Appellate Tribunal directs FBR to create conducive environment

LAHORE: An appellate tribunal has directed the Federal Bureau of Revenue (FBR) to guide officers towards its mission and create an environment conducive to businesses.

It added that it is crucial to address the conduct of tax officials who misuse the national exchequer, which can lead to significant waste of taxpayers’ money in futile litigation.

According to details, a non-resident UAE-based company filed income tax returns within the specified time frame and claimed refundable taxes for services, imports, banks, utilities, etc. However, the department initiated income tax audit proceedings, and after examining and analyzing the records and considering the relevant laws, a significant income tax demand was created against the company.

The department maintained that the taxpayer was filing returns under the incorrect assumption that WHT deducted at the import stage and for services was an adjustable/refundable income tax, whereas the same was final tax liability. It further pointed out that the taxpayer was not operating as an “industrial undertaking’ but as a service provider, making WHT on services provided a final tax.

However, the taxpayer stressed that the department’s stance was flimsy, biased, patently illegal, and vindictive.

The relevant appellate forum held that Section 170 in conjunction with Section 120 of the ITO allowed for refunds based on an assessment order issued by the commissioner on the day the return was furnished. If an amount was paid in excess of the chargeable tax determined in the assessment order, it can be claimed as a refund under subsection (1) of Section 170. Section 170 grants the commissioner the power to verify whether the claimed refund is supported by evidence but does not suggest that the Commissioner can question the correctness of a return that has attained the status of an assessment order by the fiction of law, it added.

It further maintained that the Commissioner cannot go beyond the assessment order while exercising jurisdiction under section 170 of the ITO. If the Commissioner believes the tax deducted should be treated as final tax, he should assume jurisdiction under Section 122 of the Ordinance by issuing a show cause, the forum stressed.

According to the forum, the refunding authorities are limited to verifying refund documents and ensuring tax payment to the federal treasure. They cannot discuss the taxpayer’s business or determine whether the income is presumptive or whether WHT is final, adjustable, or minimum.

Copyright Business Recorder, 2024