Islamabad High Court (IHC) has barred the Federal Board of Revenue (FBR) from recovering income tax from a leading bank based on the calculation made by the tax department for prescribing the tax rate based on the assets-to-deposit ratio.
In this regard, the IHC has issued an order in favor of Askari Bank Limited.
The IHC has also issued notices to the FBR/ Attorney General for Pakistan to file the report and para-wise comments within two weeks.
The petitioner bank has impugned Rule 6C(6A) of the 7th Schedule of the Income Tax Ordinance, 2001.
The order issued by the IHC revealed that till the next date of hearing no coercive action will be taken against the bank based on any calculation made by the tax department by applying rule 6C(6A) of the 7th Schedule of the Income Tax Ordinance to its income.
The counsel for the petitioner (bank) stated that the Tax Department is seeking to tax the income derived by the petitioner, which is a banking company, from investments made in Federal Government securities by prescribing the tax rate on the basis of gross advances to deposit ratio. In doing so, the respondents (FBR/tax department) are seeking to regulate the banking business of the petitioner, which falls beyond the scope of a Money Bill and is consequently ultra vires Article 73 of the Constitution.
He further states that the manner in which the charge has been imposed is retroactive, as investments made in Federal Government Securities did not mature during the financial year and the tax chargeable in relation to such investments could not have been enhanced and made applicable retrospectively. He also states that the impugned rule is in conflict with Section 46B(3) of the State Bank of Pakistan Act, 1956, as the said statute vests in the State Bank the authority to issue directions to banks regulated by the State Bank of Pakistan and prohibits other public authorities from issuing any directions, which are in conflict with the policies declared by the State Bank.
The petitioner undertakes banking business pursuant to the prudential regulations issued by the State Bank of Pakistan and no other authority is vested with jurisdiction to issue directions to regulate the banking business of the petitioner, which is what has been done through the impugned rule, petitioner added.
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Double standard.
Not a healthy development. Why not, because it is Askari Bank? As a tax payer, I am not happy about this all.
No bank has the right to impose tax or take tax directly from account of its citizens. Whether it’s on profit or anything it’s the civilians duty to file it’s taxes. I live in canada and no bank takes any wht(withholding tax).