Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑Ss. 15, 151 & First Sched., Division III, Part III‑‑‑Income Tax Ordinance (XXXI of 1979), S.50(2)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Exemption or lower rate certificate‑‑‑Contention was that non‑issuance of exemption certificate is a policy matter and riot as a legal right ‑‑‑Validity‑‑ Grievance of the complainant/assessee was removed by issuing him exemption certificate under S.159 of the Income Tax Ordinance, 2001‑ In order to issue such certificates it was the policy of the Government to widen the scope of S.159 of the Income Tax Ordinance, 2001 Federal Tax Ombudsman observed that Central Board of Revenue may consider amendment in S.159 of the Income Tax Ordinance, 2001 in the light of S.50(2) of the Income Tax Ordinance, 1979.

Naved Andrebi, C.A. for the Complainant.

Misri Ladhani for Respondent.

FINDINGS/DECISION

The complainant is a banking company assessed to tax vide NTN 34‑01‑0801164 at the Large Tax Payers Unit at Karachi. It has been alleged that the income‑tax assessment has been finalized up to assessment year 2001‑2002 at huge loss. The total accumulated loss up to assessment year 2001‑2002 has been indicated at Rs.19.7 billion.

2. The complainant in addition to business income has made investment in Government securities and securities issued by other financial institutions. The complainant is liable to deduction of tax at source in accordance with the provision of section 151 read with part of III, Div III of first schedule of Income Tax Ordinance, 2001 at 20%.

3. The complainant has pleaded that its income for the financial year 2002‑2003 is not likely to be charged to tax due to availability of assessed brought forward loss. As per provisions of section 159 of Income Tax Ordinance, 2001, the Commissioner of Income Tax is competent to issue exemption certificate or a certificate for deduction of tax at reduced rate in case of an assessee whose income is likely to be taxed at a lower rate of tax than the rate prescribed under the law. A certificate for deduction of tax at zero rate was issued to the complainant in the earlier year: In the current financial year the complainant was issued a certificate for deduction of tax at 10% for the period ending 31‑3‑2003. The complainant requested the C.B.R. to issue instructions for issuance of exemption certificate. The C.B.R. issued verbal instruction to Director General LTU to look into the matter. The complainant approached Director General, LTU to issue instructions for issuance of exemption certificate but the Director General informed the complainant that clarification has been sought from Member Direct Taxes. The Inspecting Additional Commissioner informed the complainant that clarifications have been received from Member Direct Taxes but further clarifications have been sought.

4. The complainant has alleged that on 13‑9‑2002 he met Director General, LTU and Commissioner of Income Tax in the presence of Member Direct Taxes and he was informed that the Bank was eligible for exemption certificate but it will not be possible to issue such a certificate because issuance of such a certificate is a policy matter which is directly related to collection of taxes and meeting collection target and that if such a certificate is issued to complainant other Bank may ask for such a certificate.

5. It has been further pleaded by the complainant that refusal to issue the desired certificate is based on self‑interest and not on any legal ground and the complainant is being denied its legal right which constitutes maladministration.

6. In reply the respondents have pleaded that since complainant's income is not exempt from tax, exemption certificate cannot be issued. However, certificate for deduction of tax at lower rate i.e. 10% was issued to the complainant and other Banks as a matter of uniform policy.

7. After the hearing was concluded the respondent was asked to reconsider the case as it was a policy matter and could affect a large number of assessees particularly the banks. The Secretary (1A) C.B.R. vide letter, dated 7‑4‑2003 informed that exemption certificate has been issued to the complainant on 31‑3‑2003 which reads as follows:‑‑

Certificate No. 1163 under section 151/159 of

the Income Tax Ordinance, 2001

In exercise of the powers conferred by subsection (1)(a) of section 159 of the Income Tax Ordinance, 2001, it is hereby ordered that no tax under section 151 of the Income Tax Ordinance, 2001 be deducted in the case of Messrs United Bank Limited bearing National Tax No.34‑01‑0801164. This certificate is valid up to 30‑6‑2003.

(Sd.)

(Asrar Raouf)

Commissioner of Income‑tax

8. The grievance of the complainant seems to be removed. However, such cases may come up for consideration again. The difficulty faced in granting such certificate under, section 159 of the Income Tax Ordinance, 2001 is quite clear. However, in order to issue certificate reproduced above if it is the policy of the Government to widen the scope of section 159 it is suggested that C.B.R. may consider amendment in section 159 of the Income Tax Ordinance, 2001 in the light of subsection (2) of section 50 of the repealed Income Tax Ordinance, 1979.

C.M.A./843/FTOOrder accordingly