AIRLINK 74.64 Decreased By ▼ -0.21 (-0.28%)
BOP 5.01 Increased By ▲ 0.03 (0.6%)
CNERGY 4.51 Increased By ▲ 0.02 (0.45%)
DFML 42.44 Increased By ▲ 2.44 (6.1%)
DGKC 87.02 Increased By ▲ 0.67 (0.78%)
FCCL 21.58 Increased By ▲ 0.22 (1.03%)
FFBL 33.54 Decreased By ▼ -0.31 (-0.92%)
FFL 9.66 Decreased By ▼ -0.06 (-0.62%)
GGL 10.43 Decreased By ▼ -0.02 (-0.19%)
HBL 114.29 Increased By ▲ 1.55 (1.37%)
HUBC 139.94 Increased By ▲ 2.50 (1.82%)
HUMNL 12.25 Increased By ▲ 0.83 (7.27%)
KEL 5.21 Decreased By ▼ -0.07 (-1.33%)
KOSM 4.50 Decreased By ▼ -0.13 (-2.81%)
MLCF 38.09 Increased By ▲ 0.29 (0.77%)
OGDC 139.16 Decreased By ▼ -0.34 (-0.24%)
PAEL 25.87 Increased By ▲ 0.26 (1.02%)
PIAA 22.20 Increased By ▲ 1.52 (7.35%)
PIBTL 6.80 No Change ▼ 0.00 (0%)
PPL 123.58 Increased By ▲ 1.38 (1.13%)
PRL 26.81 Increased By ▲ 0.23 (0.87%)
PTC 14.01 Decreased By ▼ -0.04 (-0.28%)
SEARL 58.53 Decreased By ▼ -0.45 (-0.76%)
SNGP 68.01 Decreased By ▼ -0.94 (-1.36%)
SSGC 10.47 Increased By ▲ 0.17 (1.65%)
TELE 8.39 Increased By ▲ 0.01 (0.12%)
TPLP 11.05 Decreased By ▼ -0.01 (-0.09%)
TRG 63.21 Decreased By ▼ -0.98 (-1.53%)
UNITY 26.59 Increased By ▲ 0.04 (0.15%)
WTL 1.42 Decreased By ▼ -0.03 (-2.07%)
BR100 7,943 Increased By 105.5 (1.35%)
BR30 25,639 Increased By 187.1 (0.73%)
KSE100 75,983 Increased By 868.6 (1.16%)
KSE30 24,445 Increased By 330.8 (1.37%)

The Islamabad High Court (IHC) has declared the Section 7E introduced through the Finance Act, 2022, to be ultra vires the Constitution and declared to be void ab initio.

Under Finance Act, 2022 section 7E was introduced whereby, for tax year 2022 and onwards, every resident person has been treated to have derived as income, an amount equal to five per cent of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided in the law.

The Islamabad High Court’s judgement sheet, available with Business Recorder, stated: “Summing up the reasoning as stated hereinabove, sub-section 2 of the impugned provision is confiscatory in nature and also discriminatory in its effect, and thus constitutes a violation of Article 25 of the Constitution.

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

“It also violates Article 23 of the Constitution and goes beyond the ambit of reasonable restrictions as provided thereunder, hence, is liable to be struck down.

“Moreover, the classes or exemptions provided from payment of the tax does not seem to have any proper basis and has been created at whims of the Legislature which cannot be regarded as reasonable classification or classification based on intelligible differentia, hence violates Article 25 of the Constitution.

Cases related to Section 7E: Hearing on day-to-day basis from March 26th onwards: SC

“Neither the machinery for assuming the fair market value has been provided, nor the recovery mechanism, and on the touchstone of Messrs Elahi Cotton Mills (supra), such deficiencies may form the basis for striking down a statute.

“For the above reasons, the instant petition as well as petitions mentioned in the schedule are allowed and sub-section 2 of the impugned provision i.e. Section 7E of the Ordinance, is declared to be ultra vires the Constitution, hence it is struck down and is declared to be void ab initio.

“Consequently, the notices issued by the department under section 7E ibid are also set aside for being without lawful authority,” added the notice.

Last month, the Peshawar High Court (PHC) declared that Section 7E of the Income Tax Ordinance, 2001, does not qualify the test of Capital Value of Assets and, 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;

The Federal Board of Revenue (FBR) on Wednesday directed field formations of Punjab that the section 7E (tax on deemed income basis) of the Income Tax Ordinance 2001 would now be applicable in cases falling under the jurisdiction of Lahore High Court from Feb 15, 2024.

In this regard, the FBR has decided to issue fresh instructions to its field formations.


200 characters
Ali Abid Syed Mar 03, 2024 12:24pm
Very informative
thumb_up Recommended (0) reply Reply
Bs Mar 03, 2024 07:10pm
One country 4 decisions on a federal law. The ultimate looser is "Awam"
thumb_up Recommended (0) reply Reply
Aamir Mar 04, 2024 11:25am
Such ill thought laws will ruin the economy and result in flight of investments abroad. FBR should get it's act together and tax real incomes. Not imaginary deemed incomes that don't exist.
thumb_up Recommended (0) reply Reply
Sohaib Tahir Apr 05, 2024 04:35am
Stuck due to the confused decisions of the Courts. We people are in trouble due to these decisions.
thumb_up Recommended (0) reply Reply
Abdulkhalique solangi Apr 29, 2024 08:56pm
Wether decision is for entire Pakistan When Form 7E is declared Ultra virus and unconstitutional then what would be the fat of charges already paid to the FBR during tax year 2022-2023.
thumb_up Recommended (0) reply Reply