ISLAMABAD: The Supreme Court has dismissed all appeals filed by the Federal Board of Revenue (FBR) seeking to impose a 35 percent corporate tax on dividend income, ruling that the appeals lacked merit and upholding an earlier Islamabad High Court decision in favor of the taxpayer companies.
A two-member bench headed by Chief Justice Yahya Afridi announced the verdict, with the detailed judgment authored by Justice Aqeel Ahmed Abbasi.
The court held that only Section 5 of the Income Tax Ordinance 2001 applies to dividend income, not Section 39, and that the 10 percent tax rate constitutes the legal and final tax liability on such income.
The bench ruled that dividend income falls under a separate tax block and cannot be classified as normal income, meaning the specific tax regime governing dividends remains applicable. It rejected the FBR attempt to impose the standard 35 percent corporate tax rate on the companies involved.
The dispute centered on the interpretation of Sections 5 and 39 of the Income Tax Ordinance 2001. The FBR had sought to recover a 35 percent corporate tax from the companies, while the companies maintained that dividend income was subject only to a final 10 percent tax.
The Islamabad High Court had earlier ruled in favor of the taxpayers, prompting the FBR to challenge that decision before the Supreme Court. The apex court found the FBR position legally untenable and dismissed its appeals in full.
The case was brought by Saudi Pak Industrial and Agricultural Investment Company, Fauji Foundation, Fauji Fertilizer, Cape Gas and several other companies, who had approached the courts against the FBR ruling.
