Sec 52 of Punjab ST law: No amendment, thus no proceedings against WHT agent: LHC

ISLAMABAD: A division bench of Lahore High Court has held that since no amendment has been made to the Section 52 of the Punjab Sales Tax on Services Act 2012 after promulgation of the Punjab Sales Tax on Services (Withholding) Rules 2015 thus no proceedings can be initiated against the recipient of services in his capacity as a withholding agent.

As per tax expert the relevant facts of the case that an order under section 52 was passed against a recipient of services for not withholding provincial sales tax as per withholding rules. The legal objections regarding lack of jurisdiction were rejected by the assessing officer as well as by the Commissioner Appeal. Similarly, the PRA tribunal also endorsed that existing section 52 covers the situation of no or short withholding. On that reference application was filed by the withholding agent before Lahore High Court for the opinion of the court under section 67A and the court has held that there are two main legal infirmities applicable.

When contacted, Shahid Jami and SukainaTehreem Advocates who are well versed with the issues involved explained that first legal issue considered by the Court was that existing section 52 relates to recovery of tax which has not been levied or short-levied and provides that person liable to pay such amount as service provider shall be served with a notice requiring that service provider to show cause for payment of the amount specified in the notice. Such a notice shall be issued to only the provider of the services and not the recipient of services.

The court observed that Sindh legislature was aware of need for filling in the gap and to include a withholding agent in the category of persons against whom proceeding could be initiated and accordingly through Sindh Finance Act 2016 sub-section (1B) was inserted in section 47 of the Sindh Sales Tax on Service Act 2011.

However, no such amendment has been made in corresponding section 52 of the Punjab Sales Tax on Services Act 2012 thus in our opinion no proceeding can be initiated under section 52 of the Act against the recipient of services in his capacity as withholding agent.

The second legal Issue adjudicated by the LHC is that section 14 is an overriding section and provides a special procedure and tax withholding provisions and the first condition for such procedure is for the PRA Authority to prescribe a special procedure by notification in the official gazette whereas Punjab Sales Tax on Services (withholding) Rules 2015 have been framed under section 76 and do not flow from section 14(2) hence section 14 is inapplicable to the facts of the present case.

Jami observed that now it is imperative for the PRA Tribunal to fallow the LHC precedent while deciding pending appeals until LHC order is reversed by the Supreme Court or the Punjab legislature fills the lacuna through a retrospective amendment which has been pattern in earlier litigation on various other legal issues since 2012.

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