SECRETARY, FEDERAL BOARD OF INTERMEDIATE & SECONDARY EDUCATION, ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2002 P T D 2816
[Federal Tax Ombudsman]
Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman
SECRETARY, FEDERAL BOARD OF INTERMEDIATE & SECONDARY EDUCATION, ISLAMABAD
Versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.217 OF 2002, decided on /01/.
th
June, 2002. Income Tax Ordinance (XXXI of 1979)‑‑
Second Sched., Part. I, Cls. (185A), (86), (9b) & S.50(2A)‑‑ Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(b)‑-‑Federal Board of the Intermediate and Secondary Education Act (LXVIII of 1975), Ss.3, 5, 9, 11, 12 & 15‑‑‑Service Tribunals Act, (LXX of 1973), S.2A‑‑‑General Clause Act (X of 1987), S.3(31)‑‑‑Exemption‑‑‑Assessee, Federal Board of Intermediate & Secondary Education, Islamabad, was granted exemption from withholding tax under S.50(2A) of the Income Tax Ordinance, 1979 and was also exempted from capital value tax in‑respect‑of its vehicles‑‑ Subsequently, exemption was withdrawn on the ground that
assessee, Federal Board of Intermediate & Secondary Education, Islamabad, was neither Government nor local authority and was asked to prove its legal status regarding exemption from Income Tax Ordinance, 1979 and exemption under S.85(a), 86 and 90 of the Second Schedule of the Income Tax Ordinance, 1979 was refused‑‑‑Validity‑‑‑Perusal of Ss.3 & 5 of the Board of Intermediate and Secondary Education Act, 1975 made it clear that the Federal Government had established the Board and its members were also employees and representatives of Federal Government‑‑‑Under S.15 of the Federal Board of Intermediate & Secondary Education Act, 1975, the Accountant General of Pakistan audits the accounts of the Federal Board of Intermediate and Secondary Education, Islamabad‑‑‑Federal Government controls the Federal Board of Intermediate & Secondary Education, Islamabad like any other Government department‑‑‑Even in case of dissolution of the Board all its assets were to be transferred to the Federal Government‑‑‑Federal Board of Intermediate & Secondary Education, Islamabad consists of and is managed by Federal Government employees which were nominated by the Government‑‑‑Federal Board of Intermediate & Secondary Education, Islamabad performs functions on behalf of the Federal Government‑‑ Schools and colleges of Federal Government and affiliated educational institutions were involved in teaching process whereas the Federal Board of Intermediate & Secondary Education, Islamabad conducts examination for them for maintaining uniformity and standard of education; thus a very important duty of the. educational institution was performed by Federal Board of Intermediate & Secondary Education, Islamabad‑‑ Department by granting exemption continuously for a very long period has established a practice which could not be changed without any cogent and clear reasons‑‑‑By mere change of opinion, the long established practice which otherwise did not offend any provision of law, could not be reversed and the maladministration was clearly established‑‑‑Federal Tax Ombudsman recommended that the competent authority should‑order to cancel the recovery proceedings initiated against the complainant and to grant exemption from withholding tax and capital value tax.
Muhammad Ashraf, Deputy Secretary Finance (FBISE) for Respondent.
Ms. Fareena Mahzar, Additional Commissioner, Islamabad for Respondent.
DECISION/FINDINGS
The complainant has alleged maladministration on the part of the functionary of Revenue Division for withdrawing exemption from withholding tax and capital value tax on its bank profits .and vehicles respectively.
2. Brief facts of the case are that on 13‑7‑2000 the CIT, Islamabad had granted exemption to the Federal Board of Intermediate & Secondary Education, Islamabad (FBISE) from withholding tax under section 50(2A) of the Income Tax Ordinance, 1979 up to 3‑6‑2001. Further on 6‑7‑2000 the CBR had also exempted the FBISE from capital value tax in respect of its vehicles. The CIT informed the complainant vide letter dated 7‑6‑2001 that the FBISE is neither Government nor local authority and desired the FBISE to prove its legal status regarding exemption from tax under Income Tax Ordnance, 1979. The complainant approached CBR on 29‑6‑2001 and 18‑10‑2001 to exempt it from the tax as FBISE is a Federal Government Institution and that exemption is available to the . Text Boards, Universities, National Institutions, Sport Boards and local authorities etc. under clauses 85(a), 86 and 90 of the Second Schedule of the Income Tax Ordinance 1979. The CBR W refused to accede to the request of the FBISE on the plea that no such exemption is available to it under the provisions of the Ordinance. It is also alleged in the complaint that as per sections 11 and 12 of the Board of Intermediate and Secondary Education Act, 1975 the Chairman and the Secretary of the Board are appointed by the Federal Government and as per its regulations, duly approved by the Government, the Federal Government is the Controlling Authority of the FBISE.
3. It is pleaded in the reply that similar issue is sub justice before the Lahore High Court in writ petition in the cases of Rawalpindi and Gujranwala Boards, therefore, jurisdiction of Federal Tax Ombudsman may be considered in the light of the provisions of section 9 (2)(b) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. It is admitted that the CIT, Islamabad and the CBR had issued exemption certificates in favour of the complainant but later on after examining the issue the same were withdrawn, as no such exemptions are available under the law. It is also pleaded that all receipts and surplus income is kept in a commercial bank account by the FBISE and it has not been transferred to the Consolidated Fund Account of Federal Government. The FBI$E has complete control and autonomy in respect of its income and. expenditure as well as surplus funds. The respondent specifically stated in the reply that no specific exemption from tax has been given to the Board is the Second Schedule of the Income Tax Ordinance, 1979. It is also pleaded that the Department has been directed to keep the matter pending till 31‑5‑2002 or decision of writ petitions of Gujranwala and Rawalpindi Boards whichever is earlier.
4. Mr. Muhammad Ashraf, Deputy Secretary argued of the behalf of the complainant. He contended that the CIT, Islamabad and CBR never charged withholding tax and capital value tax from the FBISE and in this regard they have issued Exemption Certificates. According to him, the respondents are deviating from the past practice and they are wrongly representing that the FBISE is not a Federal Government Institution. He referred to sections 3 & 9 of the Board of Intermediate and Secondary Education Act, 1975. He also relied on section 2A of Act LXX of 1973 and contended that the Federal Government has a control on the Board, therefore, it has status of Federal Government Institution. He also referred to Section 3(31) of General Clauses Act wherein the word "local authority" has been defined.
5. The Respondent's representative contended that the FBISE is not exempted from tax. He referred to clause 86 of Second Schedule of Income Tax Ordinance, 1979 and stated that only Educational Institutions like school and universities are exempted from tax; therefore, the FBISE cannot claim exemption from tax being educational institution. It is further argued that the FBISE is not a government organizations It is a Board and its funds are kept in a commercial bank account, maintained and controlled by the FBISE itself and the income which they earn do not transfer in the consolidated fund account.
6. Heard the parties at length. Admittedly the‑ FBISE is not party in writ petitions filed in Lahore High Court. Therefore the subject‑matter of the present complaint between the same parties is not sub judice.
7. From the record and the provisions of the statutes referred above it is clear that the FBISE was established and constituted in the year 1975 and since then the respondent never charged withholding tax and capital value tax and on the contrary they issued exemption certificates. The respondent did not deny the fact of issuance of earlier exemption certificates. It is a fact that the Federal Government has established the Board (FBISE) under a statute and under sections 11 and 12 of the Board of Intermediate & Secondary Education Act, 1975, the Federal Government appoints and nominates Government employees as its Chairman and the Secretary. Section 3 of the Act is reproduced as under:
Constitution of the Board.‑‑‑‑ (1) The Federal Government shall, as soon as may be after the commencement of this Act, establish a Board to be known as the Federal Board of Intermediate and Secondary Education."
Composition of the Board has been defined in section 5 of the Act. The same is reproduced as under:
(a) the Chairman, to be appointed by the Federal Government;
(b) two Vice‑Chancellors to be nominated by the University Grants Commission;
(c) a nominee of the Ministry of Education not below the rank of Deputy Secretary in the Federal Government;
(d) a nominee of the Directorate of Military Lands and Cantonments to represent the Cantonment Boards;
(e) one principal to be elected , in the prescribed manner by the principals from amongst themselves;
(f) one headmaster of a school for boys to be elected in the prescribed manner by the. headmasters of schools for boys from amongst themselves;
(g) one headmistress of a school for girls to be elected in the prescribed manner by the headmistress of schools for boys from amongst themselves;
(h) the Director, Federal. Government Educational Institutions, Islamabad;
(i) the Director, Institute of Islamic Research, Islamabad;
(j) three members, of whom one shall be a woman, to be elected by the National Assembly from amongst its members;
(k) two members to be elected by the Senate from amongst its members; and
(l) one representative each of the Provincial Government, the Azad Government of the State of Jammu and Kashmir. The administration of the Federal Administered Tribal Areas and the Areas of Gilgit, Baltistan, Nagar Haveli and Hunza."
It is clear from perusal of sections 3 and 5 that the Federal Government established the Board and its members are also employees and representative of Federal Government. Under section 15 of the Board of Intermediate & Secondary Education Act, 1975, the Accountant General of Pakistan audits the accounts of the Board (FBISE). The Federal Government controls the Board (FBISE) which is likely government department. Even in case of dissolution of the Board all its assets are to be transferred to the Federal Government. The Board (FBISE) consists of and managed by Federal Government employees which are nominated by the Government. The Board (FBISE) performs functions on behalf of the Federal Government. The schools and colleges of Federal Government and affiliated educational institutions are involved in teaching process whereas the Board (FBISE) conducts examination for them for maintaining uniformity and standard of education. Thus a very important duty of the educational institution is performed by FBISE.
8. Further it may be noted that the respondent by granting exemption continuously for a very long period have established a practice which cannot be changed without any cogent and clear reasons. In this case by mere change of opinion, the long established practice which otherwise does not offend any provision of law cannot be reversed. The maladministration is clearly established.
9. In the circumstances it is recommended that‑‑
(i) The competent authority order:
(a) to cancel the recovery proceedings initiated against the complainant for recovery.
(b) to grant exemption from withholding tax and capital value tax.
(ii) Compliance be reported .Within 30 days.
C.M.A./M.A.K./429/FTO Order accordingly.