The Sindh High Court (SHC) has mandated the Federal Board of Revenue (FBR) to retract all recovery notices issued to state-owned enterprises (SOEs) in order to facilitate the resolution of their tax-related disputes through the alternate dispute resolution committees (ADRCs).
The SHC has rendered a ruling in favor of the Trading Corporation of Pakistan (TCP) Pvt Ltd, which will extend to all SOEs.
According to SRO 1377(I)/2024, state-owned enterprises are required to engage with the alternate dispute resolution committees (ADRCs) of the Federal Board of Revenue (FBR) for the resolution of tax disputes, regardless of the amount of tax liability involved.
The judgement indicates that the Inland Revenue Department has acknowledged the amendments made to the Income Tax Ordinance, 2001, along with other Federal Fiscal Laws. Consequently, SOEs are mandated to submit applications to the Board for the establishment of an Alternate Dispute Resolution Committee (ADRC) to address any disputes and are obliged to withdraw all pending litigation.
The FBR has instructed its field formations that, in accordance with the amendments to section 134A(1) of the Income Tax Ordinance, 2001, section 47A(1) of the Sales Tax Act, 1990, and section 38(1) of the Federal Excise Act, 2005, it is compulsory for state-owned enterprises (SOEs) to apply to the Board for the formation of an Alternate Dispute Resolution Committee (ADRC) for dispute resolution. SOEs must also withdraw any and all pending litigation and cases related to the dispute without delay and provide the relevant details in the undertaking specified in clause (b).
In light of the aforementioned legal provisions and to prevent any additional litigation against the department, the Federal Board of Revenue (FBR) is hereby instructed to retract all recovery notices issued to State-Owned Enterprises (SOEs) under the specified tax laws, as the only legal recourse available to them is to request the establishment of an Alternative Dispute Resolution Committee (ADRC), as noted by the Sindh High Court (SHC) in reference to the FBR’s correspondence.
The SHC order further emphasizes the necessity of withdrawing all recovery notices directed at SOEs under the cited tax laws, reiterating that their sole legal remedy is the application for the formation of ADRCs. Concurrently, SRO 1290(1)/2024, dated August 24, 2024, has been issued, which outlines draft rules for the implementation of Section 134A and has been published to inform all relevant parties, as mandated by Section 237(3) for the solicitation of objections and suggestions. The letter and the SRO have been officially recorded, and the efforts of the concerned officer, specifically the Member (IR-Operations), are acknowledged.
Furthermore, it is mandated that all field formations comply with the directives of the FBR as well as the judgment rendered by this Court in the case of the Civil Aviation Authority (Supra). Non-compliance may result in appropriate actions being taken against the responsible official(s) under the applicable Service Laws, including the issuance of notices under the Contempt of Court Ordinance, 2003, as stated by the SHC.
Both petitions are hereby resolved in accordance with the aforementioned stipulations, the SHC concluded.