ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR), Karachi, has declared that no super tax is payable on income falling under the Final Tax Regime (FTR) of exporters.
The ATIR Division Bench-III Karachi has issued an order in the matter of a textile exporter against Commissioner Inland Revenue, Zone-III, medium Taxpayer Office (MTO) Karachi.
According to the order of the ATIR Karachi, no super tax is payable on income fallen under the FTR. The imputable income added in the computation of income for the purpose of charging tax under section 4C of the Income Tax Ordinance 2001.
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The appellant is a public limited company engaged in the business of export of textile products had filed the return of income for the tax year 2022.
The company claimed to be immune from the provisions of section 4C of the Income Tax Ordinance 2001 as such did not discharged his tax liability under the said provision of law. The tax department, on scrutiny of return of income, observed that non-fulfillment of tax liability under section 4C, which promoted him to issue notice to the exporter. However, the department issued order under section 4C of the Income Tax ordinance.
The taxpayer argued while realizing export proceeds the bank make tax deduction which is treated to full and final discharge of tax liability. The provisions of section4C pertaining to Super Tax have no overriding effect as the Legislature has not used the word “Notwithstanding” in section 4C of the Ordinance. Even otherwise all classes of income mentioned in Section 4C which are final tax under any provisions of law shall be excluded while calculating income under Section 4C of the Ordinance. This issue has already been decided by the Islamabad High Court in the case of M/s Fauji Fertilizer Company Limited reported as 128-TAX-141.
The legal counsels also argued that the provisions of section 4C of the Ordinance were inserted vide Finance Act, 2022 (Tax Year 2023) however the same was made applicable retrospectively for tax year 2022 as well. A charging section could not be retrospective; rights crystallized in the past could not be unhinged, no fairness was apparent from the verbiage of 4C; and it amounted to manifest arbitrariness, hence, dissonant with fundamental rights.
The argument of the counsels for the appellant is regarding the applicability of 4C of the Ordinance in respect of income falling under Final Tax Regime. Crux of the arguments advanced by the learned counsels is that the provision of section 4C of the Ordinance is not applicable in the instant case because of the reason that levy of tax u/s 4C of the Ordinance was computed after computing imputable income.
If the imputable income is deducted for the purpose of calculating tax under the said provision of law then the appellant Total income is less than Rs 150 million which is threshold for attracting the said provision of law. The argument as advanced by the learned counsels carries weightage, and we take inference on this point by the pronouncement of the Islamabad High Court, it added.
Copyright Business Recorder, 2024