ISLAMABAD: The taxpayers including exporters would only be allowed tax exemption under Income Tax Ordinance, 2001, if such exemption is specifically provided in the said Ordinance.
Moreover, the Income Tax Ordinance, 2001 is a special law for taxation purposes and it has an overriding effect over the Export Processing Zone Authority Ordinance, 1980, senior tax officials added.
Sources told Business Recorder that the Large Taxpayers Office (LTO), Karachi has submitted its legal comments on the matter of incentives provided to the exporters under the Export Processing Zone Authority Ordinance, 1980 to the Federal Board of Revenue (FBR).
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The FBR has received the comments of the LTO Karachi to plead its case before the court against a taxpayer claiming exemption under the Export Processing Zone Authority Ordinance, 1980.
The legal comments of the LTO Karachi have serious implications over the exporters operating under the Export Processing Zone Authority Ordinance, 1980.
The FBR has been informed that the overriding effect of the Income Tax Ordinance, 2001 has been provided in Section 3 of Income Tax Ordinance, 2001. A taxpayer can only be allowed tax exemption under Income Tax Ordinance, 2001 (Ordinance) if such exemption is provided in the Ordinance.
It is a settled principle of interpretation of statute that if there is a conflict between two special laws, the law which has been promulgated later in time shall have overriding effect over the other law, the LTO Karachi said.
According to the LTO Karachi, the said exemptions were allowed in the Income Tax Ordinance, 1979 (the Repealed Ordinance) for the persons operating in Export Processing Zones to enhance the exports of the country. The said provisions were time and again amended and the exemptions provided were amended as deemed expedient by the legislature.
However, the agreements between the parties cannot override the legislature.
The agreement between EPZA and the businesses cannot be termed as sovereign guarantee.
No concession through the impugned amendment has been taken away.
Instead, the exporters are now incentivised by way of treating the tax on exports as minimum tax instead of final tax.
The Export Processing Zone Authority Rules, 1981 have been notified by the federal government through subordinate legislation.
However, section 154 and 147(6C) of the Income Tax Ordinance, 2001 have been enacted by federal Legislature and it is settled proposition of law that in case of any conflict. The Act passed by the legislature shall prevail over any subordinate legislation.
The LTO Karachi added that the incentives available in the EPZA Ordinance, 1980, have only the power to provide incentives as are under their statutory competence, by no stretch of imagination can this incentive be applied to the taxation, since the lax laws are special laws dealing only with taxation.
The concept of advance tax was introduced in section 154 in Original Finance Bill 2024.
However, its proper placement was also made by inserting section 147(6C) through Amended Finance bill; the same has duly been passed by the legislature.
Every bill passed by the legislature is considered to be discussed and deliberated by the parliament. No such aspersions can be cast upon the legislation and working of the parliament of Pakistan, the LTO Karachi observed.
The amendment made through Finance Act, 2024 in section 147(6C) of the Income Tax Ordinance 2001 is well within legal competence of legislation and has not taken away any fundamental rights as alleged by petitioners.
The provisions of the EPZA Ordinance, 1980 have not empowered any authority to settle tax treatment through formulation of rules to restrict tax legislation.
The overriding effect of the Income Tax Ordinance 2001 has been provided in Section 3 of the Income Tax Ordinance, 2001.
A taxpayer can only be allowed tax exemption under the Income Tax Ordinance 2001 if such exemption is provided in the Ordinance, the LTO Karachi added.
Copyright Business Recorder, 2024