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Huzaima Bukhari & Dr. Ikramul Haq
The merger of Federally Administered Tribal Areas (FATA) with Khyber Pakhtunkhwa and Provincially Administered Tribal Areas (PATA) with respective provinces, after assent of President to The Constitution (Twenty-fifth Amendment) Act, 2018 on May 28, 2018, (‘the 25th Constitutional Amendment’) was an historic day. After almost three years, the long-overdue and much-delayed projects to offer a number of opportunities to the residents of these areas for equality, constitutional protections, development and inclusive growth remain a dream unfulfilled. At the time of merger tall claims were made by the Pakistan Tehreek-i-Insaf (PTI) ruling in Khyber Pakhtunkhwa that once in power in the Centre, it would tackle the extraordinary challenges faced by these areas in the wake of the long reign of terrorism, especially removing the sense of deprivation of local residents, integration with the rest of the country, giving equal opportunities and revitalising its economy, improving infrastructure, providing jobs and making it “paradise” for tourists.
The PTI coalition government in the Centre and having two third majority in Khyber Pakhtunkhwa have so far failed to tackle the issues of these areas—political, legal, administrative and above all, economic. In this article, taxation issue alone is highlighted as exemptions provided in these areas after the merger, are not serving the purpose for which these were granted. The Federal Board of Revenue (FBR) in the presence of explicit exemptions has issued many instructions which are against the law. These exemptions, meant to become catalysts/incentives for investment, development and creation of jobs in these areas, are being abused by unscrupulous businessmen. The majority of the population in these areas is still living in sub-human conditions.
The merger of FATA and PATA should have been accompanied with a comprehensive, multi-faceted programme of development, which is missing till today. These areas are rich in natural resources and if projects are launched prudently, the people of these areas can become prosperous. It is, in fact, the collective responsibility of all citizens to pressurise all concerned quarters—political and non-political—to give priority to these areas. It is worthwhile to mention that billions have been collected since tax year 2016 “for rehabilitation of temporarily displaced persons” under section 4B of the Income Tax Ordinance, 2001 [hereinafter “the Ordinance”] after military operations in these areas. This collection will continue in the cases of banks even after tax year 2021. The government must tell the nation how much collection under this provision is spent for those who were displaced in erstwhile FATA/PATA. This levy was challenged by many on constitutional ground that this not “tax” but Sindh High Court in [(2020) 122 Tax 208 (H.C.Kar)] and Lahore High Court in [(2020) 121 TAX 381 (H.C.Lah)] dismissed all these petitions holding that levy does not violate the vires of the Constitution of the Islamic Republic of Pakistan [“the Constitution].
The 25th Constitution Amendment removed the words “the Federally Administered Tribal Areas” from the definition of ‘Republic and its territories’ contained in Article 1 of the Constitution. These are defined in Article 246 of the Constitution. Before the 25th Constitutional Amendment, these areas were outside the operation of tax laws, enacted by the federal and provincial parliaments under Article 247(3) of the Constitution, omitted by The Constitution (Twenty-fifth Amendment) Act, 2018. The President of Pakistan had the power to extend jurisdiction of any tax law to erstwhile FATA while Governors of provinces could extend the laws to erstwhile PATA. Nevertheless, tax laws were never extended to either FATA or PATA, except the Customs Act of 1969 to recover taxes on import and export of goods from customs-notified places in these areas, where trade (transit and regular) between Pakistan and Afghanistan and imports and exports to and from many Central Asian countries take place.
After the 25th Constitutional Amendment, these areas became “taxable”. However, exemptions from income tax were extended through Statutory Regulatory Orders (SROs) and later through Finance Act, 2019. Initially, through SRO 887(I)/2018 issued on July 23, 2018, exemption clauses were inserted. In ‘The Merger and tax issues’, Business Recorder, June 1, 2018, the following textual and conceptual defects were pointed out:
- “In proviso to clause (146), Part 1 of Second Schedule to the Income Tax Ordinance, 2001 exemption is restricted to AOPs and companies on the condition that “registered offices are in the areas covered in Article 246 of the Constitution”. It is a faulty concept as these areas had/have no offices of Registrar of Firms prior or after the 25thConstitutional Amendment and the same was/is the case with Security & Exchange Commission of Pakistan (SECP) that deals with registration of companies. Any company registered by SECP anywhere in Pakistan is “resident” under the Income Tax Ordinance, 2001 and can work anywhere as its registration is not based on working for a particular area of ‘Pakistan’—the expression defined in Article 1(2) of the Constitution. Many companies, like banks, have various branches located in the areas mentioned in exemption clauses. These companies are registered for all areas of Pakistan including those mentioned in Article 246 of the Constitution.
- The exemption of income is restricted to an individual who is ‘resident’ payer/recipient of the areas. It is absurd as no border controls exist between areas mentioned in Article 246 and rest of the country and therefore criterion of counting days in a tax year to qualify as ‘resident’ under the Income Tax Ordinance, 2001 is not possible”.
In the light of above valid objections, SRO 887(I)/2018 was replaced with SRO 1213(I)/2018, issued on October 5, 2018. The exemption for sales tax restored vide SRO 1212(I)/2018, ab initio rescinding “notifications No. S.R.O. 888(1)/2018, No. S.R.O. 889(1)/2018 and No. S.R.O. 890(1)/2018, all dated the 23rd July, 2018”. In a nutshell exemptions from the levy of sales tax and income tax, including withholding taxes in these areas as existed prior to the 25th Constitutional Amendment restored as under:
- “exemption from whole of sales tax, by whatever name called, as levied under the Sales Tax Act 1990, or notifications issued thereunder, on supplies made until 30 June 2023, to which the provisions of the Sales Tax Act 1990 or related notifications would not have applied had article 247 of the Constitution not been omitted”;
- “any income, which was not chargeable to tax prior to the commencement of the (25th Amendment) Act 2018 of any individual domiciled or company and association of persons resident in these areas with effect from 1 June 2018 to 30 June 2023 (both days inclusive)”; and
- exemption from deduction or collection of withholding tax under the Income Tax Ordinance, 2001 from any individual domiciled or company and association of persons resident in these areas with effect from 1 June 2018 to 30 June 2023 (both days inclusive).
In the new exemption clauses inserted in the Ordinance [clause (146) Part I, Second Schedule and clause (110) in Part IV, Second Schedule to The Ordinance], the words used were “of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive)”. Both these clauses were later inserted by Finance Act, 2019 with new numbering but the same language.
Below is text of clause (145A), Part I, Second Schedule to the Ordinance”, inserted by Finance Act, 2019:
“(145A) Any income which was not chargeable to tax prior to the commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive)”.
It is strange, rather shocking, that ingenious draftsmen sitting in the FBR and Ministry of Law twice inserted faulty exemption clauses. More painful is the fact that legislators sitting in National Assembly and Senate (who sent their recommendation under Proviso to Article 73(1) of the Constitution without taking note of deficiencies) passed these as part of Finance Act, 2019 without taking note of serious conceptual errors. All companies and association of persons (AOPs) are residents of Pakistan. If intention is to give exemption to only those companies and AOPs having their registered offices and “control and management” in these areas then unambiguous words should have been employed to this effect which are missing till today.
The concept of ‘domicile’ for an individual is still debatable as to whether his/her income received from taxable areas will also be exempt or not. Is this exemption is for everywhere in Pakistan to earn any income or only in the area mentioned in Article 246 of the Constitution? Is this exemption is “individual specific” or “income specific”? Many unscrupulous people are exploiting this exemption clause, either using fake domiciles or using of genuine domiciled persons of these areas for doing business from taxable areas but claiming exemption available in these areas, e.g. importing goods for Lahore and showing destination in any area of erstwhile FATA/PATA. Like-wise, goods are being exported from Karachi and exports proceeds are received in any branch situated in non-taxable areas to avoid withholding of tax under section 154 of the Ordinance.
As explained above, clause (146) in Part-I of the Second Schedule and clause (110) in Part IV of Second Schedule to the Ordinance were inserted through SRO. 1213(I)/2018 dated 05.10.2018. In Finance Act, 2019, clause (145A) of Part-I and clause (109A) of Part-IV of Second Schedule to the Ordinance were inserted. There was no difference in the language of clauses (145A) and (146) of Part-I of Second Schedule. Similarly, clauses (109A) and (110) of Part IV of Second Schedule to the Ordinance have identical language and both exist even today. In Tax Laws (Second Amendment) Ordinance, 2021, issued on March 22, 2021 as a precondition of International Monetary Fund (IMF) to get tranche of US$ 500 million, clause (146) of Part I of Second Schedule inserted through SRO.1213(I)/2018 dated 05.10.2018 has been omitted. However, clause (110) of Part IV of Second Schedule inserted through the same SRO is still part of the Ordinance, whereas clause (109A), inserted by Finance Act 2019. It shows an omission on the part of FBR not to rescind clause inserted through SRO. 1213(I)/2018.
The FBR in in its version of Income Tax Ordinance, 2001 (“amended upto 30 June 2020”) in print form and available on its website is showing both the provisions having the same language! Even the publishing team and those manage website never bothered to read and correct it. Both the provisions are reproduced below:
Clause (109A) of Part-IV of Second Schedule to the Ordinance, inserted by Finance Act, 2019:
“The provisions of sections in Division III of Part V of Chapter X and Chapter XII of this Ordinance for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) shall not apply to individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive)”
Clause (110) of Part-IV of Second Schedule to the Ordinance, inserted through SRO. 1213(I)/2018 dated 5 October 2018:
“The provisions of sections in Division Ill of Part V of Chapter X and Chapter XII of the Ordinance for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) shall not apply to individual domiciled or company and association of person resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive)”.
The above duplication was not removed by FBR despite our pointing out the same in writing. After insertion of clause (109A), clause (110) though not omitted by Finance Act, 2019, should have been rescinded as it has become redundant and must be deleted as was done in the case of clause (146) of Part I, second Schedule to the Ordinance through Tax Laws (Second Amendment) Ordinance, 2021.
It may be noted that exemption is also available to “plant, machinery and equipment imported for setting up industries in FATA subject to the same conditions and procedure as are applicable for import of such plant, machinery and equipment under the Customs Act, 1969 (IV of 1969)” [serial 116, Table I, Sixth Schedule to the Sales Tax Act, 1990]. Interestingly, in this exemption provision PATA is missing, which appears to be another inadvertent oversight by the FBR (de facto legislature) as the members in National Assembly and Senate (who send their recommendations for passage of Finance Bill under the Constitution) are totally incompetent to pick up above cited lapses, omissions, deficiencies and even blunders.
The FBR has recently issued the following circulars in respect of streamlining the exemptions available in the erstwhile FATA/PATA as discussed above and even misconstrued serial 116, Table I, Sixth Schedule to the Sales Tax Act, 1990 that does not mention PATA but it is assumed in para (vi) of Circular 9 of 2021 (Income Tax). These are reproduced below for ready reference:
“C.No.7(1)TIPU/IR/2020
GOVERNMENT OF PAKISTAN
REVENUE DIVISION
FEDERAL BOARD REVENUE
Islamabad, the 26th March, 2021
INCOME TAX CIRCULAR NO. 13/2021
Subject: Procedure for issuance of exemption certificate for import of industrial inputs/machinery by FATA/PATA-resident tax persons.
In pursuance to the amalgamation of FATA/PATA regions via 25th Amendment to the Constitution, in order to boost economic development therein, the Government of Pakistan, vide Clause (146) of Part I of 2nd Schedule to the Income Tax Ordinance, 2001 (hereinafter “the I.T.O, 2001”), exempted income “of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan…with effect from the 1st day of June, 2018 to the 30th day of June, 2023.” The “provisions of sections in Division III of Part V of Chapter X and Chapter XII” of the I.T.O, 2001, pertaining to withholding taxes have also been rendered inapplicable to FATA/PATA-domiciled tax persons vide Clause (110) of Part IV of 2nd Schedule to the I.T.O, 2001.
2. Although, FBR’s stated position continues to be that section 148 by dint of its being in Division II (instead of Division III) of Part V of Chapter X of the I.T.O, 2001, in has consciously been excluded from the nexus of Clause (110) by the Legislature as also emphatically articulated by FBR vide letter No.DOC.No.1(1)-M(IR-Ops)/2020/165904-R dated 21-09-2020, yet in view of Hon’ble Peshawar High Court’s judgment in W.P.No.442-M of 2020 to the contrary, and till its reversal by the Supreme Court of Pakistan in a CPLA filed by FBR, FATA/PATA-domiciled tax persons could avail exemption u/s 148 of the I.T.O, 2001.
3. There, however, does exist significant confusion as to the mechanism of operationalization of the exemptions enshrined in the law. In particular, a controversy has recently raged vis-à-vis application of withholding tax at the import stage as to whether it would be available to a FATA/PATA-domiciled persons per se or it would trigger on issuance (and production) of exemption certificate as stipulated in section 148/159 of the I.T.O, 2001.
4. The Hon’ble Peshawar High Court in W.P.No.442-M of 2020 titled as Hadi Khan Silk Mills Vs. Federation of Pakistan has also categorically held that FATA/PATA-domiciled tax persons “shall be exempt from levy and imposition of advance tax payable under section 148…at import stage, till the period mentioned in Clause 146” of Part 1 of 2nd Schedule to the I.T.O, 2001. More importantly, the Hon’ble High Court, in the same judgement, has gone on the address the critical question as to how this particular exemption would operationalize by mandating “that for seeking exemption from payment of advance income tax under section 148 of the Ordinance at import stage, the petitioners shall have to seek exemption from the levy thereof, under section 159 of the Ordinance.” The Hon’ble High Court has re-affirmed this mechanism in W.P.No.1219-M of 2020 titled Sohrab Sons & Co. Vs. Government of Pakistan & Others and W.P.No.2009-P of 2020 titled M/s Dawood Steel Vs. Federation of Pakistan & Others.
5. Foregoing in view, a standardized procedure for the issuance of Exemption Certificate on quarterly basis is being rolled out so as to ensure fair operationalization of the exemptions enshrined in the law. Accordingly, a FATA/PATA-domiciled person appearing on the “active taxpayers’ list” instituted by FBR in terms of section 181A of the I.T.O, 2001, in intending to import “plant, machinery, equipment” or “industrial inputs” for installation or consumption at his own manufacturing site would lodge a written application to the Commissioner Inland Revenue (CIR) concerned providing therein:–
(i) Production capacity of the manufacturing unit, and if the same has increased over time, the month from which the enhanced production capacity was installed along with particulars of the additional manufacturing capacity;
(ii) Month-wise quantity of (a) raw material imported, and (b) purchased locally since July, 2020 (or 1st month of the tax year);
(iii) Quantity of stock available form earlier imports;
(iv) Month-wise details of Gas and Electricity consumed since July, 2020 (or 1st month of the tax year);
(v) Month-wise particulars of goods produced;
(vi) Month-wise details of post-dated cheques (PDCs) deposited earlier with Customs authorities, if any;
(vii) List of buyers of the goods produced;
(viii) Bank statement for the past quarter;
(ix) Electricity/Gas bills for the past quarter; &
(x) Month-wise proof of Federal Excise paid – only in case of goods covered under the Federal Excise Act, 2005.
6. The CIR would ensure that particulars supplied by the taxpayer are verified before the issuance of Exemption Certificate. In case any data are not verified, the taxpayer would be given an opportunity to complete the application, provide the required information, and make up the deficiency. The Exemption Certificate issued will be directly mailed to the Collector Customs concerned with a copy thereof being duly marked to member (IR Operations) and Member (Customs Operations), and under no circumstances will be handed over to the taxpayer. If the CIR decides to reject the application for a Exemption Certificate, the previous PDCs deposited would be encashed”.
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Note: in above circular of FBR omitted clause (146), Part I of the Second Schedule. The existing one is clause (145A) inserted by the Finance Act, 2019. The FBR must immediately take note of it.
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“C.No.7(1)TIPU/IR/2020
GOVERNMENT OF PAKISTAN
REVENUE DIVISION
FEDERAL BOARD REVENUE
Islamabad, the 26th March, 2021
SALES TAX/FEDERAL EXCISE CIRCULAR NO. 05/2021
Subject: Procedure for issuance of consumption certificate for import of industrial inputs by FATA/PATA-Domiciled industries.
In order to earnestly implement and enforce the tax-related incentives and benefits extended by the Parliament to residents of FATA/PATA, Circular No. 9 of 2021 dated March 1, 2021, has been issued. The Circular takes account of safe arrival of industrial inputs imported by FATA/PATA domiciled industries form the port to the intended manufacturing sites. Section 13(1) read with serial No. 151 of Table I of Sixth Schedule to the Sales Tax Act, 1990, exempts import of “industrial inputs” to FATA/PATA-located industries “on presentation of a post-dated cheque for the amount of sales tax payable under…, and the same shall be returned to the importer after presentation of a consumption…certificate…in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction.” This particular benefit is subject to a further condition that if the goods produced form the exempted raw materials as “transferred or supplied outside the tribal areas, the tax exempted shall be paid at the applicable rate.”
2. This makes CONSUMPTION CERTIFICATE issued by Commissioner Inland Revenue (CIR) the centerpiece of the tax-exempt cycle of importation of industrial inputs, production of finished goods by FATA/PATA-domiciled industries and their ultimate consumption within the FATA/PATA regions. It is therefore that a standardized procedure for the issuance of Consumption Certificate is being rolled out so as to ensure fair operationalization of the exemptions enshrined in the law.
3. A FATA/PATA-based manufacturer/Registered Person (RP), who is also an “active taxpayer” in terms of section 2(1) of the Sales Tax Act, 1990 (hereinafter “the STA, 1990”), and intending to import raw materials for consumption at his own manufacturing site would make a written application to the CIR concerned providing therein:–
(i) Production capacity of the manufacturing unit, and if the same has increased over time, the month from which the enhanced production capacity was installed along with particulars of the additional manufacturing capacity;
(ii) Month-wise quantity of (a) raw material imported, and (b) purchased locally since July, 2020 (or 1st month of the tax year);
(iii) quantity of stock available from earlier imports:
(iv) Month-wise details of Gas and Electricity consumed since July, 2020 (or 1st month of the tax year);
(v) Month-wise particulars of goods produced;
(vi) Month-wise details of post-dated cheques (PDCs) deposited with Customs authorities, if any;
(vii) List of buyers of the goods produced;
(viii) Bank statement for the relevant periods;
(ix) Electricity & Gas bill for the relevant period; &
(x) Month-wise proof of Federal Excise paid – only in case of goods covered under the Federal Excise Act, 2005.
3. The CIR would ensure that particulars supplied by the RP are verified before the issuance of Consumption Certificate. In case any data are not verified, the RP would be given an opportunity to complete the application, provide the required information, and make up the deficiency. The Consumption Certificate issued will be directly mailed to the Collector Customs concerned with a copy thereof being duly marked to Member (IR Operations) and Member (Customs Operations), and under no circumstances will be handed over to the taxpayer. If the CIR decides to reject the application for a Consumption Certificate, the previous PDCs deposited would be encashed.
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C.No.7(1)TIPU/IR/2020
GOVERNMENT OF PAKISTAN
REVENUE DIVISION
FEDERAL BOARD REVENUE
Islamabad, the 1st March, 2021
INCOME TAX CIRCULAR NO. 09/2021
Subject: Mechanism to be adopted for the release of Consignment of FATA/PATA residents stuck-up at the Karachi Ports.
A meeting was held under the Chairmanship of the Chairman, FBR with Inland Revenue-Operations and Customs Operations Wings to sort out the issues of imported goods of FATA/PATA residents stuck-up at Karachi Ports, Consumption/Installation Certificates, Postdated Cheques and Exemption Certificates under Section 148 of the Income Tax Ordinance, 2021.
2. After thorough deliberations between the Chairman, Member (IR-Operations) and Member (Customs-Operations) following mechanism was devised for the release of consignments of FATA/PATA residents stuck-up at the Karachi Ports:–
(i) The stuck-up containers are to be released by Customs authorities against Postdated Cheques (PDCs) and sent to their destination (FATA/PATA) under standard tracker mechanism.
(ii) The Collector Customs (Enforcement & Compliance), Peshawar, will issue detention orders of the raw materials effective from day the consignment reaches the manufacturing premise of importers.
(iii) The importer/manufacturer will be responsible to take the import documents alongwith detention order to the CIR Corporate Zone, RTO, Peshawar and make arrangements to have the manufacturing premises/raw material/machinery/goods imported verified.
(iv) The CIR Corporate Zone, RTO, Peshawar will be liable to verify/undertake physical visit as conducted by the importer/manufacturer to the manufacturing premises where the goods are kept under detention, and allow the raw material to be consumed/utilized in writing.
(v) The CIR, Corporate Zone, RTO, Peshawar will ensure the monthly stock-taking of the raw materials to consumed in the production of manufactured goods by these manufacturing units. This stock-taking will facilitate in issuance of the Consumption Certificate under S.No.151 of the Sixth Schedule of the Sales Tax Act, 1990.
(vi) The residents of FATA/PATA will apply for tax exemption certificates under section 159 of the Income Tax Ordinance, 2001 for the import of raw material/machinery in light of the Honorable Peshawar High Court, Mingora Bench, (Dara-ul-Qaza), Swat’s decision dated 24.11.2020.
3. Commissioner Corporate, RTO, Peshawar and Collector Customs (Enforcement & Compliance), Peshawar would keep a close liaison to successfully implement the laid down mechanism”.
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The decision cited of Peshawar High Court, Mingora Bench, (Dara-ul-Qaza), Swat dated 24.11.2020 by FBR in Income Tax Circular 9 of 2021 needs reconsideration in the light of judgement of the Supreme Court of Pakistan in Pakistan through Chairman FBR and others v Hazrat Hussain and others [(2018) 118 TAX 260 (S.C.Pak)] that has apparently escaped attention of FBR. The Supreme Court has held in this case that the FBR cannot impose any condition through instructions to curtail or dilute exemptions given under the law. The exemption clause inserted by Finance Act, 2019 in the Ordinance says that no withholding of income tax will be done. The imposing of condition of obtaining exemption certificate under section 159 of the Ordinance is thus violation of law and order of the Supreme Court. Same is the case for sales tax as exemption inserted vide SRO 1212(I)/2018 clearly says: “exemption from whole of sales tax, by whatever name called, as levied under the Sales Tax Act 1990, or notifications issued thereunder, on supplies made until 30 June 2023, to which the provisions of the Sales Tax Act 1990 or related notifications would not have applied had article 247 of the Constitution not been omitted”
The exemption clauses reproduced above related to sales tax and income tax, including the withholding taxes under the Ordinance are not imposing any condition to seek tax exemption certificates under section 159 of the Ordinance or other conditions imposed in above circulars. These instructions are thus not binding on the taxpayers as provided in section 206(3) of the Ordinance.
There is a common misconception that only ratio decidendi of the orders of Supreme Court is applicable and an obiter dictum is to be ignored while applying judgements of the apex court. The legal sweep of Article 189 of the Constitution of Pakistan takes the situation out of the usual circular limits of ratio decidendi, obiter dictum and casual observations. Once the declaration of law that includes obiter dictum is succinct and clear, any attempt to distinguish decisions on facts or to say factual position is almost impermissible. In a case reported as Shahid Pervaiz v Ejaz Ahmad and others 2017 SCMR 206, the Supreme Court of Pakistan held as under:
“A fourteen Member Bench of this Court in the case of Justice Khurshid Anwar Bhinder v. Federation of Pakistan (PLD 2010 SC 483), has concluded that where the Supreme Court deliberately and with the intention of settling the law, pronounces upon a question of law, such pronouncement is the law declared by the Supreme Court within the meaning of Article 189 and is binding on all the Courts of Pakistan. It cannot be treated as mere obiter dictum. Even obiter dictum of the Supreme Court, due to high place which the Court holds in the hierarchy in the country enjoys a highly respected position as if it contains a definite expression of the Court’s view on a legal principle, or the meaning of law”.
The solution is simple: These backward areas are in dire need of investment for infrastructure, industrial and business development, especially after economic toll of Covid-19 endemic. For creating jobs, especially for the youth, the investors, no matter to which area they belong to or are resident of, should be given complete tax holiday unconditionally to the extent of incomes accruing and arising, and on goods and services rendered in these areas. This will attract investment and remove the loopholes created by exemption clauses and eliminate discretionary powers and bargaining tools available to tax officials through instructions issued by FBR, reproduced above. The provincial governments should also waive all taxes within the areas mentioned in Article 246 of the Constitution to attract domestic and foreign investment for rapid development and job opportunities that are urgently needed for local residents of these areas facing miseries since long, accentuated after 9/11, military operations and many other reasons. These areas need integration through economic prosperity with the rest of the country and not merely through political clichés, slogans and empty promises.
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The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)