The Central Board of Revenue (CBR) is facing a legal controversy because of contradictory judgements of the Sindh High Court and the Lahore High Court over the inclusion of custom duty and sales tax in the import value for the purpose of withholding tax under section 50(5)/148 of the Income Tax Ordinance.
In a recent judgement on the case of N.H. Pesticides Group International V/s Income Tax Commissioner, the Sindh High Court has reaffirmed the CBR position that income tax withheld at import stage has to be charged on the import value as defined in ITO 1979 or under section 148 of the IT Ordinance 2001. Legal experts say it means import value has increased by the customs duty and the sales tax.
Earlier, the Lahore High Court, in Ramna Pipe & General Mills case, had ruled exclusion of Sales Tax from value of supply for the purposes of withholding under section (4) of 50 of ITO 1979 (on supplies) based on the concession given by the CBR''s legal adviser.
Relying on the "Ramna" case, this view was also taken in the case of Dy. Collector Customs Railway station Lahore versus Abdul Ghaffar and Abdul Rehman and sales tax was excluded. The Supreme Court also applied "Ramna" ratio in view of the concession made again by the CBR advocate.
Sources told Business Recorder that some tax payers got refund wrongly although the order of the Supreme Court could be taken as judgement in personam, (a judgement not to be quoted as precedent), as provision of law were not discussed.
The sources said that it should be appreciated that law could not be laid down as neither facts of the "Ramna" were applicable nor definition of "import value" was declared ultra vires by any of the courts. The sources said that latest judgement of the Sindh High Court is in the field and the CBR would follow this judgement.
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