ISLAMABAD, Oct 9: Federal Tax Ombudsman Justice (Retd) Saleem Akhtar has directed the Central Board of Revenue to refund Rs0.56 million additional tax collected from a private limited company of Sialkot.
The FTO has also asked for compliance report in the matter by October 20, said an official announcement here on Tuesday.
He recommended to the commissioner of Income Tax to invoke his jurisdiction under section 138 of the Income Tax Ordinance suo motu and cancel the order passed under section 86 on June 15, 1999, which in fact was a nullity in law.
The FTO gave these directives while deciding a complaint lodged by a private limited company of Sialkot which was awarded the contract by the Sialkot Municipal Corporation (SMC) for collection of Octroi during 1998-99 for over Rs104 million.
The contractor had agreed to pay under a lease agreement under the Punjab Local Council Lease Rule, the amount in 10 equal instalments and fulfilled the terms. The complainant also paid income tax of bid money at 5 per cent with each instalment.
The complainant said that the Sialkot Municipal Corporation also charged Rs0.56 million from his security deposit on account of additional tax under section 86 of the Ordinance, allegedly for late payment of tax due under section 50(7-A) without any prior intimation of the alleged liability.
The complainant submitted that deduction of Rs0.56 from his security deposit was unwarranted in law and he applied for refund in January 2000 but there was no response.
The representatives of revenue division were asked to explain the basis of the view that tax under sub-section (7A) of section 50 has to be collected on the entire bid money from the Octroi contracts on the date of awarding contract notwithstanding the fact that the lease agreement provided for collection of bid money in monthly instalments which is in accordance with the Punjab Local Councils Lease Rules.
The revenue division submitted that in case tax under section 50 (7A) was to be collected on instalments such as provision could have been made in the Income Tax Ordinance but the facility has not been provided under section 50 (7A). Since the Municipal Corporation failed to recover the full tax in advance at the time of awarding contract, additional tax was charged and recovery was made from the mayor of the Sialkot corporation and not from the component.
The FTO stated that these submission have been considered keeping in view the facts and circumstances of the case. The provision of sub-section (6) of section 50 is on the basis of an annual rate prescribed in the First Schedule on each category of transport vehicles that the taxpayer already possesses and owns and “advance tax is collected under sub-section (7A) on the amount of bid offered by contractor to secure lease for collection of Octroi.
He observed that the imposition of additional tax on SMC was illegal and consequently, SMC being agent of the revenue division was not authorized to deduct from the security of the complainant the amount of additional tax. The decision to charge additional tax under section 86, therefore, was contrary to law.
