2025 PLP 1249 (PTD)

SYED ARSHAD ALI, J.

Dr. Musa Kalim, an Associate Professor of Pediatrics at Lady Reading Hospital-a Medical Teaching Institution ("MTI") established under Section 3 of the Khyber Pakhtunkhwa Medical Teaching Institutions Reforms Act, 2015 ("MTI Act") along with Dr. Siraj-ul-Islam and Dr. Murad Ali, civil servants serving as District Surgical Specialist and District Specialist in Mardan, respectively, have filed the present petition, alongside connected W.P No. 757-P/2020. Through these petitions, they challenge the deduction and withholding of professional tax directly from their monthly salaries and contest the validity of Rule 10 of the Khyber Pakhtunkhwa Professions, Trade and Callings Tax Rules, 1991 ("the Rules). Given the commonality of facts and legal issues, this judgment will address and decide both petitions collectively.

2. The petitioners' counsel argued that while the Finance Act, 1990 ("Act No. IV of 1990") provides for the levy and collection of professional tax through a charging provision, it does not prescribe any mechanism for assessment or recovery. As a result, the deduction of professional tax from the petitioners' salaries is beyond jurisdiction. They further contend that although Rule 10 of the Khyber Pakhtunkhwa Professions, Trade and Callings Tax Rules, 1991 mandates the deduction of professional tax from government servants' salaries, the absence of a recovery mechanism in the parent Act renders the Rule ultra vires. Additionally, it is argued that, as government servants, the petitioners are not engaged in any profession falling within the charging provision of the Act. Lastly, the counsel highlighted a discriminatory practice, asserting that all doctors, regardless of their area of practice, are subjected to a uniform tax rate based solely on their place of appointment.

3. Conversely, the learned Additional Advocate General (AAG) and counsel for the respondents contend that the levy of professional tax falls within the provincial domain and is validly imposed under the Finance Act, 1990 ("Act No. IV of 1990"). They further argue that Section 10 of the Act explicitly empowers the framing of rules for the assessment and recovery of professional tax, thereby rendering the Rules intra vires.

4. The arguments were heard, and the case record was thoroughly examined with the valuable assistance of the learned counsel for both parties.

5. Before delving into the respective arguments presented by the learned counsel, it is essential to first set out the relevant legal provisions pertinent to the present dispute. Constitutional Scheme Article 163 of the Constitution of the Islamic Republic of Pakistan ("Constitution"). "

163. A Provincial Assembly may by Act impose taxes, not exceeding such limits as may from time to time be fixed by Act of Majlis-e-Shoora (Parliament), on persons engaged in professions, trades, callings or employments, and no such Act of the Assembly shall be regarded as imposing a tax on income." Statutory Scheme Section 7 of the Act No. IV of 1990. "

7. Tax on Professions, Trades and Callings.

(1) There shall be levied and collected a tax, for each financial year, from persons engaged in professions, trades, callings or employment described in column 2 of the Table below at the rate specified against each category in column 3 thereof: Provided that where a person falls in more than one category of profession, trade, calling, etc., he shall be liable to pay tax in respect of the one where the rate of tax is highest. (2) if a person liable to pay tax under subsection (1) fails to pay the tax by the 30th day of September of the year to which the tax pertains, he shall be liable to pay a penalty at the rate of 50% of the tax due from him in addition to the actual tax. (3) The tax and the penalty levied or imposed under this section shall be recoverable as arrears of land revenue." Section 7 of the Act No. IV of 1990 amended through the Khyber Pakhtunkhwa Finance Act, 2019 provides in the following manner: "

3. Amendment of section 7 of the Khyber Pakhtunkhwa Act No.IV of 1990.

In the Khyber Pakhtunkhwa Finance Act, 1990 (Khyber Pakhtunkhwa Act No.IV of 1990), in section 7, in subsection (1), for the existing "TABLE", the "TABLE", as specified in Appendix-II, appended to this Act, shall be substituted." Appendix-II Table S.No. Description of Tax Payers Rates of Tax

11. DOCTORS,- A. Specialists practicing at Peshawar Rs.80000 B. Specialists practicing at divisional headquarters Rs.60000 C. Specialists practicing at districts headquarters Rs.50000 D. Specialists practicing at places other than a, b, c above Rs.40000 E. Non specialists including Medical Practitioners, Hakeems, Homeopaths etc; Rs.30000 F. Dentists certified by PMDC. Rs. 15000 Section 10 of the Act No.IV of 1990 "

10. Power to make rules.

Government may make rules for carrying into effect the purposes of this Act, and such rules may, among other matters, prescribe the procedure for the assessment, collection and payment of any tax, fee or cess levied, or imposition of any penalty under this Act, in so far as such procedure is not provided for in this Act." The Khyber Pakhtunkhwa Professions, Trade and Callings Tax Rules, 1991 have been framed by the Government of Khyber Pakhtunkhwa under Sections 7 and 10 of the Act No. IV of 1990. Rule 10 of the Rules 10. (1) In case of assessee being Government Servant, the drawing and disbursing officer shall deduct at source the amount of tax from the pay bills of such Government servant for the month of May in each financial year by sending a schedule in Form FPT-4, in triplicate, to the Accounts Officer concerned. The Accounts Officer shall credit the amount of tax so deducted to the receipt head as specified in rule 12 and shall send one copy of the schedule to the respective District Excise and Taxation Officer with a covering statement indicating the total deduction made in respect of each Department/Office of Government so as to reach there not later than the 30th June of the respective financial year. Provided that in case of such Government servants who receive their salaries through computerized system, the tax shall be deducted at source by the Accountant General in the manner specified in this sub-rule. (2) In case of local authority, company or other public body, the principal officer thereof shall deduct the amount of tax from the salaries of their employees liable to pay the tax for the month of August payable in September in each financial year and deposit the same into the Treasury under the head specified in rule 12 within a period of fifteen days from the date of deductions. (3) The principal officer shall send a statement of the deductions as made to the District Excise and Taxation Officer by the 31st January of the respective financial year, giving the names of the persons from whom tax has been collected. The Professions Tax Limitation Act, 1941. ("Act No.XX of 1941"). The Act No. XX of 1941 is a Federal Act, whereby the maximum limit of a professional tax was initially fixed as Rs.50/-, however, the same was later enhanced to Rs. 100,000 per annum. Section 2 of the Act No.XX of 1941 reads as under: "

2. Limitation of tax on professions, etc.--(1) Notwithstanding the provisions of any law for the time being in force, a Provincial Assembly may by an Act impose tax not exceeding one hundred thousand rupees on persons engaged in professions, trades, callings or employments. (2) Notwithstanding anything contained in any law or in any judgment of any court including High Court and the Supreme Court, the tax on professions, trades, callings or employments levied and collected under an Act of a Professional Assembly on or after the 1st day of July, 1977, as in not in excess of the limit fixed in subsection (1) shall be deemed to have been validly levied and collected and shall not be liable to be refunded and the provisions of this Act shall have and shall be deemed always to have had, effect accordingly."

6. In the present case, admittedly the province's authority to impose professional tax, rooted in Article 163 of the Constitution, remains unchallenged. The historical context of professional tax has been comprehensively outlined by the Apex Court in Province of Punjab through Secretary, Excise and Taxation, Government of Punjab and others v. Sargodha Textile Mills Ltd., Sargodha and others (PLD 2005 Supreme Court 988), thus need no reiteration. Similarly, the quantum of the tax, being less than Rs. 100,000/ has not been challenged as it falls within the permissible limit prescribed under Act No. XX of 1941, as amended by the Federal Laws (Revision and Declaration) Ordinance No. XXVII of 1981. Article 163 of the Constitution explicitly clarifies that such a tax imposed on individuals engaged in professions, trades, callings, or employments is not a tax on income. It is noteworthy that Act No. XX of 1941 is a federal statute. The relevant portion of the judgment is reproduced below: "

12. As mentioned above, the Central Legislature also enacted a law called the Professions Tax Limitation Act No. XX of 1941. Section 2 thereof laid down that notwithstanding the provisions of any law for the time being in force, the professional taxes payable would cease to be levied to the extent they exceeded Rs.50 per annum. The Act of 1941 continues to be in force as an existing law and is also protected by virtue of Articles 268 and 279 of the Constitution of Islamic Republic of Pakistan, 1973. It was amended by the Federal Laws (Revision and Declaration) Ordinance No. XXVII of 1981. The Parliament enacted the Finance Act No. VI of 1999 on 30-6-1999, whereby the pre-existing maximum limit of Rs.50 of the professional tax, was enhanced to Rs. 1,00,000 per annum."

7. Turning to the central argument advanced by the learned counsel for the petitioners concerning the alleged impermissible delegation of authority to frame rules for the assessment and collection of professional tax under Section 7 of Act No. IV of 1990, it was contended that the Act itself does not expressly provide for the mechanism of assessment and recovery. Consequently, the petitioners argued that delegating such authority to the government is untenable, as rules and regulations cannot extend beyond the scope of the parent statute nor independently expand its provisions. To support their position, the learned counsel cited various precedents, including judgments in the cases of Muhammad Uneeb Ahmed v. Federation of Pakistan through Secretary, Ministry of Science and Technology, Islamabad and others (2019 MLD 1347); Mir Shabbir Ali Khan Bijarini and 3 others v. Federation of Pakistan and others (PLD 2018 Sindh 603); National Electric Power Regulatory Authority v. Faisalabad Electric Supply Company Limited (2016 SCMR 550); Sunbiz Private Limited (7 News TV Pakistan) through Abbas Ali Khan v. Federation of Pakistan through Secretary Ministry of Information and 3 others (2018 YLR 1785) and Ahmad Mehmood v. Government of Punjab through Chief Secretary and others" (PLD 2019 Lahore 206).

8. Lord Dunedin, a renowned jurist, outlined the three stages of taxation at a fundamental level in the case of Whitney v. IR Commissioners (1926) 10 TC 88, in the following:1 "Now, there are three stages in the imposition of a tax: there is the declaration of liability, that is the part of the 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."

9. It is a well-established principle of law that no tax can be imposed on an individual beyond the scope defined by the charging section, and such provisions must be interpreted and applied strictly. Before levying tax on any person, it must be demonstrated that they fall within the explicit terms of the charging section. If a case does not clearly fall within the confines of the charging section, tax cannot be imposed by inference, analogy, or by attempting to discern the legislature's intent.2 Therefore, any authority seeking to impose a tax must first establish that the individual is liable to taxation through the clear language of the statute.

10. Section 7 of Act No. IV of 1990 imposes liability on individuals engaged in various professions, trades, callings, or employments, at the rate specified by the Provincial Assembly in Appendix-II. However, the Act itself does not provide a mechanism for the assessment or recovery of professional tax. Section 10 of the Act clearly mandates that the provincial government must establish rules for the assessment and collection of professional tax. It is important to note that the determination of the tax slab has been fixed by the Provincial Legislature, and this authority has not been delegated to the provincial government.

11. A similar issue was addressed by the Supreme Court in the case of Pearl Continental Hotel and another v. Government of N.W.F.P. and others (PLD 2010 Supreme Court 1004). The matter before the Court involved the interpretation of the North-West Frontier Province (now Khyber Pakhtunkhwa) Finance Ordinance, 2002, and the North-West Frontier Province (Amendment) Ordinance or Act of 2003 ("Act of 2003"). The Act of 2003 did provide for the imposition of a tax on hotels; however, it did not establish a recovery mechanism. During the pendency of the initial petition, rules were framed to define the agency, mode, and manner for the assessment and collection of the hotel tax. At the time the impugned demand for professional tax was made, however, no such rules were in place. In the Pearl Continental Hotel case, the Supreme Court extensively examined the well-established principle of interpreting taxing statutes where legislation fails to provide the means for its collection. For guidance, we will reproduce paragraphs 17 to 19 of the judgment, which read as: "

17. We are conscious that in some cases where the assessment and recovery of the tax was made in good faith and strictly in accordance with law and the re-exercise thereto would have been futile, Courts refused to interfere merely because of the inadequacy or error in or the absence of the machinery provisions or procedure.

18. In the case of "West Punjab Province v. K.B. Amir ud-Din and others (PLD 1953 Lahore 433) held that:- "We will explain what we regard as the correct approach in cases like the present. The provisions of a taxing Act may be broadly divided into two categories those that determine the liability to be taxed and those that provide the machinery for its assessment and realization. With respect to the first category the rule of interpretation is that the charge must be imposed by clear and unambiguous language and in cases of doubt a construction beneficial to the subject should be adopted. With respect to the second category, however, the rule of construction is entirely different. If the liability to be taxed be clear the machinery sections ought to be interpreted so as to enable the Crown to realize the tax unless there be compelling reasons to the contrary. In Drummonds v. Collins (1) Lord Parker of Waddington, dealing with a machinery section said, "This section is a collecting section and not a taxing section and there is no reason in principle why it should not receive a liberal interpretation." In "Muhammad Younas v. Chairman Municipal Committees, Sahiwal and others" (PLD 1984 Lah. 345) a learned Judge in Chambers of Lahore High Court, Lahore supported the view that the absence of machinery provisions was only an omission but becomes relevant when tax is improperly charged. Two important judgments were referred as under: "The well-recognized principle as laid down by Rowlet, J. in Brandy Syndicate v. Inland Revenue Commissioners ((1921) 1 KB 64) is "that in a taxing act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax nothing is to be read in, nothing is to be implied. One can look fairly at the language used". Again, Rumer, J, observed in the case of MecKenna v. Eaton-tumor ((1936) 1 KB 1) that "if the tax is clearly imposed the omission of the legislature to provide means for its collection must be regarded as an unfortunate omission and nothing else. It is only where a doubt arises whether the tax is chargeable by a certain section that the absence of machinery for collection becomes a relevant consideration".

19. We are in no doubt that the machinery provisions, where provided, have to be construed liberally and in the manner aiding the realization of proper tax and to prevent avoidance of the tax. And where not provided for but tax recovery is made as per the law, the omission of machinery may not be considered as fatal to the tax recovery but where law is disregarded or breached or violated in assessing or recovering tax, non-existence of recovery provisions cannot be ignored."

12. At this juncture, we may refer to the insertion of Section 3A in the Federal Excise Act, 2005, through the Finance Act, 2007, that empowered the Federal Government to impose and collect, via notification in the official Gazette, a special excise duty on specific goods, subject to conditions, limitations, or restrictions it deemed appropriate. This provision was challenged before the worthy Sindh High Court on the grounds that it constituted an impermissible delegation of legislative authority to impose taxes. The Sindh High Court declared Section 3A of the Federal Excise Act, 2005, invalid. However, the matter was comprehensively addressed by the Supreme Court in Shahtaj Sugar Mills Ltd. and others v. Government of Pakistan through Secretary Finance and others (2024 SCMR 1656). In paragraph 8 of the judgment, the Apex Court observed that: "It is obvious from the language of section 3 that the legislature had levied special excise duty on the two categories and goods but its collection was suspended and left to the discretion of the Federal Government. The rate of such levy and collection was fixed by the legislature itself. The policy of the imposition of special excise duty was implicit and the legislature itself had set forth the guidelines to be followed by the delegated authority. By no stretch of the imagination can it be construed that the legislature had delegated the essential legislative functions to the Federal Government. The legislature had merely delegated the ancillary and incidental functions to the Federal Government. The legislature had empowered the Federal Government to determine the goods for the purposes of collection of the special excise duty. Section 3A does not delegate unfettered power in the absence of standards set out by the legislature. The legislature has prescribed intelligible guiding principles to be applied while exercising the delegated authority. The question that is to be answered is; whether the High Court was justified in striking down section 3A on the touchstone of the doctrine of impermissible and excessive delegation of legislative authority. In order to answer this question it would be beneficial to examine the settled principles regarding striking down a statutory provision and the relevance of the doctrine of impermissible and excessive delegation of legislative authority". In light of the above, it is clear that the delegation of authority in section 3A was not an unconstitutional transfer of legislative power, but rather an administrative delegation with clear parameters set by the legislature. The legislature defined the rate of the excise duty and outlined the criteria for its collection, ensuring that the delegated authority was exercised within prescribed limits. The Apex Court in Para. 12 of the said judgment further went on to say: "...as long the legislature has set out procedural safeguards and has prescribed the standards, the delegation cannot be construed as impermissible or excessive. Moreover, the doctrine may become relevant if the delegated legislative authority is unrestricted and uncontrolled. In order to strike down a law on the basis of the doctrine of impermissible and excessive delegation of legislative power, great care has to be exercised by the courts. In case of doubt, the question of vires must be resolved in favour of upholding the law and every effort must be made to sustain the validity. Apprehension that the law could be abused cannot be a ground for striking it down."

13. Section 7 of Act No. IV of 1990 expressly delineates the imposition of professional tax across four specified categories of individuals engaged in professions, trades, callings, or employments, with the tax slabs determined directly by the legislature. The Provincial Government, empowered under the Act, has framed Rule 10 to regulate the method of tax collection. Considering the principles enunciated in Pearl Continental Hotel and Shahtaj Sugar Mills Ltd., Rule 10 neither causes any prejudice to the petitioners nor constitutes an excessive delegation of legislative authority. Therefore, the Rules are unequivocally intra vires.

14. It is also contended that Doctors cannot be termed as professional for the purpose of professional tax under the scheme of Constitution as well as the Act.

15. As far as this contention of the petitioner is concerned, suffice it to mention, that Appendix-II of the Table categorizes the Doctors, according to their geographical location. According to the said table, specialist doctors practicing at Peshawar are to pay Rs. 80,000 tax per annum; whereas the specialist doctors practicing at Divisional Headquarter would pay an amount of Rs.60,000 per annum; specialist doctors practicing at districts are paying Rs.50,000/- per annum and thus the doctors practicing at any other areas are paying the said tax at the rate of Rs. 40,000 to Rs. 30,000 per annum. Therefore the said classification as evident from their geographical location qualifies the essential attributes of intelligible differentia. We also do not tend to agree with the assertions of the petitioner that the quantum of tax is unreasonable. It would be important to note that as stated above, the professional tax is not tax on income but a tax on profession. The wisdom of legislation quantifying the said tax cannot be substituted by this Court which is otherwise not confiscatory. Therefore, the said contentions of the learned counsel for the petitioner are repelled.

16. Moving on further to the assertion that the parties do not fall within the mischief of the charging section. At this juncture, it is necessary to examine the meaning of the terms profession, trade, calling and employment. According to Black's Law Dictionary the term "profession" is defined as: "

1. A vocation requiring advanced education and training; esp., one of the three traditional learned professions- law, medicine, and the ministry.

2. Collectively, the members of such a vocation."3 The Concise Oxford English Dictionary defines "profession" as: "A paid occupation, especially one involving training and a formal qualification. A body of people engaged in a profession."4 The term "trade" is defined in Black's Law Dictionary as: "

1. The Business of buying and selling or bartering goods or services.

2. A transaction or swap.

3. A business or industry occupation; a craft or profession."5 Similarly, the term "calling" is defined as: "A strong urge towards a particular way of life or career; a vocation; a profession or occupation."6 Lastly, "employment" is defined as: "Work for which one has been hired and is being paid by an employer."7 In light of the definitions provided, the term "profession" encompasses vocations requiring specialized training and qualifications, such as law, medicine, and education. The inclusion of doctors under the ambit of professional tax is justified by their distinct professional status, beside, employment in government service or the service of corporate entity involves advanced education, formal qualifications, and adherence to ethical standards. As per Black's Law Dictionary and the Concise Oxford English Dictionary, professions are vocations that provide specialized services, often with a societal impact. Similarly, the terms "trade" and "calling" emphasize structured and skilled engagement in particular fields. Doctors, being integral to the medical profession, fit these definitions as they render critical health services through their specialized knowledge and expertise. In this regard, the Supreme Court of India in case of Employees State Insurance Corporation cum Medical Officers Association v. Employees State Insurance Corporation and another (AIR 2014 Supreme Court 1259) made a distinction between the expressions "profession" and "occupation" in the context of medical profession and held as under: "We are of the view that a medical professional treating patients and diagnosing diseases cannot be held to be a "workmen" within the meaning of Section 2(s) of the ID Act. Doctors profession is a noble profession and is mainly dedicated to serve the society, which demands professionalism and accountability. Distinction between occupation and profession is of paramount importance. An occupation is a principal activity related to job, work or calling that earns regular wages for a person and a profession, on the other hand, requires extensive training, study and mastery of the subject, whether it is teaching students, providing legal advice or treating patients or diagnosing diseases. Persons performing such functions cannot be seen as a workman within the meaning of Section 2(s) of the ID Act. We are of the view that the principle laid down by this Court in A. Sundarambal's case (supra) and in Muir Mills's case (supra) squarely applies to such professionals. That being the factual and legal position, we find no reasons to interfere with the judgment of the High Court. The SLP lacks merit and is dismissed accordingly."

17. Doctors belong to a highly skilled and trained profession. Professional tax, distinct from income tax, is levied based on one's professional expertise and ability to earn in a specific field. Unlike income tax, professional tax is not dependent on an individual's earnings but rather on the nature of their chosen profession. Therefore, under Section 7 of the Finance Act, 1990, and the procedural mechanisms in the Khyber Pakhtunkhwa Professions, Trade, and Callings Tax Rules, 1991, doctors are rightly classified as professionals subject to taxation based on their paid occupation within the ambit of "profession."

18. As far the contention of deduction of professional tax at source, it is imperative to look into the provisions of sub-rules (2) and (3) of Rule 10 of the Rules, which read as: (2) In case of local authority, company or other public body, the principal officer thereof shall deduct the amount of tax from the salaries of their employees liable to pay the tax for the month of August payable in September in each financial year and deposit the same into the Treasury under the head specified in rule 12 within a period of fifteen days from the date of deductions. (3) The principal officer shall send a statement of the deductions as made to the District Excise and Taxation Officer by the 31st January of the respective financial year, giving the names of the persons from whom tax has been collected. It is to be noteworthy that sub-rule (1) of Rule 10 is specifically designed for the collection of professional tax from the "Government Servant" i.e. deductible at source. On the contrary, under sub-rule (2) of Rule 10, the mode of deduction of tax from the employees of local authority, company or other public body is somehow different. It is the principal officer of that local authority, company or public body, who shall deduct the amount of tax from the salaries of their employees liable to pay the tax and deposit the same into the Treasury under the head specified in rule

12. It is an admitted position that the petitioner, Dr. Musa Kalim, is an employee of MTI, which is recognized as a body corporate under Section 3 of the MTI Act. Section 3 of the MTI Act provides:

3. Establishment of Medical Teaching Institutions.

(1) Government may, by notification in the official Gazette, establish such Medical Teaching Institutions, as it may deem necessary and shall apply the provisions of this Act to such institutions. (2) A Medical Teaching Institution established under this Act to which this Act is applied or an existing Medical Teaching Institution to which this Act applies shall be a body corporate having perpetual succession and a common seal with power to acquire hold and dispose of movable and immovable property and may in its name sue and be sued.

19. It is thus evident from rule 10 that it provides two different modes of deduction/withholding of advance tax; one from the civil servant and the other from the persons, who are in the employment of companies or statutory bodies. The petitioner, Musa Kalim is an employee of MTI, whereas the other two petitioners are the civil servants, therefore, both are liable to the impost of professional tax and has been rightly recovered from their salaries in the manner as provide under rule 10 ibid.

20. For the foregoing reasons, the instant petitions disposed in the above terms. MH/68/P Order accordingly.