KARACHI: The Federal Tax Ombudsman (FT) has recommended to the Federal Board of Revenue (FBR) to direct the Chief Commissioner to issue refund/compensation to labour contractor amounting to Rs198,966, as the refund arose as a result of excess deduction of tax at source. According to details, M/s Azim Brother, a labour contractor, had filed a complaint with the FTO against non-implementation of order passed by the Commissioner (Appeals) and non-issuance of resultant refund. Azim Brothers claimed refund of Rs75,331, Rs61,178 and Rs62,457 aggregating to Rs198,966 for Tax Years 2003 to 2005 as per returns filed and deemed assessments finalized under Section 120(1) of the Income Tax Ordinance 2001 (the Ordinance). The refunds arose as a result of excess deduction of tax at source under Section 153(1)(b) of the Ordinance (services rendered). Matter pertaining to tax treatment of receipts on account of services rendered had gone before the HonÃ¢â‚¬â„¢ble High Courts at Lahore and Peshawar and vide judgments cited as 102TAX229(LHC), 98TAX114(LHC), 2008PTD1243(LHC) and 103TAX62(PHC) it was held that all services rendered are liable to be taxed under normal law provisions and are not to be placed in the final tax regime. The Deptt had evidently wrongly rejected the ComplainantÃ¢â‚¬â„¢s refund claims and after appeals filed by him to contest the DeptÃ¢â‚¬â„¢l treatment the Deptt finally accepted that the tax deductions were adjustable and appeal effect was given vide DCRs No. 09 to 11 dated 15.03.2013. When confronted, the Deptt filed a reply contending that appeal effect had been given to the order dated 31.01.2011 of the CIR (Appeals) Zone-III, Lahore on 15.02.2013. The Deptt also acknowledged that supporting documentation had been filed by the Complainant to substantiate the refund claims but that the same was under verification and final decision on the issuance of refund would be taken once the verification process was complete. The FTO noted that protracted, unjustified delay in giving appeal effect is evident in this case as the order was passed by the Commissioner (Appeals) Zone-III, Lahore, on 31.01.2011, whereas appeal effect was given on 15.03.2013, after a lapse of more than two years when it was required to be given within 2 months from the date the CIR received the order. Prima facie, this is a case involving considerable delay in disposing of the outstanding refund claim and the responsibility for the delay is that of the Deptt. The FTO recommended issuance of refund/compensation in accordance with the prevailing and law and directed to report compliance within 21 days.