FBR Directs Field Formations to Start Charging Tax on Immoveable Properties in Punjab

Applying 7E’s rules (tax on deemed income basis) to properties in Punjab has been mandated by the Federal Board of Revenue to field formations.

The tax department has released a partial revision of Instructions of Circular No. 03 of 2023–24, and sources told ProPakistani that 7E, which was previously rendered inoperative for properties in Punjab, has once again been operative.

The Finance Act of 2023 introduced the newly inserted sub-part (2A) of section 236C of the Income Tax Ordinance, 2001, also known as “the Ordinance.” To eliminate any potential implementation challenges, the Board published instructions through Circular No. 03 of 2023-24 on August 15, 2023.

Section 7E is extra vires in terms of Entry 47 of Part-I of the Fourth Schedule to the Pakistani Constitution, according to a ruling made by the Single Bench of the Lahore High Court, Lahore, via W.P. No. 52559 of 2022, dated 06.04.2023. Therefore, under the authority of the Lahore High Court, Lahore, the implementation of the provisions of section 7E of the Ordinance was suspended.

For convenience of reference, the following instructions are taken from Paragraph 02 of Circular No. 03 of 2023–24.
Regarding the ruling in WP no. 52559 of 2022, dated 06-04-2023, it is made clear that the contents of the circular will not be applicable in cases under the purview of the Lahore High Court unless the aforementioned judgment is overturned, stayed, or vacated in an intra-court appeal or by the Pakistan Supreme Court.

In an order dated February 15, 2024, the Lahore High Court in Lahore set aside the earlier decision of the learned Single Bench after the department filed an Intra Court Appeal (ICA) with the court.

The earlier instructions regarding section 7E of the Ordinance’s non-applicability in cases falling under the jurisdiction of the Honorable Lahore High Court, Lahore—which were conveyed through paragraph 02 of the subject circular—are hereby withdrawn with effect from 15.02.2024 in accordance with the Lahore High Court’s decision vide ICA No. 35908 of 2023, titled “The Commissioner Inland Revenue Vs. Muhammad Osman Gul,” dated 15.02.2024.

Since section 7E’s provisions would take effect upon the suspension of the Single Bench judgment, as stated explicitly in paragraph 02 of Circular No. 03 of 2023–24.

In light of the foregoing, it is requested that Punjab’s field formations be notified that the Lahore High Court has overturned the previous ruling of the learned Single Bench via ICA No. 35908 of 2023, dated 15.02.2024, and that Section 7E of the Ordinance’s provisions apply to cases under the LHC’s jurisdiction.

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