ORDER SHEET

     IN THE HIGH COURT OF SINDH, KARACHI

                                 C.P. No. D-1660 of 2001

   Date                         Order with signature of Judge

For further orders

17.04.2009.

          Through order dated 30.8.2002 on the request of counsel for the petitioner, this petition was adjourned sine die, as the issue regarding  taxability of Payments received with regard to retirement was pending before the Hon'ble Supreme Court of Pakistan.

2.       Today nobody is in attendance. Perusal of the file shows that the petitioner claims exemption from the payment of receipts on account of voluntary retirement and claims exemption of with holding tax on the amounts interalia including exgratia. The petitioner impugned Circular No.15 of 1997 dated 6.11.1997 and an earlier Circular No.1-IT of 1965 dated 01.07.1965, on the basis of which claim of exemption on exgratia payment received on retirement was treated as part of salary. The issue regarding taxability or otherwise of the payment receipts on V.S.S. (Voluntary Separation Scheme/Golden Handshake) was considered by the Hon'ble Supreme Court of Pakistan in the case of Malik Muhammad Inam v. Federation of Pakistan reported in 2006 P.T.D 2277 SC in which the Hon'ble Supreme Court has been pleased to observe that such payment are taxable. As such respectfully following the judgment of Hon'ble Supreme Court of Pakistan this petition is also disposed of in the terms of the said judgment.

3.       However, in the impugned Circular No.15 of 1997 Central Board of Revenue granted relief to the terminated/retired employees, if so opt to get the amount received, taxed at reduced rate applicable to the assessment year 1998-99. It was further provided in the said circular that if an employee considers that three years average method is more beneficial to them they could opt for such.

4.       Since in this petition challenge was made that the respondent deducted tax on exgratia payment arbitrarily, the petitioner, if so advised, may seek the relief in terms of Circular No.15 of 1997 in respect of beneficial rate of 1998 or three years average which relief has also been granted to other tax payers by the Department in view of judgment of Iftikhar Ahmed Butt v. Government of Islamic Republic of Pakistan 2002 P.T.D 562, where it has been held that exgratia  payments fall within the definition of salary, however the assessees are entitled for relief of three years average method as contained in the Board's Circulars. With these observations, this petition is disposed off.

                                                                                      JUDGE

                                                                   JUDGE