The Constitution of Pakistan, 1973 Developed by Zain Sheikh

In the above background, now the contention of the learned counsel for the petitioners may be examined. Their main thrust was that expression “capital value of assets” as appearing in Item No. 50 of Fourth Schedule to the Constitution means “net assets” which are arrived at after deducting liabilities from the gross value of the assets and, as such, no tax could be levied by the Parliament on the gross value of those assets.

There is, however, no warrant for such a restrictive interpretation. The Constitution does not define the words “capital value of assets” nor does it place any restriction on the meaning of the aforesaid phrase.
[p. 256]B.

A close reading of the judgment of the Supreme Court clearly shows that their lordships were of the view that “capital value of assets” means the whole value of assets. It was further observed that the question as to under what method the assets are to be valued relates to mechanism and can well be decided by the Legislature.[p. 258, 259]D.

Though the Decision Bench of the Sindh High Court was pleased to remark that according to the dictionary meanings, the words “capital value of assets” would mean “net value of assets also but the High Court went on to hold that in matters of commerce the capital value of assets, means the total value as such.[p. 259]E

It is obvious from the above reproduced paras that the learned Judges were of the view that there is no limitation placed on the use of word “assets” in Item No 50 of 4th Schedule and the question as to whether “gross assets” or “net assets” are to be taxed was relatable to mechanism and could be determined by the Federal Legislature while further legislating on the subject.[p. 260]F

In Messrs Elahi Cotton Mills (Pvt)Ltd. v Federation of Pakistan and others 1997 SCMR 582, it was observed that tax can be levied on sliding scale.[p. 261]L.

b) Interpretation of Constitution

While interpreting the entries are to be interpreted in the widest possible manner and should not be given any restrictive, narrow or pedantic meanings. See Haider Automobile Ltd. v. Pakistan PLD 1969 SC 623; Brig. (Retd) F.B. Ali and another v. The State PLD 1983 SC 457 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan and others PLD 1997 SC 582. In the last-mentioned judgment, it was held that while interpreting the laws relating to economic activites the Courts should view the same with greater latitude than laws relating to civil rights and that the efforts of the Courts of the should be to save the laws rather than to destroy it.
[p. 257]C.
(c) Constitution of Pakistan(1973) Art. 77 & Fourth sched

I am, therefore, unable to agree with the learned counsel on the interpretation being placed on Item No. 50 of 4th Schedule to the Constitution. No doubt tax can only be levied by the Parliament as ordained by Article 77 of the Constitution but as by promulgating section, 12 of the Finance Act, 1991, the tax is being levied on the capital value of assets, no valid exception can be taken thereto.[p. 260]G.
(d) Constitution of Pakistan(1973) Art. 2A & Fourth Sched

Part I, Legislative List, Item No,50 & Art.2A–Finance Act (Xii of 1997)
S.12–Corporate Assets Tax–Islam does not prohibit the Legislature for levying any tax on the gross value of the assets held.

There is no cavil with the proposition that while interpreting a law, Islamic provisions have to be kept in view but there is nothing in Islamic which prohibits the Legislature for levying any tax on the gross value of the assets held by it. Although while determining Nasaab for the assets held by it. Although while determining Nasaab for the purpose of Zakat, the liabilities are to be excluded but that does not mean that same principle has to be applied even in respect of other taxes.[p. 260,261]H
(e) Constitution of Pakistan(1973) Art. 25
r/w Finance Act (XII of 1997)–

Coming now to the question as to whether the provision is discriminatory or confiscatory in nature, suffice it to say, that the tax has been levied on the Corporation which hold capital value whose assets as given in the balance-sheet is more than Rs. 50 million. Such Corporations are a class apart and, therefore, the question of any discrimination does not arise.[p. 261]I.

In the present cases, it will be seen that the levy of tax is on the valuation of the assets and is based upon intelligent differential relatable to the object of Act. As already observed, Corporations which hold assets of the value of Rs.50 million or more, form different and distinct class and the question of any discrimination does not arise. Similarly, there is nothing on the record to sustain the contention that the impugned law is confiscatory, indeed, it has not been so demonstrated before this Court.
[p. 261]K.

In Messrs Elahi Cotton Mills (Pvt)Ltd. v Federation of Pakistan and others 1997 SCMR 582, it was observed that tax can be levied on sliding scale.[p. 261]L.