FBR to Only Give Tax Exemptions If Its Per Law

Taxpayers and exporters would only be allowed tax exemption under the Income Tax Ordinance, 2001 if such exemption is specifically provided in the said Ordinance. In this regard, the Large Taxpayers Office (LTO) Karachi has submitted its legal comments on incentives provided to the exporters under the Export Processing Zone Authority Ordinance, 1980 to the Federal Board of Revenue (FBR). 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 for the exporters operating under the Export Processing Zone Authority Ordinance, 1980. Moreover, the Income Tax Ordinance, of 2001 is a special law for taxation purposes and it has an overriding effect over the Export Processing Zone Authority Ordinance, of 1980, senior tax officials added. 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 the Income Tax Ordinance, 2001 (Ordinance) if such exemption is provided in the Ordinance. It is a settled principle of interpretation of the statute that if there is a conflict between two special laws, the law that has been promulgated later shall have an overriding effect over the other law, 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 According to the LTO Karachi, the said exemptions were allowed in the Income Tax Ordinance, 1979 (the Repealed Ordinance) for the persons operating in Export Processing Zones to enhance the exports of the country.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 a sovereign guarantee. No concession through the impugned amendment has been taken away. Instead, the exporters are now incentivized by way of treating the tax on exports as a minimum tax instead of a final tax. The Export Processing Zone Authority Rules, 1981 have been notified by the Federal Government through subordinate legislation. However, sections 154 and 147(6C) of the Income Tax Ordinance. 2001 has been enacted by the Federal Legislature and it is a settled proposition of law in case of any conflict. The act passed by the legislature shall prevail over any subordinate legislation. 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 the imagination can this incentive be applied to taxation, since the lax laws are special laws dealing only with taxation. The concept of advance tax was introduced in section 154 of Original Finance Bill 2024. However, its proper placement was also made by inserting section 147(6C) through the 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, LTO Karachi observed. The amendment made through the Finance Act,2024 in section 147(6C) of the Income Tax Ordinance 2001 is well within the 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, 200. A taxpayer can only be allowed tax exemption under the Income Tax Ordinance 2001 if such exemption is provided in the Ordinance, LTO Karachi added.