Law: Income Tax Ordinance, 2001

Section: 5(2),2(7)

Law: Banking Companies Ordinance, 1962

Section: 5(c),5(b)

SUMMARY The Islamabad High Court, through Babar Sattar, J., considered a tax reference arising from the order of the Appellate Tribunal Inland Revenue dated 27.09.2017. The Court noted that Questions No. 2 to 5 had already been decided in an earlier case (STR No. 12/2016). Following the precedent established in that case, the Court held that no fresh adjudication was required on those questions and remanded the matter to the Assessing Officer for determining the relevant tax years in which the payments were made, in accordance with the law previously laid down by the Court. The principal dispute concerned whether payments made to Khushhali Bank Limited, Tameer Microfinance Bank Limited, Pak Brunei Investment Company, and House Building Finance Company Limited were exempt from withholding tax on the basis that these entities were “banking companies” under the Income Tax Ordinance, 2001. The Court examined Section 2(7) of the Income Tax Ordinance, 2001 and Sections 5(b) and 5(c) of the Banking Companies Ordinance, 1962, and held that a banking company must be engaged in accepting deposits from the public for lending or investment purposes. Since the applicant failed to establish that the concerned entities were deposit-taking institutions, the Court agreed with the Tribunal that they did not qualify as banking companies. Consequently, the withholding tax obligation remained applicable, and the reference was decided in favour of the Tax Department and against the applicant. ORDER SHEET  Babar Sattar  , J:  This reference has arisen from the order of the Appellate Tribunal Inland Revenue dated 27.09.2017.   Learned counsel for the applicant states that questions 2 to 5 framed vide order dated 06.11.2017 have already been decided by this Court in STR no.12/2016 in a manner that the matter was remanded back to the Assessing Officer for determination of the tax years in which the relevant payments were made. Accordingly, for purposes of questions 1 to 5, no fresh adjudication is required and to such extent the matter is remanded back to the Assessing Officer to be determined in accordance with the law laid down by this Court in STR…