LAHORE: Some power distribution companies (Discos) are allegedly claiming tax credit without deducting and collecting withholding tax against annual expenses, said sources.

According to the sources, the Discos take the plea before the income tax department that their operations are spread on multiple locations and it is not possible for them to produce humongous record and information sent by the staff for reconciliation of amounts to establish the deduction and collection of withholding tax.

The Income Tax department, on the other hand, holds Discos responsible to pay the amount of tax for their failure to collect tax as advance payment or deductions at source. Also, the department imposes default surcharge at the rate of 12% per annum from the date the Discos failed to collect or deduct the tax to the date it was paid.

It is also worth noting that every person collecting or deducting tax should furnish to the commissioner income tax a quarterly statement in the prescribed form.

Most of the Discos make huge payments of operating cost and P&L expenses crosshatching with the withholding statements and tax returns but they do not discharge their responsibility as withholding agent in the prescribed manner. They fail to mention CPR numbers in the withholding annual statements to verify tax deduction amount and get permission for credit of tax deduction accordingly.

The Discos approach the appellate forums with a plea of not providing reasonable opportunity of being heard when the department creates a tax demand.

However, according to the sources, the Discos management fails to provide details of payments made on account of various expenses with relevant supporting documents and instead seeking adjournments one after another and avoid submitting relevant documents or an explanation on the issue of non-deduction/non-collection of tax as required by the Ordinance.

Accordingly, the tax authorities are left with no option but to close down the proceedings on the basis of the available facts, they added.

Copyright Business Recorder, 2023