Balochistan High Court Issues Notices to FBR Regarding Section 7E
Balochistan High Court Issues Notices to FBR Regarding Section 7E. The Balochistan High Court (BHC), on Tuesday, issued notices to the Federal Board of Revenue (FBR) relating to the constitutionality of Section 7E of the Income Tax Ordinance, 2001. Section 7E of the Income Tax Ordinance relates to the tax on deemed income.
The Balochistan High Court has also stopped the FBR and Chief Commissioner Inland Revenue, Quetta from taking any action against the petitioners on the basis of Section 7E of the Income Tax Ordinance, 2001.
The court has also asked the Chief Commissioner Inland Revenue, Quetta for the interpretation of the Section 7E of the Income Tax Ordinance, 2001.
Who has filled the Petition?
This petition 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 through the Finance Act, of 2022.
Moreover, the petitioners have challenged Section 7E inserted in the Income Tax Ordinance, 2001. Which is being in contrary to the provisions of Article 142 of the Constitution and which according to the petitioners also involves double taxation.
What is Section 7E of Income Tax Ordinance 2001?
According the FBR, a new section 7E introduced through Finance Act, 2022. Whereby for tax year 2022 and onwards, a resident person treated to have derived income equal to five percent of fair market value of the capital assets situated in Pakistan which will be chargeable to tax at the rate of 20 per cent under Division VIIIC of Part I of First Schedule of the Ordinance.
Following exclusions have been provided to which this section will not apply:
(i) One capital asset owned by the resident person;
(ii) Self-owned business premises from where the business carried out by the persons appearing on the active taxpayer’s list at any time during the year;
(iii) Self-owned agriculture land where agriculture activity carried out by the person but excluding farmhouse and annexed land. Farmhouse defined in this section;
(iv) Capital asset allotted to —
(a) A Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;
(b) A person or dependents of a person who dies while in the service of Pakistan armed forces or federal or provincial government;
(c) A war wounded person while in service of Pakistan armed forces or federal or provincial government;
(d) An ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial governments. Who are original allotees of the capital asset as duly certified by the allotment authority;
(v) Any property from which income is chargeable to tax under the Ordinance and tax leviable has been paid;
(vi) Capital asset in the first year of acquisition on which tax under section 236K paid;
(vii) Where fair market value of the capital assets in aggregate excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed rupees twenty-five million;
(viii) Capital assets which owned by a provincial government or local government;
(ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction. Subject to the condition that such persons registered with Directorate General of Designated Non-Financial Businesses and Professions.