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Teachers engaged in Full-Time Teaching, even with Administrative Duties, qualify for the 25% Tax Rebate --- Islamabad High Court, Islamabad Upholds Tax Rebate for School Principals, Headmasters and Senior Teachers

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Islamabad 31-01-2025: The Islamabad High Court (IHC) has dismissed the Federal Board of Revenue (FBR)’s Writ Petition, upholding the President’s Secretariat’s decision that granted a 25% tax rebate to principals, headmasters, and senior teachers of elementary and secondary schools.

The judgment, delivered by Mr. Justice Sardar Ejaz Ishaq Khan, held that the Federal Tax Ombudsman (FTO) had the jurisdiction to investigate FBR’s refusal to grant the tax rebate, rejecting FBR’s argument that such matters were outside the FTO’s purview.

The dispute originated when FBR denied the 25% tax rebate under Clause (2) of Part III of the Second Schedule to the Income Tax Ordinance, 2001, to school principals and headmasters, claiming they did not qualify as full-time teachers due to their administrative duties. The FTO ruled in favor of the teachers, citing that similar rebates were granted to their counterparts in Federal Government and KPK schools.

FBR challenged this ruling, arguing that the FTO had no jurisdiction under Section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000, which excludes matters related to tax assessment, interpretation, and classification where legal remedies exist. The President’s Secretariat upheld the FTO’s decision, prompting FBR to file a Writ Petition in the Islamabad High Court (IHC).

The Court ruled that FTO’s jurisdiction is not automatically excluded in tax matters. Section 9(2)(b) only applies where a legal remedy (appeal, review, or revision) is available, which was not the case here.

Pakistan through Secretary Finance Vs. Messrs Lucky Cement (2007 SCMR 1367)

FBR relied on Circular No. 6 of 2013, which defined a “full-time teacher” as someone not engaged in administrative roles. The Court rejected this argument, emphasizing that circulars cannot override statutory provisions.

Oxford University Press Vs. Commissioner of Income Tax (2019 SCMR 235)

The Court found FBR’s actions to be unjust and discriminatory, as similar teachers in Federal and KPK schools received the rebate, while others were denied. This fell under the definition of maladministration as per Section 2(3) of the Federal Tax Ombudsman Ordinance, 2000.

After reviewing all arguments, the Court dismissed FBR’s petition in limine, stating that no valid grounds existed for judicial interference. This ruling reaffirms the principle that teachers engaged in full-time teaching, even with administrative duties, qualify for the 25% tax rebate.