BHC declares: Agri income levy falls under provincial jurisdiction
ISLAMABAD: The Balochistan High Court has declared that agricultural income taxation falls under provincial jurisdiction and any consequences of delayed payments should be governed by provincial laws.
The Acting Chief Justice of the Balochistan High Court has ruled in favor of the taxpayer, Khalid Hussain, in a legal dispute regarding the taxability of agricultural income under Section 111 and the exemption provided by Section 41 of the Income Tax Ordinance, 2001.
On the behalf of taxpayer, the case was pleaded by Riffat Naeem Jan Advocate High Court, Karachi.
Retrospective application from Jan 1: Agri tax will be levied from July 1
The case centered on whether the Federal Board of Revenue (FBR) had the authority to tax agricultural income, given its classification as a provincial matter. The Commissioner
Inland Revenue argued that Hussain improperly claimed agricultural income as exempt and failed to pay taxes. Conversely, the taxpayer asserted that agricultural income falls under provincial jurisdiction, especially following the 18th amendment, and should not be taxed by FBR.
A key contention involved the validity of notices and assessments. The Commissioner maintained that the notice issued under Section 122(9) sufficed and negated the need for a separate notice under Section 111 after amendments introduced in the 2021 Finance Act.
Meanwhile, the taxpayer insisted that FBR cannot override the exemption granted under Section 41.
The case originated when the Deputy Commissioner Inland Revenue issued an assessment order, creating a tax demand of Rs. 10,154,812. This order was upheld by the Commissioner Appeal IR but later overturned by the Appellate Tribunal Inland Revenue (ATIR), which ruled in favor of Hussain, emphasizing that agricultural income cannot be taxed by redefining Section The Commissioner then sought judicial review through a high court reference.
The Balochistan High Court dismissed the Commissioner's appeal, citing precedents from the Supreme Court (CP 2447-L/2022) and Lahore High Court (ITR No. 61061 of 2022).
The ruling reaffirmed that agricultural income taxation falls under provincial jurisdiction, and any consequences of delayed payments should be governed by provincial laws.
This decision strengthens the legal position that FBR cannot tax agricultural income and reinforces the provincial government's exclusive authority over such taxation matters.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
15 hours ago
- Business Recorder
WHT regime: Finance Bill will introduce major changes
ISLAMABAD: Finance Bill (2025-26) will introduce major changes in withholding tax regime in budget (2025-26) to generate additional revenue. According to sources, the difference of withholding taxes between filers and non-filers would be further widened from next fiscal year. The heavy reliance on withholding taxes would continue in the next fiscal year. The withholding taxes (collected in sales tax mode) constitute over 70 percent of the direct taxes collection. One of the proposals under consideration is to raise tax rate on interest income. Cash withdrawals from banks: FBR proposes raise in WHT for non-filers The Federal Board of Revenue (FBR) has proposed to raise withholding tax on cash withdrawal from the banks by non-filers from 0.6 percent to 1 to 1.2 percent. Another proposal is to impose 1.5 percent withholding tax on the value of imports. The rates of Withholding Tax on immovable properties are expected to be rationalized in the upcoming budget (2025-26) to facilitate buyers and sellers of real estate sector from July 1 2025. Other proposals under consideration included raise in withholding tax on supplies, services and contracts. Copyright Business Recorder, 2025
Business Recorder
15 hours ago
- Business Recorder
Expiry of statutory time limits: ST Department criticised for passing orders
LAHORE: Tax experts have objected to the sales tax department for passing orders after expiry of statutory time limits while treating the tax cases. They are of the view that the departmental proceedings after the expiry become invalid because these time limits are mandatory. They asserted that the specific insertion of time periods through statutory amendments showed a clear legislative intent to make these timelines mandatory. The use of 'shall,' they argued, indicated a mandatory requirement, particularly since no such time limit existed prior to 2000, and its later inclusion was deliberate. The department, on the other hand, believes that the time limits are meant only to ensure speedy proceedings and should not invalidate lawful tax liabilities. Ironically, the department deals with all such time limits as directory, saying that in fiscal laws, especially, such time limits are aimed at efficient and timely tax collection. They contended that the time limits are intended to enforce administrative discipline, not to cancel tax liabilities entirely. According to the departmental sources, the absence of any explicit penalty for missing these deadlines supports their view that the time limits are not mandatory, rather than mandatory. According to the department, the time limits prescribed for passing orders under sections 11(5), 11G, and the former section 36 of the Sales Tax Act are mandatory or merely directory and the use of the term 'shall' in these provisions does not impose a strict legal obligation to adhere to the specified timelines. However, the tax circles are of the considered view that the language of sections 11(5), 11G(2), and section 74 suggests that both uses of 'shall' in the provisions are mandatory, especially when combined with the words 'in no case.' They said that reading the timelines as directory would render critical parts of the statute meaningless. Section 74 does not give FBR unlimited power to extend time. Any extension must be based on objective and reasonable grounds to strike a fair balance between administrative discretion and legal certainty, helping prevent delays, abuse of power, and uncertainty in tax matters. Furthermore, they added that the 2024 amendments retaining the same time structure strongly confirmed Super Asia's interpretation. Copyright Business Recorder, 2025
Business Recorder
2 days ago
- Business Recorder
ST returns filing: PCDMA concerned at FBR's new requirement
KARACHI: The Pakistan Chemical & Dyes Merchants Association (PCDMA) has raised serious concerns about difficulties faced by traders in filing their sales tax returns, following a new requirement introduced by the Federal Board of Revenue (FBR). Through SRO 55(I)/2025, the FBR has made it mandatory for all registered commercial importers, distributors, and wholesalers to declare their stock position in Annexure H1 with every monthly sales tax return. However, PCDMA Chairman Salim Valimuhammad said the lack of clear instructions from the FBR has created unnecessary confusion and hardship. He explained that many traders submitted their March 2025 returns without Annex H1 simply because they didn't understand the process. As a result, they're now unable to declare their opening stock for April, and the delay continues even in June. 'PCDMA has received many complaints from members who are still unable to file their April 2025 returns due to this confusion,' Valimuhammad stated. He added that many traders were forced to go back and forth with the FBR for clarification. Eventually, the FBR allowed revised returns without needing to change Annex A or C or seek commissioner approval—but by then, it was too late for many. To address the issue, PCDMA is urging the FBR to grant traders a 60- to 90-day grace period to submit Annexure H1 after filing their returns. This would be similar to the 120-day window already available to manufacturer-exporters. 'PCDMA believes that such decisions should be made after proper consultation with trade bodies,' Valimuhammad said. He emphasized that timely and clear communication is crucial to ensure compliance and avoid similar problems in the future. PCDMA continues to push for reforms that protect traders' interests and promote smoother tax procedures. The association urges urgent action before more disruptions affect business operations, confidence, and overall revenue collection in the coming months. Copyright Business Recorder, 2025
