Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. 56(2)(ii) & Ss.96, 102‑‑‑C.B.R. Letter C. No.44(16)IT‑V/78, dated 17‑7‑1978‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Exemption‑‑ Refund‑‑‑Pension fund‑‑‑Deduction of tax from exemption pension fund‑‑Claim of refund of same‑‑‑Department contended that claim for refund was barred by time‑‑‑Validity‑‑‑Admitted position was that the amount in question being a pension fund, its income was exempted from tax‑‑‑Any deduction or levy of tax on the income of the Fund was arbitrary and illegal‑‑‑Recovery of tax was made illegally particularly as it was not subject to‑tax ‑‑‑Bar of limitation could not be applied‑‑‑Refund of any tax illegally recovered could not be refused on the ground of limitation‑‑‑Deportation committed maladministration in deducting the tax by not replying four letters and retaining the amount illegally deducted and refusing to refund on the plea of bar of time limitation‑‑ Amount claimed was illegally deducted which became refundable immediately on the date of deduction‑‑‑Complainant/assessee was not required to file return of income nor, S.99(2) of the Income Tax Ordinance, 1979 could be pressed in service‑‑‑Federal Tax Ombudsman recommended that the amount of Rs.40,000 together with compensation under S.102 of the Income Tax Ordinance, 1979. be paid to the complainant/assessee within 30 days.

Haider Naqvi for the Complainant

Umer Farooq, IAC Range‑II, Co. V, Karachi.

Ch. Muhammad Tarique, DCIT, Circle‑I, Co. V, Karachi for Respondent.

FINDINGS/DECISION

The complainant is a Pension Fund duly approved by the Central Board of Revenue vide its Letter C. No.44(6)IT‑V/78, dated 17‑7‑1978. For the assessment year 1998‑99 .the complainant has claimed refund amounting to Rs.40,000 deducted as tax on exempt income. The complainant has further claimed additional payment on the amount .of refund under section 102 of the Income Tax Ordinance, 1979. The complainant has alleged that the Pension Fund is exempt from tax vide clause 56(2)(ii) of Part‑I of Second Schedule of the Income Tax Ordinance, 1979. The complainant had filed return of income claiming refund of Rs. 40,000 and between 16‑3‑2002 and 27‑4‑2002 four letters were written to various Income Tax Authorities to pass assessment order and issue refund voucher but no response was received from them.

2. In reply the Department has pleaded that the claim for refund is barred by time. It has been denied that return income was filed by the complainant. Mr. Haider Naqvi, the learned Advocate for the complainant produced papers and documents in support of the claim of refund of Rs.40,000 for assessment year 1998‑99.

3. The complainant was not required to file return of income for the assessment year 1998‑99 since the income of the Fund was exempt from income‑tax. However, the return of income was allegedly filed showing "nil income" and refund of Rs.40,000 together with additional amount under section 102 of the Income Tax Ordinance, 1979 was claimed. The learned Advocate was asked to produce evidence in support of filing of return of income for the assessment year 1998‑99 and also for refund application for this year. No evidence, however, has been produced to show as to when and on what date the return of income was filed or application for refund was made. The statement regarding filing of these two documents are merely verbal statement and could not substantiated with any documentary evidence.

4. The admitted position is that the complainant being a Pension Fund its income is exempted from tax. Any deduction or levy of tax on the income of the Fund was arbitrary and illegal. Thus the recovery of tax was made illegally particularly as it was not subject to tax. In view of the principles laid down by the Supreme Court in Pfizer Laboratories Ltd. the bar of time limitation cannot be applied. The Supreme Court has observed that refund of any tax illegally recovered cannot be refused on the ground of limitation. The principle laid down by the Supreme Court is applicable to the present case. The plea that the claim is time‑barred cannot be pressed in service by the Department. The Department committed maladministration in (i) deduction the tax (ii) not replying four letters and (iii) retaining the amount illegally deducted and refusing to refund on plea of bar of time limitation. As the amount claimed was illegally deducted it became refundable immediately on the date of deduction. The complainant was not required to file return of income nor section 99(2) could be pressed in service.

5. It is therefore, recommended that:‑‑

(i) The amount of Rs.40,000 together with compensation under section 102 be paid to the complainant within 30 days.

(ii)Compliance be reported within one week thereafter.

C.M.A. /857/FTOOrder accordingly.