KARACHI: The Federal Tax Ombudsman (FTO) has observed that in the presence of two conflicting judgments on the case of final tax regime and minimum tax regime by appellate tribunal it was difficult for the FTO office to make judgment its own and suggested in depth examination of statutory provisions.
In an appeal filed by M/s Pak Traders of Mandi Baha-ud-Din contested that it is distributor for the products of various cement companies and earns commission income exclusively, therefore,
The complainant submitted that payments made by the principals or cement companies are subject to tax withholding at source under Section 233 of Income Tax Ordinance, 2001 and the same constitutes the complainant’s final tax liability under the statute and provisions of section 122(5A) /221 of the ordinance are not applicable.
The regional tax office having jurisdiction over the case issued show cause notice under 122(5A) of the ordinance with the view that complainant’s contention in the matter was not borne out by the pertinent documentary evidence insofar as no written agreement with the principal companies were produced by complainant before the departmental assessing officer when asked.
The department held that the complainant had simply contrived placement in fixed tax regime (FTR) arbitrarily in order to avoid payment of minimum tax under section 113 of the ordinance.
The provisions of section 122(5A) of the ordinance were, therefore, being invoked to facilitate levy of tax under section 113 of the ordinance by rectifying, under section 221 of the ordinance, the deemed assessment made under section 120(1) of the ordinance.
The complainant referred to Appellate Tribunal Inland Revenue (ATIR) judgment on May 28, 2013 in which it was held that no minimum tax was payable under Section 113 in the case of a taxpayer placed in the FTR.
The department confronted the complainant and also produced copy of ATIR dated October 10, 2013 in which it was held that the resort to provisions of section 122(5A) of the ordinance in the taxpayer’s case in tax year 2011 in order to levy minimum tax under section 113 of the ordinance was justified as the commissioner (Appeals) had earlier annulled order passed under Section 221 of the ordinance on technical grounds and the department thereafter rightly finalized assessment under section 122(5A) after looking at the pertinent facts and circumstances of the case.
After hearing both the sides, the FTO observed:
“It is evident from the record produced that conflicting judgments of the ATIR on an identical issue are being relied on by the two sides to support their respective points of view ………….. Under the given facts and circumstances of the case therefore, it is not feasible for the FTO to intervene and record his own judgment in the matter. Any attempt to do so would necessarily entail in-depth examination of statutory provisions as well as evaluation of two conflicting judgments of the ATIR referred to supra and he does not have jurisdiction under the FTO Ordinance (provisions of Section 9(2)(b) thereof to do so.”
The Federal Board of Revenue (FBR) has advised the field formation to look into the important order / findings while defending like cases before the FTO.