Law: Income Tax Ordinance, 2001

Section: 5,67,99,120,122(5A),First Schedule,Part-I,DivisionIII&FourthSched. ,R.5

Per Javed Iqbal, Chairman, Muhammad Waseem Ch., Nazir Ahmed, Judicial Members and Masood Akhtar Shaheedi, Accountant Member agreeing, Muhammad Asif, Accountant Member, dissenting. Income Tax Ordinance (XLIX of 2001)- -Ss. 5, 67, 99, 120 & 122(5-A), First Sched., Part-I, Division III & Fourth Sched., R. 5- Insurance company-Amendment of assessment-Benefit of reduced rate of taxation on 'dividend income ', claim for-Taxpayer, for relevant tax years filed return of total income claiming benefit of reduced rate of taxation of 10% on 'dividend income' under S.5 of Income Tax Ordinance, 2001, read with Division III of Part I of First Schedule to the Income Tax Ordinance, 2001-Such returns were deemed to be assessment orders issued under S.120 of the Income Tax Ordinance, 2001-Department, later on, invoked the provisions of S.122(5-A) of the Ordinance, asserting the position that since taxpayer company was an 'Insurance Company', taxation of its income was to be carried out under S.99, read with Fourth Schedule to Income Tax Ordinance, 2001; and provisions of S.5 of the Ordinance, 2001, providing for reduced rate of taxation for dividend income did not apply in the case, as entire income, including 'dividend income \ was required to be treated as 'income from business 'chargeable to tax at full rate of corporate law in that regard- Validity-Up till 30-6-2007, in Division HI of Part I of First schedule to Income Tax Ordinance, 2001, a separate and specific rate of tax for 'dividend income' of 'Insurance Companies' was clearly prescribed- Providing for a reduced rate of taxation, explicitly in Division III of Part I of First Schedule for Insurance Companies at the time of promulgation of the Income Tax Ordinance, 2001, aimed at aligning the Legislation in line with principles settled by the Supreme Court in the case reported as PLD 1997 SC 700 - 1997 PTD 1693- Controversy, was limited to determine the effect of amendment introduced in said Division III of Part I of the First Schedule of Income Tax Ordinance, 2001, vide Finance Act, 2007, whereby the reduced rate, inter alia for insurance companies was done away with; and a uniform rate of 10% was prescribed for…