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ISLAMABAD: The Supreme Court has decided that from March 26th, it would hear cases related to Section 7E introduced through the Finance Act, 2022, on a day-to-day basis.

Islamabad High Court (IHC) declares Section 7E of the income tax ordinance ultra vires of the constitution.

A three-judge bench, headed by Justice Syed Mansoor Ali Shah and comprising Justice Jamal Khan Mandokhail and Justice Athar Minallah, on Monday, heard 192 petitions related to Section 7E of the Income Tax Ordinance, 2001.

Abid Hussain Shaban and other lawyers appeared before the bench.

Section 7E: Sindh High Court grants stay for TY2023 subject to 50% payment

The bench noted that since the judgements in Section 7E cases of Lahore High Court (LHC), Islamabad High Court (IHC), and Balochistan High Court (BHC) had not come; therefore, deferred the petitions.

The LHC single bench declared Section 7E,“ultra vires”, while the division bench in the intra-court appeal (ICA) allowing the appeals declared it, “intra vires”. The Sindh High Court (SHC) has also declared it, “intra vires”. However, both the Peshawar High Court (PHC) and the IHC declared the Section, “ultra vires”. The cases related to the section are pending before the BHC, but it has granted a stay.

In the SC, the cases are also pending and it has granted 50 per cent stay.

A division bench of the LHC on February 15 had allowed the appeals. But, in the same vein, it said that the respective constitutional petitions brought by these appellants will be dismissed for the reasons enumerated in the judgment.

It allowed the appeals (Appendix-I attached with this judgment), and set aside the impugned judgment. The appeals at Appendix-II (attached with this judgment) have been filed by the appellants (petitioners before the Single Bench) on the ground that the relief granted by the learned single judge is materially opposed to what was sought in the constitutional petitions.

However, a division bench the PHC on February 14 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.

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; 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).

Copyright Business Recorder, 2024

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Aamir Feb 20, 2024 10:00am
Controversial taxes like these result in flight of capital into real assets in Dubai and abroad.
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