ISLAMABAD: President Arif Alvi has dismissed/rejected 81 representations/appeals filed by the Federal Board of Revenue (FBR) and upheld the orders of the Federal Tax Ombudsman (FTO) to treat the income of low-paid employees as salary income under section 12 of the Income Tax Ordinance,2001 for taxation purposes.
Briefly, in the subject cases, the complainants were temporary lecturers hired by the Higher Education Department (HED), Khyber-Pakhtunkhwa and posted at various colleges in the KPK. The employer colleges were alleged to have been deducting excessive taxes at source from the meagre salaries paid to the complainants. As a matter of concern for the complainants instead of treating them as salaried persons, to be treated u/s 149, they were rather subjected to unjust deductions u/s 153(i)(b) of Income tax ordinance, 2001 i.e. under head “Services Rendered” and that too treating the complainants as non-filers.
This treatment was vehemently agitated by the subject 81 complainants.
When confronted the department defended the treatment stating;“College authority has hired the subject complainant on semester basis and the taxpayer providing services to the Government Degree College Kaki Bannu in private capacity upon which tax is withheld u/s 153(1)(b) of the Income Tax Ordinance 2001 @ 10 per cent in case of filer and @ 20 per cent in case of non-filer. As the complainant is neither registered nor filed returns(s), of income, therefore, tax deduction @ 20 per cent has rightly been made as per prescribed rates.
The Tax Ombudsman while disposing of the subject complaints of low-paid employees, whose services were hired by Government Educational institutions in the KPK, had recommended the FBR to treat the payment against services rendered as salary income. The FTO had further recommended FBR to:-(i)ensure that hired lecturers of Post Graduate College, Bannu or other such educational institutions are not burdened with excessive tax deductions at withholding stage. While taxpayers facilitation constitutes the core function of FBR, its implementation on ground should also be visible.
(ii) direct RTO to process the instant cases on priority basis and under relevant legal provisions, so as to save the complainants from grave hardship they are suffering ever since hired by the concerned institution.
(iii) issue necessary clarification for all withholding agents to safeguard such employees against excessive deductions.
President Arif Alvi, while disposing of the subject Appeals, has observed that:“The order of the learned FTO is based on valid justifications and sound legal footings. Further, the FBR vide its letter dated 11th April 2022 has already decided that the income of such employees hired under any of the forms, ie, regular, ad hoc or daily wages, contingency etc would be treated as salary income under section 12 of the Income Tax Ordinance, 2001. There remains no justification to treat the complainants differently. Thus, the representations of the FBR are liable to be rejected accordingly.
The president has held that: “the FBR vide its letter dated 11th April2022 has already decided that the income of such employees hired under any of the forms, ie, regular, ad hoc or daily wages, contingency etc would be treated as salary income under section 12 of the Income Tax Ordinance,2001. There remains no justification to treat the complainants differently. Thus, the representations of the FBR are liable to be rejected accordingly.”
Copyright Business Recorder, 2022
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