ISLAMABAD, Jan 11: The federal tax ombudsman (FTO), Justice Saleem Akhtar (retired), has asked the Central Board of Revenue (CBR) to direct the tax officials to stop the deduction of withholding tax on the profit accrued from regular income certificates (RICs) of taxpayers.

The ombudsman observed that the CBR should immediately withdraw the clarification issued to the Central Directorate of National Savings (CDNS), Islamabad so that relief could be provided to the complainant.

According to the FTO’s judgment issued on Friday, Justice Akhtar said in the light of the unambiguous provision of law on the issue involving the complainant, the clarification issued by the CBR was arbitrary, contrary to law and based on irrelevant ground falling under the term of maladministration.

The complainant was working as UN diplomat and serving in the United Nations Mission in Sarajevo, Bosnia and Herzegovina.

He was operating the foreign currency account in a bank at Aabara Melody branch, which was frozen following the nuclear tests.

He purchased RICs amounting to Rs0.750 million after encashing his frozen accounts in Pak rupees and requested the authorities concerned to entitle his mother to the profit of this amount, which was agreed by them.

According to the complainant, his mother was receiving the profit without deduction of tax from it, but for the last one year, the national saving officers started deducting the tax from the profits on the plea that his mother was not the holder of the certificates.

The ombudsman observed that the law clearly provided that the profits or interest from certificates, which had been created by conversion of foreign currency account or deposit held on May 28, 1998 with a bank authorized under the foreign currency accounts scheme of the State Bank would be exempted from tax.

Therefore, the exemption from tax on profit is allowed with reference to particular certificates created by conversion of foreign currency account or deposit as specified without any reference to the person holding such certificates, the FTO said.

The compliance report should be produced to this office within 30 days of this order, he added.