Law: Income Tax Ordinance, 2001

Section: 59AA,59B,

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001)---Sections: 59AA, 59B, Clause (103A) & (103C) to the Second Schedule - Finance Act, 2004 - Finance Act, 2007, Finance Act, 2016, & Finance Act, 2019 - Group Taxation - Group relief - Withdrawal of exemption from taxation in respect of inter-corporate dividend - It is petitioner’s case that the exemption ought to perpetuate ad-infinitum, notwithstanding the omission thereof in the statute book - It is contention of the petitioners that they had acquired a vested right, being their entitlement to exemption from taxation in respect of inter-corporate dividends - Validity - FACTS The issue was the withdrawal of exemption from taxation in respect of inter-corporate dividends. It was the petitioners’ case that the exemption ought to perpetuate ad infinitum, notwithstanding the omission thereof in the statute. The respondents disagreed and argued that the exemption remained valid during its tenancy on the statute book and under no stretch of interpretation could it be construed to perpetuate infinitely, especially since the same had consciously been omitted from the statute. ARGUMENTS It was the petitioners’ case that by reorganization as holding company/subsidiaries, in the manner contemplated by section 59B, the petitioners had acquired a vested right, being their entitlement to exemption from taxation in respect of inter-corporate dividends. It was the Federal Board of Revenue’s case that while the petitioners enjoyed the exemption during its tenancy, however, no vested right existed to perpetuate the exemption perpetually and that also post clear and conscious withdrawal thereof by the Parliament. DECISION (a) It is the prerogative of the Parliament to confer and withdraw fiscal benefits, in the interests of the public at large It is the prerogative of the Parliament to confer and withdraw fiscal benefits, in the interests of the public at large. It is observed that no irrevocable entwining of Clause 103A with section 59B of the Ordinance could be demonstrated before us, hence, the argument that the exemption ought to subsist during tenancy of section 59B found no favor before us. (b) Remedial and curative…

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