TARIQ ULLAH SUFI Versus COMMISSIONER INLAND REVENUE, AEOI, LAHORE
ZAHID SIKANDAR, MEMBER.--- The taxpayer has challenged order dated 21.02.2025 passed by DCIT Range-I AEOI-Zone, Lahore whereby the taxation officer ordered recovery of Capital Value Tax (CVT) amounting to Rs. 22,514,241 under section 8(7) of Finance Act, 2022 read with Rule 6(1) of Capital Value Tax Rules, 2022.
2. Brief facts of the case are that notice dated 06.12.2024 under section 8(7) of Finance Act, 2022 was issued to the taxpayer on account of his failure to pay Capital Value Tax under section 8 of Finance Act, 2022 in respect of foreign assets calling for explanation regarding non-payment of CVT @ 1% with the intention to charge the same. In response, the taxpayer filed reply on the strength of matter sub-judice before the superior courts. Reply was rejected and the OIR finalized show cause proceedings against the taxpayer by way of charging Capital Value Tax amounting to Rs. 22,514,241/- @1% in terms of section 8(7) of Finance Act, 2022 against foreign assets value of Rs.2,251,424,100/-.
3. Aggrieved, the taxpayer has filed the instant appeal directly before the tribunal under the erstwhile provisions of section 126(A) read with section 131 of Income Tax Ordinance, 2001. Arguments heard.
4. We have examined the order and found that the taxpayer has not disputed the factum of declaration of foreign assets and non-payment of CVT @ 1%. Admittedly, the taxpayer filed foreign income and assets statement under section 116A of ITO which is required to be filed by a resident individual. Further, the taxpayer has declared foreign assets in his wealth statement under section 116A for tax year 2024 to the tune of Rs. 2,251,424,100/- whereas no capital value tax was paid under section 8 of Finance Act, 2022 as required under the law. No explanation was given by the taxpayer for non-payment of CVT at the time of adjudication rather taxpayer's main reliance was on the pendency of the appeals before the High Court where vires of levy of capital value tax is under challenge. The Hon'ble single bench of Lahore High Court has repelled the challenge of vires of section 8(2)(b) of Finance Act in 2023 PTD 268 titled as Zakaud Din v. FOP unequivocally in following terms:
"37. In view of the above, challenge is repelled, Section 8 (2)(b) of the Finance Act, 2022 is valid, constitutional and intra vires; No fault is found in exercise of legislative powers by the Parliament under entry 50 of the Federal Legislative list, which matter is within the competence of Parliament in terms of Article 142(a) of the Constitution of Pakistan. For the reasons provided in preceding paragraphs, all listed petitions are dismissed being devoid of any substance. No order as to the costs."
5. Presently, the above quoted decision holds the field which is to be followed. Mere pendency of Intra Court Appeals against the said decision is no, ground to set aside/delete the levy of capital value tax or to keep the matter in abeyance especially when there is no stay order given by the Division Bench against the levy of capital value tax. Further, application of law must continue. The ownership of foreign assets is an admitted position as the taxpayer himself declared the same in his wealth statement/statement of foreign assets.
6. Besides, the learned AR argued that the learned officer below did not have jurisdiction to pass impugned order as there was no jurisdiction order of AEOI Zone. The question of jurisdiction of AEOI zone has already been dealt with in detail by the tribunal in appeal ITA No. 645/KB/2023 titled as Muhammad Ali Tabba v. CIR AEOI Zone LTO Karachi wherein almost same objections were raised by the taxpayer regarding jurisdiction of AEOI zone. It was the objection of taxpayer in the appeal referred supra that no jurisdiction for the collection of CVT has been notified by the FBR. Further, jurisdiction notifications to AEOI zone does not include powers conferred under section 8 of Finance Act, 2022. The tribunal rejected the objection of jurisdiction for reasons enumerated therein. Having no different opinion, another bench of ATIR, Lahore in I.T.A. No.3858/LB/2023 titled as Shahid Nazir v. AEOI zone by following the ratio settled in Muhammad Ali Tabba's case supra turned down the objection regarding jurisdiction of AEOI zone officer. Incidentally, o both the author of decision and authorized representative of taxpayer in that case happened to be the same as of this appeal/decision (Zahid Sikandar, Member ATIR and Ibrahim Butt, Learned AR) so having a different view now would be against principles of judicial precedent and the rule of stare decisis. It is also a matter of propriety that courts should follow prior decisions when deciding similar cases. The issue of jurisdiction of assessing officer of AEOI Zone already stands settled therefore by following the earlier decision the taxpayer's objection is rejected.
7. It is vehemently contended that the OIR created arbitrary demand against the taxpayer as he failed to consider the amnesty claimed by the taxpayer under the Foreign Assets (Declaration and Repatriation) Act, 2018 (hereinafter referred as FEDRA ) with respect to foreign assets. The learned AR emphasized that as per section 8(2) of FEDRA, 2018 no tax is payable under any law for the time being in force including the Income Tax Ordinance, 2001 where tax has been paid under subsection (1) in respect of foreign assets declared under section 5. Firstly, this contention was not taken at the time of adjudication rather the only plea taken by the taxpayer before the assessing officer is about the pendency of appeal challenging the vires of section 8 (vires) before the superior courts. However, to properly assess the Appellant's argument, it is pertinent to first examine the relevant provisions of FADRA, 2018 specifically sections 3, 6, 7, 8 and 11, as set out below:
Foreign Assets (Declaration and Repatriation) Act, 2018.
" AN ACT to provide for declaration and repatriation of assets and income held outside Pakistan
WHEREAS there is a large scale non-reporting and under reporting of assets and income held outside Pakistan;
AND WHEREAS it is expedient to provide for declaration and repatriation of assets and income held outside Pakistan for the purposes hereinafter appearing; it is hereby enacted as follows:
1. Short title and commencement. (1) This Act may be called the Foreign Assets (Declaration and Repatriation) Act, 2018
2. It shall come into force at once.
Definitions. (1) in this act, unless there is anything repugnant in the subject or context,‑
3. Act to override other laws. the provisions of this act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force.
4.
5. Declaration and repatriation of assets held outside Pakistan.-(1) Subject to the provisions of this Act, any person may make to the Federal Board of Revenue, by the due date specified in section 6, a declaration in respect of foreign assets acquired before the tenth day of April, 2018.
(2)
6. Period of applicability. The declaration and repatriation under section 5 shall be made on or after the tenth day of April, 2018 but on or before the thirtieth day of June, 2018.
7. Charge of tax. The foreign assets declared and repatriated into Pakistan within the due date shall be chargeable to tax at the rates specified in the Table below, namely:- S. No. Foreign assets TABLE Rote (as a percentage of the value of foreign assets) (1) (2) (3)
1. Liquid assets not repatriated 5%
2. Immovable assets outside Pakistan 3%
3. Liquid assets repatriated and invested in Government securities up to 5 years in US dollars denominated bonds with six monthly profit payment in equivalent Rupees (rate of return 3%) and payable on maturity in equivalent Rupees 2%
4. ..
8. Payment of tax.-(1) The due date for the payment of tax chargeable under section 7 shall be the date on which declaration is made under section 6.
(2) No tax shall be payable by the declarant under any law for the time being in force including the Income Tax Ordinance, 2001 (XLIX of 2001) where tax has been paid under subsection (1) in respect of the foreign assets declared under section 5.
11. Repatriation of liquid assets in Pakistan; deposit of tax in US dollars in SBP; and deposit of tax in Rupees in the income tax account of the Federal Consolidated Fund. Incorporation in books of account.
(1) Where a declarant has paid tax under section 8 in respect of foreign assets declared under section 5, the declarant shall be entitled to incorporate in his books of account such foreign assets.
(2) For the purpose of the Income Tax Ordinance, 2001 (XLIX of 2001), the cost of acquisition of foreign assets and date of acquisition shall be deemed to be the value declared by the declarant and the date on which declaration has been made by the declarant, respectively."
8. The Foreign Assets (Declaration and Repatriation) Act, 2018 ("FADRA") was promulgated with its chargeability retrospectively effective from 1st July 2018 and operative up to 13th June 2018, as delineated in Section 6 thereof. The enactment of FADRA constitutes a temporary or sunset legislation with a specific and limited objective-namely, to provide a mechanism for the voluntary declaration of foreign assets and income that had hitherto been unreported or underreported by Pakistani citizens. Section 7 of FADRA prescribes a tax at the rate of 3% on such foreign assets, conditional upon the filing of a declaration within the specified period, i.e., between 1st April 2018 and 13th June 2018. Further, under section 11(1), any asset ; so declared are permitted to be incorporated into the books of account of the declarant. From the express language and overall legislative intent of FADRA, it is manifest that the statute was enacted solely to facilitate the one-time voluntary disclosure and regularization of foreign assets, with the limited immunity granted under the scheme confined to those assets so declared. Statedly, the Appellant voluntarily availed the benefits of the FADRA scheme within the prescribed time frame, presumptively by discharging tax liability at the stipulated rate. However; the scope of immunity provided under FADRA is explicitly confined to the declared assets and does not, in the absence of an express statutory bar, afford any protection or immunity from future tax liabilities. To imply such immunity would be inconsistent with both the spirit and the express provisions of the statute.
9. It is a cardinal principle of statutory interpretation that a temporary statute, such as FADRA, ceases to have operative effect upon the expiration of its temporal application. To interpret such legislation as conferring perpetual immunity would be not only legally untenable but also constitutionally impermissible. Any suck interpretation would subvert the authority of Parliament as vested under Article 77 of the Constitution of the Islamic Republic of Pakistan, 1973, which provides that no tax shall be levied except by or under the authority of an Act of Parliament. To adopt the Appellant's contention that FADRA grants perpetual immunity from all future taxes-would result in a constitutional anomaly. It would effectively allow a temporary legislation to override the taxing power of the legislature, which is clearly impermissible under settled constitutional law.
10. In contrast, levy of Capital Value Tax (CVT) was enacted through Section 8 Finance Act, 2022. The legislative purpose and scope of CVT are distinct from that of FADRA. While FADRA aimed at the one-time regularization of undeclared foreign assets, CVT was enacted as a permanent fiscal measure under the sovereign taxing powers of the state. As such, the legislative intent behind CVT does not coincide with that of FADRA, and it must be considered an independent enactment duly authorized under Article 77 of the Constitution. It follows, therefore, that the imposition and recovery of CVT cannot be resisted on the basis of an expired and scheme-specific statute such as FADRA. To do so would not only be contrary to the legislative intent but would also amount to an indirect attempt to nullify the judicial declarations made by competent constitutional courts-an exercise which is impermissible under settled law. Furthermore, it is a settled principle of fiscal jurisprudence that any claim for exemption or immunity from taxation must be grounded in clear and unambiguous statutory language. In the absence of such express provision within FADRA, no such immunity can be claimed. The two enactments operate in separate spheres one facilitating voluntary disclosure with immunity under certain conditions, and the other imposing a prospective tax liability.
11. Under section 8 of Finance Act, 2022, a tax shall be levied, charged, collected and paid on the value of assets at the rates specified in First schedule for tax year 2024 and onwards. Subsection (2) of section 8 provides that capital value tax shall be charged on motor vehicles held in Pakistan, (b) foreign assets of a resident individual where the value of such assets on the last day of tax year in aggregate exceeds Rupees one hundred million, (c) such assets or class of assets as specified by Federal Government. Subsequent subsections deal with payment and collection mode and recovery in case the taxpayer failed to pay CVT. The case of the appellant clearly falls within the provisions of section 8 of Finance Act, 2022 as being a resident person, according to his declaration, he owns foreign assets of Rs. 2,251,424,100/- and is liable to pay CVT at specified rate of 1% against his foreign assets. Since the taxpayer has failed to pay capital value tax on declared foreign assets @ 1% amounting to Rs.22,514,241/- therefore the officer below rightly charged capital value tax to the taxpayer against his declared foreign assets. The impugned order is neither arbitrary nor fanciful rather based on valid reasons and in accordance with law and is without any legal infirmity, hence, the same is upheld.
12. In such an eventuality, the titled taxpayer's appeal is dismissed.
MQ/58/Tax (Trib.) Appeal dismissed.