Supreme Court endorses legality of Division I of Part I of the First Schedule to the Income Tax Ordinance 2001; SHC judgment struck down

KARACHI: The Supreme Court of Pakistan (SCP) has suspended the judgment of Sindh High Court dated October 25, 2013 and endorsed the legality of Division I of Part I of the First Schedule to the Income Tax Ordinance 2001 and directed the persons who have paid less tax in view of the judgment of the Sindh High Court and filed the returns, may calculate the short paid tax and deposit the same up to November 30, 2013 to avoid default surcharge etc.
The salaried individuals are informed that Supreme Court of Pakistan has suspended the judgment of the Sindh High Court that was announced in C.P NO.D-2342/2013 dated 25.10.2013.
The FBR had filed a CPLA before the Supreme Court against the judgment of the Sindh High Court.
The effect of the suspension of the Sindh High Court judgment referred above is that now the rates of tax as already provided in clause (1A) of Division I of Part I of the First Schedule to the Income Tax Ordinance 2001 shall apply to all salaried individuals.
Sindh High Court in its order declared the table inserted through Finance Act 2012 in Clause (1A) of Division-1 of Part – 1 of the First Schedule to the Income Tax Ordinance, 2001 as illegal and of no legal value.
The court also ordered the authorities to make necessary correction in the table by removing the anomaly and to notify the tax rates of salaried individuals for the tax year 2013.
The Division Bench comprising Justice Aqeel Ahmed Abbasi and Justice Muhammad Junaid Ghaffar in the petition filed by a salary individual Imran Ahmed on October 25, 2013 decided the case.
The brief facts of the case in which SHC had passes the impugned judgment revealed that the petitioner is a salaried individual and pays his taxes regularly on the income earned from salary.
The employer of the petitioner is required to withhold tax from the payment of salary made to the petitioner under Section 149 with clause (1A) of Division – 1 of Part – 1 of the First Schedule to the Income Tax Ordinance, 2001, which in the case of the petitioner was regularly withhold with effect from beginning of the tax year 2013 as prescribed under the Ordinance.
However, by virtue of Finance Act, 2012, the applicable rates of withholding tax on salary were changed and a new table with gradually increased rates was inserted, which has given the cause of grievance to the petitioner, who has filed the petition with the prayer.
Counsel for the petitioner contended that the rates which were prescribed and proposed through Finance Bill 2012 and those which have been enacted through Finance Act 2012 do not co-relate to each other, hence illegal and without lawful authority.
The counsel further argued that the arbitrary change in the rates and exorbitant increase as prescribed in the table, unreasonable, unjust, oppressive and discriminatory and has no legal basis.
The counsel further submitted that the anomaly in the tax rates of the salaried individual for the tax year 2013 was not available in the tax rates for the previous years nor the same exists in the tax rates for the subsequent tax year 2014.

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