LAHORE: The Lahore High Court suspended notices issued to taxpayers for the recovery of agriculture levies prior to the introduction of the Finance Act 2013.
Justice Ayesha A Malik issued the stay order on a petition moved by a taxpayer named Imran Ali Bhatti. He challenged a tax recovery notice issued by the district collector of the Punjab government for the year 2012. The court also directed the district collector, the Federal Board of Revenue and the federal government to submit their replies.
Advocate Muhammad Ajmal Khan, the petitioner’s counsel, argued that the district collector of the provincial government has no authority to collect agriculture income tax after the promulgation of the Finance Act 2013.
He pointed out that the government had inserted the Section 3B (the charging section) in the Punjab Agricultural Income Tax Act 1997, making it effective retrospectively. The counsel argued that this is a violation of the rules already laid down in tax laws.Khan said that according to tax laws, any amendment would have a prospective, but not retrospective effect. However, the government is issuing notices for recovery to the taxpayers while misinterpreting the Supreme Court Judgment (2019 SCMR 446).
Citing that judgment, Khan said that the apex court shifted the responsibility of tax collection to the provincial government. However, the calculation of agricultural income tax has not been decided and no mechanism for determination of liability is provided. He added that in absence of a calculation mechanism, the recovery of tax would be in violation of Article 4 and 45 of the Constitution of Pakistan.
He said that the Section 3B of Punjab Agricultural Act 1997 was promulgated through the Finance Act 2013. “However, the recovery is sought in respect of the period prior to the promulgation of the section.
Such a retrospective application is illegal, unlawful and unconstitutional. Otherwise, the recovery cannot be enforced for the tax year 2012 as it has already hit by limitation and has become barred by time.”
Khan argued that agricultural income is exempted under the provision of Income Tax Ordinance 2001. He added the column in Income Tax Return only permits taxpayers to declare total income from agricultural without computation of net income.
“There is no column to declare or claim the deduction and expenses incurred in order to earn agricultural income. Therefore, the provisions of Section 3B are against the basic scheme of taxation laws where tax is levied on net income and not on gross income.”
He said that under the provision of the Punjab Agricultural Act 1997, there is a complete mechanism to assess agricultural income expenditure on the account of labour for tilling the land, sowing the seeds, ploughing, planting, expenditure incurred on purchase of seeds and fertilisers, harvesting expenditure, marketing expenditure, ushr, abiyana, electricity bills, rent of land and markup on agricultural loans. However, there was no provision provided under Section 3B of the act.
After hearing the preliminary arguments, the court suspended tax recovery notices and directed the district collector, the Federal Board of Revenue and the Federal government to submit their replies by June 26.
source
