Karachi, August 25, 2023 – The Federal Board of Revenue (FBR) has taken legal action against Faysal Bank Limited concerning a tax dispute related to the taxability of gains on a bargain purchase.
This move comes as a part of ongoing efforts by tax authorities to resolve issues pertaining to tax liabilities.
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In a recently released half-yearly financial report covering the period ending June 30, 2023, Faysal Bank disclosed a dispute between the tax department of the FBR and the bank regarding the tax treatment of gains arising from a bargain purchase associated with the acquisition of ex-RBS Pakistan.
The additional tax liability in question is valued at Rs. 1,154.701 million, a figure that has remained unchanged since December 31, 2022. The Commissioner Inland Revenue (Appeals) [(CIR(A)] had initially ruled in favor of the bank, effectively dismissing this additional tax liability. However, the income tax department subsequently lodged an appeal with the Appellate Tribunal Inland Revenue (ATIR) challenging the CIR(A)’s decision.
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During the current period, the ATIR reviewed the matter and upheld the earlier decision made by the CIR(A), stating that the gain on bargain purchase should not be subject to taxation.
In response to this, the tax department has taken the matter to the Honorable High Court of Sindh, initiating legal proceedings against Faysal Bank. Nevertheless, the bank’s management remains confident that the outcome will be in favor of the bank. Consequently, no provision for potential financial repercussions has been recorded in the unconsolidated financial statements of the bank regarding this matter.
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The legal battle underscores the complexities of tax issues in the banking sector and highlights the significance of legal procedures in resolving such disputes. Both parties will await the decision of the court as they continue to advocate their respective positions on this matter.
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