ATIR rejects appeal of Faisal Bank in default surcharge levied by CIR

KARACHI: Muhammad Jawed Zakaria (Judicial Member) Appellate Tribunal Inland Revenue (Pakistan) Karachi rejecting appeal of M/s Faysal Bank Limited has directed to pay default surcharge levied by the Commissioner Inland Revenue (CIR) on the bank.

The Bank has appealed before this ATIR against a judgment of the CIR (A) in which it was declared that demand of Rs 78.909 million additional tax/default surcharge at Rs 13.414 million is legal. Thus aggregating demand of Rs 92.324 million was subsequently paid by the appellant. Later on a rectification application was filed by the appellant and the DCIR rectified the order thus reducing the demand to Rs 40.808 million. Being aggrieved with the order of the Inland Revenue Officer, the appellant filed appeals before the CIR (A) against the orders passed by the OIR i.e. order u/s. 161/205 and rectified order passed u/s. 221. Being further dissatisfied with the order of the learned CIR (A) the instant appeal has been filed against the confirmation of default surcharge/additional tax.

The ATIR  observed that default surcharge is levied because the taxpayer utilized government money and takes its benefit or the government is deprived of this utility/profits. If the tax is admittedly due and not paid on due date, it amounts to utilization of public exchequer and compulsion of payment of default surcharge (additional tax) is quite in accordance with equity and natural prompt of justice.

The ATIR said taxpayer cannot be absolved this payment of default surcharge qua late payment of admitted liability of tax on the plea of not being willful. Default surcharge being additional tax to be levied, charged and collected on the default amount for the period during which it remained unpaid from the date of due as per the relevant provision but this is not doubly taxed, it is because the government money was utilized in an unauthorized manner and the cost of such utilization has to be compensated in this way as the government is also paying compensation for taxpayers’ money in case of late payment of Refund.

Default surcharge is compensation, as a commercial equivalent of the deprivation of the use of money. It is the compensation allowed by the law or of fixed by the parties for the use of forbearance for detention of money. It may be regarded either as representing the profit the deprived person might have made if  he had the use of money or conversely the loss suffered because he had not that use, ATIR order said.

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