Lahore High Court Bars FBR from Demanding Advance Tax on First-Time Property Sales

Lahore High Court Bars FBR from Demanding Advance Tax on First-Time Property Sales

In a significant development for real estate developers and original property sellers, the Lahore High Court Rawalpindi Bench has issued an interim order stopping the Federal Board of Revenue (FBR) from collecting advance tax on first-time sales of immovable property.

Justice Jawad Hassan ruled that under Section 236C(4)(b) of the Income Tax Ordinance, first-time sellers who are original allottees — and certified by the relevant authority — are legally exempt from paying advance tax on property sales.

The Case: Elite Estates vs. FBR

The petition was filed by Elite Estates, a well-known housing society near the Islamabad motorway. The society argued that the Punjab Land Records Authority (PLRA) was wrongfully demanding advance tax via its online portal, despite the clear legal exemption.

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Representing the petitioner, Barrister Asad Ladha pointed out that no FBR notification authorized such tax collection from original allottees. The court accepted this stance and temporarily allowed Elite Estates to proceed with the transfer of plots to 128 buyers, provided the society submits:

• Post-dated cheques, and

• An undertaking to pay the tax later if the final verdict requires it.

Wider Implications for Real Estate

Legal experts hailed the court’s decision as a positive signal for the real estate sector, especially at a time when property deals were under strain due to tax complications.

Meanwhile, sources suggest that the federal government is reviewing the 3% federal excise duty on first-time property sales, as it reportedly generates minimal revenue and is mired in legal controversy.

The case will be heard again on April 28.