LTO fails to deduct tax on transfer from CWIP to fixed assets

LAHORE: The Lahore Tax Office (LTO) failed to deduct tax on transfer from construction work in progress (CWIP) to fixed assets, as no payment was made, said sources.

According to details, the Commissioner Inland Revenue (Appeals -l) had deleted the demand regarding non-deduction of tax levied under the heading of transfer from CWIP to fixed assets against a chemical firm.

However, the concerned Commissioner termed it unjustified and argued that the default surcharge is a mandatory levy and hence cannot be deleted and to be imposed in a scenario where tax was not deducted as per law. He further maintained that the previously passed order is bad in law and against the facts of the case, as the taxpayer was rightly charged with the tax as the taxpayer failed to furnish supporting evidence of the declared results before the Assessing Officer.

However, the taxpayer company provided the appellate forum with a letter and stated that reply with evidence was duly made to the assessing officer through the said letter. Without taking into consideration the reply made the tax was levied on the taxpayer, it maintained. Additionally, copy of ledgers, income tax return and accounts financial statement were also submitted by the company.

The appellate tribunal held that for the issue of deletion of the tax amount arising from transfer of CWIP to fixed assets, the department rightfully deleted the charge as the transfer from CWIP to fixed assets was made without any payment, henceforth, no deduction is necessary.

It was further held that on the issues of tax deletion under the heads of packing material, consumed stores & spare and advances to supplier, the produced copies of the ledger by the taxpayer company indicates that wherever tax was applicable was duly deducted and deposited.

In addition thereto, the ATIR held that the produced copy of the income tax return reflects that there was a substantial amount of refund, due to which default surcharge cannot be levied. Therefore, the departmental Appeal was rejected by the appellate tribunal.

Copyright Business Recorder, 2024