LHC recommends waiver of Rs50,000 court fee for small taxpayers to end FBR discrimination

The Lahore High Court’s Rawalpindi Bench has urged the federal government to address a long-standing inequity in tax litigation, where small and medium taxpayers are required to pay Rs50,000 per reference in high courts, while the Federal Board of Revenue (FBR) is exempt, Business Recorder reported.

In W.P. No. 2420 of 2024 (Mian Muhammad Akram versus Federation of Pakistan, etc.), Justice Jawad Hassan highlighted that the current income tax system creates a financial barrier for ordinary taxpayers and violates their fundamental rights under Articles 4, 10-A, and 37(d) of the Constitution. 

The court noted that the FBR faces no such obstacle in filing tax references, leading to unequal access to justice and discouraging small and medium enterprises from pursuing legitimate grievances.

The LHC recommended that the legislature consider either reducing or waiving court fees for taxpayers below a certain income or turnover threshold, or imposing nominal fees on the FBR to ensure parity and prevent frivolous litigation.

Dr. Ishtiaq Ahmad Khan, Director General Law at FBR, informed the court that the relevant amendment is under review and that the judicial observations will be submitted to the appropriate forums for consideration. The court disposed of the writ petitions but directed that its order serve as a guiding reference under Articles 199 and 201 of the Constitution. Relevant ministries, including Law and Justice and FBR, are expected to incorporate these recommendations in upcoming amendments to the Income Tax Ordinance.

The LHC also addressed concerns with the Appellate Tribunal Inland Revenue (ATIR). While Section 130 of the Income Tax Ordinance sets minimum qualifications for members, the court noted shortcomings in adjudication, including inadequate reasoning, procedural violations, and failure to apply Sections 127 to 129 correctly.

To improve the quality of tax adjudication, the court recommended that the government, in consultation with FBR and judicial academies, initiate continuous training programs for Commissioners (Appeals) and ATIR members. These programs should focus on legal reasoning, adjudicatory standards, recent jurisprudence, and compliance with constitutional fair trial principles. 

The court also suggested that ATIR appointments be reviewed by independent panels to ensure competence, impartiality, and transparency.