to by the learned counsel for the appellants, that there is no proposition in support of the view that a fiscal law cannot be made operative retrospectively. Obviously, when there is no such embargo imposed upon the Legislature by the Interim Constitution Act, how such a restriction can be assumed. Thus, the very basis on which the findings of the High Court rest is without any legal substance. The authorities cited by the learned counsel for the respondents, are distinguishable. Al-Samrez's case (1986 SCMR 1917), has affected decisions reported in all authorities. The facts of the said case were that the exemption given from payment of customs duty was withdrawn by an executive order. The order of withdrawal of exemption was challenged by invoking the writ jurisdiction. It was held that exemption earlier given could not be withdrawn to, the detriment of the importers through an executive order purported to have been passed under section 21 of the General Clauses Act. It may be observed here that subsequently, the Customs Act was amended by insertion of section 31-A which primarily intended to nullify the pronouncements given by the Courts in Al-Samrez's case. Thereafter, it was held in case reported as Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad (PLD 1996 Lahore 718) that after the amendment of the Customs Act in form of section 31-A, the view taken in Al-Samrez's case was no longer valid because the Legislature was competent to amend the relevant statute giving the same retrospective effect. Similarly, in case reported as Abdul Sattar Noor Muhammad & Co. v. Government of Pakistan (1999 SCMR 2345), referred to above, it was observed that as the Bill of Entry on the basis of which the income-tax was payable was filed on 30-6-1995 and the tax had been paid, the increase in the rate of tax payable from 2 % to 4 % by virtue of Act of 1995 would not entitle the concerned authority to demand the income-tax at additional rates because the matter had already been crystalised and the income- tax had been paid before the said increase. It may also be pointed out that in the instant case neither it has been the case of the respondents nor there are any findings by the High Court that any of the respondents-petitioners had paid the advance income-tax at the previous rates prior to the enforcement of the Finance Act of 1995. It is evident from the abovementioned survey of case law that the findings of the High Court that the Finance Act, 1995, which was adapted retrospectively by Ordinance No.1 of 1998, could not operate retrospectively, are not legally correct.
8. The next question which needs resolution is as to whether the High Court was legally justified in holding that demand of increased income-tax is violative of Fundamental Right No.14 guaranteed by section 4 of the Azad Jammu and Kashmir Interim Constitution Act, 1974. The High Court has taken the view that the increase in the rate of advance payment of income-tax by 2% is violative of Fundamental Right No.14 because the said increase would adversely affect the interest of the respondents-contractors in their 'property'; they would be illegally deprived of their 'property' by 2 % . For resolving the matter, it would be convenient to reproduce the Constitutional provisions of Fundamental Right No. 14 below:--- "14. Protection of property, ---(I) No person shall be deprived of his property save in accordance with law.
(2) No property shall be compulsorily acquired or taken possession of save for a public purpose and save by the authority of law which provides for compensation therefor and either fixes the amount of compensation or specifies the principles on which and the manner in which compensation is to be determined and given.
(3)
(a)
(b)
(c)
(d)
(e)
(f)
ExplanationIn sub-paragraphs (2) and (3) 'property' shall mean immovable property, or any commercial or industrial undertaking, or any interest in any undertaking."
The perusal of the above provisions would reveal that sub--paragraph (2) of Fundamental Right No. 14 is not attracted in the instant case because that visualises compulsory acquisition of the property or taking over its possession for public purposes without fixing any compensation.
Obviously, when income-tax is demanded from an assessee, there is no question of fixing any compensation for that. Even if it is assumed for the sake of argument that demand of additional income-tax is 'deprivation' of the 'property ' of the respondents within the meanings of paragraph 1, that has been done in pursuance of law, i.e., the Income-tax Ordinance, 1979 and the Finance Act, 1995 and, thus, the tax demanded could not be held violative of the Fundamental Right No. 14 according to which a person can be deprived of his property according to law. Needless to say, as has been indicated above, the demand of additional advance income-tax from the respondents was made in pursuance of the aforesaid statutes which have been validly adapted in the State.
However, the fact of the matter is that by the impugned provision of law, the rate of income-tax has not been retrospectively increased; only the rate of deduction of advance tax has been increased. The deduction of advance tax is only a tentative deduction which has to be adjusted when the final assessm ent of income-tax to be paid by the respondents-Companies is made.
Thus, the findings of the High Court that demand of additional advance income-tax is violative of Fundamental Right No. 14 guaranteed by the Interim Constitution Act, are devoid of any force and are not sustainable.