Brief Facts:
The taxpayer's appeal was pending before the ATIR for the decision; however, in the meantime, the Department forcefully recovered the amounts from the taxpayer's accounts maintained in a Bank. Hence, the taxpayer filed a miscellaneous application against the above action before the ATIR.
Decision:
LHC allowed the petition and directed the Department to return the amount to the petitioner within 15 days and held that the provisions of section 140 shall be invoked when the Department believes that the taxpayer may run away with the demand, which will become irrecoverable forever. Such action against an active taxpayer, for the sake of recovery only, amounts to robbery, if due process is not followed.
Until it is incorporated in the Rules, the Department shall not invoke the provisions of section 140, without seeking prior approval from FBR. Reliance was placed on decisions reported as 2015 PTD 458, 2016 PTD 1799, 2021 PTD 162, and 2022 PTD 1763, whereby directions were given, confirming the fundamental rights of the taxpayer under Article 10A of the Constitution of the Islamic Republic of Pakistan, 1973 with a specific direction that non-recoverability should be confronted to the taxpayer through a notice under the section 139 of the Ordinance.
In the instant case, notice under Section 140 of the Ordinance does not disclose any detail of creating or shifting the demand enforceable against the petitioner. It has already been held that proceedings under section 138 are sine qua non for invoking the provisions of section 140. Reliance was placed on the judgment reported as 2023 PTD 146.
TAXPAYER SHOULD NOT BE FORCED TO PAY A DEMAND CREATED BY A REVENUE AUTHORITY UNLESS THE ORDER CREATING SUCH DEMAND HAS UNDERGONE THE SCRUTINY OF AT LEAST ONE INDEPENDENT FORUM.
Case Name : ABDUL RASHEED, KARACHI VS THE COMMISSIONER-IR, Zone-II, LTU- II, KARACHI
The taxpayer should not be forced to pay a demand created by a Revenue Authority unless the order creating such demand has undergone the scrutiny of at least one independent forum. Reliance is placed on following decisions:
2006 PTD 535
2006 PTD 2207
2003) PTD 1746 = 89 Tax 177
NONE OF THE ASSETS OF A NONPROFIT ORGANIZATION MAY CONFER PRIVATE BENEFIT TO ANOTHER PERSON
Case Name : KASHF FOUNDATION VS CHIEF COMMISSIONER INLAND REVENUE, LTU, FEDERAL BOARD OF REVENUE
Lahore High Court in its judgment held that the Commissioner Inland Revenue had rightly withdrawn the approval granted to a Non-Profit Organization on the basis that private benefit was extended to an associated concern.
WASTAGE IN PRODUCTION IS AN INHERENT PART OF THE PRODUCTION PROCESS FOR TAXABLE SUPPLIES
Case Name : M/S. FAUJI CEMENT COMPANY LIMITED VS THE COMMISSIONER INLAND REVENUE
The High Court decided the reference in
favor of the appellant and held that
wastage during the production of taxable
supplies is an integral aspect of the
production process. The court determined
that section 8(1)(a) does not apply to
wastage incurred while producing taxable
supplies, as such wastage does not serve
any purpose other than that of providing
taxable supplies. The court clarified that
taxpayers are entitled to input tax adjustments for wastage related to
taxable supplies, and therefore allowed
the reference setting it as a precedent for
future cases in respect of admissibility of
input tax on production-related wastages.
LHC MANDATES TIMELY RESOLUTION OF TAX REFUND CLAIMS, HIGHLIGHTING THE NEED FOR LEGISLATIVE REFORMS TO UPHOLD TAXPAYER RIGHTS AGAINST UNDUE DELAYS
Case Name : M/S. AGRITECH LIMITED VS FEDERATION OF PAKISTAN, ETC.
The Court determined that Section 10 of
the ST Act delineates a framework for
processing refunds for taxpayers involved
in zero-rated supplies and exports.
However, it was concluded that the
petitioner’s case fell under the first
proviso of Section 10(1) regarding
supplies with a reduced tax rate.
Therefore, the faster time frame
stipulated under Section 10(1) was not
applicable.
The Court observed that while the FBR is
empowered to conduct audits and inquire
into claims deemed non-admissible, it
must adhere to the statutory timeframes
set out in Section 10(3) for completing
such audits, within initial period of 60
days and possible extensions up to 9
months. Non-adherence to these
timelines were seen as infringing on the
taxpayer’s constitutional rights under Articles 23 and 24. The Court also ruled
that show-cause notices serve as a means
for taxpayers to address issues raised
regarding their claims, and as such,
challenging them prematurely was not
justified. The petitioner was entitled to
have its claim processed expeditiously,
reflecting the importance of taxpayer
rights in balancing tax administration and
the promotion of legislative reforms to
prevent unjust delays in refund claims
processing.
CUTTING TREES INTO PIECES DOES NOT TRANSFORM IT INTO A DISTINCT PRODUCT, THEREBY NOT TRIGGER SALES TAX ON ITS SUPPLY
Case Name : M/S FRONTIER GREEN WOOD INDUSTRIES (PVT.) LTD. VS THE COMMISSIONER INLAND REVENUE
The Court decided the case in Favour of
the appellant and held that raw wood
where standing trees cut into pieces are
classified as agricultural produce which is
exempt from sales tax under entry no. 10
Table 2 of Sixth Schedule to the Act. The
court analyzed the definitions of "supply",
"Taxable goods", "taxable supply", and
"Taxable activity" under the ST Act and it
was held that the charging section of the
Act would only trigger when there is a
taxable supply relating to taxable goods
in furtherance of any taxable activity
carried by a person.
