LAHORE, May 8: The Supreme Court on Thursday dismissed a petition of the income tax authorities for declaring Wapda an “assessee” with regard to a one-million-rupee tax liability on bank service charges on its electricity bills.

The SC upheld the judgment of Lahore High Court and ruled that Wapda did not fulfil the definition of assessee laid down in Section 50(4) of the Income Tax Ordinance 1979 in this case. It further observed that Wapda was not responsible for paying the tax on a Rs2 deduction made by the Habib Bank Limited from every electricity bill as service charges.

Deputy Attorney General Dr Danishwar Malik presented a letter dated April 8, 1995 claiming that Wapda had authorised HBL to collect Rs2 per electricity bill as service charges, and it stood established that this amount was being collected on behalf of Wapda, who was liable to pay the tax on it.

The court, however, refused to accept the authenticity of the letter on grounds that the document might be a bogus one since Wapda had not owned it.

The income tax authorities had filed the petition claiming that Wapda was liable to pay Rs1,034,642 as tax on bank service charges paid out of its revenue for the assessment year 1994-95. Wapda had filed an appeal before the income tax commissioner in 1997 against this liability, which was dismissed.

Later on, Wapda moved the LHC against the income tax commissioner’s verdict, and Justice Malik Mohammad Qayyum allowed the appeal ruling that the HBL was never given the authority to deduct service charges from Wapda’s revenue, and the latter could not be assessed for a tax on this account.

Appearing before the SC on behalf of the income tax commissioner, the DAG argued that since the revenue was collected by the bank on behalf of Wapda and the service charges were deducted out of that revenue, the amount collected through service charges should be considered an earning of Wapda and not of the HBL. Therefore, Wapda was responsible for paying the tax on account of service charges, the DAG argued.