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Government enjoys discretion in allowing exemption of taxes

.
High Court Division 
(Special Original Jurisdiction)
Md Ashfaqul Islam J
SM Emdadul Hoque J
Gulshan Club Ltd
..............Petitioner
vs
Chairman, National Board of Revenue and another.........
..........................Respondents
Judgment
December 13th, 2010
Finance Act (XVI of 2004)
Section 75(1A (g)
A person having a tax identification number shall have to file a return under section 184A of  the Ordinance.
Income Tax Act (Xl of 1922) Sections 44(4), 15 and 18.
The provision of section 44(4) clearly says that government by notification in the official gazette can at any time give exemption to any person from paying taxes if so decided by the government. Provisions for giving any exemption from paying Income Tax was existing from long before as back as in the year 1922. Subsequently in Income Tax Ordinance 1984, section 44, under chapter VI has been incorporated which clearly states that in the sixth Schedule part A and B the categories upon which exemptions are to be given have been stipulated. Gulshan Club or any other organisation like that of Gulshan Club have been exempted from paying income tax. . ..... (17)
Income Tax Act (XI of 1922) Section 44(4)
Government Discretion-One is the filing of the return and other one is the exemption from paying income tax. Certainly with the introduction of section 75(A)(g) it is imperative upon any person having a TIN number to file a return but the decision to give exemption under section 44(4) from paying tax absolutely lies with the discretion of the government.
Masood R. Sobhan with Fatema S Chowdhury and AFM Saiful Karim, Advocate-For the Petitioner
Murad Reza Additional Attorney General, Masud Rumy, Pratikar Chakma, Mahfuza Begum, Assistant Attorney Generals - for the respondent No.2.
Judgment
Md Ashfaqul Islam J : At the instance of the petitioner, Gulshan Club Ltd this Rule Nisi was issued calling upon the respondents to show cause as to why it should not be declared that the petitioner registered under the Companies Act 1913, as a company limited by guarantee without any share capital and being a non-profit making organisation is not liable to pay income tax.
2. The background leading to the Rule, in short, is that the petitioner Gulshan Club Ltd a company limited by guarantee, was incorporated under the Companies Act 1913. It was established in 1978 and is situated in Gulshan area. In clause 4 of Memorandum of Association of the Company it has been clearly stated:
"The income and property of the Company, howsoever derived, shall be applied solely towards the promotion of the object of the Company as set forth in this Memorandum of the Company and no portion thereof shall be paid or transferred, directly or indirectly by way of dividend or bonus or otherwise, howsoever by way of profit to the persons who at any time are or have been members of the Company or to any of them or to any persons claiming through any of them."
3. The Club was established by some persons who prescribed to the shares and signed their names as the first share holders. Others became members of the Club at a subsequent period and the total strength of the members is now 1400. It has been stated in paragraph 8 of the petition that respondent no-I, National Board of Revenue (NBR), in the year 2003 had exempted the Dhaka Club Ltd. a similar organisation like that of Gulshan Club Ltd. which was also registered under Companies Act 1913 from submitting tax return and eventually it has been exempted from paying taxes for subsequent years and, as such, the demand of the respondents upon the petitioner to pay tax is arbitrary as well as discriminatory.
4. It has also been stated that the Commissioner of Taxes, Company Circle No.7, Zone-3, Dhaka has assessed taxes of the petitioner from 1996-97 up to 2006-2007 against which appeal was filed before the Tax Appellate Tribunal which upheld the order of the respondent No.2 and the petitioner by reference moved the High Court Division against the said order of Tribunal and in all the cases this Division has stayed the decision of the Tribunal till disposal of the Tax Reference Application No. 638 of 2004 filed by the petitioner (Annexure-C).
5. It has been stated that the Club has been formed for the welfare and enjoyment of the members and their families and not for income making motive and no profit or dividend is distributed amongst the members. It is further submitted that since the members of the Club are contributors and participants and therefore, the doctrine of mutuality is applicable for the petitioner. In another perverse finding the tribunal held that the petitioner and the respondents, under misconception of law and without understanding the true and actual intent of the objects and the scope of the objects of the petitioner held that the petitioner is liable to pay tax.
6. Since the Club is a social organisation making no profit of which its members are entitled to receive as dividend or receive a share of it in any other way. Its members have appointed the employees including cooks, waiters, security guards and other staffs for their own benefit and services for which the members availing them pay for, including consumption of food and drinks out of which "profit" is made by the Club which do not attract payment of income tax by the petitioner. The petitioner company being aggrieved since it has not been exempted from paying income tax moved this Division under Article 102 of the Constitution and obtained the present Rule.
7. Mr Masood R Sobhan, the learned Advocate appearing on behalf of the petitioner after taking us with the petition and the supplementary affidavit along with the Annexures thereof mainly submits that Club has been formed for the welfare and enjoyment of the members and their families and not for income making motive and no profit or dividend is distributed amongst the members. The members pay their subscriptions and charges and other income of the Club is not income or profit and it is not engaged in any trade nor does any business for profit, it is not liable to pay any income tax. Mr Sobhan therefore, submits that doctrine of mutuality is applicable for the petitioner since the members of the Club are contributors and participants. Substantiating his argument Mr Sobhan asserts that the Club is not liable to pay any tax since it is. a social organisation making no profit. Its members have appointed employees including cooks, waiters, security guards and other staffs for their own benefit and services for which the members availing them pay for, including consumption of food and drinks out of which "profit" is made by the Club which is also used for the benefit of the members itself and, as such, it is not required to pay any income tax.
8. He has also argued that the Club was registered under the Companies Act 1913 with the Registration of Joint Stock Companies and Firms as a company limited by guarantee by its members without any share capital and, as such, the petitioner Club is not liable to pay any tax under the Income Tax Ordinance 1984. Drawing our attention to Annexure-' B' to the petition Mr Sobhan submits that on 18-2-2003 Dhaka Club Ltd, a similar organisation like that of Gulshan Club has been exempted from submitting return. Therefore, he submits that the petitioner Club standing on the same footing is entitled to be exempted from paying income tax as well as filing return. Mainly taking all these grounds the learned counsel sum up his argument and prays that in all fairness this Rule should be made absolute declaring that the petitioner is exempted from paying any income tax.
9. Mr Murad Reza, the learned Additional Attorney General with Mr Md Abdur Rahim Bhuiyan, Deputy Attorney