JUDGMENT MALIK MUHAMMAD QAYYUM, J.- This judgment shall dispose of Writ Petitions Nos.
1261/1998 and No. 11655/1999, in both of which the question which falls for determination is as to whether the respondent can justifiably levy additional tax during the period stay orders granted by the High Court or the Supreme Court remained in operation.
2. In view of the nature of the dispute it would suffice to give facts of W.P. No. 1261/1998 only. The petitioner in that petition had filed Writ Petition bearing No, 9442/1991 in this Court challenging the vires of section 80-D of the Income Tax Ordinance, 1979. On 21.10.1991, this Court suspended the recovery of this liability. However, the petition was ultimately dismissed by this Court on 22.1.1993.
The petitioner went in appeal to the Supreme Court of Pakistan which on 17.5.1995 again stayed the recovery. The appeal was finally dismissed on 4.6.1997.
2. In view of the nature of the dispute it would suffice to give facts of W.P. No. 1261/1998 only. The petitioner in that petition had filed Writ Petition bearing No, 9442/1991 in this Court challenging the vires of section 80-D of the Income Tax Ordinance, 1979. On 21.10.1991, this Court suspended the recovery of this liability. However, the petition was ultimately dismissed by this Court on 22.1.1993.
The petitioner went in appeal to the Supreme Court of Pakistan which on 17.5.1995 again stayed the recovery. The appeal was finally dismissed on 4.6.1997.
3. After the decision of the Supreme Court, the respondents called upon the petitioner to pay an outstanding amount of Rs.141,90,886/- which was inclusive of a sum of Rs. 2717147/- as additional tax under Section 88 of the Income Tax Ordinance, 1979 due to the failure of the petitioner to pay the tax within due dates, It appears that some sales tax refund was payable to the petitioner by the Sales Tax Department. As the petitioner did not pay the tax, they issued a notice under Section 90 of the Income Tax Ordinance, 1979 calling upon the Collector, Sales Tax to pay to them an amount due on account of refund of sales tax. As already indicated, the only dispute between the parties in the present cases is with regard to the liability of the petitioner to pay additional tax or penalty as the case may be.
4. The learned counsel for the petitioner has contended that the respondents had no authority in law to levy any additional charge or penalty on account of nonpayment of tax for the period during which stay orders granted by the High Court and the Supreme Court were in operation.
5. Mr. Muhammad Ilyas Khan, learned counsel for the respondents has, however, submitted that since the petitioners themselves are responsible for non-payment of the tax within the due date when instead of making the payment, they filed proceedings in the High Court and Supreme Court of Pakistan, which were later on found to be without any merit and as such the, respondents were justified in levying additional tax. Reference has been made to Sections 86, 87 and 89 of the Income Tax Ordinances 1979.
6. A perusal of the provisions referred to by the learned counsel for the respondents shows that the additional tax can only be levied, if there has been a "failure" to pay tax on the due dates or on the happening of certain eventuality. The question, therefore, which arises is as to whether a person can be deemed to have failed in performance of his obligation, if there is an order passed by a Court of competent jurisdiction staying recovery of said amount.
7. Having considered the arguments addressed by the learned counsel for the parties and having gone through the relevant provision of the Income Tax Ordinance, 1979, it becomes clear that the answer to the above question has to be in the negative and a person in whose favour, stay order operates cannot be held to have failed to make payment of the amount due. Further more, the demand cannot be said to have become final when the matter is sub-judice before a Court of law which had stayed its recovery.
8. The word "fail", according to the Ballentainets Law Dictionary, third edition, at page 450, means to refuse, to neglect. Similarly, in Black's Law Dictionary "fail" has been defined as fault, negligence, or refusal. Consequently, the mere non-payment by itself would not amount to failure to pay unless there has been a neglect or refusal or inexcusable commission on the part of a person liable to pay the amount.
9. A somewhat similar situation arose in the cases of Sindh Employees' Social Security Institute v.
Silver Industries Ltd. (1982 PLC 1062) and M/s. R.L.D. Ball Bearing Limited v. Sindh Employees' Social Security Institution, Karachi (PLD 1991 S.C. 308). In both the cases the dispute was with regard to payment of increase under Section 23 of the West Pakistan Employees' Social Security Ordinance, 1965, according to which, if an employee fails to pay on the due date the contribution payable by him, the amount so payable shall be increased by such percentage or the amount as may be prescribed, In the first case, honourable Mr. Justice Amal Mian (as he then was) after considering various dictionaries as also the case-law ruled that although words "fail" and "default" were not synonymous, and "fail" has wider connotation as compared to "default" but the reasonable interpretation would be that in order to attract the penal provision of levy or increase contained in the above section, there should be in excusable, neglect or omission on the part of the employer to pay contribution.
10. In the other case before the Supreme Court, the precise question was as to whether during the period, the recovery of the contribution had been stayed by the High Court, it can be said that the employer has failed to pay the contribution and was liable to pay the increase, In that context it was observed by the Supreme Court of Pakistan that it can legitimately be said that there was no failure on the part of the employer to make payment as the High Court had by granting stay suspended the obligation of the employer to make payment during the operation of the stay.
11. Another case which is of some relevance is reported as M/s. Murree Borwery v. Naeem (PLD 1994 Lah. 508), where provisions of Section 34 of the Sales Tax Act, 1990 with regard to payment of additional tax on account of non-payment of the deposit of tax, fell for consideration, It was held that payment of additional tax was not necessary consequence or corollary of non-payment of sales tax within the stipulated period.
12. Mr. Muhammad Ilyas Khan, learned counsel for the respondents has, however, relied upon the judgment of Indian Supreme Court reported as Haji Lai Muhammad v. The State of U.P. And others (1973 STC 96 (VaI. XXXIX)). That case arose under the U.P. Sales Tax Act, 1948 and the dispute was that if the recovery of the sales tax had been stayed by the High Court, was the assessee liable to pay interest at the rate of 18% per annum under Section 8(1-A) of the Sales Tax Act. It was. Held, by the Supreme Court of India that the liability to pay interest was automatic and arises by operation of law and, therefore, even if there was stay granted by the Court, the liability to pay interest remains.
12. This case is distinguishable for two reasons; firstly, that it relates to payment of interest and secondly, that the words used in sub-section (1-A) of Section 8 of the Sales Tax Act, 1948, are that if the tax payable remains un-paid". This provision does not use the corresion "failed"to pay or "defaults in payment" which in the subject-matter of the present discussion. This case is, therefore/ clearly distinguishable and, in any case, it cannot be relied upon in view of the pronouncement of the Supreme Court in M/s. R.C.D. Ball Bearing Limited v. Sindh Employees Special Security Institution, Karachi (PLD 1991 S.C. 308). It is pertinent to mention that in this case, the Supreme Court of Pakistan was pleased to observe that the analogy adopted by the learned Single Judge of the High Court in respect of interest payable on a money decree was intact and was irrelevant.
In view of what has been said above, these petitions are allowed and the demand of the respondents to pay additional tax, during the period, the stay was in operation, is declared to be without any lawful authority and of no legal effect. There shall be no order as to costs.