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General’s ‘general law’ v ‘special law’

Huzaima Bukhari & Dr. Ikramul Haq

The Income Tax Ordinance, 2001, was promulgated by General Pervez Musharraf, through a Presidential Ordinance on September 13, 2001 repealing Income Tax Ordinance, 1979, which was also introduced by a military dictator, General Zia-ul-Haq. Section 1(3) of Income Tax Ordinance, 2001 says: “It shall come into force on such date as the Federal Government may, by notification in Official Gazette, appoint. The Federal Government made it effective from July 1, 2002 through SRO 381(I)/2002 dated June 15, 2002. The Finance Ordinance, 2002, inserted 115 amendments in Income Tax Ordinance, 2001, even before it became operative. Finance Acts 2003 and 2004 inserted 332 and 339 amendments respectively in this law. This has become a unique piece of legislation which underwent such massive amendments in such a short span of time after its promulgation.

The number of amendments inserted in this Ordinance during the last 15 years [2005 to 2020] by elected representatives (sic) ran into thousands! A wise step would have been to repeal it and introduce a simple income tax law (both in English and Urdu) by an Act of Parliament. However, the Musharraf-controlled Assembly [held inaugural session on November 16, 2002 and completed its term on November 15, 2007], could not dare think about it as always keen to validate a military dictator’s unlawful actions/laws since October 12, 1999. Thereafter, during the Decade of Democracy [2008-18], the Governments of Pakistan People Party and Muslim League (Nawaz) also showed no interest to repeal the law promulgated by a military dictator and validated by his “loyal” civilian (sic) government. The coalition Government of Pakistan Tehreek-i-Insaf (PTI), assuming power in August 2018, is also keeping this legacy of Musharraf alive, though claiming to be “true” representatives of Naya [new] Pakistan.  

The Supreme Court of Pakistan aptly observed in CIT v Eli Lily (Pvt) Ltd (2009) 100 Tax 81 (S.C. Pak): “Since the creation of Pakistan we have not been able to frame any Income Tax Act duly debated in the Assembly. Both the Ordinances were promulgated during the Martial Law Regime otherwise the Constitution has prescribed a four month life of an Ordinance in case the Ordinance is not placed before the Assembly and it shall be enacted as an Act then the Ordinance will automatically cease to exist. This aspect also reveals that the Constitution has cast duty upon the legislative body to frame the laws within the parameters prescribed under the scheme of the Constitution”.

The Income Tax Ordinance, 2001 is a highly complex law that is badly drafted and recklessly amended by all civilian governments since 2008.

During the last 19 years and despite over 2500 amendments, it has generated enormous and undue litigation. The Apex Court noted in (2009) 100 Tax 81 (S.C. Pak) as under:

“The fact that the Ordinance in question was issued and various amendments were incorporated before and even after the enforcement of the Ordinance 2001 raises the controversy that the Ordinance in question was promulgated without meticulous debate on the subject due to which assessees and concerned departments were compelled to agitate the issues in different courts”.

 We have been pointing out since its inception, various errors of drafting and concepts (see Law & Practice of Income Tax,Volume I, pp 1-14) but none of the Governments bothered to consider these and ultimately lost revenue of billions of rupees when Supreme Court vindicated our viewpoint in (2009) 100 Tax 81 (S.C. Pak) as under:

“It appears that the Ordinance was drafted in post haste and the draftsman omitted to incorporate this important provision. This observation is supported from the fact that the Ordinance was subjected to speedy, successive and large scale amendments, particularly at its very inception”. It may be seen that section 238 provided that the Ordinance shall come into force on a date to be appointed by the Federal Government by notification in the official gazette. Accordingly, vide notification (SRO No. 381(I)/2002) dated 16.6.2002, the Ordinance came into force with effect from the first day of July 2002, but with more or less 1000 amendments inserted by the Finance Ordinance, 2002, as calculated by the learned counsel for the respondents…..Had the un-amended provision of subsection (1) of section 239 continued on the statute book, no difficulty would have arisen regarding the treatment of assessment orders passed in respect of the assessment year ending on 30th June 2003. In such eventuality, the assessments up to the said period would have been governed under the repealed Ordinance, while the assessments of the post enforcement period of the Ordinance of 2001 would be governed under the latter Ordinance”.

In para 53 of (2009) 100 Tax 81 (S.C. Pak), the Supreme Court has categorically held that “there is a need to review the language, content and scope of the power to amend and further amend an assessment, the power to revise an assessment and the power to rectify mistakes envisaged in these sections so as to make it in line with the legislative intent of consolidating the law relating to income tax so as to make it easily comprehensible to the convenience of the taxpayers”. This judgement was passed on June 22, 2009 and till today neither any government nor the Parliament has implemented the command of the Supreme Court. The Federal Board of Revenue (FBR) has lost and is still losing cases involving substantial revenue because of conflicting and confused provisions of the Income Tax Ordinance, 2001, but Revenuecracy is least pushed to suggest its repeal and introducing it as an Act of Parliament as directed by the Apex Courtthat is “easily comprehensible to the convenience of the taxpayers”.  They damn care about facilitating the taxpayer! 

The power of Revenuecracy lies in “complexities” of tax codes and they exercise arbitrary powers through rules for that even they do not require the approval of Parliament. They will never prepare simple law facilitating the citizens.   

The Martial Law provision of General-Musharraf’s law is section 3 of the Income Tax Ordinance, 2001: “The provisions of this Ordinance shall apply notwithstanding anything to the contrary contained in any other law for the time being in force”. On the basis of this provision, the officers of Inland Revenue Service (IRS) erroneously believe that all other laws when in conflict with Income Tax Ordinance, 2001 will yield before this non-obstante section. For the general readers it may be explained that non-obstante provisions in a particular statute are meant to provide an overriding effect whenever a conflicting provision of another law comes into clash and where there is no such clash there will be no application of the overriding provision.

The correct rule of interpretation is quite different from what the IRS wing of FBR believes and practices. The non-obstante provisions of the Income Tax Ordinance, 2001 cannot override special laws containing the same provisions, enacted before or after of this provision as per dictum laid down by the Supreme Court of Pakistan in Amjad Qadoos v Chairman Accountability Bureau (NAB) Islamabad & Others 2014 SCMR 1567 as under:

“Regarding the controversy as to whether the NAB Ordinance would prevail over the Income Tax Ordinance, it would be seen that both these pieces of legislation contain non obstante clauses which provide that the provisions of each Ordinance would prevail notwithstanding anything to the contrary contained in any law for the time being in force.  Apparently this seems to be the cause of conflict in the provisions of the aforementioned legislative instruments i.e. the Income Tax Ordinance and the NAB Ordinance.  It would be seen in this regard that such non obstante clauses are contained in most legislative instruments which either curtail a citizen’s liberty or his financial resources and perhaps for the reason that these are designed to be watertight and leave no room whatsoever for the citizen to escape from these provisions once it is established he has committed any criminal offence or is required to pay any tax to the State.”

“In our opinion the answer to this controversy would be to determine whether or not any of the statutes is a special statute which would then either prevail over the other one or if both are special statutes then what would be the situation. In this regard reference can be made to the case of Messrs Elahi Cotton Mills Ltd. and others (supra) in which it has been held in no uncertain terms that the Income Tax Ordinance is a general statute qua the Economic Reforms Ordinance, 1992 and hence the provisions of the latter would prevail.  Similarly it was held in the case of Khan Asfandyar Wali and others (supra) that the NAB Ordinance was a special statute and hence would prevail over the general laws although at the same time certain provisions thereof were struck down and certain recommendations were made to the Federal Government to amend the same.  Finally in the case of I.G. HQFrontier Corps and Others (supra) it has been held that a special law would prevail over a general law although it has been enacted after the said general law. In view of the foregoing discussion we have no hesitation in holding that the NAB Ordinance is a special law and hence would prevail over the provisions of the Income Tax Ordinance being the general law.”

The above decision of honourable Supreme Court covered two aspects:

  1. Special law versus general law
  2. Legislation in terms of time frame

The Supreme Court in above case held that non-obstante provision of a special law cannot be overruled by non-obstante provision of a general law even if enacted later in time.

The above was just to highlight that a General’s income tax law being “general law” cannot override the same General’s special law that is the NAB Ordinance, 1999. Both are bad laws! It is time that the PTI Government prepares and offers for public debate drafts of income tax (containing in it Taxpayers’ Bill of Rights) and accountability law. Parliament should get rid of both and enact new laws after public debate and after the relevant Standing Committees seek input from experts. We can never inculcate tax culture and accountability unless new simple tax codes and laws against financial crimes are passed and implemented taking stringent action without fear and favour or discrimination against anybody indulging in tax evasion and public office holders involved in corrupt practices. All exemptions given in the existing income tax law should be abolished and lower rates on widest possible base are applied. In accountability law power of investigation should be with an independent commission headed by a retired judge of Supreme Court and members having specialisation in investigating financial crimes. This autonomous commission must work within the framework of Article 10A of the Constitution.   

The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)    

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