2004 PLP 2176 (PTD)

5. I have given some thought to the respective contentions of the learned counsel for the parties. I deem it proper to reproduce hereunder the said similarly worded entry in Item No.86 and Item No.92 in the 2nd Schedule respectively framed with reference to section 14 of the Income Tax Ordinance, 1979 and section 53 of the Income Tax Ordinance, 2001:‑‑ "Any income of any university or other educational institution established solely for educational purposes and not for purposes of profit." It will, therefore, be seen that any income shall be exempted upon payment of tax under the said laws subject to the following conditions:‑‑ (i) If it is an income of any university, or (ii) if it is an income of other educational institution, (iii) established solely for educational purposes, and (iv) not for purposes of profits.

6. Now the first petitioner has been established by the Federal Government under section 3 of the said Act of 1975 while the second petitioner has been established under section 3 of the said Act of 1976 by the Provincial Government. Upon a reading of section 8 of the said Act, of 1975 and section 10 of the said Act of 1976, the petitioners have the power to organize, regulate, develop and control Intermediate Education and Secondary Education. The said provisions then particularized the powers without prejudice to the said general provision and these include the powers to hold and conduct all examinations pertaining, inter alia, to Intermediate and Secondary Education, to prescribe courses of study for the examinations, to prescribe the Rules for admission of candidates to the examinations and to recognize institutions.

7. In the case of the first petitioner, the Federal Government and in case of the second petitioner the Minister for Education or the Provincial Government has the power to cause an inspection to be made by such person or persons as it may direct, of the offices, activities and funds of, and of the examinations conducted by the Board and to cause an enquiry to be made in like manner in respect of any matter concerning the Boards i.e. the petitioners. The said Act of 1975 and of 1976 respectively provide for the audit of the accounts of the petitioners. The principal officers of the petitioners i.e. the Chairman and the Secretary are to be appointed by the Federal Government in the case of the first petitioner and the Controlling Authority in the case of the second petitioner.

8. Upon a reading of the said provisions of the Act, of 1975 and the said. Act of 1976 it is but apparent that the petitioners have been constituted by the Federal and the Provincial Government respectively for the sole purpose of organising, regulating, developing and controlling Intermediate Education and Secondary Education in the Islamabad Capital Territory and the Rawalpindi Division respectively.

9. Now as already stated by me above, the said Income Tax Ordinance exempts any income of a university or an educational institution established solely for educational purposes and not for purposes of profits. Now I have examined the University of the Punjab Act, 1973 and the Quaid‑i‑Azam University (erstwhile University of Islamabad Act, 1973. I find that section 3 of the said two Acts are almost in paramateria. Under the said provisions of the said two Acts, the Universities reconstituted respectively at Lahore and at Islamabad, A under section 4 of the said Acts, shall have the powers, inter alia, to provide for instruction in such branches of learning as the University may deem fit and to make provision for research and for the advancement and dissemination of knowledge in such manner as the University may determine, to prescribe courses of studies to be conducted by it and the Colleges: to hold examinations and to award and confer degrees, diplomas, certificates and other academic distinctions to and on persons who have been admitted to and have passed its examinations under prescribed conditions.

10. It will be thus seen that one of the primary power/function of the said Universities is to hold examinations in the manner prescribed and as a result to confer the said awards upon successful candidates.

11. Now the contention of the learned counsel for the respondents as noted above is that the exemption envisaged by the said Income. Tax laws is to be availed only by such institutions who impart education. Precisely, what, is being tried to be argued is that only such institutions would be exempted where only teaching is imparted in various courses and since the petitioners‑Boards do not involve themselves in the teaching process directly they would not be entitled to the said exemption. In my humble opinion, the contention is wholly misplaced. The words used by the Legislature are "established solely of educational purposes" as distinct from "for purposes of profits." II can be safely stated that the petitioners‑Boards have not been established for purpose of profits rather the purposes are duly laid down in the said respective Federal and Provincial enactments. Now the said profits are accruing not because, the purpose of the petitioners is to earn those profits rather the first petitioner have made those deposits in compliance with the provisions of the law governing it while the second petitioner is maintaining its funds also in accordance with the said Act of 1976. It cannot at all be said that the petitioners established primarily for the purpose of organizing, regulating, developing and controlling Intermediate and Secondary Education in their respective territories have n not been established solely for educational purposes.

12. So far as the said preliminary objection raised by the learned counsel for the respondents is concerned, suffice it to say that in view of the persistent conduct of the respondents, in the matter, the remedies provided under the said Income Tax Ordinances would be illusory.

13. For all that has been stated above, both the writ petitions are allowed and the act of the respondents in deducting or causing or directing to deduct any tax under the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 qua the said deposits is declared to be void ,and without lawful authority. No orders as to costs. M.A.W./B‑22/L Petitions allowed