FBR clarifies exemption from advance tax on properties

The Federal Board of Revenue (FBR) has dispelled an impression created through Income Tax (Amendment) Ordinance 2016 that exemption from collection of advance tax under section 236C is available to any/every first sale of immovable property irrespective of laid down qualification/conditions, which was not the intent of the legislature. The FBR has issued circular number 19 of 2016 here on Monday.
The FBR has clarified that the exemption from collection of advance tax under section 236C of the Income Tax Ordinance shall be restricted to a singular transaction represented by the first sale of immovable property by a seller, who is the dependent of a Shaheed (martyr) belonging to the Pakistan Armed Forces, a person who dies while in the service of the Pakistan Armed Forces or the service of the federal or provincial government in respect of immovable property acquired from or allotted by the federal government, provincial government or any authority duly certified by the official allotment authority being in recognition of or for services rendered by the Shaheed or the person who dies in service.
According to the FBR, Income Tax (Amendment) Ordinance 2016 was promulgated on 31st July, 2016 whereby a new sub-section (4) was added in section 236C of the Ordinance relating collection of Advance Tax on sale or transfer of immovable property. The aforementioned sub-section is reproduced hereunder for ease of reference:
"(4) Sub-section (1) shall not apply to:-
(a) A seller, if the seller is dependent of:
(i) a Shaheed belonging to Pakistan Armed Forces; or (ii) a person who dies in the service of the Pakistan Armed Force or the Federal and Provincial Government; and
(b) to the first safe of immovable property which has been acquired or allotted as an original allottee, duly certified by the official allotment authority.
The FBR said that some ambiguity/confusion prevailed with regard to the interpretation of the aforementioned sub-section, whereby, a plain reading of clause (b) of sub-section (4) created an impression that exemption from the applicability of section 236C of the Ordinance is available to any/every first sate of immovable property irrespective of qualification/ conditions laid down in clause (a) of sub-section (4) of section: 236C of the Ordinance which was not the intent of the legislature.
Therefore, cognisance of the same was taken and in order to remedy the situation sub-section (4) of section 236C was omitted and a proviso was added in Sub-section (1) of section 236C of the Income Tax Ordinance, 2001 through the Tax laws (Amendment) Ordinance, 2016 dated 31st August, 2016 which is reproduced hereunder:
"Provided that this sub-section shall not apply to a seller, being the dependent of a Shaheed belonging to the Pakistan Armed Forces or a person who dies while in the service of the Pakistan armed forces or the service of federal or provincial government, in respect of first sale of immovable properly acquired from or allotted by the federal government or provincial government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.
The FBR said that in light of the aforementioned proviso added in sub-section (1) of section 236C of the Income Tax Ordinance, 2001, it is manifest that exemption from collection of advance tax under section 236C of the Ordinance shall be restricted to a singular transaction represented by the first sale of immovable property by a seller, who is the dependent of a Shaheed belonging to the Pakistan armed forces, a person who dies while in the service of the Pakistan armed forces or the service of the federal or provincial government in respect of immovable property acquired from or allotted by the federal government, provincial government or any authority duly certified by the official allotment authority being in recognition of or for services rendered by the Shaheed or the person who dies in service, the FBR added.