KARACHI: Sindh High Court (SHC) on Thursday declared Income Support Levy (ISL), imposed through Money Bill 2013 ultra vires to the constitution and discriminatory "as it creates unreasonable classification within the same class person".
A division bench of SHC comprising Justice Aqeel Abbasi and Justice Junaid Gaffar gave the verdict against ISL in response to 576 petitions filed against this levy and were clubbed for hearing. The hearing of the case commenced on December 16, 2013 and concluded on June 29, 2020.
According to detailed judgment of SHC division bench, the levy imposed through Income Support Levy Act, 2013 alongwith Money Bill, does not possess the characteristics of a tax, as it is not a common burden for raising revenue to be utilized for general public purpose.
On the contrary, it is a levy in the nature of fund to be charged and utilized for a specific purpose i.e. "to provide for financial resources for raising an income support fund for the economically distressed persons and their families", the court stated.
The bench also ruled that the Income Support Levy Act, 2013, could not be introduced through the Finance Act 2013, in terms of Article 73 of the constitution, 1973 and declared it to be ultra vires.
The court ruled that "the levy imposed through the Income Support Levy Act, 2013, is ultra vires to the Constitution for being discriminatory, as it creates unreasonable classification within the same class of person i.e. persons having Net Moveable Wealth exceeding Rs.1.00 M (One Million), whereas, its incidence and charge of levy falls un-equally upon the existing taxpayers only, who file or required to file Wealth Statement under Section 116 along with their Income Tax Return under Section 115 of the Income Tax Ordinance, 2001".
However, non-existing taxpayers, who are not required under law, or do not file their Wealth Statement along with Income Tax Return, inspite of having much higher Net Moveable Wealth, exceeding one million, have been excluded from the incidence and charge of such levy, which is in clear violation of Article 25 of the constitution".
The court declared that all the notices and the proceedings, including assessment orders passed under Section 5 of the Income Support Levy Act, 2013 after repeal of the Income Support Levy Act, 2013, under clause 10 of the Finance Act, 2014, in the absence of any saving or validation clause to protect or validate the Income Support Levy Act, 2013 are without jurisdiction and lawful authority.
The court observed that "the concept of absolute authority to impose tax by rulers on their subjects, without having any representation of the people in such legislation, is no more available under the modern democratic system of governments, which are run by the elected representative of the people under their respective constitutions.
"The unbridled powers and authority to impose tax arbitrarily, without having any rationale or reasonableness, is now being regulated under the constitutional restraints, whereby, taxes are to be imposed reasonably, without discrimination and in such a manner that those may not encroach upon the fundamental rights of a person as guaranteed under the constitution" court maintained".
During hearings, the counsel for petitioners argued that the ISL Act 2013 is ultra vires, discriminatory and not a tax, as it has been levied for a specific purpose.
The counsel representing the federation and other respondents contended that the Income Support Levy Act, 2013, is not discriminatory because is liable to be recovered from all persons having moveable assets in excess of one million and argued that that there can be different taxes on same commodity or income as the legislature is fully competent to levy different taxes on same income.
Copyright Business Recorder, 2020
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