PESHAWAR, Dec 26 The Peshawar High Court on Friday suspended the recovery of advance income tax levied through the Finance Act 2008 on the industrial and commercial consumers of electricity at the rate of 10 per cent of the bill amount.

The validity and levy of the 10 per cent withholding advance tax on the gross bill amount of the consumers was challenged by Messrs Flying Craft (Pvt) Limited through a writ petition.

A single bench comprising Justice Syed Musaddiq Hussain Gillani after hearing arguments of the petitioner's counsel Abdul Rauf Rohaila directed the Peshawar Electric Supply Company (Pesco) authorities to receive only electricity consumption bill and the payment of the newly levied withholding tax should remain suspended in the meanwhile.

The parliament had emended the Income Tax Ordinance 2001 through the Finance Act 2008 and levied the controversial advance income tax.

Mr Rohaila contended that the parliament had traveled beyond its jurisdiction when such levy had been imposed through the Finance Act 2008.

According to Entry No. 47 Part I of the Fourth Schedule of the Constitution read with Article 260 the Parliament had been authorised to levy or recover directly, indirectly or advance any tax on income and no tax could be levied without considering the business and income history determined by the income tax authorities.

It was urged that payment of income tax in advance was not a new modality as it was originally introduced in Income Tax Act 1922 which continued in Income Tax Ordinance 1979 and Income Tax Ordinance 2001.

However, a rationale had been adopted for the collection of advance tax payable in four quarterly installments taking into consideration the income and tax history especially the last assessed and determined income.

Mr Rohaila further stated that collection of advance withholding tax through electricity bills was inserted and introduced and promulgated in 1992 but on very nominal rates recoverable from commercial and industrial consumers.

This levy, he stated, was time to time enhanced but never exceeded Rs2,000 per month which was subject to adjustment on final determination.

He submitted that by virtue of amendments brought in section 235(4) of the Income Tax Ordinance 2001 through the Finance Act 2008 the parliament had levied advance withholding tax at the rate of 10 per cent of the bill amount not withstanding the taxability and pay ability of the taxpayer.

In some of the cases, it was stated that the assesses were sustaining heavy losses and by no imagination there income was liable to tax and that when no income could be accrued and assess by the taxpayer the parliament had no authority and had traveled beyond its jurisdictions to impose such tax.