Income Tax Ordinance 2001: Commissioner does not fall under definition of ‘person’: ATIR Islamabad

ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) Islamabad has ruled that commissioner does not fall under the definition of “person” according to Section 2(42) read with Section 80 of the Income Tax Ordinance 2001.

Thus, the commissioner cannot file appeal before the ATIR according to Section 131 of the Income Tax Ordinance 2001 amended through Finance Amendment Act 2024.

According to the order issued by the ATIR Islamabad, the appeal was filed on May 17, 2024, by the Appellant department under the newly substituted Section 131 of Income Tax Ordinance, 2001 (Ordinance).

Section 122 (2) of ITO: ATIR reconciles apparently conflicting provisions

The appeal challenges the Appellate order dated April 30, 2024, issued by the commissioner Inland Revenue (Appeals-I), LTO, Islamabad, for the Tax Year 2018, based on the grounds outlined in the memorandum of appeal.

The authorized representative raised objections regarding the applicability of Section 131 of the Ordinance, which was amended through the Tax Laws (Amendment) Act, 2024. The amended provision introduced the term “person” as defined under Section 2(42), read with Section 80 of the Ordinance. Furthermore, the term “commissioner” is separately defined in Section 2(13) of the Ordinance.

In response, the departmental representative (DR) argued that the second appeal was filed against the CIR(A)’s impugned order dated April 30, 2024, before the implementation of the amendment. The DR asserted that, at the time of filing the appeal on May 17, 2024, the unamended provision of Section 131(1) was applicable, which allowed either the “taxpayer or commissioner” to file an appeal before the Appellate Tribunal.

The question of whether the term “commissioner,” as defined in Section 2(13) of the Income Tax Ordinance, 2001, falls within the scope of “person” as defined in Section 2(42), read with Section 80 of the Ordinance, thereby entitling the commissioner to file an appeal under the newly substituted Section 131 requires careful analysis of the statutory language and intent.

The ATIR order added that the substituted section 131 appears to restrict the right to appeal to the Appellate Tribunal to “any person” as defined under section 2(42), which does not explicitly include the commissioner.

Therefore, under the new section 131, the Commissioner may not have the right to appeal to the ATIR. In light of the foregoing discussion, the department’s appeal is dismissed as not maintainable under the newly substituted/amended Section 131 of the Ordinance, 2001, the ATIR order added.

The revised Section 131 permits only “any person, other than an SOE,” to file an appeal to the ATIR. It does not explicitly include the commissioner within the scope of “person”.

In contrast, the previous version of Section 131 explicitly allowed both the “taxpayer” and the “commissioner” to appeal to the ATIR.

The removal of the term “commissioner” from the revised provision appears deliberate. Likewise, the newly substituted Section 133 of the Ordinance continues to use the terms “aggrieved person” or “commissioner” in relation to filing a reference application before the High Court.

The exclusion of the term “commissioner” from the substituted section suggests that the legislature intended to limit the appeal rights to persons as defined under Section 2(42). If the commissioner were to retain the right to appeal, the language of Section 131 would likely have mirrored the previous version by expressly including the “commissioner”, the order of the ATIR added.

Copyright Business Recorder, 2024