Tax credit for investment

2025 PTD 1448 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S. 65B as inserted vide Finance Act, 2010 and subsequently amended through Finance Act, 2012Tax credit for investmentWords "extension" and "expansion", addition ofRetrospective effectScopeBeneficial legislationScope

Plea of the taxpayer being that subsequent amendment in S. 65B of the Income Tax Ordinance, 2001 ('the Ordinance 2001') made through Finance Act 2012 whereby words "extension" and "expansion" were added and where tax credit was made allowable (against tax payable including on account of minimum tax and final taxes) carry retrospective effect as a beneficial legislation

Whether beneficial, remedial or curative legislation has a retrospective effect?

Validity

Retroactive legislation , as a general rule, is rightly looked upon with disfavor because of its tendency to be unjust and oppressive; consequently, in the absence of any indication in the statute that the legislature intended for it to operate retroactively, it must not be given retrospective effect

However, where an Act is procedural, declaratory or explanatory or where a statute is passed for the purpose of supplying an obvious omission in a former statute, it is to operate retrospectively, obviously because it does not affect vested rights

The legal position that emerges is that generally beneficial legislation is to be given liberal interpretation, however, for the said legislation to have a retrospective effect, the beneficial legislation must carry curative or remedial content

Therefore, such legislation must either clarify an ambiguity or an omission in the existing law and must, therefore, be explanatory or clarificatory in nature

While beneficial legislation is to be liberally interpreted, in order to advance the beneficent object of the statute, it in no manner means that "beneficial legislation" or "liberal interpretation" necessarily includes or interchangeably means retrospective application of the statute

Unless the legislation is remedial, curative, explanatory or clarificatory, it cannot be interpreted retrospectively merely on the ground that the legislation is generically beneficial in nature

An amendment becomes a part of the original statute and must be read together

While an amendment, being considered as the last expression of the will of the legislature, generally prevails, however, such effect is prospective and would not be given any retroactive construction, overriding effect on prior rights, unless the verbiage of the provision makes such construction necessary

In the present case, there was no ambiguity or anomaly existing in the law, as it stood prior to Finance Act, 2012

Section 65B of the Ordinance 2001 was/ is the section allowing tax credit subject to certain conditions

Amendment in the said S. (65B) vide Finance Act, 2012 simply introduced additions of words "extension" and "expansion" and allowed tax credit against Minimum Tax and payment of tax in Final Tax Regime in S. 65B and that by no means remedy or cure any ambiguity or omission in the law

There is nothing in the language of S. 65B (as amended by Finance Act 2012) to suggest that the amendment is retrospective

The amendment merely enlarges the scope of tax credit to be allowed in case of "extension" and "expansion" (in addition to balancing, modernization and replacement of plot and machinery already installed in an industrial undertaking)

Further, provision under S. 65B provides tax credit to be allowed for the first time on tax payable on account of minimum tax and final taxes payable under the law, which was not in existence in previous tax years; the same being in the nature of a substantive amendment would be prospective, in the absence of any indication to the contrary

Hence, plea of taxpayer to label the given amendments as remedial or curative legislation is misconceived

Thus, the benefit of amendments in S. 65B made through Finance Act, 2012 was not available to the taxpayer / appellant for tax made through Finance Act, 2012 having no retrospective application

Commissioner Inland Revenue (Appeals) rightly held the amendments in S. 65B through Finance Act, 2012 as of prospective having no retrospectivity

Appeal , filed by Taxpayer/ Company, was dismissed.

2014 PTD 397 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 65B & 2(29C)Tax credit for investmentIndustrial undertakingTaxpayer, a Gas distribution company

Not covered under the definition of "industrial undertaking" and not entitled to take tax credit under S.65B of the Income Tax Ordinance, 2001

Finding by the Assessing Officer and confirmed by the First Appellate Authority were in consonance with provisions of the Income Tax Ordinance, 2001

Appeal on that score was rejected by the Appellate Tribunal.