Sindh High Court (SHC) on Friday declared tax rates prescribed for salaried individuals in the First Schedule to the Income Tax Ordinance, 2001 through Finance Act, 2012 illegal, ultra vires of the Constitution and Income Tax Ordinance 2001. Sources told here on Friday that the SHC while deciding a constitutional petition filed by Syed Naveed Andrabi Advocate Supreme Court has declared tax rates prescribed for salaried individuals in the Finance Act 2012 as illegal. It has been further declared that the arbitrary increase in the slabs at serial number 4, 5 and 6 is against the graduated rates of taxation and principle of natural justice. Hence, all salaried individuals shall be paying the tax according to the principles of graduated slab rates of taxation with no arbitrary increase. According to sources, SHC has also directed the tax department to issue tax refund to all the salaried individuals whose tax has been withheld and deposited in the treasury pursuant to incorrect amount of tax under Finance Act 2012, within a period of one month from the date of filing such return. Sources said the petitioner, who is a salaried individual has challenged the vires and legality of the table inserted through Finance Act, 2012 in Clause (1A) of Division-I of Part-1 of the First Schedule to the Income Tax Ordinance, 2001. The petitioner requested the court that the Table inserted through Finance Act, 2012 in Clause 1A of Division-I of Part-1 of the first Schedule to the Ordinance be declared to be arbitrary, illegal and ultra vires of the Constitution. Sources said the SHC has declared that the anomaly in the calculation and quantification of tax at S.No 4, 5 and 6 of the Table-B has crept due to inadvertence on account of incorrect arithmetic calculation as there is no rational basis or reasonableness whatsoever in such determination of the tax liability. The amount of tax as calculated under slabs of taxable income at S.No 4, 5 and 6 of table B is without any conscious application of mind. It also lacks certainty of charge and is devoid of any rationale basis and has resulted in creation of additional burden of tax upon a particular group of salaried individuals without legal sanction. The anomaly in tax calculation for salaried individuals neither existed for the earlier tax years, whereas, by Finance Act, 2013, it has been rectified for the Tax Year 2014 in similar set pattern of tax calculation on the basis continued gradual increase of tax rate as discussed hereinabove. Accordingly, SHC holds that the table inserted by Finance Act, 2012 for the Tax Year 2013 in respect of rates of tax for salaried individuals with particular reference to amount of tax calculated under slabs of income at S.No 4, 5 and 6 of table B is ultra vires of the constitution, the Income Tax Ordinance, 2001 and also inconsistent with the slabs of taxable income of the table B itself, hence of no legal effect. The table inserted through Finance Act, 2012 in clause (1A) of Division-I of part-1 of the First Schedule to the Income Tax Ordinance, 2001 is declared to be illegal, arbitrary and of no legal, whereas valid table under Clause (1A) of Division-1 of Part 1 of the First Schedule to the Income Tax Ordinance, 2001, contains the correct arithmetic calculation of tax of the salaried individuals falling under different slabs of income as detailed therein. The SHC has directed the department to make necessary correction in the table by removing the anomaly and to notify the tax rates of salaried individuals for the Tax Year 2013 in conformity with the judgement of the court, sources said. The tax department should also issue refund of tax to all the salaried individuals whose tax has been withheld and deposited in treasury pursuant to incorrect amount of tax as prescribed under Table-B, which was introduced by Finance Act 2012, within a period of one month from the date of filing such return, sources said referring to the SHC.
Posted on: Sat, 26 Oct 2013 07:50:42 +0000
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