Cases falling under LHC jurisdiction: Section 7E of tax law will now be applicable

ISLAMABAD: The Federal Board of Revenue (FBR) Wednesday directed field formations of Punjab that the section 7E (tax on deemed income basis) of the Income Tax Ordinance 2001 would now be applicable in cases falling under the jurisdiction of Lahore High Court from Feb 15, 2024.

In this regard, the FBR has decided to issue fresh instructions to its field formations.

The FBR has partially modified earlier instructions of Circular No. 03 of 2023-24.

Cases related to Section 7E: Hearing on day-to-day basis from March 26th onwards: SC

Therefore, the earlier instructions regarding non-applicability of section 7E of the Income Tax Ordinance in cases falling under the Jurisdiction of Lahore High Court are hereby withdrawn with effect from Feb 15, 2024, FBR new decision added.

According to the FBR’s instructions, FBR directed the field formations of Punjab that the Lahore High Court has set-aside the earlier decision of the learned Single Bench vide ICA No.35908 of 2023 dated 15.02.2024 and provisions of Section 7E of the Ordinance are applicable in cases falling under the Jurisdiction of Lahore High Court.

The FBR stated that the instructions were issued through Board’s Circular No. 03 of 2023-24 dated 15.08.2023 in order to remove any difficulties in the implementation of newly inserted sub-section(21t) of section 236C of the Income Tax Ordinance, 2OO| (“the

Ordinance“) introduced through Finance Act, 2023. The learned Single Bench of the Lahore High Court, Lahore vide W.P. No. 52559 of 2022 dated 06.04.2023, declared the provisions of section 7E ultra vires in terms of Entry 47 of Part-I of the Fourth Schedule to the Constitution of Pakistan. As a result, the operation of the provisions of section 7E of the Ordinance were suspended under the jurisdiction of Lahore High Court, Lahore, FBR said.

Accordingly, instructions were issued through Para 02 of the Circular No. 03 of 2023-24, reproduced for ease of reference as under:

“ …. it is clarified that contents of the Circular will not apply in cases falling in the Jurisdiction of the Lahore High Court with reference to the

Judgement in WP no. 52559 of 2022 dated 06-04-2023 unless the said judgment is reversed, suspended or vacation in an Intra Court Appeal or by the Supreme Court of Pakistan.“

The department filed Intra Court Appeal [CA) before the Lahore High Court, Lahore and the Court has set-aside the earlier decision of the learned Single Bench vide order dated 15.02.2024.

In pursuance of Lahore High Court’s decision vide ICA No. 35908 of 2023 titled “The Commissioner Inland Revenue Vs Muhammad Osman Gul”, dated 15.02.2024, the earlier instructions regarding non-applicability of section 7E of the Ordinance in cases falling under the Jurisdiction of Lahore High Court, Lahore which were conveyed through para 02 of subject Circular are hereby withdrawn with effect from Feb 15, 2024.

Since para 02 of Circular No. 03 of 2023-24 clearly states that upon suspension of the Single Bench judgement, the provisions of section 7E, would be applicable. In view of the above, it is requested that field formations of Punjab may be informed that the Lahore High Court has set-aside the earlier decision of the learned Single Bench vide ICA No.35908 of 2023 dated 15.02.2024 and provisions of Section 7E of the Ordinance are applicable in cases falling under the Jurisdiction of Lahore High Court, Lahore, FBR added.

Copyright Business Recorder, 2024