ISLAMABAD: The Balochistan High Court has declared that agricultural income taxation falls under provincial jurisdiction and any consequences of delayed payments should be governed by provincial laws.
The Acting Chief Justice of the Balochistan High Court has ruled in favor of the taxpayer, Khalid Hussain, in a legal dispute regarding the taxability of agricultural income under Section 111 and the exemption provided by Section 41 of the Income Tax Ordinance, 2001.
On the behalf of taxpayer, the case was pleaded by Riffat Naeem Jan Advocate High Court, Karachi.
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The case centered on whether the Federal Board of Revenue (FBR) had the authority to tax agricultural income, given its classification as a provincial matter. The Commissioner
Inland Revenue argued that Hussain improperly claimed agricultural income as exempt and failed to pay taxes. Conversely, the taxpayer asserted that agricultural income falls under provincial jurisdiction, especially following the 18th amendment, and should not be taxed by FBR.
A key contention involved the validity of notices and assessments. The Commissioner maintained that the notice issued under Section 122(9) sufficed and negated the need for a separate notice under Section 111 after amendments introduced in the 2021 Finance Act.
Meanwhile, the taxpayer insisted that FBR cannot override the exemption granted under Section 41.
The case originated when the Deputy Commissioner Inland Revenue issued an assessment order, creating a tax demand of Rs. 10,154,812. This order was upheld by the Commissioner Appeal IR but later overturned by the Appellate Tribunal Inland Revenue (ATIR), which ruled in favor of Hussain, emphasizing that agricultural income cannot be taxed by redefining Section The Commissioner then sought judicial review through a high court reference.
The Balochistan High Court dismissed the Commissioner’s appeal, citing precedents from the Supreme Court (CP 2447-L/2022) and Lahore High Court (ITR No. 61061 of 2022).
The ruling reaffirmed that agricultural income taxation falls under provincial jurisdiction, and any consequences of delayed payments should be governed by provincial laws.
This decision strengthens the legal position that FBR cannot tax agricultural income and reinforces the provincial government’s exclusive authority over such taxation matters.
Copyright Business Recorder, 2025
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