Sources told Business Recorder here on Monday that the contractors of the KP/FATA/PATA would meet tax authorities on the said issue in coming days. The contractors of these areas are seeking exemption on the argument that all types of taxpayers cover contractors under clause 120F of Second Schedule of Income Tax Ordinance 2001.
It has been proposed by contractors that the provision of clause 126F shall apply to all types of taxpayers whose businesses are situated in KP, FATA and PATA irrespective of the fact whether their incomes fall under Normal Tax Regime (NTR) or Final Tax Regime (FTR). Details of the issue revealed that Senate Standing Committee on Finance has received a complaint to insert a clarification to income tax exemption, which was given to all businesses except four sectors through Finance Act, 2010.
The clause 120F in second schedule of Income Tax Ordinance was inserted in 2001 vide Finance Act, 2010 to provide exemption from income tax to businesses of terrorism-stricken KP, FATA and PATA with only exception of four sectors. It said: "Clause 126F: Profits and gains derived by a taxpayer located in the most affected and moderately affected areas of Khyber Pakhtunkhwa, FATA and PATA for period of three years starting from the tax year 2010:
Provided that this concession shall not he available to the manufacturers and suppliers of cement, sugar, beverages and cigarettes." Contractors were of the view that the FBR circular used the word "businesses" meaning exemption to all businesses. The intention of legislature was quite clear to give exemption and FBR's circular No. 14 also gave more clarity, where the word "businesses" have been used, hence this exemption was available to all type of tax payers (including contractors) except aforesaid four sectors.
However, the Supreme Court in its judgment civil petition No. 3364-3366, dated January 20, 2017, held that the cases falling under Final Tax Regime such as contractors or commercial importers don't qualify for exemption under 126F, which apparently was not the purpose of exemption.
The proposed clarificatory provision in the second schedule to Income Tax Ordinance stated: "It is hereby declared that the provision of clause 126F shall apply to all types of taxpayers whose businesses are situated in KP, FATA and PATA irrespective of the fact whether their incomes fall under Normal Tax Regime (NTR) or Final Tax Regime (FTR)."
Copyright Business Recorder, 2017