Legal Fiction in Pakistani Jurisprudence: Doctrine, Limits and Application

A legal fiction is an assumption the law treats as true for a defined purpose, even though it is known to be untrue, incomplete, or notional. The law does not pretend that the assumed fact exists in nature. It constructs a working truth so that rights, liabilities and remedies can be applied with consistency.

Pakistani law inherited the doctrine from the common law and then developed it through the Constitution of 1973, taxing statutes, company legislation, the Qanun-e-Shahadat Order, 1984, and a long line of Supreme Court authority. The controlling principle is not that the legislature may invent reality at will. It is that a fiction is a tool of limited purpose: it must be tethered to a coherent object, confined to the persons and period for which it was created, and not stretched until it becomes a legal farce.

Concept and Distinction

A legal fiction assumes what is known to be false. A legal presumption assumes what may be true. The Qanun-e-Shahadat Order, 1984 draws the evidentiary line with some precision. Article 2 distinguishes facts that the court “may” presume, “shall” presume, or treat as “conclusive proof”. A conclusive presumption approaches a fiction: once the predicate fact is proved, contrary evidence is shut out. A rebuttable presumption is different. It shifts the burden but remains open to disproof.

The classic common-law description still holds in Pakistani interpretation. When a statute enacts that something shall be deemed to have been done which in truth was not done, the court must ascertain “for what purposes and between what persons” the statutory fiction is to be resorted to. Where a person is deemed to be something, the only meaning possible is that, though he is not that thing in reality, the Act requires him to be treated as if he were, “with all inevitable corollaries of that state of affairs”. Those propositions were adopted and restated by the Supreme Court of Pakistan in “Elahi Cotton Mills Ltd. v. Federation of Pakistan”, PLD 1997 SC 582.

Two further rules follow.

• First, a fiction must be carried to its logical conclusion “within” its purpose. It cannot be used to generate consequences the legislature never enacted.
• Second, a fiction cannot be extended beyond the purpose for which it was created. That second rule is the heart of Pakistani doctrine.

Corporate Personality: The Classic Fiction

The most familiar legal fiction in commercial life is corporate personality. A company has no body and no mind. Yet the law attributes to it a separate legal existence.

Section 18 of the Companies Act, 2017 provides that, from the date of incorporation, the subscribers and those who later become members “are a body corporate by the name stated in the certificate of incorporation.” The company may sue and be sued, own property, incur debt, and survive the death or departure of its members. Limited liability and perpetual succession are the practical fruits of that attribution.

Pakistani courts accept the Salomon principle: the company is a person distinct from its shareholders. They also accept the identification doctrine when criminal or regulatory liability is in issue. Because a company cannot itself form mens rea, the acts and mind of those who constitute its directing will are treated, by fiction, as the acts and mind of the company. The fiction is not a licence for abuse. Where the corporate form is used to evade a legal obligation, defeat public interest, or commit fraud, the courts lift the corporate veil. The fiction yields when its purpose is exhausted or perverted.

The same architecture appears in the Limited Liability Partnership Act, 2017, which expressly declares an LLP a body corporate and a legal entity separate from its partners.

Tax Law: Where Fictions Do Most of the Work

Tax statutes use the language of “deeming” more than any other branch of Pakistani law. The reason is structural. Income tax is a tax on a person “in relation to his income”. Revenue cannot always wait for cash in hand. The statute therefore treats amounts as received, accrued, derived, or chargeable even when the commercial picture is incomplete.

Elahi Cotton remains the leading authority. The Court upheld presumptive and minimum taxes under the then Income Tax Ordinance, 1979 (ss. 80-C, 80-CC and 80-D) as intra vires Entries 47 and 52 of the Federal Legislative List. In doing so it laid down principles that still govern every deeming provision in the Income Tax Ordinance, 2001:

• A deeming provision brings within the net an amount that would not ordinarily have been treated as income: income not actually accrued but supposedly accrued notionally.
• Legal fictions are limited for a definite purpose. They cannot be extended beyond the purpose for which they are created.
• What is not “income” cannot be made income merely by a Finance Act if the constitutional entry does not support the charge.
• Legislative entries are construed liberally, but Parliament cannot tax as income that which, in no rational sense, can be regarded as a citizen’s income.

Those limits have been repeated in later tax jurisprudence, including Pakistan State Oil Ltd. v. Commissioner of Income Tax, 2018 PTD 1306, which insisted that taxation must remain intelligible within the legal scheme and that labels must not defeat substance.

Illustrations in the Income Tax Ordinance, 2001

Several charging and computational provisions rest on fiction.

Deemed receipt and accrual. Section 69 treats a person as having received an amount, benefit or perquisite in specified circumstances. Section 72 applies the Ordinance as if a source of income had not ceased. Non-arm’s length transfers under section 78 treat the disposer as having received fair market value and the acquirer as having incurred that cost.

Unexplained income or assets — section 111. Amounts that the taxpayer cannot satisfactorily explain may be added as income. The addition is not a finding that the money was earned from a particular trade. It is a statutory attribution: unexplained wealth is treated as income of the year.

Minimum tax — section 113. Tax is levied by reference to turnover even where computed income is nil or a loss. The charge does not assert that the taxpayer earned a profit equal to the tax. It deems a minimum measure of liability to protect the base against suppression.

Super tax — section 4C. “Income” for this purpose is a constructed aggregate of several heads, including imputable income. The legislature defines the base; the courts then test whether the definition remains a tax on income in the constitutional sense.

Section 7E — deemed income from immovable property. This provision has produced the sharpest recent contest. It treats a resident person as having derived income equal to a percentage of the fair market value of specified immovable property, whether or not rent was received. High Courts have divided on whether the charge is a legitimate fiction under Entry 47 (taxes on income) or a tax on capital value dressed as income. The debate turns exactly on Elahi Cotton: does the fiction have a rational nexus with income, person, period and taxable subject, or has nomenclature been used to convert an asset tax into an income tax?

The same discipline applies to sales tax and federal excise. Deeming a supply, a taxable activity, or a value “as if” it were something else is permissible only within the purpose of the charging section.

The practical rule for the Department and for the taxpayer is the same. Identify the purpose of the fiction. Identify the persons between whom it operates. Identify the tax year and the subject. Stop there. A fiction that taxes ownership as if it were rent, or a past closed transaction as if it were still open, without textual warrant, exceeds its charter.

Evidence Law: Presumptions That Approach Fiction

The Qanun-e-Shahadat Order, 1984 is the principal code of proof. Several articles create working truths for litigation.

Articles 123 and 124 — life and death. If a person was alive within thirty years, the burden of proving death lies on the person who asserts it (Art. 123). If the person has not been heard of for seven years by those who would naturally have heard of him, the burden of proving that he is alive shifts (Art. 124). The law does not know that the missing person is dead on the seventh anniversary. It allocates risk so that estates, marriages and successions can move. The Supreme Court has held that the probable date of death within the seven-year period is a question of circumstances, not a rigid statutory clock.

Article 122 — facts especially within knowledge. Where a fact lies peculiarly within one party’s knowledge, that party must explain it. In matrimonial homicides inside the home, this article, read with Article 129, allows the court to treat unexplained presence and opportunity as a link in the chain. It is not an irrebuttable fiction of guilt. It is a structured inference.

Article 129 — course of natural events. The court may presume facts likely to have happened, having regard to the common course of natural events and human conduct. This is the statutory home of ordinary presumptions: recent possession of stolen goods, continuance of a state of affairs, regularity of official acts.

Conclusive proof under Article 2(9). When one fact is declared conclusive proof of another, evidence to disprove the second fact is barred. That is as close as Pakistani evidence law comes to a true fiction.

Dying declarations under Article 46 rest on a different but related idea: nemo moriturus praesumitur mentire — a dying person is not presumed to lie. The statement is admitted because necessity and the solemnity of death are treated as a substitute for oath and cross-examination. Courts still scrutinise it closely.

Other Working Fictions

Relation back. In insolvency, administration of estates, and certain tax assessments, an event is treated as having occurred at an earlier date so that priorities and accounts can be settled. The fiction relates the later act back to the earlier moment. It does not rewrite history for all purposes.

Constructive notice. A person dealing with registered land or with a company’s public documents is treated as knowing what the register or the public file contains. Actual ignorance is irrelevant. The fiction protects third parties who rely on the register and disciplines those who should have searched.

Advocate’s authority. An advocate appointed by vakalatnama is treated as having implied authority to conduct the cause, including compromise or withdrawal, unless the instrument restricts that authority. The client is bound by the advocate’s statement in court. The relationship is agency clothed with a procedural fiction of completeness.

Execution as continuation. In banking recovery, section 19 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 treats the suit as automatically converted into execution on pronouncement of decree. No fresh application is required. The legislature deemed the execution proceeding to exist so that the decree-holder is not defeated by a procedural gap.

Transfer of pending proceedings by fiction of law. When jurisdiction is shifted by constitutional or statutory amendment — as has occurred in accountability matters after creation of a new appellate forum — pending petitions may stand transferred “by fiction of law.” The cases do not physically move of their own accord. The law treats them as having moved.

Legitimacy and maintenance. Family courts distinguish the legal status of a “legitimate child” from the fact of a “biological child.” Maintenance and status questions are resolved by statutory and Islamic rules of legitimacy, not by genetics alone. The legal status is a constructed category, not a laboratory finding.

Retrospective legislation. When the legislature gives a provision retrospective effect, it imagines a state of affairs that did not exist and attaches consequences to it. Courts still protect past and closed transactions unless the text clearly reaches them. A retrospective fiction is read strictly.

Constitutional Limits

Article 4 guarantees that no action detrimental to life, liberty, body, reputation or property shall be taken except in accordance with law. Article 8 strikes down laws inconsistent with fundamental rights. Article 25 requires equality before the law. Article 189 makes the law declared by the Supreme Court binding.

A legal fiction that is confiscatory, discriminatory without intelligible differentia, or so disconnected from its subject that it is a tax in name only, is vulnerable. Elahi Cotton itself recognised that a tax so designed as to make business impossible or to acquire property under the guise of taxation would offend the right to trade and to hold property.

Article 227 requires that existing laws be brought into conformity with the Injunctions of Islam. A fiction that contradicts a clear Qur’anic or Sunnah rule — for example, on legitimacy, inheritance, or evidence — cannot stand merely because it is convenient.

The Federal Legislative List still matters. Entry 47 authorises taxes on income. Entry 52 authorises taxes on the capital value of assets (excluding immovable property, historically a provincial subject, subject to later adjustments). A fiction that treats ownership of land as “income” must survive the pith-and-substance test. If the charge is in truth a tax on capital value, calling it deemed income does not enlarge legislative competence.

When Fiction Becomes Farce

The useful test, developed in recent tax writing and consistent with Elahi Cotton and PSO, is the nexus test.

A valid fiction has:

1. Nexus with the person — a legally identifiable subject of the charge or right.
2. Nexus with time — a defined period or event.
3. Nexus with the subject-matter — income, supply, property, status, or proceeding that the statute actually addresses.
4. Nexus with purpose — a coherent object (anti-avoidance, administrative certainty, protection of third parties, continuity of process) that the text can support.

Remove the nexus and the device is no longer a legal fiction. It is a label. Law may deem; it may not invent. It may classify; it may not counterfeit.

That is why courts refuse to extend a deeming clause from computation into constitutional competence, from one tax year into another, from the company onto the shareholder without lifting the veil, or from a missing person’s seven-year silence into a fixed date of death without evidence of circumstances.

Conclusion

Legal fiction is not a judicial trick and not a legislative blank cheque. In Pakistani law it is a disciplined instrument. Corporate personality allows commerce. Deeming provisions allow a tax system to reach suppression and avoidance. Presumptions of death allow families and estates to move. Constructive notice protects reliance on public records. Automatic conversion of a banking suit into execution protects the fruits of a decree.

The price of that usefulness is confinement. Elahi Cotton Mills Ltd. v. Federation of Pakistan, PLD 1997 SC 582, remains the shortest and safest statement of the rule: legal fictions are limited for a definite purpose; they cannot be extended beyond the purpose for which they are created.

An advocate drafting a reference, a CPLA, or an opinion on a deeming provision should therefore ask four questions in that order. What fact does the statute ask the court to treat as true? For what purpose? Between which persons? And what corollary did the legislature actually enact? Everything outside those answers is argument, not fiction.