LAHORE – The Lahore High Court on Friday suspended the tax recovery notices for agriculture income issued to the taxpayers for the period prior to the promulgation of Finance Act 2013.
Justice Ayesha A Malik issued the stay order on the petition moved by a taxpayer Imran Ali Bhatti challenging the tax recovery notice for the year of 2012 by the district collector of the Punjab government.
The court also directed the district collector, Federal Board of Revenue, Punjab and Federal government to submit their replies.
Muhammad Ajmal Khan advocate, the petitioner counsel, argued that district collector of the provincial government has no powers to collect the agriculture income tax for the past years after the promulgation of Finance Act, 2013. He pointed out that the government has inserted a section 3B (the charging section) in the Punjab Agricultural Income Tax Act 1997 giving the effect retrospectively which is a violation of the law already laid down in the tax laws and statutes. He pointed out that all the tax laws say that any amendment in the law will have prospective effect, but not retrospective effect. However, the government is issuing notices for the tax recovery to the taxpayers while relaying and misinterpreting a supreme court judgment (2019 SCMR 446).
Citing that judgment, Mr Khan pointed out that, the apex court has shifted the responsibility for collection of the tax to the provincial government. However, the issue of calculation of agricultural income tax has not been decided as well as no mechanism for determination of liability is provided, in absence of calculation mechanism 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 Finance Act, 2013 however the recovery is sought in respect of the period prior to the promulgation of Section, such retrospective application is illegal, unlawful and unconstitutional. Even otherwise the recovery cannot be enforced for the tax year 2012 as it has already hit by limitation and has become barred by time, he added.
Mr Khan went to argue that agricultural income is exempt under the provisions of Income Tax Ordinance, 2001 and the column in Income Tax Return only permits taxpayers to declare total income of agricultural without computation of net income as there is no column to declare or to claim deduction/expenses which are incurred in order to earn agricultural income, hence 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 added that under the provision of the Punjab Agricultural Act, 1997 there is a complete mechanism for assessing the agricultural income expenditure on the account of labour for tilling the land, sowing the seeds, ploughing / planting, expenditure incurred on purchase of seeds and fertilizers, harvesting expenditure, marketing expenditure, ushr, abiyana, electricity bills, rent of land, markup on agricultural loan whereas no such provision is provided under Section 3B of Act.
After hearing the preliminary arguments, the court suspended that tax recovery notices and directed the district collector, Federal Board of Revenue and Federal government to submit their replies till June 26. The court also directed to fix all connected matter, if any, on the next date of hearing.
