Pakistan’s Supreme Court on Thursday made a landmark observation on existing tax laws which purportedly enables an individual or business entity to generate income from agriculture land by leasing it rather than owning it, according to court arguments by a defendant’s lawyer.
The apex court told the counsel representing Pakistan Tehreek-i-Insaf (PTI) Secretary General Jahangir Tareen (defendant) that he had failed to convince the court his client was exempted from paying tax on income generated from the 18,566 acres of leased land.
The PTI politician and parliamentarian had earned around Rs1.6 billion (approx $16 million) agricultural income from the said land leased by him in 2010.
The observation was made by three-member bench headed by Supreme Court Chief Justice Saqib Nisar while hearing a petition filed by PML-N leader Hanif Abbasi which seeks disqualification of Tareen and PTI Chief Imran Khan over alleged non-disclosure of assets, existence of offshore companies, as well as receiving foreign funding for the PTI.
Tareen’s attorney argued before the court that there are ambiguities in Punjab province’s agriculture tax laws and that, as a contractor of leased land, the agriculturist lawmaker was not liable to pay income tax on revenue generated from the land.
The lawyer maintained that, while tax is payable by the owner of the piece of land, the contractor (lessee) is not required to do the same on income generated.
However, the chief justice told the defendant’s lawyer that income from agricultural land comes in the form of rent [to the person who owns it] and in the form of harvest revenue for the person who leases it.
“We are trying to understand the law. We are not giving our final opinion on the matter,” the chief justice clarified. “Whoever earns income from agricultural land has to pay tax.”
He added that even if Tareen had acquired the land on lease, the PTI leader was earning income on it and therefore, was liable to pay tax on the revenue being generated.
The chief justice added that Tareen, consequently, had not disclosed his entire income before the Election Commission of Pakistan.
“One part of the income [from owned land] was declared in the nomination papers, while the other [from leased land] was not,” the chief justice said. “What is the consequence of making incorrect declarations?’
The defendant’s attorney maintained the election forms do not contain a column for leased land.
“What will be the legal implications of not paying tax on leased land?” Justice Bandial — one of the members of the bench asked.
“You have not been able to satisfy the court that tax is not payable on agricultural income,” the chief justice reiterated.
The hearing considered important by many constitutional experts, political observers and financial experts, was adjourned until Tuesday next week.