Tax Recovery

2024 PTD 1097 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 111, 120 & 122

Convention between the Government of the French Republic and the Government of the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, Art.4

Tax recovery

Double taxation

Non-resident

Bilateral treaty

Appellant was aggrieved of show-cause notice issued by authorities for recovery of tax

Plea raised by appellant was that he was a tax non-resident and was assessed in France

Validity

Provisions of Income Tax Ordinance, 2001, could not be invoked as Bilateral Tax Treaty between Pakistan and France had overriding effect

Appellant was filing his tax returns in France and in the light of treaty between Pakistan and France no action could be perpetuated in Pakistan by authorities

Appellant was absolved from taxation in Pakistan and no provision of Income Tax Ordinance, 2001, was attracted as he did not have any plausible source of income that could be deemed to have been accrued to him

Provision of S. 111 of Income Tax Ordinance, 2001, was applicable to residents of Pakistan only and could not be extended to appellant who was resident abroad and did not have taxable in Pakistan

Provision of S. 111 of Income Tax Ordinance, 2001, could be invoked on non-residents whose habitual abode was in France and had more personal and economic interest in France than Pakistan and had not earned Pakistan source income

Authorities failed to discharge onus for reinforcement of S. 111 of Income Tax Ordinance, 2001

Appellate Tribunal Inland Revenue set aside the orders passed by two fora below, as appellant was not taxable in Pakistan and S. 111 of Income Tax Ordinance, 2001, was not attracted to non-resident in presence of treaty between Pakistan and France upon applicable tie-breaker text

Appeal was allowed, in circumstances.

2022 PTD 1690 ISLAMABAD Judicial Precedent

Ss.4(1)(s) & 140Tax recoveryCoercive measuresMechanismRedressal of grievance

Federal Board of Revenue is endowed with duty to facilitate taxpayers and establish mechanism to address their grievances and complaints

Under fiscal laws, including Income Tax Ordinance 2001, officials are conferred vast powers to adopt coercive measures to affect recovery of tax liability under S.140 of Income Tax Ordinance, 2001, from person holding money on behalf of taxpayer

Such powers should never be abused to meet collection targets by Commissioner or by adopting abhorrent procedures such as not serving notice under S.140 of Income Tax Ordinance, 2001, in a timely fashion on taxpayer and or third party from whom collection is to be made in order to pre-empt opportunity for such persons to verify or challenge such demand to seek redressal against it

In case such power is abused by tax officials or wrongly exercised, leading to recovery from a person from whom collection could not be made under S.140 of Income Tax Ordinance, 2001, there must be provided a grievance redressal mechanism in discharge of Federal Board of Revenue's functions under S.4(1)(s) of Income Tax Ordinance 2001.