Recovery of taxes: PHC dismisses petition against FBR’s notice

Court restrains board from recovering amount till next hearing

PESHAWAR: The Peshawar High Court dismissed a petition filed by Pakhtunkhwa Energy Development Organisation (PEDO) against Federal Board of Revenue (FBR)’s notice for the recovery of taxes for generating power from its units in 2011 and 2012.

The court dismissed the petition on grounds of maintainability and directed PEDO to raise the issue with the income tax commissioner.

The petition was dismissed by a division bench, headed by Justice Nisar Hussain, after FBR lawyer Neelam Khan questioned that the issue was not taken up on the proper forum.

She said PEDO challenged the notice from the income tax commissioner’s office but maintained the court dismissed the appeal after which PEDO filed a writ at the high court.

The lawyer said the writ should be dismissed and the stay order should be vacated. However, PEDO’s counsel said FBR has issued a notice to the organisation for the payment of taxes amounting to Rs2.5 billion for two years.

He said FBR has also sent its recovery officers to the concerned banks for recovery of the amount. He maintained FBR officials threatened banks with stringent action and even prepared bank drafts in favour of the board.

He stated PEDO was generating electricity from Malakand-III and as sales tax laws were not extended to Malakand Division. As a result, the recovery was illegal and unconstitutional.



He said once the amount was recovered, it would take years to get it back and that would overburden the provincial kitty.

PEDO’s lawyer told the court the power station was owned by the provincial government under Article 165 of the Constitution. As a result, they were not liable to pay taxes. Article 165 (1) stipulates that Parliament cannot impose tax on the property or income of a provincial government.

He said the provincial government owned all power projects being run or developed by PEDO and under Article 260 of the Constitution and they fall under the property of provincial government.

He said the organisation was accountable to the provincial government that was running various power projects, mostly in Provincial Administered Tribal Areas (Pata).

The power generations station was located in Malakand, while two others – Reshun and Shishi –were situated in Chitral.

The case was also fixed before Peshawar Chief Justice Mazhar Alam Miankhel. He directed PEDO to raise the issue at the proper forum within two days and the application would be fixed for hearing on the very next day. However, he restrained FBR from recovering the amount till the next hearing.

Published in The Express Tribune, June 30^th, 2016.