Withholding Tax Deduction

[Atif Mufassir]

This issue was debateble before the promulgation of new Income Tax Ordinance, 2001 since in the previous Ordinance, this matter was not dealt with in section 50(4). At that time two confilcting decisions of Income Tax Appellate Tribunal were available. One Tribunal held that tax has to be withheld on the amount inclusive sales tax and the other Tribunal held that tax shold be withheld on the amount exclusive of sales tax. In the said scenario, the tax payer could take relief from the decision of the Supreme Court of Pakistan wherein it has been held that whenever more than one interpretation of law is possible then one favouring the tax payer shall prevail.

However, the new Ordinance is quite clear on this issue and it has been provided in section 153 that ( from July 01, 2002 and onwards)tax shall be deducted on the gross amount. The gross amount payable is defined to include the sales tax, if any payable in respect of the sale.

I hope that the above clarification will serve your purpose.


atif m

Edited by - Atif Mufassir on Sep 17 2003 40610 PM