Author: Mrs. Anjum Shahnawaz

ISLAMABAD: Pakistan Tax Bar Association (PTBA) has raised objections to amendments proposed in format as 16 million returns have already been filed for tax year 2022.

In a letter sent to the chairman of the Federal Board of Revenue (FBR) on Monday October 10, 2022, the PTBA submitted objections and suggestions on the proposed amendments to be made in the Second Schedule, in part-II-V, in the heading “Tax chargeable / payments” in the Income Tax Rules, 2002 as published vide S.R.O. 1829(1)/2022 dated October 03, 2022.

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The PTBA said that amendment in the format of return had been proposed vide notification under S.R.O. 1829(1)/2022 dated October 03, 2022. Whereas, as per FBR declaration, returns above 16 million for the tax year 2022 have already been received. What would be the status of the said returns? Taxpayer in future may face undue litigations.

It is submitted that tax is charged on the net value of the capital assets whereas, no row has been provided to declare the amount of liabilities as well as net value of capital assets.

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PTBA said that the federation has no power to levy tax on agricultural income whether real or deemed as it is the domain of the provinces. “Every province of the country is charging Income Tax on the holding exceeding 12.5 Acres. The charge u/s 7E amounts to double tax,” it added

It is further submitted that self-owned agricultural land where agricultural activity is carried out by a person has been excluded under clause (C) of sub section (2) of section 7E. No column has been provided to claim exemption in this respect.

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It is not clear that whether a landlord who has leased out his agricultural property, is obliged to file the return, particularly, when he does not have any other source of income, except the agricultural income.

For the sake of brevity, the relevant section 41 of the income Tax Ordinance, 2001 is reproduced hereunder;

“S. 41. Agricultural Income.-

(1) Agricultural income derived by a person shall be exempt from tax under this Ordinance.

(2) In this section, “agricultural income” means, –

(a) any rent or revenue derived by a person from land which is situated in Pakistan and is used for agricultural purposes;

(b) any income derived by a person from land situated in Pakistan from –

(i) agriculture;

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by such person to render the produce raised or received by the person fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by such person, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); or

(c) any income derived by a person from –

(i) any building owned and occupied by the receiver of the rent or revenue of any land described in clause (a) or (b);

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(ii) any building occupied by the cultivator, or the receiver of rent-in-kind, of any land in respect of which, or the produce of which, any operation specified in subclauses (ii) or (iii) of clause (b) is carried on, but only where the building is on, or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue, or the cultivator, or the receiver of the rent-in-kind by reason of the person’s connection with the land, requires as a dwelling-house, a store-house, or other out-building.

The PTBA said that one Capital Asset owned by the resident person has been excluded from deeming income under clause (a) of sub section (2) of section 7E. But to claim such exemption no column has been provided in the proposed draft.

Furthermore, self-owned business premises (which may be more than one) from where the business is carried out by the person is excluded under clause (b) of sub section (2) of section 7E. No column to claim the said exemptions has been provided in the draft.

Likewise, to claim exemption under sub clauses (i), (ii), (iii) and (iv) of clause (d) of sub section (2) of section 7E, no column has been provided in the draft.

No space to claim exemptions under clauses (e), (f), (g), (h), (i) of sub section (2) of section 7E has been provided in the draft.

In order to claim the basic exemption of Rs. 25,000,000/- from the aggregate value of the Capital assets to be assessed u/s 7E, the space column may be provided.

It is suggested that the auto shifting data from wealth statement regarding immovable asset including its costs be made possible, to avoid extra labour of the tax consultants who are already facing a lot of burden and as well have a short time in filing tax returns.