SHC restrains deductions of Advance Income Tax from Trust Funds

KARACHI:-A division bench of High Court of Sindh (SHC) barred deduction of Advance Tax from the Staff Gratuity Fund of Meezan Bank (Pvt) Limited.

The bench hearing a constitution petition filed by the Manager of Meezan Bank Limited Staff Gratuity Fund issued notice to the Deputy Attorney General for Pakistan for 17-9-2015 ordering that “till next date private respondents shall not deduct Advance Tax by virtue of clause 47B, 150,151, 233 and 236 P, Part IV of Second Schedule of Income Tax Ordinance 2001 from the dividend profits on debts and commission on income of the trust”.

The respondents include Director general Withholding Tax, Revenue Division, FBR, FBR House ,Member Legal, FAMCO Associates private Limited, Fauji Fertilizer Bin Qasim Ltd, Pakistan Petroleum Ltd, Hub Power Company Limited, Fauji Fertilizer Company Lahore, THK Associates, Pakistan Oilfields Ltd, Habib Metropolitan Bank Limited, Noble Computer Services Limited, UBL Fund Managers Ltd, UBL, Meezan Investment Managers Ltd, Meezan Bank Limited, The Associates(Pvt) Limited, Corplink (Pvt) Limited, Chief Manager Public Debt Office, State Bank of Pakistan.

The petitioner maintained that petitioner is registered Staff Gratuity Fund Trust, duly approved by Commissioner Inland Revenue Karachi and its income is exempted under clause 57 of Part I, Second Schedule of Income Tax Ordinance 2001 and enjoyed such benefit till May 12, 2015 whereby Director General, WH Tax interpreted clause 47-B, Part IV, II Schedule of IT Ordinance 2001 and ordered that exemption would be available only when exemption certificate is issued by the commissioner concerned.

The petitioner challenged such interpretation and prayed to the court to declare the interpretation/ direction issued by the DG, WH Tax to be illegal, to restrain the respondents and other WH agents, authorized banks from deducting Advance Tax on the basis of illegal interpretation issued by DG , WH Tax , to declare that provision of clause 47-B of Part IV be declared to have an over-ridding effect and to declare that DG WH Tax and Member Legal FBR have no authority to interpret any provision of the Income Tax Ordinance 2001.

The bench after initial hearing noted that a number of petitions on identical question of law are pending and fixed for hearing in the month of October. The court however in view of new petition ordered issuance of notice to the DAG and respondents so as to facilitate hearing of all identical petitions on same date. The DAG was however put on notice for 17-9-2015.

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