2016 PLP 2171 (PTD)

AYESHA A. MALIK, J.

The Petitioner seeks a clarification with respect to the charging of advance tax under Section 235 of the Income Tax Ordinance, 2001 ("Ordinance") on the electricity bill.

2. Learned counsel for the Petitioner submits that Respondent FBR issued a clarification on 08.06.2013 in terms of which income tax under Section 235 of the Ordinance was to be charged and collected on the electricity bill which includes the amount of sales tax paid on the said bill. Learned counsel states that this clarification issued by the FBR is contrary to Section 235 of the Ordinance and the respondents have served a notice to the Petitioner dated 08.05.2014 seeking an explanation with respect to the collection of advance tax under Section 235 of the Ordinance. Learned counsel argued that advance income tax cannot be charged on the sales tax that has been paid. Reliance has been placed upon the case titled Deputy Collector of Customs, Railway Station, Lahore v. Messrs Abdul Ghaffar Abdul Rehman and others (2005 PTD 194). He further stated that Section 235 of the Ordinance itself is clear that tax must be collected on the electricity consumed and not on the total electricity bill, which include sales tax, income tax and in some cases further tax and extra tax.

3. Report and parawise comments have been filed on behalf of the Respondents. It was argued on behalf of the Respondents that on the basis of a clarification issued by the FBR dated 08.06.2013 advance tax under Section 235 of the Ordinance has to be collected on the gross amount of the electricity bill, which will include sales tax. It has also been argued that since a show cause notice has been impugned, the instant petition is not maintainable. The case of the Respondents is that the Petitioner is the withholding agent of the Respondents, who is required to collect tax in terms of the clarification dated 08.06.2013 issued by the FBR.

4. The basic issue is with respect to the collection of advance tax under Section 235 of the Ordinance. Section 235 of the Ordinance provides that advance tax should be collected at the rate specified in Part IV of the First Schedule on the amount of electricity bill of a commercial or industrial consumer. The question before the Court is what amount should be considered in the electricity bill for the purposes of advance tax. The Respondents have required the Petitioner to include all amounts in the electricity bill including the amount paid as sales tax, income tax and in some cases further tax and extra tax. Subsection (2) of Section 235 of the Ordinance provides that a person preparing electricity consumption bill shall charge advance tax under subsection (1) in the manner electricity consumption charges are charged. This means that advance tax is to be charged on the electricity consumed and not on the total billed amount. Therefore, a bare reading of Section 235 makes it clear that advance tax shall be paid on the electricity consumed and not on the total billed amounts which will include sales tax, income tax and in some cases further tax and extra tax. Furthermore, advance income tax cannot be levied on sales tax as has been held in 1994 PTD 848 and 2005 PTD 194 as well as PTR No.137/2006.

5. In view of the aforesaid, this petition is accepted and the impugned clarification dated 8.6.2013 issued by FBR is set aside. ZC/F-4/L Petition allowed.