At the time of promulgating the Income Tax law in 2001, the tax authorities tried to tax incomes of a number of non-profitable institutions. It was an ill-conceived move which was withdrawn in 2003 to protect the exemption from income tax available in other statutes prior to Income Tax Ordi-nance, 2001.

Now, in the Finance Act, 2008, the original position has been restored, destroying the very concept of income taxation.

The Sec 3 of the Income Tax Ordinance says that: “the provisions of this Ordinance shall apply notwithstanding anything to the contrary contained in any other law for the time being in force”. This overriding provision disentitles all the institutions from claiming exemption from tax available in their respective laws. The Sec 54 of the ordinance reinforces this inference. As amended by the Finance Act 2008, the Section reads as under:

Exemptions and tax provisions in other laws: No provision in any other law providing for—

(a) an exemption from any tax imposed under this ordinance;

(b) a reduction in the rate of tax imposed under this ordinance;

(c) a reduction in tax liability of any person under this ordinance; or, (d) an exemption from the operation of any provision of this ordinance, shall have legal effect unless also provided for in this ordinance”.

The ordinance has withdrawn exemptions and concessions available to a number of charitable and public utility institutions. Their names are not appearing in the exemption clauses of the ordinance, although they enjoy exemptions under their respective laws. Some of these are as under:

* Women in Distress and Detention Fund Act, 1996 [ Sec 8 grants it special exemption from taxes].

* High Court Judges (Leave, Pension and Privileges) Order, 1978 [paragraph 22C grants exemption from tax on certain allowances and privileges].

* Pakistan Bait-ul Mal Fund, established under Act No1 of 1992.

* National Fund for Cultural Heritage Act, 1994 [Sec 7 gives special exemption from income tax to all contributions and donations]

These are just a few examples. There may be many other such institutions that are enjoying special exemptions from tax under their special laws.

However, the special provisions contained in their respective laws will have to yield before the overriding provisions of the Income Tax Ordinance, 2001 unless the same is specifically inserted in it.

It is an established principle of interpretation of statutes that in case of conflict between two provisions of two different laws, the law which was enacted later in time, will prevail. Since the Income Tax Ordinance, 2001 is promulgated later in time, it will override all the previous laws.

The Federal Board of Revenue has extended tax exemptions to a number of institutions in the ordinance, but has failed to give the same treatment to the above-mentioned non-profitable bodies.

The reason and logic demand that either tax exemptions from all such institutions should be withdrawn or all of them should be given the same treatment.

The method of pick and choose without any transparency is against public policy and violates Article 25 of the Constitution of Pakistan. It is hoped that the policy makers will review the situation giving equal treatment to the institutions engaged in somewhat similar activities that are not for profit purposes.