Law: Sales Tax Act, 1990

Section: 4,13

Law: Income Tax Ordinance, 2001

Section: 162,205,148,SecondSched.,Part-II,Cls.9,1 3(G)

(a) Sales Tax Act (VII of 1990)--- ----Ss.4 & 13---Income Tax Ordinance (XLIX of 2001), Ss.162, 205, 148 & Second Sched., Part-II, Cls. 9 & 13(G)---Customs Act (IV of 1969), S.25---S.R.O. 549(I) 2008 (Sales Tax) dated 11-6-2008---S.R.O. 575(I)/2006 dated 5-6-2006---S.R.O. 567(I)/2008 dated 11-6-2008---Recovery of tax from the person from whom tax was not collected or deducted---Import of machinery---Reduce rate of tax---Demand was created on the ground that reduced rate @ 1% as envisaged under Cl.(9) of Part-II of the Second Schedule to the Income Tax Ordinance, 2001 did not apply in the present case as the goods were not zero rated under Sales Tax Regime but were exempt from the payment of sales tax and that rate of tax should be charged @ 4% or 5% as the case may be---Validity---Rate of tax under S.148 of the Income Tax Ordinance, 2001 at import stage of machinery remained 1% also before the issuance of S.R.O. 549(I)/2008 dated 11-6-2008, under Cl.13G(i, ii, iii) were rescinded vide S.R.O. 567(I)/2008 dated 11-6-2008---Board on the same date issued S.R.O. 549(I)/2008 under S.4 of the Sales Tax Act, 1990 and declared machinery zero rated---All the machinery without any classification qualified to fall under clause 9 of the Second Schedule of the Income Tax Ordinance, 2001 for the purpose of charging the income tax @ 1% under S.148 of the Income Tax Ordinance, 2001 at the import stage---To promote the business and industry, the rate of sales tax on the import of machinery was maintained @ zero % and the rate of income tax was to be charged @ 1%---S.R.O. 575(I)/2006 dated 5-6-2006 issued under the provisions of Customs Act, 1969 and S.13, Sale Tax Act, 1990 (exemption of goods) did not apply on the imported goods (machinery) of the taxpayer which were declared zero rated under S.R.O. 549(I)/2008 issued under S.4 of the Sales Tax Act, 1990---Zero rated machinery could not be treated as exempt---Rate of income tax will be charged @ 1% as per Cl.9 of Part-II of the Second Schedule of the Income Tax Ordinance, 2001---Tax deducted on machinery at import stage @ 1% by considering the zero rated sales tax regime was absolutely correct and in accordance with…

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