Law: Income Tax Ordinance, 2001

Section: 214C, 37(1A), 133, 122, 18

  JUDGMENT SHEET SAMAN RAFAT IMTIAZ, J.    This is a Reference Application filed under Section 133 (1) of the Income Tax Ordinance, 2001 against the Order dated 11-5-2022 (“Impugned Order”) passed by the learned Appellate Tribunal Inland Revenue, Islamabad (“Tribunal”). The brief facts as per the Memo of the Application are that the Applicant [Abdul Majeed Chaudhry] is an individual who duly filed his income tax returns for the tax year 2015.  The Applicant was selected for audit for the tax year 2015 under Section 214C of the Income Tax Ordinance, 2001 on February 2, 2017.  During audit proceedings it was observed by the Respondent No. 2 [Assistant/Deputy Commissioner Inland] that the Applicant has declared Capital Gain of Rs. 20,185,900/- in his wealth statement filed on 30-6-2015 along with income tax return for the tax year 2015.  The Respondent No. 2 issued notice under Section 111(1)(b) read with 122(9) of the Income Tax Ordinance, 2001. The Respondent No. 2 passed order treating the gain on sale of immoveable properties as Business Income under Section 18 of the Income Tax Ordinance, 2001 instead of Capital Gain under Section 37(1A) of the Income Tax Ordinance, 2001.  The Applicant filed appeal against the order of the Respondent No. 2 passed under Section 122(1) of the Income Tax Ordinance, 2001 before the Commissioner Inland Revenue (AppealsI) (“CIR(A)”) on 28-7-2021.  The CIR(A) confirmed the order of the Respondent No. 2 by holding that gain on sale of immoveable properties will be taxed as Business Income under Section 18 of the Income Tax Ordinance, 2001 instead of Capital Gain under Section 37(1A) of the Income Ordinance, 2001.  The Applicant filed appeal against the order of CIR(A) before the Tribunal. The Tribunal vide the Impugned Order upheld the taxation of gain on sale of immoveable properties as business income under Section 18 of the Income Tax Ordinance, 2001 instead of Capital Gain under Section 37(1A) of the Income Tax Ordinance, 2001, hence, the instant Reference.  This Court vide Order dated 19-5-2022 framed following questions of law for…