PESHAWAR: A single-member Peshawar High Court bench has issued a stay order stopping the Federal Board of Revenue and its regional tax office from collecting around Rs1.42 billion from the Pakhtunkhwa Energy Development Organisation on account of income tax imposed on power generation units owned by it.

Justice Syed Arshad Ali issued the order while hearing two separate sales tax references filed by Pedo against the issuance of notices by the FBR for recovery of the impugned tax at source for years 2011, 2012 and 2013. The bench issued notices to the respondents, including FBR chairman and Regional Tax Office Peshawar’s chief commissioner (inland revenue) and additional commissioner (inland revenue), to respond to the petitions.

Shumail Ahmad Butt, lawyer for Pedo, said the organisation was accountable to the provincial government and had been running various power projects owned by the provincial government mostly located in the Provincially Administered Tribal Areas (Pata). He said the biggest power station was Malakand-III, which was situated in Malakand, while Reshun and Shishi were located in Chitral.

The lawyer said the Income Tax Ordinance and Sales tax Act were not so far extended to Pata in terms of Article 247 of the Constitution. He added that under the Constitution, the governor of the province with the prior approval of the country’s president could order extension of a law to Pata.

Pedo insists IT ordinance, sales tax law don’t apply to its power units for being located in Pata

Mr Butt said the petitioner had filed last year a petition against the levy of income tax on power generation units situated in Pata. He said the high court had disposed of that petition observing that it was not maintainable as the petitioner had the remedy available to file an appeal before the commissioner Inland Revenue (appeal) before approaching the high court.

The lawyer said the Pedo had filed appeals before the commissioner (appeal), which were rejected.

He said the Pedo had approached the appellate tribunal (inland revenue), which had also rejected the Pedo’s plea.

The lawyer said against the said decisions, the Pedo had filed the instant tax references over question of law and constitution.

He said the notices and tax assessment orders were issued by the Peshawar additional commissioner (inland revenue), while completely ignoring the constitutional position of non-applicability of the two tax laws in Pata.

The lawyer said earlier, the high court had given judgments in different writ petitions on the same point and had ruled that the said two laws were not applicable to Pata and thus taxes could not be imposed under it.

He said recently, the Supreme Court had upheld the high court’s judgments. Mr Butt said the FBR had issued notices to the concerned banks and companies for at source deduction of the controversial tax. He added that the FBR had sent a notice to the Central Power Purchase Agency directing it to release to FBR an amount of Rs100 million which it had to pay to the Pedo on account of purchase of power generated by the hydel units of the province.

Published in Dawn, December 29th, 2017