ISLAMABAD: Following the promulgation of ‘Tax Laws (Amendment) Ordinance, 2025’, the Federal Board of Revenue (FBR) immediately started recovery proceedings and enforcement measures late Saturday night against companies where courts have granted decisions in favor of the FBR.
It is learnt that the Large Taxpayer Office (LTO) Islamabad remained opened on Saturday to recover taxes from telecom companies after promulgation of “Tax Laws (Amendment) Ordinance, 2025”. Senior FBR officials also visited LTO Islamabad evening to ensure recovery of taxes from telecom companies.
The FBR officials were ready for forceful recovery of taxes through attachment of bank accounts of these two companies falling under the jurisdiction of the LTO Islamabad. However, there was finally settlement between the FBR and the companies to pay the recoverable amount as per court orders.
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In case of one cellular company, the company agreed to pay the due amount in billions to the FBR after order of the Islamabad High Court (IHC).
Another telecom related company (joint venture) case is also related to payment of withholding tax on mergers.
According to the order of the IHC against the mobile phone company, applying these principles, this Court is of the view that the insertion of telecommunication companies into the definition of “industrial undertaking” by the Finance Act 2021 does not have any bearing on the tax year currently under question. As such, the FBR was justified in treating the tax collected under Section 148 of the Income Tax Ordinance on import of plant and machinery as minimum tax liability rather than an adjustable credit, and in disallowing the adjustment claimed by the company.
The company claimed initial depreciation as well as normal depreciation on fixed assets and amortization on intangible assets which was allowed in the deemed assessment order. However, the assessing officer found that the same was not in accordance with Rule 12 of the Income Tax Rules, 2002, therefore, disallowed the same.
In light of the legal and factual position discussed hereinabove, it is held that the action of the Assessing Officer in disallowing the amount of Rs 868,089,293/- was in accordance with law. The decision rendered by the Appellate Tribunal Inland Revenue, having duly appreciated the facts and applied the correct legal principles, does not suffer from any legal infirmity.
Accordingly, the FBR was justified in confirming the disallowance under the head ‘Customer Acquisition Cost’.
Clause (vi) of S.R.O. 390(I)/2001 clearly stipulates that the responsibility to deposit the said tax lies with the cellular operators. Accordingly, if a cellular company pays a government-imposed tax which, in substance, is the liability of the customer, such payment cannot be treated as the company’s own deductible expense for tax purposes, irrespective of whether or not the amount is recovered from the customer, IHC order added.
Copyright Business Recorder, 2025
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