Court to resume hearing on petitions challenging tax collection on bank income
The Islamabad High Court (IHC) will resume hearings on Tuesday on multiple petitions filed by various banks challenging Rule 6C(6A) of the 7th Schedule of the Income Tax Ordinance, 2001, concerning the taxation of bank income.
Justice Babar Sattar will preside
over the proceedings as a single bench, hearing petitions filed through legal
representatives, including Salman Akram Raja. Previously, the court had issued
a restraining order preventing the government from collecting the disputed tax
from banks.
In addition, the court issued
notices to the Secretary of Finance, the Attorney General for Pakistan (AGP),
and other relevant respondents, directing them to submit detailed reports and
parawise comments within two weeks.
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The petitioners argue that Rule
6C(6A) imposes a tax on income derived from Federal Government securities based
on a gross advances-to-deposits ratio. Their counsel contended that this tax
mechanism goes beyond the scope of a Money Bill, violating Article 73 of the
Constitution by effectively regulating banking operations.
The counsel further argued that the
tax is being applied retroactively, as the investments in Federal Government
securities have not matured within the relevant financial year, making any
retrospective tax enhancement unconstitutional.
Additionally, the petitioners claim
the rule conflicts with Section 46B(3) of the State Bank of Pakistan Act, 1956,
which grants the State Bank exclusive authority to regulate banks and prohibits
other public authorities from issuing conflicting directives.
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The hearing is set to continue with
critical implications for the banking sector and broader financial regulation
in Pakistan.
Source: The Nation