In a significant development on Thursday, the Federal Constitutional Court (FCC) of Pakistan invalidated Section 7E of the Income Tax Ordinance, ruling the provision unconstitutional. This decision came after the Federal Board of Revenue (FBR) had filed appeals seeking to reinstate the tax rule, which the court ultimately dismissed. The ruling effectively annuls all actions taken under this section.
Section 7E had introduced a tax on deemed income derived from immovable properties, including unused plots of land. This measure had sparked widespread legal challenges across various high courts in Pakistan. Notably, the Peshawar, Balochistan, and Sindh high courts had previously declared the provision invalid, whereas the Islamabad and Lahore high courts had upheld its constitutionality.
In a decisive move, the Federal Constitutional Court reviewed appeals filed by citizens contesting the favorable rulings of the Islamabad and Lahore high courts. After careful consideration, the court ruled against the FBR’s position, striking down Section 7E. The verdict, which had been reserved since April 30, marks a pivotal moment for the country’s taxation framework concerning real estate.
This judgment is expected to bring considerable relief to Pakistan’s real estate sector, which had been under pressure due to the tax imposed on undeveloped and unused properties. The ruling may also influence future tax policies and legal interpretations related to property income in the country.
