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ISLAMABAD: The Islamabad High Court (IHC) rejecting the applications of the Federal Board of Revenue (FBR) ruled that it has jurisdiction to hear the pleas of the taxpayers, who are not assessed to tax in Islamabad.

A single-judge bench of Justice Sardar Ejaz Ishaq Khan on Friday after hearing the arguments of the petitioner and the respondents’ counsels, announced a short order verbally, allowing the petitions. He maintained that IHC has jurisdiction to hear the petitions of the taxpayers who are not assessed to tax in Islamabad. He said the detailed judgment would be passed subsequently.

Salman Akram Raja, Farogh Naseem, Khalid Jawed Khan, Abid Shaban, Amayad Tola, Rashid Anwar, Haider Wahid, Asad Tola represented the taxpayers, while Asma Hamid appeared on behalf of the FBR.

FBR’s restructuring report to be submitted to IHC on 28th

A number of taxpayers challenged the constitutional vires of the amended Section 4C for the tax year 2023, before the IHC. Even those taxpayers that were not assessed to tax in Islamabad approached the IHC in its writ jurisdiction under article 199 of the Constitution as the FBR and seat of Federal Government are in Islamabad.

The IHC had granted interim relief wherein it directed that the maximum rate of super tax that can be charged is four per cent (the tax rate applicable before the amendment made vide Finance Act 2023) and that no demand inconsistent with the judgment titled Fauji Fertilizer Company Limited and another vs Federation of Pakistan and others (W.P. 4027 of 2022 earlier passed by IHC shall be raised by the FBR. As such, one of the key principles, emerging from the interim order of the IHC in the Fauji Fertilizer judgment was that income falling under the Final Tax Regime shall not be taken into account for the purposes of computing super tax under section 4C of the Income Tax Ordinance 2001.

The FBR through applications had requested the IHC to dismiss the petitions of the respondents, who were not assessed to tax in Islamabad on the grounds that since they were assessed to tax in different provinces, therefore, IHC lacked territorial jurisdiction to entertain the said writ petitions.

The IHC after hearing the arguments of both sides at length on this issue dismissed the FBR applications vide short order dated 08/12/2023. It decided; “to proceed to hear the case on merits on 26.01.2024.”

The FBR then approached the Supreme Court. A three-member bench of the apex court on February 27 had set aside the interim orders passed by the IHC, and directed it to pass a speaking order on the question of the maintainability of the respondents’ petitions within one month.

The FBR had challenged two interim orders of the IHC passed on the petitions of the respondents (taxpayers) challenging the vires of Section 4C of the Income Tax Ordinance, 2001 for the tax year 2023.

It was the contention of the FBR counsel that respondent taxpayers operate and reside in Sindh and Punjab, the said respondents had earlier challenged the vires of Section 4C for tax year 2022 in their respective provinces before the Sindh High Court (SHC) and the Lahore High Court (LHC). It was submitted before the apex court that the SHC vide its judgment dated 13.01.2023 upheld the vires of the said section and same view was taken by the LHC, however, in the case of LHC, ICAs are pending before a Division Bench of the said court.

In this background for the tax year 2023, the said respondents who operate and reside in Sindh and Punjab decided to approach the Islamabad High Court once again challenging the vires of Section 4C of the Ordinance which has already been turned down by their respective Provincial High Courts.

It was a submission of the FBR counsel that the respondents approached the IHC because the IHC had already decided in favour of the taxpayers by reading down Section 4C of the Ordinance in its judgment passed in the case titled Fauji Fertilizer Company Limited and another v. The Federation of Pakistan and others (W.P. No.4027/2022).

Asma had also argued that since vires of law had been challenged, no interim relief could be granted, in support of this contention, learned counsel placed reliance on Federation of Pakistan v. Aitzaz Ahsan (PLD 1989 S.C. 61).

In pursuance of the Supreme Court directions, the IHC on March 5 as an interim relief had restrained the FBR from any recovery proceedings from the taxpayers and fixed the case for hearing on 14th March 2024.

However, on 14th March advocate Asma Hamid moved an application before IHC, stating that she was busy before the Supreme Court in some other cases and requested for adjournment. She also requested that the cases may be fixed on a date that suits the convenience of the Court (IHC).

Justice Ejaz, who heard the case, accepting her plea fixed the case for 15th March 2024. Asma Hamid on 15th March again through her junior requested for adjournment as she was busy before the Supreme Court. The IHC judge considering the importance of the issue kept aside the case for hearing.

Asma subsequently appeared and argued the case once again in detail and the other side also presented their arguments. The judge after hearing the arguments maintained that IHC has jurisdiction to hear the petitions of the taxpayers, who are not assessed to tax in Islamabad.

Copyright Business Recorder, 2024

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