ISLAMABAD, Oct 18: Federal Tax Ombudsman Justice Saleem Akhtar has directed the Central Board of Revenue to implement the decision of the Ministry of Law and dropped proceedings for assessment and recovery against complainants shortly.

The Ombudsman observed that the refusal of the CBR not to implement the decision rendered through secretary, Ministry of Law, was arbitrary, illegal and amounted to mal-administration, said an official announcement issued on Friday.

The compliance report should be produced to his office within 30 days of the orders, said the Ombudsman.

The complainant, Karachi Dock Labour Board, 58-West Wharf Road, Karachi, claiming to be the statutory regulatory authority established under an act was functioning to regulate the employment of dock workers at the Karachi Port.

By virtue of its authority and duties, it claimed to be a local authority empowered to impose cess on the cargo handled at the Karachi Port to generate funds for the welfare of dock workers registered with the Karachi Dock Labour Board (KDLB) under the scheme.

It claimed exemption from tax and has relied on clause (88) of Part I of second schedule to the income tax ordinance, 1979.

The complainant further stated that KDLB when approached for getting income tax exemption certificate on the basis of being a local authority the department initiated proceedings for levy of income tax on its receipts.

The issue in the light of cabinet decision was taken to the Ministry of Law for taking necessary action in this regard. And the secretary law decided that KDLB was a local authority and was not liable to pay income tax on its receipts.

Despite that, the tax authorities demanded Rs33.412 million from the complainant under section 52 A for the assessment year 2001-02, by observing that ruling of the ministry has not been accepted by the CBR and it has moved the law division for review of its earlier decision. The department also recovered an amount of Rs19.60 million by attachment of bank account of KDLB from the complainant.

The Ombudsman in his short order recommended that the department should cancel the demand raised under section 52 A for the assessment year 2001-02 by the commissioner exercising his power 122 of the Income Tax Ordinance, 2001. The Ombudsman further directed to refund the amount recovered by attachment of bank account of the complainant.