Tax returns for Tax Year 2012: FBR skips certain key issues

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue (FBR) has skipped certain issues while finalising the tax returns for Tax Year 2012 notified vide SRO 848(I)/2012.

A tax expert said here on Wednesday that the levy of surcharge u/s 4A of the Income Tax Ordinance, 2001 on certain categories of taxpayers and taxation of services liable to withholding tax u/s 153(1) (b) of the Ordinance @ 1% when affected under SRO 333(I)/2011 dated 02.05.2011 has been skipped while as per Annex C-1 of the Companies tax return “Tax already paid including adjustments (Including Surcharge) has been made part of tax return”.

Sources said that certain suggestions were forwarded to FBR Member IR in proposed amendments in the Income Tax Rules, 2002 vide Notifications S.R.O 727(I)/2012 & S.R.O 752(I)/2012 wherein proposed income tax return forms for Tax Year 2012 have been published but at the time of finalizing tax returns the issues of crucial nature have been skipped.

Services u/s 153(1)(b) to Zero rated taxpayers under sales tax act, 1990 (SRO 333(I)/2011):

FBR has skipped to place these types of taxpayers in the newly introduced tax returns. As per proviso (b) to sub-section 3 of section 153 of the Ordinance income tax deducted on these transactions shall be treated as ‘Minimum Tax Liability’ instead of final tax liability.

Levy of 15% Surcharge u/s 4A of the Income Tax Ordinance, 2001:

The levy of surcharge has been omitted intentionally in the tax returns, which is contrary to the clear wording of the law and verdicts of the High Courts of Pakistan. Income Tax (Amendment) Ordinance, 2011 inserted a new section 4A in the Income Tax Ordinance, 2001 on March 15, 2011. The law categorically says that it is to be paid @15% of the income tax payable for the period commencing from the promulgation of this Ordinance till June 30, 2011.

There are certain categories of taxpayers whose income year falls outside the material date of 30.06.2011 but they are legally bound to discharge this obligation u/s 4A. The taxpayers adopted special tax years and closed accounts on December 31st and September 30th are liable to pay surcharge for the period 15 March 2011 to June 30, 2011. It clearly means period between 01.01.2011 to 31.12.2011 and 01.08.2010 to 30.09.2011 adopted by some taxpayers as special tax year shall also be liable for payment of Surcharge u/s 4A.

Earlier FBR has also said that imposition of 15% surcharge on the amount of payable income tax for the period 15th March, 2011 to 30th June, 2011 is applicable on all income of taxpayers whether individual, Association of Persons (AOPs), or Companies. It is an across-the-board surcharge, levied without exception or discrimination, on all categories of income taxpayers. As such, the promulgated law does not envisage any exemption or special treatment to any category of taxpayers. Earlier on a representation to FBR, a clarification was also issued by the Chief IR (Income Tax Policy) vide letter C.No.4(27)ITP/2010 dated April 22, 2011.

Tax expert further quote the verdict of Sindh High Court on the issue. Provisions of section 4-A of Income Tax Ordinance, 2001 were silent qua applicability thereof either to taxpayer whose tax year started from July 1 and ended on 30th June or those whose tax year started other than normal tax year — Normal tax period would be a period of twelve months ending on 30th June – Permission granted to petitioner to submit return on 1st January of each year was only to accommodate him and not for purposes to evade payment of income tax on such count — Impugned surcharge was levied for rehabilitation of flood affectees and would apply to every taxpayer using either normal tax year or special tax year.

Surcharge is a one time levy and chargeable for the period from 15/03/2011 to 30/06/2011, therefore, taxpayers having account closing period after the 30th day of June 2011 (30.09.2011 or 31.12.2011) shall also discharge their statutory liability in the corresponding period tax returns, covering the defined period for chargeability of Surcharge u/s 4A of the Ordinance and in the light of verdict of High Court-sources added.