TARIQ PARVEZ, J.---Through this common judgment we intend to dispose of a number of Tax References and F.A.Os. (list separately attached) as common question of law is involved in all these cases which is to be answered by this Court.
The question that is involved is formulated as under:-- "Whether on facts and in the circumstance of the case the learned Income Tax Appellate Tribunal was legally right in holding that Workers Welfare Fund is not leviable in case of an industrial establishment whose income is exempt from tax under the Income Tax Ordinance, 1979?"
2. In all these connected matters which are subject-matter of our this judgment, the respondents are industrial establishments situated within the limits of N.-W.F.P. In different Industrial Estates or otherwise but are enjoying tax holiday by virtue of exemptions granted from payment of Income- tax under different concessionary provisions contained in the Income Tax Ordinance (hereinafter referred to as Ordinance).
3. An Ordinance known as Workers Welfare Fund Ordinance (Ordinance No. XXXVI of .1971)
(hereinafter referred to as WWFO) was promulgated by the President of Pakistan on 9-12-1971 with its Preambles to the effect to provide for the establishment of a Fund for residential accommodation and other facilities for workers and for matters connected therewith or incidental thereto. WWFO through section 4 had prescribed mode of payment by, and recovery from, industrial establishments, "Fund" is defined under section 2, clause (c). Section 4 requires that "every industrial establishment, the total income of which in any year of account commencing on or after the date specified by the Federal Government in the' official Gazette in this behalf is not less than one lakh of rupees shall pay to the "Fund" in respect of that year a sum equal to two per cent.
Of so much of its total income as is assessable under the Ordinance or would have been so assessable but for the mode by section 48 thereof. This part of section 4 deals with the chargeability while the remaining prescribes the mode of recovery and penalty in case of failure of an establishment in contributing to the fund. As reference to section 48 of the Ordinance is made in section 4 of the WWFO, it is rather desirable to reproduce the text of section 48 relevant to the present proposition:-- "48. Exemption from tax of newly established industrial undertaking. ---(I) Subject to the provisions of this section, there shall be exempt from the tax payable under this Ordinance so much of the profits and gains derived by an assessee from an industrial undertaking, to which this section applies, as does not exceed an amount computed with reference to the capital employed in the undertaking as hereinafter, provided.
(2) This section applies to an industrial undertaking (hereinafter referred to as the 'said undertaking' which fulfills the following conditions, namely:-- (a)
(b)
(c) "that it is set up by a Pakistani company in the areas specified in clauses (119), (120), (121) and
(122) of the Second Schedule or in an industrial estate approved by the Central Board of Revenue and located in the territories of Pakistan (excluding Talukas of Karachi and Hyderabad), arid Tehsil of Faisalabad and Lahore, and such adjoining areas of Lahore Tehsil as may be notified in this behalf by the Federal Government."
Section 4 of the WWFO has used the words "total income" and the "assessable". Therefore, reference to those provisions in the Ordinance becomes relevant that deal With income and assessment: Section 2(6) defines "assessee" which means "a person by whom any tax, or any other sum of money is payable under this Ordinance". Clause (24) of section 2 defines "income" which includes any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this Ordinance under any head specified in section 15; any loss of such income, profits or gains; and includes any sum deemed to be income, or income accruing or arising -or received in Pakistan under any provision of this Ordinance. Total income has been defined in subsection (44) means "the total amount of income, referred to in section 11 computed in the manner laid down in this Ordinance; and includes any income which under any provision of this Ordinance is to be included in .The total income of an assessee". Section 11 canvasses the scope. Of total income while section 30 of the Ordinance relates to income from other sources which may be included in the total income of an assessee.
4. After having perused the provisions of Ordinance, referred to above, and the mode of payment and recovery of the fund from the industrial establishment towards Workers' Welfare Fund, section 14 of the Ordinance, the heading of which is "exemptions" assumes importance. Under this section there may be granted exemption from the payment of tax on income or classes of income, or person or classes of persons as are specified in the Part I, Second Schedule either to exempt them wholly or partially at the given rate.
5. In the case in hand, the respondents' establishments have all claimed exemptions from the payment of income-tax on the basis of they being exempt under some of the provisions of Second Schedule of the Ordinance.
6. Learned counsel for the appellant/petitioner contended that' the exemptions from the chargeability towards the WWF is not allowed and all industrial concerned, the total income of which for the concerned year exceed one lakh rupees would be contributing to the fund at the rate of 2 % on their assessable total income. It was argued that WWFO is beneficial legislation and is promulgated for the welfare of the workers and to interpret section 4 of the WWFO in a manner that would exempt the respondents from contributing to the fund would be against the very object and spirit of W WFO. , It was submitted that the Income-tax Authorities are only collecting agents and notwithstanding the fact that the total income is not assessable to the Income-tax because of the exemptions, yet WWFO being separate law, its provisions are to be given effect to by deducting 2 % amount from the assessable income. It was argued that no exception from the payment of fund is allowed under section 4 of the WWFO and even such industrial concerned which are exempted from the payment of income-tax and whose total income is not assessable but for section 48 of the Ordinance are also included and are liable to pay the fund. It was, therefore, argued that notwithstanding exemptions so granted under section 48, the chargeability of WWFO is independent. The only exception is that the assessable total income must not be less than one lakh rupees. Learned counsel further submitted that the object of assessment of an industrial establishment is to determine its losses and profits and that such determination has its nexus with the liability of an industrial establishment towards the payment of WWF. It was argued that at the time when WWFO was promulgated, Income-tax Act, 1922 was in force and that all the industrial establishments whose income was not less than one lakh rupees would pay WWF until the year 1991 when for the first time exemptions were claimed under clauses (118A) to (126A) to the Second Schedule of Ordinance. It was argued that the fund is collected for the benefits of the workers while income-tax is primarily a charge on all, incomes collected and is right of the sovereign State for running the affairs of the State business. It was argued that under section 14 of the Ordinance, Income tax Authorities can exempt any income or person from the liability of income-tax but it would not empower such authorities to take away the liability of the industrial establishments from payment of WWF.
7. On the other hand, learned counsel appearing for the respondents have taken us through section 14, exemption granting provisions of the Ordinance. They- have also taken objection to the maintainability of the appeals/references on the ground that the same have not been filed by an aggrieved person because fund if not charged, the aggrieved person would be workers and not Income Tax Department. It was submitted that the respondent's industries are not liable to pay WWF on their income because by virtue of exemption granted to them in terns s of section 14 read with Second Schedule of the Ordinance,. Their income is not assessable. It was argued that when the Income-tax Authorities are constrained to assess income of the respondents then in absence of any assessm ent, no refund liability can be determined. It was argued that under section 4 of the WWFO the Legislation when intended to include particular industries which were though exempted from the payment of income tax, yet have been included by virtue of insertion of section 48 of the Ordinance in the section itself. Learned counsel for the respondent have also referred, to Protection of Economic Reforms Act, 19.92 relies on section 6 thereof. It was argued that any fiscal incentive that has been advanced cannot be withdrawn to the disadvantage of the respondents. It was next argued that section 4 being a charging section, it should be interpreted in manner favourable to the taxpayer.
8.After hearing the learned counsel for the parties, interpretation of the provisions of section 4 of WWFO in context of section 14 require determination as to whether such industrial concerned which are exempted from the payment of income-tax by virtue of section 14 or any other section of the Ordinance are liable to pay contribute towards WWF in terms of section 4 of the WWFO. Section 4 imposes a charge on every industrial establishment but with the precondition that its total income for the accounting year is not less than one lakh rupees.
9. The phrase "so much of total income as is assessable" appears to be more relevant. The income for the purpose of income-tax is to be ascertained when Returns are filed and after considering the total income of the industrial establishment, its tax liability is determined. But, due to respondents being exempt from payment of income-tax or in view of their income being not assessable due to exemption granted to .Them under section 14 or any other exempting provisions other than section .48 of the Ordinance, their total income is not assessable. Therefore, since the words "total income" have been used to which there stands extended exemption, as such, levy of/deduction of Workers Welfare Fund appears to be not in consonance with the concept of exemption.
10. It is not disputed before us that the respondents are not availing exemption under Second Schedule of the Income Tax Ordinance, what is disputed is that notwithstanding such exemptions, the respondents' "total income" if it is more than one lakh rupees for the concerned year, 2% are deductible towards the Workers Welfare Fund. This appears to be illogical because on one hand under the special law dealing with taxation on income, has exempted the industrial establishments and on the other hand through different enactments, such exemptions cannot be frustrated when the special enactment i.e. WWFO in section 4 itself has used the language "total income assessable" and also that such income would have been so-assessable but for the mode of section 48 of the Ordinance, would mean that "except the condition of income to be less than one lakh rupees, it would include such industries which were granted exemption from the payment of income-tax under section 48 of the Ordinance. If the intention of the Legislature was to include all other exempted industries, it would have so included by express reference made in section 4 itself.
In absence of any such reference, the only necessary corollary that follows is that all other industries who are enjoying exemption-from the payment of income-tax other than under section 48 have intentionally been included to be covered within the mischief of section 4 towards their liability to pay WWF.
11. The tax-free holiday or any exemption from the payment of income tax has got rational behind.
They are granted to industries keeping in view their locale, nature of business, their productivity so that the process of industrialization is boosted up. Therefore, we see wisdom in not including other exempted industrial establishments within the scope of section 4 to their liability towards WWF to avoid putting extra burden on such industries.
12. Our conclusion of the matter is that so much of total income of an industrial establishment which is not open to assessm ent or is exempted under any of the section of the Income-tax Ordinance except an industrial establishment which is exempted under section 48, are not liable to the charge of WWF. Therefore, appeals and references and the question formulated therein is answered in the terms that on facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified and was correct in bolding that WWF- is not leviable as long the total income of an industrial establishment is not less than one lakh rupees or which are exempted from payment of income-tax under section 14 read with Second Schedule of the Ordinance or any other exempting clause of the Ordinance but other than industries which are exempted under section 48 of the Ordinance.
The non-changeability on such industries shall remain in force until the exemptions are withdrawn or their continuity expires by afflux of time.