HAKIMSONS (IMPEX) (PRIVATE) LIMITED vs FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad Ta

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HAKIMSONS (IMPEX) (PRIVATE) LIMITED VS FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad Taxing statute---Categories of persons---Principle of equal protection---Scope---Legislature is competent to classify persons or properties into different categories subject to different rates of tax---Test of vice of discrimination in taxing law is 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---Guarantee of equal protection of laws also extends to taxing statutes---If taxation imposes similar burden on every one with reference to that particular kind and extent of property, on the same basis of taxation, such law is not open to attack on the ground of inequality, even though result of taxation may be that the total burden on different persons may be unequal---If Legislature has classified persons or properties into different categories, which are subjected to different rates of taxation with reference to income or property, such a classification would not be open to attack of inequality on the ground that total burden resulting from such classification is unequal---In deciding whether a taxation law is discriminatory or not it is necessary to bear in mind that State has a wide discretion in selecting persons or objects it taxes---A statute is not open to attack on the ground that it taxes some persons or objects and not others. Citation Name: 2024 PTD 451 KARACHI-HIGH-COURT-SINDH HAKIMSONS (IMPEX) (PRIVATE) LIMITED VS FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad S. 7E [as inserted by Finance Act, 2022]---Constitution of Pakistan, Art. 199 & Fourth Schedule, Federal Legislative List---Constitutional petition---Vires of law---Deemed income---Concept---Federal Government, powers of---Petitioners/tax-payers assailed provision of S. 7E of Income Tax Ordinance, 2001, on the plea that it was ultra vires the Constitution---Validity---Concept of deemed income was levy of tax on fixed amount of income, whether or not property was let out; or taxpayer was actually receiving such income---Levy under S. 7E of Income Tax Ordinance, 2001, was not a tax on property per-se but a tax on deemed income for holding of a capital asset as defined in S. 7E of Income Tax Ordinance, 2001, along with exceptions and or exemptions as were also applicable to petitioners/taxpayers---It was a tax on income deemed from such immoveable properties and fell within Entry 47 of Federal Legislative List as provided under the Fourth Schedule to the Constitution---It was not a tax on property; hence, did not fall under Entry 50 of Federal Legislative List as provided under the Fourth Schedule to the Constitution and was not to be levied by Provincial Legislature---No tax was levied on property itself; rather it was a tax on deemed income of property---It was not a tax levied without there being any transaction not resulting in any income---Holding of property beyond threshold as provided in S. 7E(2)(g) of Income Tax Ordinance, 2001, was by itself a transaction which had been deemed to be an income within the ambit of S. 7E of Income Tax Ordinance, 2001---Transaction could not only occur when an actual amount of income was received, as deemed income concept was upheld by Supreme Court in the 'Elahi Cotton case' reported as PLD 1997 SC 582---High Court declined to go any further to elaborate concept of deemed income which was an income, notwithstanding that it was received in terms of money or otherwise---Deemed income was a fictional income concept, and if at all, it was to be relatable to an actual transaction or an attempt to generate an income, it would then not be an income deemed to have arisen---Deemed income of a tax-payer was always not an actual income---If conditions of an enactment were satisfied, it was deemed income, irrespective of the actual transaction---This was what the concept of a deemed income was---Any other interpretation and meaning would not be a deemed income but an actual income---Fictional income was not needed to create a situation which already existed in reality---It was an income which was deemed to have arisen and that was all---Once it was so, then any other relative happenings were materially irrelevant---Definition of income was an inclusive definition; it had enlarged meaning of income---Income from property which was made liable to tax was not its actual income in money but an artificial or statutory income as explained in S. 7E of Income Tax Ordinance, 2001---By way of insertion of S. 7E in Income Tax Ordinance, 2001, another head of income was created, though fictionally---Owner of property received no income in fact or even that there was no possibility of his receiving income was irrelevant for the consideration of the question as to what artificial or statutory income of an assessee was from property---Fictions always conflicted with reality, whereas presumptions might prove to be true---Legal fictions created an artificial state of affairs by a mandate of the Legislature---Everybody concerned including the Courts were compelled to believe existence of artificial state of facts contrary to real state of facts---When a fiction was created by law, it was not open to anybody to plead or argue that artificial state of facts created by law was not true, barring only possible course if at all available was to question constitutionality of the fiction---High Court declined to draw any exception to competence of Federal Legislature while introducing S. 7E through Finance Act, 2022, in Income Tax Ordinance, 2001---Levy in question was neither ultra vires the Constitution nor was confiscatory or discriminatory---Federal Legislature was fully competent to impose tax on deemed income pursuant to S. 7E of Income Tax Ordinance, 2001---Constitutional petition was dismissed, in circumstances.

HAKIMSONS (IMPEX) (PRIVATE) LIMITED vs FEDERATION OF PAKISTAN through Secretary Revenue Division, Islamabad Taxing statute — 2024 PTD 451 KARACHI-HIGH-COURT-SINDH

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