ISLAMABAD: The Islamabad High Court (IHC) has restrained the government from collecting tax on income of banks. Besides restraining the government, the bench also issued notices to the secretary finance and other respondents directing them to file report and para-wise comments within two weeks.
The bench said that till the next date of hearing, “no coercive action will be taken against the petitioners on the basis of any calculation made by the tax department by applying rule 6C (6A) of the 7th Schedule of the Ordinance to its income.”
A single judge bench of Justice Babar Sattar, on Friday, heard petitions filed by various banks through advocate Salman Akram Raja. The notice was also issued to the attorney general for Pakistan (AGP).
Bank’s income case: FBR restrained from initiating ‘coercive’ action
The petitioners have impugned Rule 6C (6A) of the 7th Schedule of the Income Tax Ordinance, 2001 (Income Tax Ordinance).
During the hearing, the counsel for the petitioners submitted that the Tax Department is seeking to tax the income derived by the petitioners, which are banking companies, from investments made in the federal government securities by prescribing the tax rate on the basis of gross advances to deposit ratio.
He argued that in doing so, the respondents are seeking to regulate the banking business of the petitioners, which falls beyond the scope of a money bill and is consequently, ultra vires the Article 73 of the Constitution.
He further argued that the manner in which the charge has been imposed is retroactive, as investments made in federal government securities did not mature during the financial year and the tax chargeable in relation to such investments could not have been enhanced and made applicable retrospectively.
Copyright Business Recorder, 2024
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