ISLAMABAD: The Supreme Court declared that Frontier Constabulary Security Services (Pvt) Limited is not exempted from income tax, as it does not fall in the category under sub-clause (2) (i) of clause (58) of the part-I of the Second Schedule of the Income Tax Ordinance, 2001.
The judgment authored by Justice Shafi Siddiqui stated, “Whatever income is derived by the Frontier Constabulary Security Services (Pvt) Limited is not exempted, whereas, if any of its income is forwarded/ extended to M/s Frontier Constabulary Foundation, that income of the “Foundation” is exempted. So, the entire income as derived by Frontier Constabulary Security Services (Pvt) Limited, being the petitioner here, is liable to tax. With this understanding of law, these petitions are dismissed, and the leave to appeal is declined.”
A three-judge bench, headed by Justice Yahya Afridi and comprising Justice Muhammad Shafi Siddiqui and Justice Mian Gul Hassan Aurangzeb, dismissed the petitions challenging the Peshawar High Court’s judgment dated 16.10.2024. The PHC had denied the exemption to pay tax on the income so derived to the petitioner (Frontier Constabulary Security Services).
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The Court noted that the petitioner is a Private Limited Company and derived income by providing security services, which is its only prime business.
The petitioner had sought exemption from income tax under sub-clause (2)(i) of clause (58) of the part-I of the Second Schedule to the Income Tax Ordinance, 2001, for the tax years 2007, 2008, and 2009.
The petitioner’s stance was that it is wholly owned by Frontier Constabulary Foundation, which itself is enjoying exemption from income, vide Special Education and Social Welfare Division SRO 205 (I)/ 86 dated 24.02.1986. Thus, in consequence thereof and being a subsidiary of the Frontier Constabulary Foundation, the petitioner’s income is also exempted from payment of tax, and at same yardstick should be followed.
It was also argued before the apex court that the petitioner does not fall in the category identified in sub-clause (2) (i) of clause (58) of the part-I of the Second Schedule of the Ordinance.
The judgment noted that the petitioner is an independent legal entity registered under the Company laws and hence cannot derive such benefits as being extended to the Frontier Constabulary Foundation.
The Court also observed that the petitioner’s reliance on the certificate of exemption dated 04-09-2012 is of no benefit to it, because according to that the “income received by the Frontier Constabulary Foundation” from the Projects notified in the certificate are exempted from tax as per sub-clause (2) (i) of Clause (58) of Part-I of the Second Schedule of the Ordinance.
The certificate of exemption dated 04-09-2012 stated, “The income received by M/S Frontier Constabulary Foundation, from the projects – FC Welfare Filling Station Sunehri Masjid Road, Peshawar; FC Trust Plaza (Diljan Plaza) Peshawar Cantt; FC Trust Building, Peshawar Cantt; and FC Shopping Plaza, Thall District Kohat – is exempted from tax as per Clause 58(2) (1) of Part-I of 2nd Schedule to the Income Tax Ordinance, 2001.”
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