Tax paid against exempted agriculture income: FBR must implement IT-based solution to verify claims: President
President Arif Alvi has directed the Federal Board of Revenue (FBR) to implement an IT-based solution whereby all claims of tax paid by FBR's taxpayers to provincial authorities against exempted agri income should be cross-checked on real-time basis. President Alvi has endorsed the order of the Federal Tax Ombudsmen (FTO) and issued directions to the FBR chairman for compliance.
While rejecting the representation of the FBR, the President has ruled that by taking up the matter in suo motu jurisdiction, the learned FTO did not commit any wrong, rather the step is laudable to reform and improve the system and workability to curb the menace of tax evasion. The tax/revenue collection functionaries of the State should implement such recommendations wholeheartedly to improve functioning. It appears that certain steps are under way to implement the reformatory recommendations and efforts in that direction can yield positive results. There is neither any justification made out to upset the recommendations of learned FTO, nor there is any ground for interference.
Accordingly, the President has rejected the instant representation of the FBR. President Arif Alvi has further issued instructions to the FBR to develop and implement an IT-based solution whereby all claims of tax paid by FBR's taxpayers to the provincial authorities against exempted agriculture income should be cross-checked on real time basis. System generated communications (without any human interface) asking for evidence of payment of agriculture income tax may be used prior to any formal amendment in deemed assessments under USAS.
The President further directed the FBR chairman to direct the chief commissioner-IR, Hyderabad, to complete the verification process and pass appropriate amended orders in respect of taxpayers who have claimed exemption on account of agriculture income for tax years 2014, 2015, 2016 and 2017, but failed to provide supporting evidence, as per law, and report compliance within 60 days.
The FTO on its own motion (OM) investigation assumed jurisdiction under Section 9(1) of the Federal Tax Ombudsman Ordinance 2000 (FTO Ordinance) against the alleged systemic maladministration of the department. It was noted that after insertion of the proviso to Section 111 (l)(d)(ii) of the Income Tax Ordinance 200I (the Ordinance) vide Finance Act (FA) 2013, the explanation about the agriculture income declared by the taxpayers as exempted, was acceptable "to the extent of agricultural worked back income on the basis of agriculture income tax paid, under the relevant provincial laws." Pending the investigation before the learned FTO, it revealed that during the period relevant to Tax Years 2016 and 2017, six hundred and six (606) taxpayers had declared agriculture income tax in their returns filed in RTO, Hyderabad.
The departmental representative (DR) has informed that pursuant to the recommendations of the FTO, the tax department has started implementation process and the department. The FBR can implement that IT-based solution only by linking its database to agri-income tax data base maintained by provincial revenue boards/governments. Since provincial revenue boards/governments have so far not established central database for provincial agriculture income and tax there on, this recommendation cannot be implemented till the time said database is established by the provincial governments.