LAHORE: A private firm involved in the business of ship breaking has recovered damages against the Income Tax department by proving that the departmental action was in access of jurisdiction and tainted with mala fide, said sources.
The private firm, said the sources, claimed that it had purchased a ship for breaking sank near shore but the income tax authorities restrained it from cutting, scrapping, removing and lifting that scrap from capsized ship, resulting into loss.
Accordingly, the Income Tax department refused to accept that 2100 metric tons remained under water should be considered as a loss in the books of plaintiff. Whilst this dispute with the Income Tax department was going on, the I.T.O. issued a letter to the Customs instructing to stop the company from lifting the scrap from the capsized ship.
The Customs stopped all work including business of cutting and lifting and selling of scrap. This action on the part of the Income Tax department as well as Customs resulted in gradual sinking and collapsing of the ship. The scrap lying at the shore got rusty and deteriorated, they added.
Also, the costly equipment maintained by the ship breaking firm at the beach was lost, destroyed or damaged due to non-use and stoppage by the Income Tax department. The company went from pillar to post requesting officials to allow it to continue with the scrapping and breaking work but the request was turned down. The company having been aggrieved by the said actions of the department served a notice claiming damages for the loss.
It may be noted that the income tax law clearly puts a bar on bringing a tax matter in civil court for anything in good faith done or intended to be done. However, a taxpayer becomes eligible to take the matter to a civil court once it is proven that the department has carried out tax proceedings with bad intentions.
According to tax experts, the doctrine of ultra vires envisages that a tax authority can exercise so much power as is conferred on it by law. An action of the department is intra vires when it falls within the limits of the power conferred on it, but ultra vires if it goes outside the limits.
There is plethora of precedents where the appellate forums have held that when certain actions of Income Tax department are called in question and they are found to be in access of jurisdiction and tainted with mala fide then the bar of section 162 will not be attracted and the recovery suit will become maintainable. As a result, the private firm secured millions of rupees damages against the department.
Copyright Business Recorder, 2023
Comments
Comments are closed for this article.