ISLAMABAD (August 19 2003) : Investment banks have demanded application of reduced tax rate of 35 percent as in the case of public limited companies instead of the tax rate for banking companies.
When contacted, sources told Business Recorder here on Monday that the investment banks have won their cases up to Appellate Tribunal and the government would endorse the decision in their favour after receiving verdict of High Court.
At present, investment banks are bound to pay uniform banking rate as applicable to banking companies.
These banks have demanded public companies' rate.
It is learnt that some investment banks approached the judicial fora contesting the applicability of high banking rate.
The Central Board of Revenue (CBR) eventually lost the case against the investment banks at all judicial fora including Income Tax Appellate Tribunal (ITAT).
Sources said that even the Appellate Tribunal directed CBR to apply public limited companies' rate on investment banks as these institutions have specific functions and can not be termed as commercial banks.
The CBR has filed an appeal before the High Court against the verdict of Appellate Tribunal.
However, sources categorically admitted that the CBR would have no option but to implement the decision of High Court in case the Court maintained the judgement of Appellate Tribunal.
They said, “The Board is inclined to implement the verdict of the Court.
Besides, there is no doubt that investment banks have a very strong case.”
The department is levying banking rates on these investment banks from the first day.
However, implementation of the decision would not require any amendment in the Income Tax Ordinance 2001.
Sources said that Commissioners of Income Tax are presently compiling details about the latest position of assessment of investment banks.
The CBR, in budget 2003-04, has changed the status of five Muslim banking/financial institutions from private limited companies to public limited companies, reducing tax rate from 43 percent to 35 percent.