FBR Clarifies New Late Filers Tax After LHC Order

The Federal Board of Revenue (FBR) cannot impose enhanced rates of withholding tax retrospectively on the buying and selling of immovable properties by declaring “return filers” as “late filers”, who had timely filed returns during extended deadlines during the last three years. This important legal clarification has been issued by the Corporate Tax Office Lahore on the directions of the Lahore High Court. The order has been issued for payment of normal tax under section 236K of the Income Tax Ordinance, 2001. The taxpayer is an association of persons (AOP), who appears on the Active Taxpayer List and timely filed returns during the last three years or filed returns during extended periods of the last three years. According to the clarification, the plain reading of proviso specifies that provisions of section 100BA of the Ordinance, 2001 are not applicable where a person has filed a return by the due date specified in section 118 or by the due date as extended under section 119 or section 214A for last three years. In this respect, relevant records produced by the taxpayer and records available with this office regarding the e-filing of returns for the last three years have been checked which depicts the following position:- The data shows that the taxpayer has filed its returns of income for the last three years i.e. 2020 to 2022 within the extended date in terms of section 119 of the Ordinance, 2001. Therefore, by virtue of the proviso of sub-clause (b) of clause IA of section 100BA of The Ordinance, 2001, the application regarding the late filing rate for the purpose of section 236K of the Ordinance, 2001 is not applicable in the taxpayer’s case up till 30 September 2024. As per ground III, the taxpayer contended that the amendment in the Tenth schedule through Finance Act 2014 is effective from 1st July 2024 is not tenable as the spirit of the amendment via section 100BA of the Ordinance, 2001, having retrospective effect being procedural law, therefore, the said plea is not acceptable. Keeping in view the above-narrated facts, although the taxpayer has late filed its return of income for the tax year 2023, nonetheless, the application regarding enhanced withholding tax rate for the purpose of section 236K of the Ordinance, 2001 concerning clause (IA) of section 100AB of the Ordinance, 2001 is not applicable in the taxpayer’s case by advantage of proviso sub-clause (b) of clause IA of section 100BA of Ordinance, 2001 till 30.09.2024, or filing of return for the tax year 2024 whichever is earlier, FBR added.