Liquidation of certain appellate fora: Cabinet approves amendments to tax laws

ISLAMABAD: The federal cabinet has approved amendments to tax laws aimed at liquidating some of the appellate fora immediately through legislative interventions and adoption of Alternative Dispute Resolution (ADR), official sources told Business Recorder.

On April 17, 2024, the item was tabled with the permission of the chair/Prime Minister. The Federal Board of Revenue (FBR) stated that the Appellate Tribunal Inland Revenue (ATIR) was the last fact-finding authority in the appellate hierarchy provided in fiscal statutes.

Over the years, and for various reasons, including arbitrary constitution of benches, inadequate number of benches, delay in fixation of cases and disposal of appeals, a substantial amount of revenues, to the tune of Rs. 2 trillion was held up in litigation before the ATIR.

The Cabinet was informed that FBR had been constantly trying to ensure prompt disposal of litigation cases, especially those pending before the ATIR. The Prime Minister and Minister for Law and Justice had taken a serious view of the alarming situation that had been created because of the very large amount of revenue being held up by various appellate fora, especially the ATIR and Commissioner, Inland Revenue (Appeals). Therefore, it was imperative to liquidate some of the appellate fora immediately through legislative interventions.

Tax Law (First Amendment) Bill likely to be approved today

In view of the foregoing, it was proposed that certain provisions of the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 may be amended, as follows, to reduce the appellate fora from four to three and expedite the finalisation of cases:

i-Appellate Tribunal : Appointment of chairman to be tenured (3 years), appointment of members to be through FPSC; case fixation and Bench constitution to be by 3 members; every Bench to have at least one member from IRS (BS-21/20); stay to be granted only after hearing the Commissioner; maximum stay of 90 days to be granted; stay order to vacate if hearing schedule not adhered to by the taxpayer; fresh appeals to be decided in 90 days (pending appeals in 180 days); and cases transferred from Commissioner (Appeals) to be decided in 180 days.

ii-Alternative Dispute Resolution (ADR) Mechanism: ADR committee to be provided immunity from suit, prosecution or other legal proceedings; Tribunal to inform the taxpayer regarding the ADR on first hearing; SOEs to compulsorily resolve dispute through ADR; threshold for ADR disputes to be reduced from Rs.100 million to Rs. 50 million; and SOEs also to be provided immunity from suit, prosecution and other legal proceedings in relation to a tax dispute resolved under ADR.

iii- High Court: Time for filing reference to be reduced to 30 days (existing 90 days); special Benches to be constituted for hearing of reference applications; special Benches to decide reference within 6 months; High Courts to establish Case Management System; no tax to be recovered by Commissioner for 30 days after Tribunal’s decision; High Court to grant stay of recovery on deposit of 30 percent of Appellate Tribunal’s confirmed tax demand with the government; and reference by the Commissioner to be filed when authorised in writing by Chief Commissioner.

To give effect to such actions FBR proposed draft Tax Laws (Amendment) Bill, 2024, duly vetted by the Law Division, and considered by the Federal Cabinet.

FBR stated that under rule 16(1)(a) of the Rules of the Business, 1973, proposals of legislation including money bills were required to be brought before the Cabinet.

The FBR referred to the need for an exemption from the condition of submission of the case, in the first instance, to the Cabinet Committee for Disposal of Legislative Cases (CCLC).

In response, it was clarified that the presence of the CCLC or any other Cabinet Committee did not in any manner limit the mandate of the Cabinet to directly consider cases that fell in its purview that the Rules of Business, 1973 did not impose any such condition either and that an exemption was, therefore, not required.

After detailed discussion, the Cabinet approved the proposed “amendments in tax laws through tax laws (amendment) Bill, 2024”. The Cabinet further authorized the Ministry of Law and Justice to remove typographical errors and inconsistencies, if any, in the draft (amendment) Bill.

Copyright Business Recorder, 2024