1991 PLP 488 (PTD)

MUHAMMAD AFZAL ZULLAH, C.J.

This appeal through leave of the Court is directed against the decision of the Peshawar High Court in an Income Tax matter. Leave to appeal was granted for re-examination of the question dealt with in the impugned judgment: "whether, on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in finding that the return on capital paid by Telephone Industries of Pakistan, Limited to Siemens A.G. on the holding of the latter in the share capital of the former was not dividend within the meaning of the definition given in section 2(6-A) of the Income Tax Act, 1922". The High Court answered the question in the. negative and it has been held- that the disputed amount was "dividend" within the meaning of the term as defined in section 2(6-A) of the Income-tax Act. The facts taken from the impugned judgment for the limited purpose of the present appeal and the short point involved therein are that in 1952 the Government of Pakistan, the respondent herein (M/s. Siemens A.G.) and Farid Sons Limited of Karachi; entered into an agreement for incorporation of a limited company under the title "Telephone Industries of Pakistan". It was, inter alia, provided by the agreement that dividend of 4% was to be declared on the paid-up share capital for the time being or proportionately lower sums in years of less production as the case may be, that net profits that may accrue shall first be used for declaring a dividend not exceeding 4% on invested capital and for paying other charge. The dividends were contingent on sufficient profits being made and were not otherwise guaranteed. With the expansion of the venture the need for capital was felt and the said parties amended the agreement in July, 1966. This time it was provided that the respondent-assessee had agreed to contribute additional capital towards investment subject to the condition that a fair return would be granted on such investment. It was, therefore, stipulated that their investment under the first expansion programme will bear return of 4% per annum from 1st April, 19

obviously both here and hereafter. There are very strong Commands and have been enforced in various legal fields. Recently a major contravention regarding the law of pre-emption was resolved by the Supreme Court and this principle was also applied -- Sec the case of Said Kamal Shah P L D 1986 Supreme Court 360 at 381 and 418 et seq. What was emphasized regarding prohibition against third party intervention in mutual contracts in the well-established Sunnah Injunction is that: People be left alone in. their mutually agreed transactions; "so that they be blessed by Allah through free circulation of (Rizziq) (wealth) amongst themselves" -- (Bokhari: Kitabul Baua No.3709; Abu Daud; Kitabul-Ajara No.34'I2). When parties by mutual free G consent enter into a valid contract, then the third parties have no right to intervene either to frustrate the contract or to change its nature -- (Government of N.-W.F.P. v. Said Kamal Shah MA) at 442). The question relating to exceptions has been dealt with separately on the basis of Islamic principles of Zaroorat, Zarar, public interest as such, State policy, State necessity etc. in the case of Land Reforms Qazilbash Waqf v. Chief Land Commissioner P L D 1990 SC

99. As a necessary conclusion drawn from the foregoing, it can be safely held in this case also that on the touchstone of Islamic Rules of Interpretation, which unless excluded otherwise, under the present Constitutional set-up the Courts are bound to apply in preference to the contrary so-called accepted rules of interpretation under the other jurisprudential concepts and the fiscal laws arc no exception in this behalf), the income-tax authorities cannot change the nature of the contract intended by the parties thereto, under the pretext that the rule of interpretation of fiscal law in this behalf, is different. For all these reasons and in the light of the foregoing discussion this appeal is dismissed. There shall be no order as to costs. M.B.A./C-77/S. Appeal dismissed.