Income Tax Application on Deemed Income of Idle Properties is under Threat

The Federal Board of Revenue (FBR), on Monday, failed to explain the legality of “tax on deemed income” imposed on immovable properties through the Finance Act 2022 before the Lahore High Court (LHC).

During the hearing of the case on Monday, LHC expressed serious concern over the incompetence of the FBR officials while explaining Section 7E (tax on deemed income) of the Income Tax Ordinance, 2001, within the context of the Federal Legislative List of the Fourth Schedule of the Constitution.

If the FBR fails to explain its legal stance on the next date of hearing on Sep 21, the Court is likely to strike down Section 7E (tax on deemed income) of the Income Tax Ordinance, 2001.

The order of the LHC, issued on Monday, stated that Afaque Ahmed Qureshi, Member Inland Revenue (Policy), present before the Court, is confronted with Entry 50, Fourth Schedule of the Legislative Lists, to which he has shown his inability to respond. He is further asked that till the decision, in this case, the petitioners and other taxpayers, who are caught under the mischief of Section 7E (tax on deemed income) of the Income Tax Ordinance, 2001, can be accommodated, the answer is in negative.
This Court has tried to understand from the learned counsel for the FBR (Syed Ishfaq Hussain Naqvi) regarding the mechanism of proposing any amendment in taxation laws, to ensure competence for imposing the proposed tax, along with potential implications and hardship for the taxpayers. He after consulting the Member (Policy), present in Court, answered that this aspect is looked into by Secretary Law. It is again asked whether there is any officer in the FBR, who opines on legal aspects and other decision-making and policy matters regarding taxpayers, the answer is again that Secretary Law looks into this matter.
The Court doubts the competence of Member (Policy), holding this post, who undeniably has proposed this provision of law and is taking decisions for the most important department of Pakistan, particularly when Pakistan is facing a financial emergency.
In presence of the level of assistance rendered by Member (Policy), Mirza Nasar Ahmad, Additional Attorney General, is confronted why the judgment in Federation of Pakistan v Aitzaz Ahsan and another (PLD1989 SC61) should not be distinguished and impugned provision be suspended till final decision in the matter. He requested some time to assist the Court.

Courtesy: Pro Pakistani

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