ISLAMABAD: Islamabad High Court has dismissed an income tax reference seeking charging of tax on an amount of interest paid to non-resident banks by Ghazi Barotha Project’s contractors.
IHC single bench comprising of Justice Shaukat Aziz Sissiqui heard the case and dismissed it in reference with domestic taxation laws, and the Agreement for Avoidance of Double Taxation (AfAoDT).
The judge upheld the ATIR decision and stated in the verdict that in order to avoid double taxation, i.e. the tax department could not charge tax on an amount of interest to non-resident banks.
The petitioner had submitted that interest on the paid amount was an income incurred in Pakistan; hence Pakistan’s taxation department could charge the due tax.
The court accepted respondent’s explanation that the tax department’s early decision to impose tax on the amount of interest was mainly based on the show cause notices which were served to Ghazi Barotha project’s administration and then were used as legal and official document to charge the tax. The respondent had called such conduct of tax department unlawful.
The court was hearing the income tax reference filed by commissioner Inland Revenue, Islamabad. The commissioner had challenged an ATIR decision before the court through Advocate Farhat Zafar. M/S Ghazi Barotha was made respondent in the said reference. Advocate Mian Ashiq Hussain represented the case from respondent.
