Deduction of WHT: Pipe maker fails to shift onus on tax dept

LAHORE: A pipe manufacturer failed to shift onus on the tax department against deduction of withholding tax without submitting requisite record for identifying transactions in relation to which an obligation has not been discharged, said sources.

The department had initiated recovery proceedings after the failure of the taxpayers in deducting withholding obligations and providing required information. However, the manufacturer was of the view that it had carried out the exercise of deducting withholding tax but the department had initiated recovery proceedings without identifying the controversial transactions.

The department, on the other hand, was of the view that the taxpayer had failed to reply in accordance with the format required by the department and preferred to challenge the demand raised by the department on the plea that no individual transactions were identified before generating the demand. It could only be held responsible had the taxpayer produced required record.

The sources said the department had already sought filing of a reconciliation statement from the taxpayer, which was ignored by the later and approached the appellate forums to question the proceedings. Since the taxpayer had failed to furnish required information, therefore, the department was left with no option but to include the amounts deducted within the demand generated under the relevant provisions of the law. They further agitated that the taxpayer was extended various opportunities but he failed to provide the requisite record.

The tax authorities were of the view that they could make assessment and proceed to recoveries after the failure of taxpayer to produce record asked by the department to do so.

Interestingly, the appellate tribunal favoured the taxpayer and held the department responsible for not entertaining the record submitted by the taxpayer. However, the highest appellate forum the order passed by the tribunal was lacking clarity with regard to the information submitted by the taxpayer.

The tribunal had also ignored the fact that the department had sought reconciliation statement from the taxpayer, which the latter had failed to submit in accordance with the format required by the department.

Copyright Business Recorder, 2024