'Clause' in IT Ordinance creates confusion between LESCO, FBR

LAHORE: The Clause 66, Part IV, of the second schedule to Income Ordinance has become a hard nut to crack between the Lahore Electric Supply Company (LESCO) and the Federal Board of Revenue as the former is adamant to collect arrears of Withholding Tax (WHT) on electricity bills from export-oriented units prior to the amendment of above-mentioned Clause of the Income Tax Ordinance, 2001.

Accordingly, a large number of export-oriented units are facing problems in dealing with the LESCO, particularly a few of them are intended to extend their load from the existing one. Interestingly, leading export firms, some of which are also among top five exporting firms in the country, are running from pillar to post to get the real benefit of Clause 66 of the Ordinance 2001.

It may be noted that Clause 66, Part IV of the Second Schedule to Income Ordinance specifically provides that the provisions of Section 235 (regarding levy of withholding tax on electricity bills) shall not be applicable to the taxpayers registered with sales tax as exporter or manufacturer of five export oriented sectors. This Clause has been applicable since 26th December 2019 but there is no clarification for the period starting from 1st July 2019 till the date of amendment in Clause 66 was made.

The LESCO's revenue department is in conformity with the FBR to the extent of application of the said Clause, but it is not ready to waive off the deferred amounts being chargeable for the period prior to the said Clause.

Deputy Commissioner Inland Revenue Bilal Zamir had also written a letter to the LESCO in January 2020 to exclude arrear amounts on account of Income Tax from the export-oriented firms. The letter has pointed out that LESCO's revenue department is advising the export-oriented units to clear their liabilities of WHT before seeking any further action from the Company. The Deputy Commissioner has argued in the letter that the FBR has already informed the LESCO that there are no liabilities of a particular firm in respect of income tax under the provisions of Section 235 of Income Tax Ordinance 2001, and this amount should be excluded from their bills but the LESCO's concerned revenue department has been seeking clarification time and again. A copy of the letter is available with Business Recorder.

There is a lot of confusion and ambiguity about application of Clause 66, Part IV of the Second Schedule to Income Ordinance, on the part of LESCO and the FBR is unable to bring an end to this confusion and make it clear to LESCO that no arrears could be collected from the export-oriented firms, which are exemption from WHT. Meanwhile, the export-oriented sectors are paying the cost of this confusion.

Copyright Business Recorder, 2020