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P L D 1997 SC 582

MESSRS ELAHI COTTON MILLS LTD AND OTHERS

V/S

FEDERATION OF PAKISTAN THROUGH SECRETARY
M/O FINANCE, ISLAMABAD & 6ORS

Frame (2)
Per Ajmal Mian, J.

(a) Constitution of Pakistan (1973), Articles 25, 77 & Fourth Sched.

That the Legislature is competent to classify persons or properties into different categories subject to different rates of tax. But it the same class of property similarly situated is subject to an incidence of taxation, which results in inequality amongst holders of the same kind of property, it is liable to be struck down on account of infringement of the fundamental right relating to equality. [p. 675] H

(b) Constitution of Pakistan (1973), Article 77 & Fourth Sched.

That “a State does not have to tax everything in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonably”. (Willi’s Constitutional Law). [p. 675] I

(c) Constitution of Pakistan (1973), Articles 8, 77, 25 & Fourth Sched.

That the tests of the vice of discrimination in a taxing law are less rigorous. If there is equality and uniformity within each group founded on intelligible differentia having a rational nexus with the object sought to be achieved by the law, the Constitutional mandate that a law should not be discriminatory is fulfilled/ [p. 676] J

That the policy of a tax, in its operation, may result in hardships or advantages or disadvantages to individual assessees which are accidental and inevitable. Simipliciter this fact will not constitute violation of any of the fundamental rights. [p. 676] K

(d) Constitution of Pakistan (1973), Article 77

That levy of building tax on the basis of the covered area without taking into consideration, the class to which a particular building belongs, the nature of construction, the purpose for which it is used, its situation and its capacity for profitable use and other relevant circumstances bearing on the matters of taxation is not sustainable in law for want of reasonable classification. [p. 678] CC

(e) Constitution of Pakistan (1973), Articles 25 & Fourth Sched.

That denial of reliefs provided by section 28 to 43-C of the Indian Income Tax Act to the particular business or trades covered by section 44-AC thereof without showing some basis fair and rational and without having nexus to the object sought to be achieved by the Legislature, held unfair, arbitrary, disproportionate to the prevalent evil and constitutes denial of equal treatment. Consequently, the Indian Supreme Court did not press into service non obstante clause of section 44-AC by applying theory of reading down as a rule of interpretation. [p. 678] EE

(f) Constitution of Pakistan (1973), Article 25
r/w Income Tax Ordinance (XXXI of 1979)—Ss. 80-C, 80-CC & 80-D

The impugned provisions of the provisions of the Ordinance are based on reasonable classification as they are founded on an intelligible differentia which distinguishes person covered thereunder with the other tax-payers. It has also rational nexus to the object sought to be achieved by such classification i.e., to broadening the tax base and to recover the minimum tax. [p. 694] DDD

In our view, there has not been any discrimination in the case in hand. The impugned three sections are very clear as to the class of persons covered under them. Rule 9 gives option to a manufacturer who is subject to tax and deduction under subsection (4) of section 50 to opt for the presumptive tax under section 80-C for final discharge of his tax liability. He is not otherwise covered by the impugned section 80-C. the appellants are covered by the impugned provisions and, therefore, they cannot equate themselves with a person who is not covered by the above provision. [p. 695] EEE

(g) Constitution of Pakistan (1973), Article 25
r/w Income Tax Ordinance (XXXI of 1979)—S. 80-C

It will suffice to observe that the foreign contractors constitute a class themselves and, therefore, there cannot be any comparison between a foreign contractor and a local contractor for the purpose of determining the question of reasonableness. It may be pointed out that a country cannot attract foreign contractors and foreign investors unless they are offered good terms for inducing them to participate in the development of the country. [p. 696] GGG

Dates of hearing : 1st April to 4th April and
7th April to 10th April 1997.

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