Tax officer rejects refund claims against commission paid outside Fata

LAHORE: A taxation officer has rejected refund claims against the commission paid to taxpayers for the sale of petroleum products outside Federally Administered Tribal Areas (Fata), said sources.

The taxpayers were engaged in the business of purchase of petroleum products and their subsequent sale to consumers. They were of the view that retail sale of petroleum products is made by them through petrol pumps set up in Fata where the enforcement of the Income Tax Ordinance is not extended.

According to them, the companies selling petroleum products to them pay commission or give a discount under a contractual arrangement. The Income Tax Ordinance makes it a mandatory obligation of the seller to deduct tax from the amount of the commission or discount allowed at a specified rate in the nature of final tax regime.

The taxpayers filed applications for refund of the amount deducted as tax on the ground that the enforcement of the Ordinance was not extended to Fata.

However, the concerned tax officer rejected the application while maintaining that the provisions of the Ordinance are attracted because the payments have been made by the taxpayers in the settled/taxable areas of Pakistan.

The department maintained that the factum of income was accrued on account of the commission paid to the taxpayers for the sale of petroleum products and not the sale of petroleum products to the consumers at the petrol pumps operating in Fata.

The contractual arrangement, the actual sale and payment as well as deduction of the tax had taken effect in the areas of Pakistan outside the territorial limits of Fata, therefore, the transactions and the income arising from such sale were not immune from the enforcement of the provisions of the Ordinance. The income derived by the taxpayers was on account of commission paid to them outside Fata.

The taxpayers failed to establish the fact that taxable income was not derived from the area where the statute was enforced and applicable.

Copyright Business Recorder, 2024