AIRLINK 74.00 Decreased By ▼ -0.25 (-0.34%)
BOP 5.14 Increased By ▲ 0.09 (1.78%)
CNERGY 4.55 Increased By ▲ 0.13 (2.94%)
DFML 37.15 Increased By ▲ 1.31 (3.66%)
DGKC 89.90 Increased By ▲ 1.90 (2.16%)
FCCL 22.40 Increased By ▲ 0.20 (0.9%)
FFBL 33.03 Increased By ▲ 0.31 (0.95%)
FFL 9.75 Decreased By ▼ -0.04 (-0.41%)
GGL 10.75 Decreased By ▼ -0.05 (-0.46%)
HBL 115.50 Decreased By ▼ -0.40 (-0.35%)
HUBC 137.10 Increased By ▲ 1.26 (0.93%)
HUMNL 9.95 Increased By ▲ 0.11 (1.12%)
KEL 4.60 Decreased By ▼ -0.01 (-0.22%)
KOSM 4.83 Increased By ▲ 0.17 (3.65%)
MLCF 39.75 Decreased By ▼ -0.13 (-0.33%)
OGDC 138.20 Increased By ▲ 0.30 (0.22%)
PAEL 27.00 Increased By ▲ 0.57 (2.16%)
PIAA 24.24 Decreased By ▼ -2.04 (-7.76%)
PIBTL 6.74 Decreased By ▼ -0.02 (-0.3%)
PPL 123.62 Increased By ▲ 0.72 (0.59%)
PRL 27.40 Increased By ▲ 0.71 (2.66%)
PTC 13.90 Decreased By ▼ -0.10 (-0.71%)
SEARL 61.75 Increased By ▲ 3.05 (5.2%)
SNGP 70.15 Decreased By ▼ -0.25 (-0.36%)
SSGC 10.52 Increased By ▲ 0.16 (1.54%)
TELE 8.57 Increased By ▲ 0.01 (0.12%)
TPLP 11.10 Decreased By ▼ -0.28 (-2.46%)
TRG 64.02 Decreased By ▼ -0.21 (-0.33%)
UNITY 26.76 Increased By ▲ 0.71 (2.73%)
WTL 1.38 No Change ▼ 0.00 (0%)
BR100 7,874 Increased By 36.2 (0.46%)
BR30 25,596 Increased By 136 (0.53%)
KSE100 75,342 Increased By 411.7 (0.55%)
KSE30 24,214 Increased By 68.6 (0.28%)

ISLAMABAD: The Peshawar High Court (PHC) has declared that Section 7E of the Income Tax Ordinance, 2001, which imposes taxes on immoveable property through a deeming clause does not qualify the test of Capital Value of Assets, therefore, is beyond the legislative competence of the Parliament; hence, the same is hereby struck down.

A division bench of the PHC decided that on the petitions of Latif Hakeem and others who had challenged the impugned legislation on three grounds; first, legislative incompetence of Parliament; second, the said levy is discriminatory and third; being confiscatory.

The judgment, authored by Justice Syed Arshad Ali, held; “In view of the clear bar as provided under Entry No 50 of the Fourth Schedule to the Constitution, the Parliament has no jurisdiction to impose income tax on immoveable property;

Taxation of immovable property

“The Parliament has the jurisdiction to tax Capital Value of Assets in terms of Entry No 50 of the Fourth Schedule to the Constitution;

“Capital Value of Assets means an inseparable complete whole of the property (both moveable and immoveable);

“The impugned legislation (section 7E introduced through Finance Act, 2022 to the Ordinance), which imposes taxes on immoveable property through a deeming clause does not qualify the test of Capital Value of Assets, therefore, is beyond the legislative competence of the Parliament; hence, the same is hereby struck down,” said the PHC judgment.

The Court noted that the parliamentary debate clearly mentions that the object was to tax the unrealized income of the immoveable property through a deeming clause which shall be determined on the basis of its fair market value.

It said that the term “fair market value” is defined in Section 68 of the Ordinance.

The object of legislation behind the insertion of section 7E was to tax the unrealized income of the immoveable property possessed by a resident person through a deeming clause which is not permissible in view of the law laid down by the apex court in the case of Messrs Elahi Cotton Mills and the judgment of the Indian Supreme Court in the case of Harbhajan Singh Dhillon.

Similarly, the impugned levy does not qualify the test to tax the capital value of asset as the asset means the entire wealth of a person and targeting the immovable property alone from the asset would, thus, be obviously beyond the competence of Parliament.

The judgment said that the Sindh High Court (SHC), with profound respect, though has elaborately dealt with each and every aspect of the case and has upheld the impugned legislation keeping in view the law laid down by the apex court in Elahi Cotton Mills, and Entry No 47.

“However, we do not agree with the said reasoning on the grounds stated above.”

Similarly, the Lahore High Court (LHC) has though held that the unrealized income of the immoveable property cannot be taxed through the impugned legislation in terms of Entry No 47, however, it has passed a curative judgment reading down the impugned legislation.

“We concur with the finding of the LHC, but we do not deem it appropriate to read down the impugned legislation in the manner because it is for the Parliament to re-enact the law as suggested by the Lahore High Court.”

Latif Hakeem, the petitioner in the instant petition and the other petitioners in the connected petitions are aggrieved of the insertion of Section 7E through the Finance Act, 2022 to the Income Tax Ordinance, 2001, which provides that for the tax year, 2022 and onward, a resident person shall be treated to have derived as income chargeable to tax, an amount equal to five per cent of the fair market value of the capital assets situated in Pakistan, chargeable to tax @ 20 per cent under Division-VIII C of Part-I of the First Schedule to the Ordinance.

Copyright Business Recorder, 2024

Comments

Comments are closed.

Nadia Feb 15, 2024 10:40am
Now many investors who shifted their capital to Dubai will bring back capital to KPK PUnjab and Baluchistan but Sindh Hight court declared it this Miftah Law 2022 as legal
thumb_up Recommended (0)
Builder Feb 15, 2024 12:49pm
Then what's the solution to recover rental income tax from those who conceal the income or not filers at all?
thumb_up Recommended (0)
Aamir Feb 16, 2024 01:56pm
This was a totally unfair tax and was taxing wealth instead of income. Well done PHC
thumb_up Recommended (0)