‘Defenders’ take ‘deemed income’ as tax on income, not on property

LAHORE: The “defenders” of the concept of ‘deemed income’ take it as a tax on income and not on property, stressing that this concept is not alien to the Income Tax law. It is not a tax on the very property in question but on the deemed income from the said property, they added.

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 5 percent of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided in the law.

According to them, tax from rental income is already in field and is being paid by the tax payers and various other taxes are also leviable on properties under various provisions of the Ordinance.

They have also dispelled the impression regarding discrimination within section 7E of the Ordinance as the exceptions which have been provided are in respect of different classes of persons which are otherwise enjoying various exemptions and exceptions under the Ordinance.

They have further maintained that any hardship or inability to pay a tax could not be a ground to declare a certain provision as ultra views, especially when it is not in violation of the fundamental rights as provided in the Constitution.

According to them, no property could be acquired forcibly, as it is neither confiscatory nor discriminatory. Instead, the tax has been levied to fulfil various obligations and functions of the state which requires immediate taxation measures. It is prerogative of the legislature to choose a class of persons on whom the tax may be imposed or not, they added.

They said under the concept of deemed income therefore is no requirement of a particular transaction to generate income. A tax on income is not by itself a tax on property, as income can be deemed without any transaction. The concept of presumptive income or presumptive tax is provided in the Ordinance and it is not necessary that there must be an actual income for taxation purposes, they stressed.

They have further pointed out that re-characterization of income is permissible under the Ordinance and tax on such income has been levied reasonably vis-a-vis values of the properties.

The proponents of the concept have particularly pointed out that various taxpayers had availed the benefits of Foreign Assets Declaration Act, 2018 followed by an Ordinance of 2019, therefore, when benefits of the said legislation on property was availed then subsequently the competence to levy tax on income on the same property cannot be denied.

Copyright Business Recorder, 2024