PTBA Requests Larger Bench to Resolve Conflicting Tax Decisions on Rental Income

PTBA Calls for Larger Bench to Resolve Conflicting Tax Decisions on Rental Income

KARACHI: The Pakistan Tax Bar Association has requested the Chairman of the Appellate Tribunal (Inland Revenue) to constitute a larger bench to deal with conflicting decisions passed by various Divisional Benches on taxability, of rental income from properties in the UAE.

PTBA expressed its apprehension to the Chairman of the Appellate Tribunal about conflicting decisions passed by the Divisional Benches, with a particular letter in connection with the taxability of rental income and capital gains realized by the Pakistani tax residents from the immovable properties situated in the UAE.

The PTBA highlighted a case decided by the Lahore Registry Divisional Bench (Case No. ITA 4299/LB/2022), where the bench ruled on September 8, 2022, that rental income and capital gains from properties in the UAE are not taxable in Pakistan. However, the Islamabad Registry Divisional Bench (Case No. ITA 1524/IB/2021) disagreed in its ruling on November 7, 2022, stating that these incomes are taxable in Pakistan.

Adding to the confusion further, the Lahore Registry Divisional Bench issued another order, ITA No. 2460/LB/2024, on 23 October 2024 again affirming its earlier position that rental income and capital gains from properties in both the UAE and the UK are not taxable in Pakistan.

Due to this varying judgment, PTBA moved before the Chairman Appellate Tribunal to appoint a larger bench to adjudicate the dispute. PTBA elaborated that inconsistent judgments tend to create ambiguity among taxpayers leading to problems with judicial administration. According to PTBA, even previous judgments provide an opinion which dictates, the constitution of a higher bench in the case of an irreconcilable conflict among benches of equal strength.

According to the PTBA, a broader bench will certainly clear out the much, confusion and uncertainty amongst the taxpayers as well as the taxpayers will save themselves from possible future legal quagmire. They also urged the Chairman to treat it as an extraordinary case and do the needful to bring about justice and clearness on the issue.