Applicability of WWF on E&P companies questioned

A legal question has been raised by tax authorities on the applicability of the Workers Welfare Fund (WWF) on the oil exploration and production companies to determine whether such petroleum companies are liable to pay the levy. In this connection, Large Taxpayer Unit (LTU) Karachi on Thursday requested the Federal Board of Revenue (FBR) Legal Wing to explain the legal position about the applicability of the WWF on the exploration and production companies.
The LTU Karachi has also asked the FBR to clarify the applicability of the WWF Ordinance, 1971 on the oil exploration and production companies. According to the LTU, the question has been raised on imposition of WWF in case of E&P Companies operating in Pakistan as per petroleum concession agreement (PCA). For the tax purpose, profits and gains of exploration and production of petroleum companies are treated as a separate business in view of Fifth Schedule of the Income Tax Ordinance 2001 read with Petroleum Concession Agreement (PCA) signed between the federal government and E&P Companies as per Pakistan Petroleum (Exploration and Production) Rules 1986.
In the PCA agreement, a specific clause has been provided thereby mentioning that "all rules, laws, regulations in effect on effective date including the Workers Welfare Fund Ordinance, 1971 and the Companies Profits (Workers Participation) Act, 1968 shall apply to this Agreement, throughout its term, whether or not subsequently amended or revised", LTU Karachi said.
LTU Karachi said that based on above clause of PCA agreement, all the E&P Companies are contending that WWF stands frozen with the provision of laws available at the time of signing PCA agreement. They however, opined that any amendment, revision or change in the cited law brought subsequently will not affect the contents of PCA agreement.
However, on the other hand, the audit authorities are of the opinion that operation of WWF Ordinance, 1971 etc has not ''ipso-facto'' ceased due to execution of PCA agreement, and likewise any amendment, revision or change brought subsequently in WWF Ordinance, 1971 shall continue to prevail even after the effective date of PCA agreement, LTU Karachi.
In view of the said legal position, LTU Karachi has requested the FBR Legal Wing to clarify as to whether WWF in the case of E&P companies has ceased to operate on the effective date of PCA agreement, or is leviable as per prevailing law of WWF.