Income Tax Ordinance (XXXI of 1979)---

----Ss. 102, 103 & 100---Income Tax Ordinance (XLIX of 2001), S.171---Compensation for delayed refund, non-payment of-- Department was willing to issue refund but the complainant/assessee was guilty of concealment inasmuch as despite maintaining accounts on "accrual basis"; the income becoming 'receivable' on account of compensation under S.102 of the Income Tax Ordinance, 1979 was never declared in the relevant returns and adjustment would be possible after determination of tax on that income---Validity---Department was guilty of withholding validly due compensation which, in all fairness, should have been issued alongwith the aggregated refund---Issue whether the amount of compensation as a 'receipt' would be taxable in the hands of the complainant/assessee, was a different and independent matter-- Aspects such as the suspension of operation and the complainant/ assessee having heavy accumulated losses with lack of funds to liquidate the anticipated tax liability should have been considered at the time of issuing the principal amount of refund which could be validly withheld under S.103 of the Income Tax Ordinance, 1979 if reasonable grounds existed---Compensation under S.102 was a corollary of refund and unavoidable in terms of S.171 of the Income Tax Ordinance, 2001 as it was under S.100 of the Income Tax Ordinance, 1979---Postponing issuance of compensation on the pretext of adjusting it against a possible tax demand was clearly an afterthought to cover up an act of omission falling in the realm of 'mal administration'---Federal Tax Ombudsman recommended that additional payment for delayed refund as admitted to be due be promptly worked out as per S. 171 of the Income Tax Ordinance, 2001 and issued and those responsible for delay in issuance of refund for over 5 to 15 years be identified and admonished for burdening the Exchequer with cost for delay.

Shaukat Amin Shah, FCA for the Complainant.

Muhammad Arshad, D-CIT for Respondent.

DECISION/FINDINGS

The complainant is aggrieved by non-issuance of compensation under section 102 of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) due to them on refund aggregating Rs.1,505,054 paid on 20-5-2002.

2. The facts, briefly stated, are that the complainant company is an old existing taxpayer who was issued refund on 20-5-2002 aggregating Rs.1,505,054 for the assessment years 1975-76, 1977-78 to 1979-80 and 1982-83 to 1984-85 after adjustment of some outstanding demand. Soon after, on' 17-6-2002, they approached the D-CIT for issuance of compensation for delayed refund as per provisions of section 102. This was followed by reminders to the D-CIT, then attention of the Commissioner was drawn but to no avail. At one stage, on 17-7-2002, it was requested that the amount of compensation be worked out and adjusted against tax liability of a sister concern. This also was not done despite reminders to D-CIT and CIT, hence the complaint.

3. The respondent's reply as forwarded by R-CIT, Lahore, para wise comments which do not dispute entitlement for compensation under section 102 of the repealed Ordinance; but blames the complainant for not having supplied the names of sister concern against whose tax liability the compensation was desired to be adjusted. It also is averred that--

(a)Compensation/additional refund of Rs.2,291,546 already received by the complainant has not been offered for proper taxation;

(b)The complainant has also to pay tax compensation under review at Rs.2,193,272; and

(c)The complainant-company has already suspended operations and has heavy accumulated losses with lack of funds to liquidate the anticipated tax liability.

4. The learned counsel for the complainant explained that adjustment of compensation due, against demand of a sister concern was offered in desperation because of absence of response by the Department to requests for determination and issuance of "compensation". Now, in all fairness 'compensation' should be issued separately and demand of tax, if any, against respective sister concerns by intimated independently. The learned counsel presented calculations showing that the compensation would be due as under:--

SUMMARY

5. The representative of the Revenue on his turn insisted that the Department was willing to issue refund but the complainant was guilty of concealment inasmuch as despite maintaining accounts on "accrual basis", the income becoming 'receivable' on account of compensation under section 102 was never declared in the relevant Returns and therefore, adjustment would be possible after the determination of tax on that income.

6. A scrutiny of record in the light of arguments by the two representatives is indicative that the Department is guilty of withholding validly due compensation which, in all fairness, should have been issued alongwith the aggregated refund on 20-5-2002. The issue whether the amount of compensation as a 'receipt' would be taxable in the hand of the complainant, is a different and independent matter. The aspects such as the suspension of operations and the complainant having heavy accumulated losses with lack of funds to liquidate the anticipated tax liability should have been considered at the time of issuing the principal amount of refund which could be validly withheld under section 103 reasonable grounds existed. The compensation under section 102 is a corollary of refund and unavoidable in terms of section 171 of the Ordinance as it was under section 100 of the repealed Ordinance.

Therefore, postponing issuance of compensation on the pretext of adjusting it against a possible tax demand is clearly an afterthought to cover up an act of omission falling in the realm of 'mal administration'. It is, therefore, recommended that:--

(i)Additional payment for delayed refund as admitted to be due be promptly worked out as per section 171 of the Income Tax Ordinance, 2001 and issued.

(ii)Those responsible for delay in issuance of refund for over 5 to 15 years be identified and admonished for burdening the Exchequer with cost for delay.

7. Compliance be reported within 30 days of the receipt of this Order.

C.M.A./817/FTOOrder accordingly.