SOHAIL SARFRAZ

ISLAMABAD: Appellate Tribunal Inland Revenue (ATIR) Lahore has ruled that any foreign assets declared under the Foreign Assets (Declaration & Repatriation) Act 2018 (FADRA) are immune from imposition of taxes under any law including capital value tax (CVT) imposed subsequently in 2022.

According to a judgement of a division bench of the ATIR Lahore against the Commissioner Inland Revenue, AEOI Zone, the ATIR held that FADRA being the special law prevails over CVT Act, 2022 and consequently, any foreign assets declared under FADRA, on which, tax was paid under that amnesty scheme are immune from imposition of taxes under any law for the time being in force in 2018 or enacted subsequently, which include CVT Act 2022.

The matter under consideration in the instant appeal is confined exclusively to assets declared under FADRA. Assets not falling within purview of FADRA are beyond the scope of this appeal. Consequently, the appeal is adjudicated in favour of the taxpayer, and the demand raised under the impugned order is hereby annulled, the ATIR judgment added.

The main issue involved in the appeal is whether the CVT is payable by a taxpayer under the CVT Act, 2022 in respect of his foreign assets which were duly declared and subjected to the levy under the FADRA.

Details of the case revealed that the appellant is an individual resident taxpayer, who filed his income tax return along with Wealth Statement and Foreign Income and Assets Statement under the-respective provisions of the Income Tax Ordinance, 2001. Notice was issued to the taxpayer requiring an explanation as to why the taxpayer had discharged Capital Value Tax (‘CVT’) liability partially and not on the entire foreign assets as declared in the wealth statement for-the tax—year in appeal, under the CVT Act, 2022. The reply filed by the taxpayer was not accepted and consequently, order was passed under section 8(7) the CVT Act, 2022 creating CVT demand of Rs.37,381,018. Feeling aggrieved by the said treatment, the taxpayer preferred appeal before the learned CIR (Appeals), which was rejected. Hence, the appellant preferred the instant appeal before the ATIR.

The ATIR is of the view that the judgments of both Lahore and Sindh High Courts did not deal with the issue relating to the supremacy of FADRA over CVT Act, 2022 nor any reference whatsoever could be found to the provisions of Sections 3 and 8 of the FADRA as the matter before consideration of both the Courts principally related to the Constitutional validity of CVT Act, 2022 and the observations of the Courts in relation to FADRA in their judgments were thus only in the specific context of the questions raised before them. It is reiterated that in order to apply any principle laid down in a Higher Court’s judgment, it is essential to consider the questions framed by the Court, submissions made by the parties and the decision in respect thereto. Unless the judgment is read on a holistic basis by correlating all the above factors, one cannot ascertain the principle or ratio decided of such judgment, which is the only binding force under the jurisprudence relating to the law of precedents.

The department’s reliance on the observations made in Lahore High Court’s judgment is, thus, misplaced. Both the judgments were confined to the issues relating to the constitutional validity/ vires of the CVT law particularly in the context of legislative competence of Federal Government/ Parliament to impose tax Inter alia under Entry 50 of the Federal Legislative List of the Constitution in the post 18th amendment scenario.

The question relating to supremacy of FADRA over CVT Act, 2022 particularly in the context of sections 3 and 8 of FADRA was not the subject matter of these judgments. Even if the same would have been raised before the High Courts, it is unimaginable to expect a verdict of the High Courts in conflict with settled principles of Apex Court which are binding on all subordinate Courts and appellate forums of this country. The earlier decisions of this Tribunal, as correctly pointed out by the learned ARs, simply relied on the judgments of the High Courts in which this matter vis-à-vis supremacy of FADRA over CVT, 2022 was never deliberated upon.

Keeping in view the above discussion, the appeal is adjudicated in favour of the taxpayer, and the demand raised under the impugned order is hereby annulled, the ATIR judgement added.