The Federal Board of Revenue (FBR) has filed a lawsuit against Faysal Bank Limited in connection with a tax dispute over the taxability of gains on a bargain acquisition.
FBR filed lawsuit against Faysal Bank
This action is part of the continuous efforts of tax authorities to resolve tax liability issues.
Faysal Bank acknowledged a dispute between the FBR’s tax department and the bank over the tax classification of gains stemming from a bargain purchase related with the acquisition of ex-RBS Pakistan in a recently issued half-yearly financial report for the period ending June 30, 2023.
The increased tax burden in question is around Rs. 1,154.701 million and has remained constant since December 31, 2022.
Commissioner of Inland Revenue
Initially, the Commissioner of Inland Revenue (Appeals) [(CIR(A)] ruled in favour of the bank, essentially dismissing this additional tax burden.
However, the income tax department afterwards filed an appeal with the Appellate Tribunal Inland Revenue (ATIR) disputing the decision of the CIR(A).
ATIR examined the case
During the current period, the ATIR examined the case and upheld the CIR(A)’s earlier ruling, holding that the gain on bargain acquisition should not be taxed.
In response, the tax department filed a complaint with the Honourable High Court of Sindh, starting legal procedures against Faysal Bank.
Nonetheless, the bank’s management is convinced that the verdict will be favourable.
As a result, no provision for probable financial ramifications has been recorded in the bank’s unconsolidated financial statements in this regard.
The legal battle shows the difficulties of tax concerns in the banking industry, as well as the importance of legal procedures in resolving such conflicts.
Both sides will continue to argue their respective perspectives on this topic while waiting for the court’s verdict.
To read our blog on “FBR announced categories of mandatory Tax Return for 2023,” click here
