Khudayar Mohla –
Supreme Court overruled decision of Lahore High Court that Nishat Dairy private limited is exempted from paying advance tax under provisions of Income Tax Ordinance 2001 over establishing new industrial undertaking, saying amount of advance tax collected under Section 148 of the Ordinance from importer of goods must be refunded within 30 days after their claims.
A division bench of the Lahore High Court (LHC) upheld decision of a single bench Justice Manssor Ali Shah in a petition of Nishat Dairy (Pvt) Limited during 2013 that Tax Exemption and Tax Credit are two sides of the same coin saying act of tax officials will amount to ex-facie discrimination which will offend constitutional provision on equality of citizen in case they insist for advance tax from newly established undertaking.
Appearing on behalf of the FBR in the matter before a three-member bench of Justice Umar Ata Bandial, Justice Munib Akhtar and Justice Afridi, the counsel Riaz Hussain Azam said there is difference between tax credit and tax exemption saying under Section 65D of the Income Tax Ordinance newly established industrial undertaking including a corporate dairy farm shall be given tax credit facility on the taxable income arising from such industrial undertaking for a period of five years.
Riaz Hussain Azam argued that Section 148 of the Ordinance empowers Collector of Customs to collect advance tax from every importer of goods on the value of goods at specified rate, adding that under Section 159 of the Ordinance, Commissioner of Inland Revenue has discretion to exempt newly established industrial undertaking form paying advance tax.
Substantiating his arguments, Azam apprised the bench that no provision of the Ordinance imposed bar on collecting advance tax from a newly established industrial undertaking.
Announcing a detailed verdict of 16 pages in response to appeal of Federal Board of Revenue (FBR) against LHC verdict in the matter other day, the bench said that failure in refunding the advance tax amount in the stipulated time shall lead to suitable action against the concerned Member FBR and Commissioner Inland Revenue. Justice Munib Akhtar authored the verdict saying tax credit and tax exemption are not two sides of the same coin but different in applicability.
In operative part of the judgment, the bench issued a number of directives to the concerned authorties saying, “In respect of the tax years already concluded, if the taxpayer has filed its return and, as on the date of this judgment, no amendment (or other similar) proceedings have been launched or are pending in respect of such return, then the amounts collected under Section 148 must be refunded in full within 30 days of the date hereof and an appropriate report filed with the Office of this Court”.
The bench said in its directions that in respect of the present (and future, if applicable) tax year(s) (or any past tax year in respect of which a return has not yet been filed), if no amendment (or other similar) proceedings are launched within 120 days of the filing of the relevant return, then the amounts collected under Section 148 must be likewise refunded within 30 days thereof.
“A failure to abide by these directions may result in suitable action being taken against the concerned Member FBR and Commissioner Inland Revenue – In view of the foregoing discussion, the verdict in this Court must be in favor of the Department and against the taxpayers”, the bench concluded.http://www.supremecourt.gov.pk/web/user_files/File/C.A._1262_2018.pdf
