KARACHI: A single bench of the Sindh High Court (SHC) rejected plaints filed by Pakistan Petroleum Limited against issuing of show cause notice under section 172(5) of the Income Tax Ordinance, 2001, requiring the Plaintiff to show cause why it should not be declared a representative of a non-resident company under section 172(3) of the Ordinance for tax year 2103
On 23 February 2021, after the arguments, court passed order and observes that “the plaint manifests that what the Plaintiff essentially seeks is a determination by this Court on the show-cause notice so as to bypass the special fora and remedies provided under the Income Tax Ordinance, 2001. Such practice has time and again been discouraged by the superior courts.
Regards the first objection, the show-cause notice for declaring the Plaintiff as a representative of a certain non-resident person is clearly premised on a transaction between the Plaintiff and that nonresident, which transaction, per the department, constitutes a „business connection‟ within the meaning of section sub-section (3)(b) of section 172 of the Ordinance. The words „business connection‟ were part of said provision even before the insertion of an Explanation clause in 2013. While the Plaintiff may have its own version of what the underlying transaction entails, and whether it could be termed a „business connection‟, the factum of a transaction with that non-resident is not denied, rather it is admitted. Therefore, it is incorrect to say that the show-cause notice is unfounded, or that the conditions essential to the issue of a show-cause notice are absent.
To conclude, the plaint does not raise any ground that constitutes an exception to interfere in the exercise of jurisdiction by the special fora prescribed under the Income Tax Ordinance, 2001. Consequently, the implied bar to the jurisdiction of this Court that arises by reason of the special provisions of the Income Tax Ordinance, 2001, remains intact. Therefore, the plaint is rejected under Order VII Rule 11(d) CPC”.
