SHC Directs FBR to Withdraw Recovery Notices Issued to SOEs

The Sindh High Court (SHC) has issued strict instructions to the Federal Board of Revenue (FBR) to withdraw all recovery notices issued to the state-owned enterprises (SOEs) for resolution of their tax related disputes through the alternate dispute resolution committees (ADRCs).   SHC has issued a judgement in favor of the Trading Corporation of Pakistan (TCP) Pvt Ltd which would be applicable on all SOEs.   Under the SRO 1377(I)/2024, state-owned enterprises have been bound to approach the alternate dispute resolution committees (ADRCs) of the Federal Board of Revenue (FBR) for resolving their tax disputes, involving any amount of tax liability.   According to the judgement, finally it has been realized by the Inland Revenue Department that certain amendments have been carried out in the Income Tax Ordinance, 2001 as well as other Federal Fiscal Laws; whereby, SOE’s are required to apply to the Board for the constitution of Alternate Dispute Resolution Committee (ADRC) for the resolution of any dispute and are under obligation to withdraw any and all pending litigation.   The FBR has directed the field formations that as per amendments in section 134A(1) of the Income Tax Ordinance, 2001. Section 47A(1) of the Sales Tax Act, 1990 and Section 38(1) of the Federal Excise Act, 2005, it is mandatory for State Owned Enterprises (SOEs) to apply to the Board for the constitution of Alternate Dispute Resolution Committee (ADRC) for the resolution of any dispute. SOES are under obligation to withdraw any and all pending litigation and cases pertaining to the dispute immediately and mention the details thereof in the undertaking referred to in clause (b).   In view of the above stated legal provisions and to avoid any further litigation against the department, the FBR is further directed to withdraw all recovery notices issued to SOEs under the aforementioned tax laws as there is no other legal remedy available to them except applying for constitution of alternative dispute resolution committee (ADRCs), SHC said referring to the FBR’s letter.     SHC order said it has been further directed to withdraw all recovery notices issued to SOEs under the aforementioned tax laws as there is no other legal remedy available to them except applying for constitution of alternative dispute resolution committee (ADRCs).   At the same time SRO 1290(1)/2024 dated 24-8-2024 has also been issued, whereby some draft rules have been framed for enforcement of Section 134A ibid and have been published/ notified for information of all concerned as required under Section 237(3) ibid for calling objections and suggestions. The letter and the SRO are taken on record and the efforts on the part of the concerned officer i.e. Member (IR-Operations) is appreciated. However, it is further directed that all field formations shall abide by the directions of FBR as well as judgment passed by this Court in the case of Civil Aviation Authority (Supra), failing which, as and when an appropriate case is brought before this Court on a similar issue, appropriate proceedings will be initiated against the delinquent official(s) under the relevant Service Laws, including notice(s) under Contempt of Court Ordinance, 2003, SHC said.   Both petitions stand disposed of in the above terms, SHC added.