2025 PLP 1465 (PTD)

SYED ARSHAD ALI, J.

By this common judgment, we intend to dispose of the instant petition as well as connected Writ Petitions Nos. 415-P/2020, 443-P/2020, 457-P/2020, and 5627-P/2020 whereby the petitioners have challenged the constitutionality of amendment in Section 658, of the Income Tax Ordinance, 2001 ("Ordinance") through Finance Act, 2019 ("Impugned Legislation").

2. Messrs Gadoon Textile Mills and 02 others have jointly filed this petition challenging vires of the Impugned Legislation amending section 65B of the Ordinance. It is the contention of the petitioners that in pursuance to the tax incentives offered under section 65B of the Ordinance, the petitioners had invested a huge amount of money in the expansion and upgradation of their textile plant during the period 1st July, 2018 to 30th June, 2019, purchased additional machinery which was installed by the petitioners between 1st July, 2018 to 30th June, 2019. Thus, they are entitled to a tax credit in terms of section 65B of the Ordinance on the date of installation. The petitioners contended that the proviso added to section 65B of the Ordinance reducing the tax credit from 10% to 05% for the tax year 2019 and the curtailment of sunset clause from 30th June, 2021 to 30th June,2019, could not be applied retrospectively so as to vitiate the vested right acquired by the petitioners by making investment as per section 65B ibid beside the same being a past and closed transaction.

3. The respondents have filed their para-wise comments. It is their case in the comments that though the industrial undertakings on investment in plant and machinery during the crucial period were allowed a tax credit equal to l0% of amount invested, however, the same has deprived the State Revenue from collection of minimum tax as well as final tax which are adjustable against it. The tax credit resulted in tax loss of rupees eighty-seven billion to the revenue for the tax year 2017 alone. Thus, the obvious purpose of the impugned legislation i.e. curtailing tax credit was to generate revenue amounting to rupees eighty-five billion approximately. It is also pleaded that the Impugned Legislation was passed by competent legislation which cannot be struck down on the basis of the claim as raised in the petition.

4. Messrs Lucky Cement Ltd has, inter-alia, pleaded that pursuant to the incentives introduced through section 65B ibid, the petitioner/company has installed and expanded the modernization of its already cement plant by adding Vertical Cement Mills, Waste Heat Recovery Systems etc. at Pezu and Karachi in the year 2017 and was able to install the same before 30th June, 2019 against huge investment and thus tax credit has become its vested right which cannot be denied to it. Additionally, the petitioner/company has entered into a contract with Tianjin Cement Industry Design and Research Institute Company Ltd on 01.06.2018 for purchasing machinery etc, therefore, is eligible for tax credit at the rate of 10% for the tax year 2020. The significant partition of the machinery purchased was installed prior to 30th June, 2019 and the new project is now completely functional.

5. Messrs Cherat Cement Company Ltd. through W.P. No. 443-P/2020 claims that in pursuance of incentives offered through section 65B of the Ordinance, it initiated the process of setting/expansion of additional dry clinker Production Line No. III of 6700 tons of clinker production per day along with Waste Heat Recovery Plant etc by investing in the purchase of the aforesaid plant and machinery for the purpose of extension, expansion, balancing, modernization, and replacement of the plant and machinery. The said installed plant and machinery commenced its production by January, 2019; thus, the petitioner is entitled to the full tax credit of l0% as provided in section 65B of the Ordinance.

6. Messrs Cherat Packaging Ltd. through W.P. No. 457-P/2020 claims that in pursuance and acting upon the entitlement available to the petitioner/company under section 65B of the Ordinance, it initiated the process of setting up a flexible packaging project/division in the year 2017 which was installed and commenced its production in the month of October, 2018, therefore, the petitioner is entitled to 10% of the tax credit against the total amount invested.

7. Mr. Salman Akram Raja, Advocate, the learned counsel on behalf of one of the petitioners has addressed the lead arguments. The leamed counsel has maintained that as evident from un-amended provision section 65B of the Ordinance; as it was on statute book; before the Finance Act, 2019; any company that has invested any amount in the company for expansion of the industrial undertaking set up in Pakistan, a credit equal to 10% of the amount so invested shall be allowed against a tax payable. In pursuance of the said incentives, the petitioner-company invested a huge amount in the industrial undertaking for the purpose mentioned in section 65B of the Ordinance, however, by amending section 65B through Finance Act, 2019, not only the tax credit has been halved but the period provided for installation of the machinery by 30th June, 2021 was curtailed/brought back to 30th June, 2019. This Impugned Legislation cannot deprive the petitioner-company of the tax credit which had become the property of the petitioner as neither the Impugned Legislation could be retrospectively applied to the case of the petitioner nor the vested right accrued to the petitioner by making investment as contemplated through section 65B of the Ordinance could be vitiated. The learned counsel has referred to the judgment passed by the worthy Sindh High Court in the case of C.P. D-8233 of 2019 (Sapphire Textile Mills Ltd v. Federation of Pakistan and others) decided on 07.02.2023 wherein a similar issue has been effectively resolved. The learned counsel has also relied upon the law settled by the superior courts relating to the retroactive application of taxing law in the cases of Gulshan Spinning Mills Ltd and others v. Government of Pakistan and others (2005 PTD 259), Mollasis Trading and Export (Pvt) Limited v. Federation of Pakistan and others (1993 SCMR 1905), Shahnawaz (Pvt) Limited v. Pakistan through the Secretary Mintstry of Finance and others (2011 PTD 1558), Pak Elektron Limited and others v. Federal Board of Revenue and others (2018 PTD 778), Zila Council Jhelum through DCO v. Messrs Pahistan Tobacco Company Ltd and others (PLD 2016 SC 398), Al-Samrez Enterprise v. The Federation of Pakistan (1986 SCMR 1917), Province of East Pakistan v. Sharafatulah and 87 others (PLD 1970 SC 514) and Al-Tech Ensineers and Manufacturers v. Federation of Pakistan and others (2017 SCMR 673).

8. The worthy counsel has finally proposed that the factual aspect of the case as to whether a person had purchased and installed the equipment machinery within the period as contemplated by section 65B ibid or otherwise be determined by the department in any appropriate proceedings, however, this Court may only determine the interpretation of Finance Act, 2019 for having neither any retroactive application to the past and closed transaction nor can vitiate the vested rights acquired by the Petitioners as agitated in preceding paras.

9. Messrs Sanaullah worthy Deputy Attorney General, Rehmanullah and Mukhtar Ahmad Maneri, Advocates, the learned counsels on behalf of the respondents have argued that the Impugned Legislation was passed by the competent legislative assembly i.e. Parliament and the Parliament always has the power, to such extent, to take away the vested right. In support of their arguments, they have relied upon the law laid down by the Apex Court in the case of Messrs Elahi Cotton Mills Ltd and others v. Federation of Pakistan through Secretary Messrs Finance, Islamabad and 6 others (PLD 1997 SC 582). They do not object to the scope of determination by this Court as proposed by the learned counsel for Petitioners.

10. In order to appreciate the legal issues propositioned by the learned counsel for the petitioners, we deem it appropriate to re-produce the un-amended section 65B of the Ordinance as it was prior to the amendment vide Finance Act, 2019; "65B. Tax credit or investment. (1) where a taxpayer being a company invests any amount in the purchase of plant and machinery, for the purposes of extension, expansion, balancing, modernization and replacement of the plant and machinery, already installed therein, in an industrial undertaking set up in Pakistan and owned by it, credit equal to ten percent of the amount so invested shall be allowed against the tax payable, including on account of minimum tax and final taxes payable under any of the provisions of this Ordinance, by it in the manner hereinafter provided. (2) the provisions of subsection (1) shall apply if the plant and machinery is purchased and installed at any time between the first day of July, 2010, and the 30th day of June, 2021. (3) The amount of credit admissible under this section shall be deducted from the tax payable by the taxpayer in respect of the tax year in which the plant or machinery in the purchase of which the amount referred to in subsection (1) is invested and installed. (4) The provisions of this section shall mutatis mutandis apply to a company setup in Pakistan before the first day of July, 2011; which makes investment, through hundred percent new equity, during first day of July, 2011 and 30th day of June, 2016, for the purposes of balancing, modernization and replacement of the plant and machinery already installed in an industrial undertaking owned by the company. However, credit equal to twenty percent of the amount so invested shall be allowed against the tax payable, including on account of minimum tax and final taxes payable under any of the provisions of this Ordinance. The credit shall be allowed in the year in which the plant and machinery in the purchase of which the investment as foresaid is made, is installed therein. Explanation. For the purpose of this section the term "new equity" shall, have the same meaning as defined in subsection (7) of section 65E. (5) Where no tax is payable by the taxpayer in respect of the tax year in which such plant or machinery is installed, or where the tax payable is less than the amount of credit as aforesaid, the amount of the credit or so much of it as is in excess thereof, as the case may be, shall be carried forward and deducted from the tax payable by the taxpayer in respect of the following tax year and so on, but no such amount shall be carried forward for more than two tax years in the case of investment referred to in subsection (1) and for more than five tax years in respect of investment referred to in subsection (4), however, the deduction made under this section shall not exceed in aggregate the limit specified in subsection (1) or subsection (4), as the case may be. (6) Where any credit is allowed under this section and subsequently it is discovered by the Commissioner Inland revenue that any one or more of the conditions specified in this section was, or were, no fulfilled, as the case may be, the credit originally allowed shall be deemed to have been wrongly allowed and the Commissioner, notwithstanding anything contained in this Ordinance, shall recompute the tax payable by the taxpayer for the relevant year and the provisions of this Ordinance shall, so far as may be, apply accordingly."

11. The essential and salient features of section 65B can be illustrated as following; i) that a taxpayer company may invest an amount of money in the purchase of plant and machinery for the purpose of expansion, balancing, modernization and replacement of the plant and machinery already installed in an industrial undertaking setup in Pakistan and owned by it; ii) The plant and machinery so purchased should be installed by or before 30th June, 2021. iii) the said company shall be entitled to a tax credit equal to l0% of the amount so invested against the tax payable including on account of minimum tax and final tax payable under any provision of the Ordinance; iv) the tax credit would be allowed against the income tax liability in respect of tax year in which the plant or machinery is purchased and installed; v) when in the said tax year, the company was not required to pay any tax or its tax liability in the said year is less than the amount of tax credit as stated above, the said tax credits are so much of it is in excess thereof, as the case may be; shall carry forward and deducted from the tax payable by a tax payer for the following two consecutive tax years; vi) at any time, if the Commissioner finds that the tax credit has been availed by the taxpayer without fulfilling the essential conditions stated above, the competent authority may recomputed tax payable by the taxpayer in accordance with law.

12. Unlike; as envisaged by section 65D of the Ordinance and subsection (4) of section 65B, subsection (1) of section 65B does not explain the mode of investment through raising of new equity, therefore it is open to the taxpayer company that in order to avail the tax credit it may opt any option for investment either from its own resources or through a financial institution or a bank.

13. The term "tax credit" has not been defined under the Ordinance, however, the Apex Court in the case of H.M. Extraction Ghee and Oil Industries (Pvt) Ltd1 has very elaborately explained the same while referring to a well-known passage of Lord Dunedin rendered in the case of Whitney2 and has held that: "Now, there are three stages in the imposition of tax: there is the declaration of liability, that is the part of statute which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment. That, ex hypothesi, has already been fixed. But assessment particularizes the exact sum which a person liable has to pay. Lastly, come the methods of recovery, if the person taxed does not voluntarily pay." It was finally concluded by the Apex Court while drawing distinction between exemption and tax credit, that the exemption inserts itself between the first two stages i.e. between what is leviable and what is payable where the tax credit inserts itself between the second and third stages i.e. between what is payable and what is recoverable.

14. Therefore, it can be said that tax credit once earned under a legal dispensation is a coin in the pocket/hands of the taxpayer which can be adjusted against the tax assessed against the tax payer as per the law allowing such adjustment.

15. Through the Finance Act, 2019, section 65B of the Ordinance was amended/substituted in the following manner:- "(13) in section 65B,- (A) in subsection (1), for full stop, occurring at the end, a colon shall be substituted and thereafter, the following provisos shall be added, namely: - Provided that for the tax year 2019 the rate of credit shall be equal to five percent of the amount so invested: Provided further that the provisions of subsection (5) relating to carry forward of the credit to be deducted from tax payable, to the following tax years, as specified in the said subsection, shall continue to apply after tax year 2019; and (B) in subsection (2), for the figure "2021", the figure "2019" shall be substituted;"

16. The amendment introduced through the Impugned Legislation can be illustrated as following; I) The first proviso inserted as above; applies to the tax year 2019 (1st July, 2018 as per section 74 of the Ordinance) whereby the tax payer making any investment in the manner as provided under subsection 65B of the Ordinance would be entitled to a reduced rate of tax credit i.e. 5% of the investment. II) The second proviso reaffirms the carrying forward of tax credit to the following two tax years. III) The machinery or equipment purchased through an investment as envisaged by subsection (1) ibid shall be installed by 30th June, 2019.

17. The language employed in the Impugned Legislation does not give any impression of its retrospective application in clear words. However, it is the case of the revenue that the effect of the Impugned Legislation is that if taxpayer company though has invested any sum of money for purchasing plant and machinery etc, however, if it has failed to install the said machinery by 30th June, 2019, it will not be entitled to any tax credit, however, if any taxpayer company was able to have installed machinery by 30th June, 2019 in that case it will only entitled to the tax credit equal to 05% of the amount invested in the expansion of undertaking for the tax period, 2019.

18. The Allahabad High Court in the case of Upper Doab Sugar Mills3 has aptly summarized the rule of interpretation of taxing statutes as follows: "it is well settled that in a taxing statute one has to look at what is clearly said. There is no room for any intendment; there is no equity about a tax. Nothing is to be read and nothing is to be implied"

19. At common law, there is a presumption that a statute does not have retrospective effect. The statement in Maxwell on the Interpretation of Statues, 12th Edition (1969), page 215 is frequently quoted: "Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes a retrospective operation. They are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect is clearly intended. It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication."

20. Lord Woolf, LCJ while speaking for the Court in the case of Wainwright4 at para-27 has stated, "the general presumption that legislation should not be treated as changing the substantive law in relation to events taking place prior to legislation coming into force." The principle was very elaborately explained in the case of Gustavson Drilling (1964) Ltd5 by the Supreme Court of Canada wherein at page 279 to 280 Dickson Judge observed that the general rule is that statues are not to be construed as having retrospective operation unless such a construction is expressly or by necessary implication required by the language of the Act. An amending enactment may provide that it shall be deemed to have come into force on a date prior to its enactment or it may provide that it is to be operative with respect to transactions occurring prior to its enactment. In those instances, the statute operates retrospectively. Superficially the present case may seem akin to the second instance but I think the true view is to be that the repealing enactment in the present case, although undoubtedly affecting past transactions, does not operate retrospectively in the sense that it alters rights as of a past time. The section as amended by the repeal does not purport to deal with taxation years prior to the date of the amendment; it does not reach into the past and declare that the law or the rights of parties as of an earlier date shall be taken to be something other than they were as of that earlier date. The effect, so far as the appellant is concerned, is to deny for the future a right to deduct enjoyed in the past but the right is not affected as of a time prior to enactment statute.

21. In our jurisdiction, the Apex Court of Pakistan in the case of Aziz-ud-Din Industries Ltd6 has affirmed the said principles in our jurisprudence wherein; it was held that: "It is well-settled that no statute shall be construed so as to have a retrospective operation unless its language is such as plainly to require such construction."

22. In the case of Al-Samrez Enterprise7, the Apex Court while dealing with the matter where exemption was granted by the Government through notification issued under section 19 of Customs Act, 1969 and when the said exemptions were withdrawn after the opening of letter of credit by a party in favour of foreign supplier, the Apex Court has held that: "the opening of letter of credit by a party in favour of foreign supplier had created vested right in favour of the party which could not be token await or destroyed by the withdrawal of exemption on the date subsequent to the opening of letter of credit."

23. In order to nullify the effect of Al-Samrez's case, the then Government through parliament had inserted section 3lA in the Customs Act, 1969 through Ordinance No. 2 of 1988 in the following manner: - "Section 31A.Effective rate of duty.-(1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of section 30[30A] and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under Sections 18[18A and 18C]. [Omitted] and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof. (2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign currency is to be converted into Pakistan currency shall be the rate of exchange in force on the date immediately preceding the relevant date referred to in Sections 30, 30A or 31."

24. The effect and retrospective applicability of insertion of section 31A to the law laid down by the Apex Court in the case of Al-Samrez Enterprise once again came up before the Apex Court in the case of Mollasis Trading and Export (Pvt) Limited8 wherein it was approved and confirmed that the legislation has achieved the purpose by inserting Section 31A in the Customs Act to nullify the effect of the judgment passed by the Apex Court in the case of Al-Samrez Enterprise, however, relating to the past and closed transaction, the Apex Court has opined; "In the light of the aforesaid principles it cannot straightaway be held that the mere fact that section 31-A has been given retrospective effect, it will affect even the past and closed transactions or all the vested rights that have accrued. It is in this context that the remaining contentions of the learned counsel for the appellants are to be examined. It has been urged on behalf of the appellants that as the bill of entry was presented in all these cases before 1st July, 1988, when section 31-A was enacted and enforced, their cases are past and closed transactions. There seems to be a great deal of force in this submission. Before the insertion of section 31-A the position was that upon the presentation of a bill of entry, by virtue of section 30 of the Act the levy of duty was crystallized. As explained in the case of Al-Samrez Enterprise, the liability to tax was created under section 18 with reference to this date, because it is the rate of duty by application of which the tax liability can be quantified or assessed. Simultaneously, any benefit of exemption also takes effect on the same date because in the very nature of things, the liability is wiped off by virtue of the exemption at the same time. Therefore, this is the crucial point of time at which, by operation of law the liability is discharged. In other words, the rights and liabilities of the importers attained fixity on the said crucial date. Inevitably therefore a vested right has been created and the transaction is closed by the quantification of the tax, if any, or by the discharge of liability on that date. The mere fact that any proceedings remained pending for assessment of the tax by a statutory functionary for the purpose of recovery of the dues, will not prevent the law from operating and producing the result of closing the transaction. This is on the simple principle that every functionary is bound by the provisions of law and has to pass a lawful order which alone is protected. Besides on this date the liability to pay tax and the exemption from payment are matters of mere calculation in terms of section 30 read with sections 18 and 19 of the Act, because the rate and value of the goods become fixed with reference to this date. Indeed no adjudicative process is involved in such a matter. Viewed in this perspective, if effect is given to the provisions of section 31-A so as to undo the discharge of the liability which had already taken effect, it will amount to re-opening a post and closed transaction. The simple reason is that under the existing law there was no further liability to pay the tax and by giving retrospective operation to the new dispensation a liability is being created for the payment of the tax. I cannot see anything in the language of section 31-A, expressly or by necessary intendment, to that effect. Such result is therefore not a necessary corollary of the fiction created by the deeming provisions of section 5 of the Finance Act, 1988. Otherwise also it will be contrary' of the principle, mentioned above, namely, that liabilities once fixed or rights created by operation of law upon facts or events, must not be disturbed by a general provision given retrospective effect unless such intention is clearly manifested by the language employed. In the case of Mehreen Zaibun Nisa (supra) retrospective effect was not given to the changed low so as to invalidate certain acts of legislature, although the entry in the relevant legislative list had been changed with retrospective effect." (underline is for emphasis)

25. In the case of Zila Council Jehlum9, it was held by the Apex Court, although the Legislature can legislate prospectively and retrospectively, such power is subject to certain constitutional and judicially recognised restrictions. According to the canons of construction, every statute including amendatory statutes is prima facie prospective, based on the principle of nova constitutio futuris forman imponere debet, non praeteritis (which means 'a new law ought to regulate what is to follow, not the past' as per Osborn: Concise Law Dictionary); unless it is given retrospective effect either expressly or by necessary implication. In other words, a statute is not to be applied retrospectively in the absence of express enactment or necessary intendment, especially where the statute is to affect vested rights, past and closed transactions or facts or events that have already occurred. This principle (s) is attracted to fiscal statutes which have to be construed strictly, for they tend to impose liability and are therefore burdensome (as opposed to beneficial legislation). Furthermore, it is not only the wording/text of the statute which is to be considered in isolation; we are not to examine simpliciter whether such law has a retrospective effect or not, rather it has to be examined holistically by considering several factors such as, the dominant intention of the legislature which is to be gathered from the language used, the object indicated or the mischief meant to be cured, the nature of rights affected, and the circumstances under which the statute is passed.

26. The law laid down in Zila Council's case ibid was reaffirmed by the Apex court in the case of Qaisar Abbas and others10, further elucidating the matter that retrospectivity can only be attributed to a statute where it is made explicit or can be inferred by necessary implications; it cannot be presumed.

27. In the Impugned Legislation, the first proviso inserted after subsection (1) of section 65B of the Ordinance clearly mentions that the taxpayer company will be entitled to a reduce rate of tax credit at 5% for the tax year 2019 followed by a second proviso reaffirming the carrying forward of the tax credit for the following two tax years. Similarly, the substitution of figure 2019 for 2021 does not give any impression of its retrospective application. The later part of the Impugned Legislation substitutes the period of installation of the plant and machinery purchased in terms of section 65B ibid which has the effect that the earlier period provided has seized to exist and the new period is brought into existence in its place. The meaning of substitution has been elaborately discussed by the Bombay High Court in the case of The Central Provinces Manganese11, as "the theory is advance that "substituted" means (i) repeal, and (ii) enactment or re-enactment." Therefore, the effect of insertion of figures 2019 for 2021 is that the earlier figure of 2021 was repealed and re-enacted as 2019, a cut of date for installation of plant and machinery as required under subsection (1) of section 65B ibid. The effect of repeal on any right privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed has been protected under section 6 of the General Clauses Act, 1897 unless a different intention appears in the repealing Act. In the present case, the Impugned Legislation being a repealing Act to the extent of curtailing the cut of date (from 2021 to 2019) has no retrospective effect to the investment made and machinery or plant purchased by the taxpayer companies pursuant to section 65B of the Ordinance. Had the legislature intended so, it must have provided the same in very clear words as laid by the Canadian Supreme Court in the case of Gustavson Drilling (1964) Ltd and in the cases of Mollasis Trading and Export (Pvt) Ltmited, Zila Council and Qaiser Abbas (supra) as decided by the Apex Court.

28. Unlike section 31A of the Customs Act, 1969 the Impugned Legislation does not give any impression to specifically deal with the transaction ensued by a tax payer prior to the promulgation of Impugned Legislation. It is the case of some of the petitioners that prior to 30th June, 2018, the petitioners had purchased and installed the machinery pursuant to the incentives provided through section 65B, therefore, to the said extent they were entitled to the tax credit for the said tax year when the machinery was installed equal to 10% as provided under un-amended provision (65B ibid) and thus if in the said tax year either they had to pay no tax or the tax payable was lesser than their tax credit they would be entitled to adjustment of the entire tax credit at the rate of 10% of their investment for the following two years. It is so for two reasons; firstly, that when they had invested amount in the manner as provided under section 65B ibid, purchased the machinery and installed the same, it obviously became past and closed transaction, therefore, under the law laid down by the Apex Court in the cases of Molasis Trading and Export (Pvt) Ltd and Gustavson Drilling (1964) Ltd (supra) neither the past and closed transaction could be destroyed by subsequent legislation nor the first proviso added through the Impugned Legislation does give any such impression of retrospective application nor it in specific words envisages that the reduction in the tax credit would be applicable to those undertakings/taxpayers who had invested the money and installed the machinery and equipment prior to the Impugned Legislation.

29. Moving on to the second limb of the claim of the petitioners. As stated above; it is the case of revenue that though if the taxpayer; pursuant to the mandate of section 65B ibid had invested money in purchasing the machinery, however, if it has failed to install the machinery by 30th June, 2019 as (date brought back through the impugned legislation from 2021), the taxpayer would not be entitled to any tax credit.

30. Against that it is the case of petitioners that by investing the money and purchasing the machinery, it has taken a material step and thus acquired a vested right for entitlement of tax credit equal to 10% of the total investment and the Impugned Legislation thus cannot vitiate the same. Whether the company by investing money and the purchase of machinery for enlargement of the existing undertaking prior to the Impugned Legislation (having effect from 1st July, 2018 as per section 74 of the Ordinance), a vested right has accrued to the petitioners which cannot be taken away by the Impugned Legislation unless there is specific language in this regard is the core issue which we intend to resolve.

31. In the case of Vishwas Bajirao Patil12 the Court of Bombay held that the expression 'vested rights' is not defined by the legislature in any statute. The word 'vest' is normally used where an immediate fixed right in present or future enjoyment in respect of a property is created. With the long usage of the said word 'vest' has also acquired meaning as 'an absolute or indefeasible right.' It had a 'legitimate' or 'settled expectation' to obtain right to enjoy the properly etc. Such 'settled expectation' can be rendered impossible of fulfillment due to change in law by the legislature. Besides this, such 'settled expectation' or the so-called 'vested right' cannot be countenanced against public interest and convenience which are sought to be served by amendment of the law.

32. Similarly, the Hon'ble Supreme Court of Pakistan had the occasion to consider the expression "vested right" in the case of Nabi Ahmed and another"

13. It was observed that: "vested right is free from contingencies, but not in the sense that it is exercisable anywhere and at any moment. There is hardly any right which can be so exercised. There must always be occasions at which and circumstances under which they may be exercised. Those occasions and circumstances do not constitute contingencies but are the peculiar characteristics of those rights. For instance, the right to cross-examine (not to re-cross-examine) a witness is a vested right, although the occasion for exercising it arises only if the witness says or has said something unfavorable and often after his examination-in-chief is over. The occasion to cross-examine may not arise or may not be exercised but the right is not to be denied." This view was reaffirmed in the cases of Zaman Cement Company (Pvt) Ltd14 and Asadullah Mangi and others15.

33. However, we should not detain ourselves in the definition and explanation of the "vested rights" because the essential issue is whether the impugned legislation has a retrospective application and thus the rights accrued to the petitioners by investing money and purchasing the machinery/equipment as required under section 65B ibid before the cut-of-date would confer upon the petitioners the vested right to claim tax credit as envisaged through unamended law, which cannot be effected by the Impugned Legislation meaning thereby that the Impugned Legislation has no retrospective application to the cases of the petitioners.

34. In support of the arguments, the learned counsel has relied upon the law laid down by the Superior Court in the cases of Sapphire Textile Mills Ltd16, Shahnawaz (Pvt) Ltd17, Anwar Yahya18, and Gulshan Spinning Mills Limited

19. In the case of Gulshan Spinning Mills Limited, a similar preposition was resolved in favour of the taxpayer wherein it was held that the tax credit crystallized upon making of relevant investment and installation was material only in respect of tax year when the credit was to be claimed. The same view was re-affirmed in the case of Sapphire Textile Mills Ltd by the Sindh High Court.

35. If the tax payer has invested the money and purchased the plant and machinery through a concluded agreement followed by establishment of letter of credit at any time prior to the enactment of Impugned Legislation (having effect from 1st July, 2018) its right to claim tax credit stood crystalized, and verbiage of the Impugned Legislation does not give any impression of its retrospective application, therefore, the Impugned Legislation does not affect the claim of the companies for tax credit at the rate of 10% of the total investment as envisaged by the un-amended section 65B of the Ordinance.

36. In the case of Sapphire Textile Mills Ltd, the worthy Sindh High court has held that if the qualified person has purchased the plant or machinery in terms of section 65B of the Ordinance by or before 30th June, 2019 its vested right could not be vitiated through the Impugned Legislation. However, with profound respect, we cannot subscribe to the same in totality and would take the exception that the said machinery or plant ought to have been purchased on or prior to 30th June, 2018 that is before the insertion of the Impugned Legislation as on enactment of Impugned Legislation (having effect from 1st July, 2018) if the qualified person has failed to have taken any material steps that is purchasing the plant and machinery as contemplated by the un-amended provision of section 658 ibid, it cannot be clothed with any right for the tax credit what to say of a vested right. Indeed with effect from 1st July, 2018 the legal dispensation regarding the availing of tax credit has been altogether changed that is to say that with effect from the date of enactment of the Impugned Legislation (1st July, 2018) any taxpayer company may invest in purchasing of plant and machinery in term of section 65B ibid, however, on such investment the taxpayer company shall be entitled to 5% of the total investment tax credit and has to install the machinery and equipment by or before 30th June, 2019. For this reason, we with profound respect disagree that the Impugned Legislation is ultra vires. Indeed, it is settled law that a law made by Parliament or the Legislature can be struck down by Courts on two grounds viz, (i) lack of legislative competence (ii) violation of any of the fundamental rights guaranteed under the constitution.20 Further, N.S. Bindra in his book "Interpretation of Statutes" (7th Edition) at page 771 commented as under: "In construing a taxing measure for determining its Constitutional validity, the question of reasonableness cannot enter a judicial mind. The only consideration, which is germane, is whether the legislation challenged is permitted by the Constitution. The reasonableness or otherwise of such a State is a matter of legislative policy and it is not far the Court to adjudicate upon." Thus, in the present case, when the obvious interpretation of the Impugned Legislation is that it is not retrospectively applicable as mentioned above then there is no occasion to strike it down.

37. The nutshell of the above discussion is that the Impugned Legislation does not give any impression that it has either affected the vested rights of the petitioners as stated above nor is retrospectively applicable, therefore, we hold that the Impugned Legislation does not require any interference being passed by a competent legislation having prospective effect except in the following manner: - (i) That the petitioners' companies who have made investment in the manner and mode as provided under subsection (1) of section 65B of the Ordinance and have installed machinery and equipment in their industrial undertaking by or prior to 30th June, 2018 will be entitled to a tax credit of 10%for the tax year in which the plant and machinery was installed and will be also entitled for carrying forward the tax credit for the following two tax years @ of 10% of their investment in the manner and mode as provided under the un-amended section 65B of the Ordinance. (ii) The petitioners' companies who have invested any amount in terms of subsection (1) of section 65B of the Ordinance, though could not install the plant and machinery by 30th June, 2018 will still be entitled to the tax credit @ of 10% of their investment provided before 30th June, 2018 they had purchased the machinery and executed a binding contract with the manufacturer followed by establishment of LCs and has installed the machinery and equipment etc before 30th June, 2021.

38. All the petitions stand disposed of accordingly. MH/47/P Order accordingly.