SARDAR MUHAMMAD RAZA KHAN, J.---Messrs Gul Cooking Oil and Vegetable Ghee (Pvt) Limited is a company incorporated, having its registered office at Dargai, Malakand Agency of the North- West Frontier Province. It carries on the business of manufacturing, processing and sale of Vanaspati Ghee and Cooking Oil; for the purpose whereof, the company imports edible oil as the raw material exclusively for its own use.
2. The company opened a letter of credit for the import of 1745 metric tonns of RBD palm nil out of which 245 MT had reached the country at Port Muhammad Bin Qasim, Karachi which is to be ex- bonded within a permissible period. The bill of lading is dated 15th of June, 1999. To be effective from the 1st of July, 1999, the Federal Government (Ministry of Finance) issued a Notification S.R.O.
No.824(1)/99, dated 8th of July, 1999, whereby the following amendment was made in the Second Schedule to the Income Tax Ordinance, 1979:--- "In the aforesaid Schedule, in Part Il, for clause (6AA) the following shall be substituted, namely 6AA.---In respect of any edible oils imported as raw material by an industrial undertaking exclusively for its own use, the tax under subsection (5) of section 50 shall be collected at the rate of two percent. Of the value of such edible oils as increased by customs duty and sales tax, if any, levied thereon."
Deputy Commissioner Income Tax Companies Circle Peshawar subsequently issued notice purportingly under section 56 of Income Tax Ordinance, 1979 to furnish income tax returns for the assessm ent year 1998-99 by 8th of March, 1999. The petitioner-company gave a reply to it but instead of attending thereto, another notice was issued for personal appearance and still another notice dated 15-6-1999 was issued to the same effect.
3. Prior to such demand the Commissioner Income Tax had been issuing exemption certificate to the petitioner-company from time to time (Annexure 'J' Page 35 and Annexure 'K' Page-36) qua the collection of income tax on the basis of Notification S.R.O. 593(1)/91, dated 30th of June,, 1991 whereby the Central Board of Revenue had specified certain classes of persons to whom subsection (5) of section 50 of the Income Tax Ordinance was made not applicable. Such exemptions included those persons who produced a certificate from the Commissioner of Income Tax concerned to the effect that their income during the income year was exempt from tax under the Second Schedule to the Ordinance. Another development took place through a letter dated 24- 7-1999 written by Assistant Collector Headquarter 1, Collectorate of Customs Port Qasim, Karachi to Assistant Collector Customs and Central Excise, Mardan whereby he sought certain verifications concerning income tax exemption with special reference to such claim of exemption by Messrs Gul Cooking Oil, the petitioner. The letter is Annexure 'L' Page-37.
4. The Commissioner of Income Tax Companies Zone Peshawar and Deputy Commissioner of Income Tax Companies Circle-1 Peshawar filed their comments, wherein they raised certain preliminary objections supported subsequently in their arguments, to the effect that the petitioner was liable to be dismissed on the ground that through the amendment of the Income Tax Ordinance, 1979, by the Finance Act, promulgated on 30-6-1999, and through the addition of section 80DD of the Income Tax Ordinance, a withholding tax is bound to be deducted at the rate of 2% from the petitioner on the import of edible oils and that such Collector Customs Appraisement, Karachi has not been made' a party to the present petition. It was added that with the insertion of section 80DD in the Ordinance of 1979 the petitioner --company has no locus standi as well as a cause of action. Secondly, it was contended that the High Court at Peshawar had no territorial jurisdiction because the tax was being deducted and realised at Karachi. The third contention of the respondent was that against the assessment in question, the petitioner had the remedy available of going to the Collector Appeals and hence the jurisdiction of this Court under Article 199 of the Constitution could not be invoked. The last objection was to the effect that through the Finance Act, 1999, the power to grant exemption certificate having vested in the Commissioner of Income Tax, stood already withdrawn by, the Central Board of Revenue. We would try to take up the objections one by one.
5. The contention that the power to grant exemption certificate stands withdrawn from the Commissioner Income Tax by the Central Board of Revenue, is taken up first. A perusal of notifications concerning powers to issue exemption certification and a perusal of law in that behalf, would indicate that the Commissioner, as such, has no power to exempt somebody from the payment of income tax. The certificate is issued with regard to certain exemptions already sanctioned by the law enacted in that behalf. In other words, it is a mere information furnished through such certificate to the Appraisement Agency at Karachi that such and such person or company is exempt from the payment of income tax and that such tax be not deducted. This is a power used to he vested in the Commissioner Income Tax to inform the Appraisement Agency about the exemption availed by some company or person under the enacted law and not under his own discretion. When we talk of the enacted law, we refer to the income Tax Ordinance and the subordinate legislation there under.
6. Keeping the above levy of taxes and the exemptions there from, within the scope of the Income Tax Ordinance, 19.79, we revert to the primary and the most substantial ground, of the petitioner who alleged that the very. Income Tax Ordinance, 1979 is not at all applicable to them within the contemplation of Article 247 of the Constitution, in the light or compliance whereof, the Income Tax Ordinance, 1979 was never extended to the Malakand Division or to the Provincially Administered Tribal Areas of the North-West Frontier Province, where the petitioner-industry is to4ated and hence the benefit which is claimed by the petitioner is .Not through the Ordinance but is without the Ordinance,
7. As far the applicability to and the extension of Income Tax Ordinance with reference to Article 247 of the Constitution is concerned, it is proved as well as admitted that the Ordinance is not applicable to the territory where the petitioner-company is located. It is also admitted that Income Tax Ordinance is not applicable to the petitioner-company having not at all been extended to the area. In view of this factual as well as legal position, we are convinced that while dealing with the affairs of the petitioner-company, we should not bring into consideration any provision of the Income Tax Ordinance, 1979, at all. When seen from this angle, we are further convinced to observe that the petitioner-company does not at all stand in need of any certificate of exemption issued to it by any authority under the Ordinance because the Ordinance is not applicable to the company and the authority cannot issue any certificate unless the exemption related thereto flows from the Ordinance. The petitioner is exempt from the payment of income tax not because the Ordinance exempts him so but because the very Ordinance is not at all applicable thereto. It, therefore, makes the least difference whether some such authority empowered to issue exemption certificate exists in the field or has lately been done away with. Similar observation had once been made by the Commissioner of income Tax/Wealth Tax Zone-A Peshawar (Mr. Liaqat A.I Khan) through his Letter No. J/585 dated 18-10-1997 to the Inspecting Additional Commissioners of Income-tax D.I. Khan and Peshawar Range-11. Such letter was produced before the Court. The petitioner-company is, therefore, not at all liable to pay the income tax on the income derived in the Provincially Administered Tribal Areas, foe, the Income Tax Ordinance is not extended and is not applicable thereto.
8. Next we take up the non-maintainability of the claim in the light of newly added section 80DD of the Income Tax Ordinance. For facility of reference, the section is reproduced as follows:--- "80DD. Minimum tax on income of importers of edible oils, etcNotwithstanding anything contained in this Ordinance, or any other law for the time being in force, the tax collected under subsection (5) of section 50 on import of edible oils as raw material by an industrial undertaking shall be deemed to be the minimum amount of tax payable under this Ordinance and where the final tax liability determined under this Ordinance exceeds the amount collected under the said subsection, the said amount shall be adjustable against such liability of the said industrial undertaking."
9. It would be fairly anomalous to conclude or deduce that to a particular area the Income Tax Ordinance, 1979 is not applicable but one section 80DD thereof is, of course, applicable and the importers of edible oils in such area would be taxed under section 80DD alone. This is simply a contradiction, in terms. When the very Act is not applicable to Malakand Division or PATA, any single section thereof cannot be made applicable by any force of argument or by any stretch of imagination. ,
10. The commencing words of the above section make the contents thereof applicable notwithstanding anything contained in the Income Tax Ordinance or any other law for the time being in force- yet, it can be added that the non-applicability of Income Tax Ordinance to the territory in question is not a matter merely limited to the Ordinance or to any other law for the time being in force but is a matter referable to the Constitution itself, Article 247 whereof does not make any Ordinance or law applicable to such area unless the same, in accordance with the Article, is specially extended to such area. We are of the firm view that section 80DD is also not applicable to the companies or persons who derive their income in Provincially Administered Tribal Areas. .
11. We now revert to the objection that the petitioner had the remedy available of going to the Collector Appeals by remaining within the hierarchy concerned and that it could not invoke the Constitutional jurisdiction of this Court. This is again putting forth the same argument but in different words We must say once again that when the very Income Tax Ordinance, 1979 has no application at all to the specific area, no provision of said Ordinance can 'be invoked against the petitioner and hence no remedy can be restricted within the ambit of such Ordinance. Moreover, the instant one is not a case of income tax assessment so that the petitioner if wrongly assessed should have resorted to the Collector Appeals in their own hierarchy. In the present case the Deputy Commissioner Income Tax Companies Circle-1 demanding tax returns from the petitioner, is acting so much without jurisdiction and beyond the scope of the Ordinance that it is not incumbent upon the petitioner to seek a remedy provided by, the Ordinance. In this particular situation, the petitioner can very well-invoke the jurisdiction of the High Court under Article 199 of the Constitution, directly without resorting to the provisions of the Ordinance.
12. The above argument is attracted to the present case from the only letter on file Annexure 'L'
Page 37 whereby Assistant Collector Headquarter Collectorate of Customs, Port Qasim, Karachi had sought certain verifications concerning income tax exemption with special reference to such claim made by the present petitioner. No doubt, the tax collectors are the Customs Authorities at Karachi but they do so under the instructions and verifications provided and furnished by the Income Tax Authorities at Peshawar. In the instant case, therefore, the cause of action if at all referable to the Income Tax Ordinance, which it cannot, arises in parts. Part of a cause of action may be said to have arisen at Karachi but the substantial part thereof arises at Peshawar within the jurisdiction of the High Court and hence we also answer the relevant objections in the negative that this Court had no territorial jurisdiction. For that we would rely on the case of Collector v.
Messrs Raees Khan Limited (1996 SCM R 83).
13. Now we advert to the case law. The case of Dr. Zafar A.I Khan from Peshawar High Court (1997 PTD 1829) was the one where it was held that in the presence of some remedy available in the relevant law, the party could not by-pass such statutory remedy and come to the High Court directly. As said earlier, the case referred to above, was one of the assessments under the Income Tax Ordinance whereas the instant one is neither assessment nor it can be referred to any Ordinance. (1998 PTD 2860), a case from Indian jurisdiction of Calcutta High Court is equally distinguishable on the same arguments. Amin Textile Mills v. Islamic Republic of Pakistan (1998 SCM R 2389) is a case where a demand for loan was made by a Bank at Karachi and hence it was determined that the High Court at Lahore had no jurisdiction. Whereas, in the instant case the very demand is made at Peshawar.
14. On the argument that the instant one is not a case of assessment and also is not a case of any action taken under the Ordinance, we can equally distinguish the authorities Income Tax Officer v.
Messrs Chappal Builders (1993 SCM R 1108), C.B.R. v. Sheikh Spinning Mills Ltd. (1999 SCM R 1442) and the case, of Hamdard Dawakhana (PLD 1992 SC 847).
15. In the case of Sandal Bar Enterprises, the Hon'ble Supreme Court had ruled that a High- Court has power to issue a direction to a person performing within its territorial jurisdiction certain functions in connection with the affairs of Federation, to refrain from doing anything he is not permitted by law to do or to do anything he is required by law to do. The Income Tax Authorities at Peshawar performing function in connection with the affairs of Federation are doing an unlawful act by demanding income tax from a person who earns income in an area which is beyond the scope of Income Tax Ordinance and hence this Court has complete jurisdiction to interfere. In the instant case the relief sought is one which is a matter of direct concern of the Federation and the Central Board of Revenue, who both, are a party to the writ petition and hence, in view of the verdict given by the August Supreme Court in Flying Craft's case (1997 SCM R 1874), this -Court is vested with the territorial jurisdiction to adjudicate upon the matter.
16. As a sequal to the above discussion, it is held that the Income Tax Ordinance, 1979 is not applicable to, inter alia, Malakand Division within the contemplation of Article 247 of the Constitution; that the notices purporting to be issued under sections 56 and 63 of the Income Tax Ordinance, 1979, are illegal, without jurisdiction and without lawful authority. The respondents are hereby directed to release the raw material in dispute forthwith without deducting two percent. Of withholding tax, the levy whereof is unlawful as well as without jurisdiction. The writ petition is accordingly accepted.