ISLAMABAD: The district administration of Islamabad fears freezing of its bank accounts for the over Rs2 billion tax default after a stay order against the Federal Board of Revenue (FBR) has been withdrawn.

The Islamabad High Court (IHC) last week disposed of a petition filed by the Islamabad administration against freezing of the accounts by the FBR.

The FBR had frozen the accounts in the National Bank of Pakistan, F-8 branch, for non-remitting the Rs2.38 billion tax.

The capital administration had taken the stance that the action was uncalled for and without any justification because non-recovery of the Capital Value Tax (CVT) cannot be attributed to it as many defaulters had gone into litigation against the administration.

The district administration had filed the petition in the IHC and obtained the restraining order.

The FBR, on the other hand, filed comments objecting to the maintainability of the petition.

It stated that during the pendency of the petitions that challenged the CVT, the district administration stayed the recovery for which they were solely responsible.

It may be mentioned that private housing societies reportedly exchanged land with each without paying the CVT. In some cases, the sellers and purchasers initiated the process of transfer, got registered the entries into the land register and despite taking physical possession of the land did not deposit the CVT.

CVT was imposed through section 7 of the Finance Act 1989 which placed the responsibility of collecting it on the registering or attesting authority at the time of registering or attesting the transfer. According to the Federal Board of Revenue rules, CVT is payable by individuals, firms and companies which acquire an asset by purchase or a right to use for more than 20 years.

IHC Judge Arbab Mohammad Tahir noted that the challenge to demand for payment of CVT was finally decided by the Supreme Court in the case of M/s Pak Gulf Constructions Company.

The apex court had observed: “the sale, purchase, transfer and other similar transactions are undertaken between the petitioner company which is the owner of the immovable assets and buyer in whose favour the transfer takes place, therefore, it is only logical that the petitioner should be obligated to collect CVT from the purchaser and deposit it with the Federal Government.”

Justice Tahir noted that “the private entities engaged in sale, purchase, transfer and other similar transactions were held responsible to collect CVT from the purchasers and deposit it with the Federal Government being falling within the purview of sections 7(d) and (4) of the Finance Act, 1989 read with Rule 4 of Rules, 1990.”

Justice Tahir was of the view that the FBR was not at fault in this case of directing the National Bank of Pakistan to freeze the accounts of the Islamabad administration.

“Even otherwise, there is no error in the impugned order,” he ruled.

The question of law and facts of the instant case are akin to one decided earlier by this court.

However, counsel for the FBR, Syed Ishfaq Hussain Naqvi, said the Islamabad administration had assailed the assessment orders before the FBR’s commissioner.

Subsequently, the court disposed of the petition observing that since they had already an availed alternative remedy before the appropriate forum against the assessment orders, there left no need to comment on the merit of the case.-

Published in Dawn, March 28th, 2022