‘Adventure in the nature of trade’: Burden of proof for taxing lies with FBR: ATIR

ISLAMABAD: Appellate Tribunal Inland Revenue (ATIR) has ruled that the burden of proof lies with the Federal Board of Revenue (FBR) to establish/ prove its case to tax buying/ selling immovable properties as “adventure in the nature of trade”.

The “adventure in the nature of trade” is a legal term used that a person is repeatedly doing buying/ selling immovable properties for the purpose of trading, a tax expert said.

“There is no evidence on record to prove that taxpayer is buying/ selling immovable properties regularly and continuously with a motive and intention to earn business income,” the order of the ATIR added.

ATIR rules: ‘Islamabad taxmen conducted proceedings in unprofessional way’

Through a new order, the ATIR ordered that to tax buying/ selling immovable properties as adventure in the nature of trade, Burden of Proof lies on the Federal Board of Revenue to establish/ prove its case. In absence of evidence, the sale of property would give rise only to capital gain.

It is reliably learnt that in a recent landmark judgment, ATIR held if it is alleged that an activity is in the nature of an adventure, there, must be positive material brought on record to prove that the taxpayer intended to indulge in such activity and in absence of evidence, the sale of immovable property would give rise only to capital gain.

When contacted tax lawyer Waheed Shahzad Butt told this correspondence that this landmark order would highlight the real picture of some tax employees directly responsible to cheat the process of law and exploit the fiscal laws solely to fulfil their own secret agenda. PM Shehbaz Sharif has already said that his government would not tolerate any corrupt officers within the tax authority.

ATIR order states: “In case any transaction is to be taxed as adventure in the nature of trade, then Burden of Proof lies on the department to establish by means of bring on record all the material evidences which prove that the transaction of sale of property is in fact adventure in the nature of trade.

The department has failed to establish the additions made U/s 18. There is no evidence on record to prove that taxpayer is buying/selling immovable properties regularly and continuously with a motive and intention to earn business income.

When someone is alleged to earn profits and gain out of any business, then to prove this allegation true, the person levelling the allegation must prove conducting of business by that person. DCIR has failed to prove that the gains earned out of transactions made were actually the gains/profits out of business activity. We feel no hesitation in deleting the addition made u/s 18 without legal support, ATIR ordered.

Copyright Business Recorder, 2024