LHC Verdict Leads To Exemption From Section 7E For Taxpayers: LCCI Spokesman

Lahore Chamber of Commerce and Industry (LCCI) said on Wednesday that Lahore High Court (LHC) has revoked the implementation of Section 7E in its jurisdiction

LAHORE, (UrduPoint / Pakistan Point News - 16th Aug, 2023 ) :Lahore Chamber of Commerce and Industry (LCCI) said on Wednesday that Lahore High Court (LHC) has revoked the implementation of Section 7E in its jurisdiction.

LCCI spokesman told media here that 7E pertains to tax on deemed income basis, would no longer apply to cases (both filers and non-filers) falling within the jurisdiction of the Lahore High Court. The withdrawal of Section 7E by the FBR is a significant achievement for the Lahore Chamber, he said, asserting that this decision ensured that the transfer of immovable properties in Punjab would not be affected by the requirement of income tax returns, regardless of whether the individuals involved were filers or non-filers. The LCCI's persistent efforts and advocacy had successfully addressed this issue and provided relief to stakeholders in the region, he claimed.

LCCI spokesman said that explanatory circular issued by FBR for facilitating the sale of property or transfer transactions, would be valid for an interim period till the development of an automated system. However, transferring authority of immovable property would maintain a proper record of the seller/transferor data along with relevant documents with respect to properties under sale/transfer covered under specified situations mentioned in the Circular No. 03 OF 2023-24 (Income Tax) dated August 15. 2023 which provides guidelines on the necessary documentation and procedures for transferring authority of immovable property.

The spokesman claimed that unwavering efforts of the Lahore Chamber of Commerce and Industry have yielded significant results as the Federal board of Revenue (FBR) heeded to the LHC judgment pertaining to Section 7E of the Income Tax Ordinance 2001. The driving force behind this achievement was attributed to LCCI's President, Kashif Anwar, as the LCCI's initiative was prompted by concerns within the business community following the introduction of Section 7E through the Finance Act of 2022, which had raised alarm bells among entrepreneurs.

In response to multiple inquiries received by the Board, comprehensive clarification has been provided regarding the process for furnishing evidence regarding the application of Section 7E of the Income Tax Ordinance 2001.

This clarification specifically addresses cases involving the sale or transfer of immovable property as stipulated in sub-section (2A) of Section 236C of the Ordinance, he maintained.

To facilitate the seamless integration of the newly introduced sub-section (2A), he explained, specific modifications had been introduced to the guidelines detailed in Circular No.1 of 2023-24, released on July 21, 2023. The significance of these alterations lies in their non-applicability to cases falling under the jurisdiction of the honorable Lahore High Court. This exemption was in alignment with the judgment delivered in WP no. 52559 of 2022 on April 6, 2023.

Furthermore, he said, an important alteration pertains to the expression "tax year 2022" as mentioned in Circular No. 1 of 2023-24. This reference will now be understood as encompassing "Tax Years 2022 and onwards".

Of note is the exemption of conditions mandating a certificate from the Commissioner, as outlined in Circular No. 1 of 2023-24, under specific circumstances.

This significant development is a testament to the persistent advocacy by the Lahore Chamber of Commerce and Industry, exemplifying their steadfast commitment to fostering transparent and efficient tax practices, he mentioned.

The Lahore High Court's verdict has resulted in an income tax circular that abolished the requirement for obtaining exemption certificates from the Commissioner Inland Revenue across various taxpayer categories, including non-resident individuals, under Section 7E of the Income Tax Ordinance 2001.

In praising the LHC verdict and the removal of the exemption certificate requirement, LCCI President Kashif Anwar termed it as a moral victory for the business community. He argued that the new Section 7E introduced through the Finance Act of 2022 imposed income tax on deemed rental income of properties, which marked a significant departure, as property tax has traditionally been a vital revenue source for local governments worldwide.

Kashif Anwar emphasized that the elimination of Section 7E for cases falling under the jurisdiction of the Lahore High Court was a promising development that provided respite to the property sector.