Electricity consumption

Petitioners / tax payers were running their industrial units in erstwhile Federally Administered Tribal Area and after 25th Constitutional Amendment, sought exemption from income tax

Authorities contended that petitioners' manufacturing units were involved in manufacturing of products which reached settled area, therefore, petitioners could not claim blanket exemption from levy of income tax unless their taxable activities relating to sale of products was verified by the authorities

Validity

This was a valid objection prior to promulgation of 25th Constitutional Amendment, as at the relevant time, persons, who were domiciled in erstwhile FATA, were enjoying immunity from income tax as the same was never extended to erstwhile FATA

Under new dispensation, exemption provided under S. 109A of Income Tax Ordinance, 2001 through Finance Act, 2019, was specific to the person, who was permanent resident of erstwhile FATA and was generating his income from business which was situated at erstwhile FATA or taxable activities which he carried there

High Court declared that demand of authorities of income tax/advance income under Income Tax Ordinance, 2001, from petitioners whose registered offices were situated in erstwhile FATA/PATA through their monthly electricity bills was illegal and without lawful authority

High Court further declared that demand of authorities for extra tax and further tax under Sales Tax Act, 1990, from petitioners who had established their manufacturing units at erstwhile FATA/PATA, and were registered with the authorities under S. 14 of Sales Tax Act, 1990 and had active tax profiles on relevant portal of FBR was illegal and without lawful authority

High Court directed electricity distribution companies PESCO/TESCO not to demand income tax under Income Tax Ordinance, 2001 and extra tax/further tax under Sales Tax Act, 1990, from petitioners who had fulfilled said two conditions

Constitutional petition was allowed accordingly.

Federal Board of Revenue issued clarification that advance tax had to be collected on the gross amount of electricity bill

Contention of petitioner was that advance tax must be collected on the electricity consumed and not on the total electricity bill

Validity

Advance tax was to be charged on the electricity consumed and not on the total billed amount which would include sales tax, income tax and in some cases further tax and extra tax

Advance income tax could not be levied on sales tax

Impugned clarification of Federal Board of Revenue was set aside

Constitutional petition was allowed in circumstances.

Question before the High Court was whether advance income tax was to be deducted on the electricity consumption charges only or on the gross amount of the electricity bill

Held, that distinction existed between "electricity consumption bill" and the "gross electricity bill" and advance income tax was required to be charged on basis of electricity consumption only in the manner in which electricity consumption was charged, and therefore the gross electricity bill, which included Excise Duty, Income Tax, and General Sales Tax was not relevant for the purposes of charging advance tax at the rates specified in Part IV of the First Schedule of the Income Tax Ordinance, 2001

No ambiguity or conflict existed between Ss.235(1) & 235(2) of the Income Tax Ordinance, 2001, which were to be read in harmony and not in isolation.