FBR presents legal viewpoint

RECORDER REPORT

ISLAMABAD: Federal Board of Revenue (FBR), Member Legal Muhammad Aqil Usman on Wednesday submitted legal viewpoint of the Law and Justice Division on the imposition of the capital gain tax (CGT) on immovable property before the Senate Standing Committee on Finance, paving way for the FBR to collect the CGT on sale of property after amendment in entry No. 50 of the Federal Legislative List through the Constitution Eighteenth Amendment Act, 2010.

Aqil Usman having ample experience of interpretation of tax laws explained the Senate Standing Committee on Finance about the legal opinion of the Law and Justice Division. The Law Division has confirmed the interpretation made by FBR Member Legal on the amendment to entry No. 50 of the Federal Legislative List under the Constitution Eighteenth Amendment Act, 2010.

The legal viewpoint of the Law and Justice Division said that the following question has been referred for advice of this Division by the FBR: "Whether after the amendment in item No. 50 of the Federal Legislative List through Eighteenth Amendment (Act, 2010) in the Constitution, the levy of tax on capital gain on the disposal of immovable property has become federal subject and now the Majlis-e-Shoora (Parliament) can legislate for the levy of tax on capital gain on disposal of immovable property?".

Law Division ruled, "After amendment in entry No. 50 of the Federal Legislative List through the Constitution Eighteenth Amendment Act, 2010, the levy of tax on capital gain on the disposal of immovable property has fallen within the domain of the Parliament to legislate on the subject. The query raised is answered accordingly", Law Division added. FBR Member Legal informed the committee that prior to the amendment in item No. 50 of the Federal legislative list of Schedule Four to the Constitution of 1973 through Eighteenth Amendment (Act of 2010) the Majlis-e-Shoora (Parliament) had no power to legislate for the levy of tax on capital gain on disposal of immovable property. Accordingly in section 37 of the Income Tax Ordinance, 2001, which lays down the procedure for taxation of "capital/gain", the expression 'any immovable property' was consciously excluded from the purview of meaning of "capital assets" provided in sub- section (5) of the said section.  Through Eighteenth Amendment in the Constitution of Islamic Republic of Pakistan, 1973, item No.50 of the Federal Legislative List has been amended as under:-

"50 Taxes on the capital value of the assets, not including taxes" [     ] on immovable property.

*The words "on capital gain: omitted ibid."

After this change in the Federal Legislative List, the Board is of the view that now levy of tax on the income under the head capital gain on disposal of immovable property has become federal subject and the Majlis-e-Shoora (Parliament) can legislate for the levy of tax on the income under the head capital gain on disposal of immovable property, FBR Member Legal said.

Keeping in view the above said amendment in the Federal Legislative List there is a proposal for levy of tax on the income under the head capital gain on disposal of immovable property in the budget.