The Federal Board of Revenue (FBR) cannot impose enhanced rates of withholding tax retrospectively on the buying and selling of immovable properties by declaring “return filers” as “late filers” if they filed returns on time during extended deadlines over the last three years.
This important legal clarification was issued by the Corporate Tax Office Lahore following directions from the Lahore High Court.
The order pertains to the payment of normal tax under section 236K of the Income Tax Ordinance, 2001.
The taxpayer, an association of persons (AOP), appears on the Active Taxpayer List and has filed returns on time over the last three years or during the extended period of the last three years.
According to the clarification, a plain reading of the proviso specifies that the provisions of section 100BA of the Ordinance, 2001, are not applicable where a person has filed a return by the due date specified in section 118 or by the extended due date under section 119 or section 214A for the last three years. In this respect, the relevant record produced by the taxpayer and the record available with this office regarding e-filing of returns for the last three years have been checked, which depict the following position:
The data shows that the taxpayer filed its returns of income for the last three years, i.e., 2020 to 2022, within the extended date in terms of section 119 of the Ordinance, 2001. Therefore, by virtue of the proviso of sub-clause (b) of clause IA of section 100BA of the Ordinance, 2001, the application regarding the late filing rate for the purpose of section 236K of the Ordinance, 2001, is not applicable in the taxpayer’s case until 30.09.2024.
As per ground III, the taxpayer contended that the amendment in the Tenth Schedule through the Finance Act 2014, effective from 1st July 2024, is not tenable as the spirit of the amendment via section 100BA of the Ordinance, 2001, has a retrospective effect being procedural law; therefore, the said plea is not acceptable.
Considering the above facts, although the taxpayer filed its return of income late for the tax year 2023, the application regarding the enhanced withholding tax rate for the purpose of section 236K of the Ordinance, 2001, concerning clause (IA) of section 100AB of the Ordinance, 2001, is not applicable in the taxpayer’s case by virtue of the proviso sub-clause (b) of clause IA of section 100BA of the Ordinance, 2001, until 30.09.2024, or the filing of the return for the tax year 2024, whichever is earlier, the FBR added.
