ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to maintain a separate record of all refunds of the Workers Welfare Fund (WWF) paid to the taxpayers.
In this connection, the FTO issued an order on Tuesday.
According to the order, the overall amount of refund of WWF communicated by the Inland Revenue (IR) field formations must be separately summed up by the Secretary of Revenue Budget IR FBR.
The Inland Revenue field formations must reflect the overall refund amount of the WWF, if any, paid by them during the year. The accumulative amount of refunds of a non-tax levy/WWF paid from the revenue collection needs to be adjusted at the time of the final yearly adjustment of the federal accounts.
The refunds order under section 170(4) of the Income Tax Ordinance 2001 covers only the issuance of tax refunds, the FTO added. The FBR IR Policy Wing should issue necessary clarification for all concerned and the IR-Operations Wing should develop an SOP for the WWF refunds, the FTO order added.
In a past order, the FTO has declared that the Workers Welfare Fund (WWF) is neither a tax covered under the Income Tax Ordinance, 2001 nor falls in the category of “other taxes”, i.e., sales tax, federal excise duty, customs, as it is a non-tax levy.
Therefore, the adjustment of a determined tax refund against non-tax cess, i.e., WWF is patently illegal, a departure from the norm and discriminatory. Brief facts of the case are that the complainant, a public limited company and a subsidiary of a company filed refund applications for various years, 2013 to 2016; 2018 to 2020. After Taxpayers, repeated requests and a long wait, the Large Taxpayer Office (LTO), Islamabad passed refund orders u/s 170(4) of the Income Tax Ordinance, amounting to Rs109.2 million.
A considerable time since passing the above-mentioned orders elapsed but the FBR has not released the payments to the complainant. The complainant company approached the FTO office for relief and it complained that despite providing all supporting documents, no refund orders for Tax Years 2018 –2020 has been issued despite several requests to the senior officials, including the chairman FBR.
While responding to FTO notices initially the Chief Commissioner-IR, LTO Islamabad informed that the refund orders for Tax Years 2013-2016 have been passed by LTO, Islamabad on 31.01.2020. Further processing for the transfer of funds will be made by the FBR.
The CCIR further reported that a refund order for Tax Year 2020 has been issued on 18.02.2022. As for Tax Year 2018, it has been informed that the verification process has been completed and a refund order will be issued expeditiously. For Tax Year 2019 it has been informed that the verification is under process.
The authorized representative (AR) while reacting to the above-mentioned comments of the respondent department informed that despite issuing refund orders for Tax Years, 2013 to 2016, the refund amount has not been transferred to the taxpayer’s account.
Second, in the refund order for Tax Year 2020, the DCIR has adjusted the WWF demand for the previous four years i.e. 2017 to 2020 without giving reasons for making such adjustments. All the orders have been passed without issuing notice or providing opportunity of hearing.
While deciding the case, FTO has observed that WWF is neither a tax covered under Income Tax Ordinance, 2001, nor falls in the category of “other taxes”, i.e., ST/FED/Customs. This is basically a non-tax levy which is only collected by tax authorities.
Thus adjustment of a determined tax refund against non-tax cess, i.e., WWF is patently illegal, a departure from the norm and discriminatory. Furthermore, FBR had itself issued clear instructions vide C. No. 1(10) ST-LP and E/2020 66012-R dated 25th May 2021, wherein, all field formations were prohibited to adjust liabilities of WWF and WPPF against refunds of income tax.
The LTO’s adjustment order is in defiance of FBR’s instructions on the subject. The FTO has, accordingly, ordered FBR to :-( i) direct Chief CITRO FBR to ensure that the amounts of refund for Tax Year 2013to 2016 vide order dated 31.01.2022 are transferred to the taxpayers account immediately. (ii) direct the Commissioner concerned to dispose of refund applications for Tax Years 2018 and 2019 strictly in accordance with law and after giving proper hearing; (iii) direct the concerned CIR to work out and arrange additional payment for delayed refund u/s 171(1) of the Ordinance for TYs 2013, 2014, 2015, 2016, and 2020. (iv) direct the Commissioner-IR, concerned to revisit the order u/s 170(4) for Tax Year 2020 passed on 18.03.2022 and subsequent illegal adjustment of refund against WWF;(v) the officer who has made illegal adjustment need to be counseled after obtaining his explanation.
Copyright Business Recorder, 2022