Balochistan High Court issued notice to FBR regarding Section 7E.
Balochistan High Court issued notice to FBR regarding Section 7E. Balochistan High Court (BHC) issued a notice to the Federal Board of Revenue on TuesdayFBR) regarding the constitutionality of Section 7E of the Income Tax Ordinance, 2001. Section 7E of the Income Tax Ordinance Relates to tax on deemed income.
The Balochistan High Court has also restrained the FBR and the Chief Commissioner Inland Revenue Quetta from taking any action against the petitioners under Section 7E of the Income Tax Ordinance 2001.
The court has also sought the interpretation of Section 7E of the Income Tax Ordinance 2001 from the Chief Commissioner Inland Revenue, Quetta.
Who filled the petition?
The petition has been filed by the Quetta Chamber of Commerce and Industry (QCCI) regarding the constitutionality of Section 7E of the Income Tax Ordinance, 2001. which was inserted by the Finance Act, 2022.
Further, the petitioners have challenged Section 7E inserted in the Income Tax Ordinance, 2001. which is against the provisions of Article 142 of the Constitution and which, according to the petitioners, involves double taxation.
What is Section 7E of Income Tax Ordinance 2001?
According to the FBR, a new section 7E was introduced by the Finance Act, 2022. Under which for the tax year 2022 and thereafter, a resident person shall be deemed to have income equal to five percent of the fair market value of capital assets situated in Pakistan which would be chargeable. Paying tax at the rate of 20 per cent under Division VIIIC of Part I of the First Schedule to the Ordinance.
The following exceptions are provided to which this section shall not apply:
(i) a capital asset owned by a resident person;
(ii) self-owned business premises from which business is carried on by persons included in the list of active taxpayers at any time during the year;
(iii) Self-owned agricultural land where agricultural activity is carried on by the person but excluding farmhouse and attached land. Farmhouse is defined in this section;
(iv) Allocated capital asset –
(a) a martyr or sponsor of a martyr belonging to the armed forces of Pakistan;
(b) a person or a dependent of a person who dies in the service of the Armed Forces of Pakistan or the Federal or Provincial Government;
(c) a person injured in war while in the service of the Armed Forces of Pakistan or the Federal or Provincial Government;
(d) An ex-serviceman and serving personnel of the Armed Forces or ex-employees or serving personnel of the Federal and Provincial Governments. who are actual allottees of capital assets as certified by the allotting authority;
(v) any property from which the income is taxable under the Ordinance and the tax has been imposed;
(vi) Capital asset in the first year of acquisition on which tax has been paid under section 236K.
(vii) Where the fair market value of capital assets as a whole excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed twenty five million rupees.
(viii) Capital assets held by the Provincial Government or Local Government.
(ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction. Provided that such persons are registered with the Directorate General of Designated Non-Financial Businesses and Professions.
