PAKISTAN (Commonwealth Union)_The Lahore High Court (LHC) has directed the chairman of the Federal Board of Revenue (FBR) and the federal secretary of the Ministry of Law and Justice to appear before it tomorrow (17 Nov) to answer the hardship and assist the Court in understanding the rationale for omitting Section 7 from the Finance Act, 1989, after the 18th Amendment and taxation of immovable property as deemed income, and Entry 47, rather than Entry 50, of the 4th Schedule to the Constitution.
The case was heard by Justice Shahid Jamil Khan, who noted that the Wealth Tax Act of 1963, which drove legislative competence from Entry 50, was repealed earlier, without any apparent logic, where the yardstick for taxation was Annual Letting Value, which had a rational basis, whereas fair market value is speculative. The case was deferred until today (16 Nov) by the LHC’s single-member bench for additional arguments on the topic and the related petitions. During the hearing, Additional Attorney General Mirza Nasar Ahmed adopted Khalid Ishaq’s arguments on behalf of the respondent/FBR.
Without prejudice to the respondents’ claims, he contended that under Section 7E, ignoring the clause for deeming income, the incidence of tax is the value of immovable property, i.e., 5% of the fair market value of capital assets.
He also pointed to Khalid Ishaq’s arguments that competence can be inferred from separate entries and that two different taxes can be levied in the same act. He further argued that, under the interpretation principle that the Court should work hard to salvage legislation, the disputed provision can be interpreted down to align it with the competence available under Entry 50.
He repeated that the actual incidence of taxation is 5% of the fair market value of capital assets, and that Entry 47 does not consider income to be competent. He claimed that competence is available under Entry 50, which permits for capital gains taxation on assets, and that term assets include immovable property.
