Mr. Justice Muhammad Sajid Mehmood Sethi in his judgment has decided the issue of advance income tax on auction price and declared it intra vires the Constitution of Islamic Republic of Pakistan 1973 in Writ Petition No. 33336 of 2015.
1. Brief facts of the case are that petitioner was declared the successful/highest bidder on account of care taking of footwear of Pilgrims etc. adjacent to Darbar Hazrat Data Gunj Bakhsh, Lahore, in a public auction conducted by respondents No.1 to 3 on 15.06.2015, for the financial year 2015-16 (w.e.f. 01.07.2015 to 30.06.2015) against consideration of Rs.35,060,000/-. After being declared as the successful bidder, petitioner paid 1/3rd amount i.e. Rs.11,686,667/- immediately on 15.06.2015 to the Auqaf Department. The possession of the said site / premises was given to petitioner, who regularly paid monthly installments for the months of July and August, 2015. Petitioner is aggrieved of the impugned provisions of Section 236A and Division VIII of Part IV of the First Schedule of the Income Tax Ordinance, 2001 (“Ordinance”), in terms of which, the demand of advance income tax is being made from petitioner. Petitioner has sought the following relief from this Court:
“Under the above said circumstances, it is therefore most respectfully prayed that the writ petition in hand may very kindlybe accepted with costs and declaring that the impugned legislation of Section 236-A and Division VIII of the Income Tax Ordinance, 2001, and demanding the Advance Tax on the sale by auction from the petitioner at this stage in the auction of care taking of footwear of Pilgrims etc adjacent to Darbar Hazrat Data Gunj Buksh, Lahore, is unconstitutional, illegal, unlawful, unwarranted, ultra vires, void ab initio, without any lawful authority and has no legal effect in the eyes of law and also inoperative in the rights of the petitioner. The respondents may kindly be directed to abide by law.
It is further prayed that the respondents may also be restrained from adopting the coercive measures against the petitioner in any way whatsoever.………”
2. Learned counsel for petitioner submits that in pith and substance, collection of the impugned tax on auction as advance according to Section 236A and Division VIII of Part IV of the First Schedule of the Ordinance, from the person to whom such property or goods is being sold, is in itself illegal, void ab-initio and unconstitutional. He adds that the impugned demand is against fundamental principle of taxation which has been inserted just to extract money from the taxpayer. He further submits that it confers unchallenged and arbitrary discretion on the part of respondents and is patently violative of the preamble and Articles 4, 8, 9, 18, 24 and 25 of the Constitution of Islamic Republic of Pakistan, 1973 (“Constitution”). He further submits that the impugned legislation tantamounts to double taxation. He adds that the impugned legislation is inconsistent with the provisions of Section 2 sub-sections 10, 11-A, 16, 18, 29, 31-A, 36, 40, 42, 61, 63 and 66, Sections 4, 9, 10, 11, 15, 18, 19, 20, 39, Part VII, 80, Part VA, 100C, 113, 153 and other provisions of the Ordinance, therefore, impugned demand is absolutely without jurisdiction. He finally submits that the impugned legislation is discriminatory, thus the provisions of Articles 4, 10-A, 18 and 25 of the Constitution. He has placed reliance on Messrs Mehran Associates Limited v. The Commissioner of Income-Tax, Karachi (1993 SCMR 274) and Government of Sindh through Secretary and Director General, Excise and Taxation and another v. Muhammad Shafi and others (PLD 2015 Supreme Court 380).
3. On the other hand, learned Standing Counsel and Assistant Advocate General along with learned counsel for respondents, defend the impugned provisions and demand, and submit that petitioner has failed to show any illegality or unconstitutionality in the impugned legislation and demand. They add that the impugned provision is absolutely in conformity with the provisions of the Constitution and by any stretch of imagination, it does not amount to double taxation. Petitioner has failed to show as to how he has been discriminated against, as the provision of law is being applied across the board without any distinction to the similarly placed other persons. They add that similar proposition of law has already been decided by the Hon’ble Supreme Court in Bismillah & Co. and others v. Secretary, Ministry of Finance, Government of Pakistan and others (2006 SCMR 652).
Further information regarding advance income tax on auction price can be solicited from AUJ LAWYERS. Feel free to contact us in case you need any clarification and/or require legal assistance regarding advance income tax on auction price.