(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.102, 156 & 80D‑‑‑C.B.R. Letter C.No.150 IT.JUD/99,dated 25‑2‑2000 Refund- Additional payment for delayed refund‑‑Additional payment under S.102 of the Income Tax Ordinance, 1979 was due in respect of refund over and above the refund adjusted later against demand under S.80D of the Income Tax Ordinance, 1979 up to the date of its final payment.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.102, 156 & 80D‑‑‑Extablishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑C. B. R. Letter C.No.150 IT.JUD/99, dated 25‑2‑2000‑‑‑Refund‑‑‑Additional payment for delayed refund‑‑‑Adjustment of refund against the demand under S.80D of the Income Tax Ordinance, 1979‑‑‑Demand, later on, was deleted being exempt unit and refund was again 'created under S.156 of the Income Tax Ordinance, 1979‑‑‑Compensation under S.102 of the Income Tax Ordinance, 1979 was claimed from the date when refund was first created‑‑‑Validity‑‑‑Order under 5.156 creating the demand under S.80D had a definite basis at that time and it could not be considered as ab initio void‑‑‑Complainant had not filed appeal against said order under S.156 of Income Tax Ordinance, 1979‑‑‑Federal Tax Ombudsman did not consider possible to recommend any further compensation under 5.102 in respect of refund which had already been adjusted against demand under S.80D of the Income Tax Ordinance, 1979.

Messrs Kohinoor Raiwind Mills' case 2000 PTD 3351 ref.

Mian Muhammad Ashfaq, Chief Executive with Hamid Masood, F.C.A., Authorized Representative for the Complainant.

Mian Munawar Ghafoor, IAC, Panel 04, Special Zone, Lahore for Respondent.

DECISION/FINDINGS

This is a complaint by a limited company regarding additional payment claimed by it under section 102 of the Income Tax Ordinance for the assessments years 1997‑98 and 1998‑99 and which statedly has not been paid to it despite written applications.

2. The facts of the case are that income‑tax assessments for the years 1997‑98 and 1998‑99 were framed under section 62 of the Income Tax Ordinance on 23‑12‑1998 in the complainant's case assessing losses of Rs.35,435,262 and Rs.71,330,217 respectively for the two years. Application under section 156 was subsequently filed by the complainant requesting that credit for tax already paid be allowed to it and the tax so paid be refunded. An order of rectification was accordingly passed by the assessing officer on 11‑6‑1999 creating the refund of Rs. 4,513,973. The refund was, however, not paid to the complainant. Subsequently the CBR vide a Letter C.No.150 IT.JUD/99 dated 25‑2‑2000 addressed to all Regional Commissioners clarified that there was no exemption from the provisions of section 80D of the Ordinance in cases where the tax exempt unit had shown a loss the letter was statedly issued in the light of the opinion of the Law Division in the matter. On the basis of this CBR letter a show‑cause notice under section 156 was issued by the Assessing Officer to the complainant and a rectification order was passed on 30‑6‑2000 creating demand under section 80D amounting to Rs.1,115,743 and Rs.1,243,789 for the assessment years 1997‑98 and 1998‑99 respectively. The balance amount of refund, after adjusting the demand under section 80D was, however, still not paid. On the basis of another application by the complainant, yet another order under section 156 was later passed on 14.12.2000 in the light of the Court decisions again creating the refund of Rs.4,513,973 after deleting the demand created under section 80D for the assessment years 1997‑98 and 1998‑99. This admitted refund was, however, again not paid and a complaint C.No.409/2001 was, therefore, filed in this Office by the complainant which related to the assessment years 1997‑98 and 1998‑99 as well as to some other assessment years. In the findings dated 28‑5‑2001 this Office inter alia recommended that the refund be issued within seven days. The refund for the two years was paid by the department on 18‑6‑2001.

3. It is contended by the complainant that since the refund of Rs. 4,513,973 created ,by the department for the two years vide the original order under section 156 dated 11‑6‑1999 remained unpaid till 18‑6‑2001, additional payment under section 102 of the Income Tax Ordinance may be ordered to be made to the complainant. The department on the other hand has contended that adjustment of refund was made against the demand under section 80D and that refund became finally payable vide order under section 156 dated 14‑12‑2000 which was paid on 18‑6‑2001. It is stated that a delay of 96 days was thus involved on which additional payments amounting to Rs. 93,822 and Rs. 84,262 have been made to the complainant under section 102 and that no further additional payment is due‑to the complainant.

4. In the context of the respondent's reply and the contentions of its representative during the hearing, the two main contentions of the complainant are as follows:

(i)???????? A refund of Rs.4,513,973 was created in the complainant's case for the assessment years 1997‑98 and 1998‑99 vide an order under section 156 dated 11‑6‑1999. On 30‑6‑2000 vide another order under section 156 refund of Rs.2,759,532 became adjustable against demand created under section 80D but the balance refund of Rs.1,754,441 in any case remained payable to the complainant which remained unpaid. It is thus contended that additional payment under section 102 is clearly due in respect of this unpaid refund on the basis of the order dated 11‑6‑1999.

(ii)??????? Regarding the refund of Rs. 2,759,132 adjusted by the Assessing Officer against demand created under section 80D, it is contended that the demand was not valid since the CBR did not have the jurisdiction to advise the Assessing Officer that section 80D was leviable in the case of such exempt units which had declared losses. It is stated that this was duly pointed out to the Assessing Officer in response to his show‑cause notice under section 156 dated 23‑5‑2000 and that in the case of Messrs Kohinoor Raiwind Mills reported as 2000 PTD 3351 the Lahore High Court has held the clarification issued by the CBR to be invalid as the Board has been held to be not competent to issue such clarifications/directions. It is thus contended that the adjustment of the part of the refund created on 11‑6‑1999 against demand under "Section 80D is not valid and, therefore, compensation under section 102 is also payable on the amount of Rs. 2,759,532 on the basis of the order under section 156, dated 11‑6‑1999.

5. The contentions of the two sides' have been considered and as far as the complainant's contention at para. 4(i) above, is concerned it is found to be quite valid as there is absolutely no reason why the amount of Rs. 1,754,441 should not have been paid to the complainant on the basis of order under section 156 dated 11‑6‑1999 as this refund was over and above the refund later adjusted against demand under section 80D. Additional payment under section 102 is, therefore, due in respect of this refund up to the date of its final payment.

6. As regards the complainant's contention at para. 4(ii) above, it is seen that the order under section 156 was passed on 30‑6‑2000 after discussing the complainant's contentions and after considering various High Court decisions cited before him at that time which, however, were not found by the Assessing Officer to be relevant in the complainant's case. The Lahore High Court judgment which specifically applied to the CBR directions contained in its letter dated 25‑2‑2000 was, however, passed on 6‑7‑2000 i.e. after the order under section 156 had been made in the complainant's case. Thus as far as the order under section 156 creating the demand under section 80D is concerned it had a definite basis at that time and it cannot be considered as ab initio void. It is also noted that the complainant did not file any appeal against the said order under section 156. In the light of the foregoing it is not considered possible to recommend any further compensation under section 102 in respect of refund of Rs. 2,759,532 which had been adjusted against E demand under section 80D.

7. In the light of the above, it is recommended that:

(i)???????? Additional payment under section 102 be worked out in respect of refund of Rs.1,754,441 which became due from 11‑6‑1999 and the amount so calculated, as reduced by any compensation already paid, may be given, to the complainant.

(ii)??????? Compliance be reported within 30 days.

C.M.A./M.A.K./239/FTO??????

Order accordingly.