Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched. Part III, Cl. 1‑B(2)‑‑‑C.B.R. Circular No. 16 of 2000, dated 3‑7‑2000 (No. 15(1) ITP/2000‑SAL, dated 3‑7‑2000)‑‑C.B.R. Letter No. 16(1) ITP/2000‑SAL, dated 14‑11‑2000‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑ Reduction in tax liability‑‑‑Teaching staff of the Government College for elementary teachers‑‑‑Non‑admissibility of further 50% tax relief‑‑ Further 50% relief in tax was refused to the teachers of Elementary Teachers Training College, in the context of Central Board of Revenue Letter No.16(1) ITP/2000‑SAL, dated 14‑11‑2000 addressed to the Accountant‑General, Government of the Punjab, in which it was stated that the reduction in tax liability under sub‑clause (2) of Cl. (1B) of Part II of the Second Sched. to the Income Tax Ordinance, 1979 was not admissible to teachers employed in Government educational institutions‑ Validity‑‑‑Central Board of Revenue on its own interpretation of Cl. (2) of Cl. (1B) of Part III of the Income Tax Ordinance, 1979 prior to amendment by Finance Ordinance, 2001 had held Government training and research institutions to be covered by it‑‑‑Circular was a beneficial circular and did not suffer from any illegality; however, the Legislature by amendment clarified the doubt if any‑‑‑No need existed to issue letter, dated 14‑12‑2000 without any valid reason or justification which amounted to maladministration ‑‑‑Excess tax deducted at source from the salary of the complainant for the period July, 2000 to June, 2001 was refundable‑‑‑Department contended that the complaint was barred by time‑‑‑Validity‑‑‑Undisputed facts created special circumstances justifying condonation of delay, which was condoned by the Federal Tax Ombudsman‑‑‑Objection that the complaint was not competent as there was no maladministration had no merit‑‑‑Action of the Central Board of Revenue suffered from maladministration being arbitrary, unreasonable and without any justifiable ground‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue Letter No. 16(1) ITP/2000- SAL, dated 14‑11‑2000 addressed to the Accountant‑General, Punjab be withdrawn and that further relief equal to 50% be allowed to the complainants in their income‑tax assessments in accordance 'with' sub- clause (2) of Cl. (1B) of the Second Sched., Part II to the Income Tax Ordinance, 1979 after taking steps for early finalization of the assessments.

Muhammad Waseem for the Complainants.

Syed Nadeem Hassan, Secretary C.B.R. for Respondent.

FINDINGS/DECISION

This is a complaint by ten teachers of Elementary Teachers Training College, Jhelum in the context of C.B.R. Letter No. 16(I) ITP/200‑SAL, dated 14‑11‑2000 addressed to the Accountant General, Government of the Punjab, Lahore in which it is stated that the reduction in tax liability under sub‑clause (2) of clause (IB) of Part III of the Second Schedule to the Income Tax Ordinance is not admissible to teachers employed in Government educational institutions. It is pointed out in the complaint that this letter is contrary to the contents of the C.B.R. clarificatory Circular No. 15(1)ITP/2000‑SAL, dated 3‑7‑2000 (Circular No. 16 of 2000 explaining the new provisions introduced through Finance Ordinance 2000 in the case of salaried persons) in which it was clearly stated that further relief of 50% reduction in tax liability would be available to full time . teachers and researchers serving in non‑profit institutions, including Government Training and research institutions duly recognized by a Board of Education or a University or the University Grants Commission. It is contended that in the light of this circular additional 50% relief was allowable to the complainants who fully satisfied the necessary conditions and were being paid salaries from the Budget Head "41302006‑Elementary Teachers Training Colleges" and were exclusively involved in pre‑service

and in‑service teachers training while their institution was also duly recognized by the Board of Intermediate and Secondary Education, Rawalpindi. It has, therefore, been prayed that the Revenue Division be directed to issue a notification regarding the admissibility of 50% tax relief in the case of the teaching staff of the Government College for Elementary Teachers.

2. The respondent's reply has been received in which it is stated that the complaint has been filed late i.e. nearly a year and a half after the issuance of the C.B.R. letter, dated 14‑11‑2000 and that in any case no maladministration is, involved. The reply, however, seems to claim validity for both the Circular No. 16 of 2000, dated 3‑7‑2000 and the conflicting C.B.R. letter, dated 14‑11‑2000 to the A.‑G., Punjab. It is also stated that the question whether the complainants were covered by the provisions of sub‑clause (2) of clause (IB) of Part III of the Second Schedule to the Income Tax Ordinance is a question of fact to be decided by the Assessing Officer at the item of assessment in the' light of said sub‑clause (2) which reads as under:

"(2) in addition to the reduction specified in sub‑clause (1), the tax payable by a 'fall time teacher or a researcher, employed in a non‑profit education or research institution including Government training and research institution duly recognized by a Board of Education or a University or the University Grants Commission, shall be further reduced by an amount equal to 50% of the tax payable after the aforesaid reduction."

3. While the respondent's reply is rather vague the fact is that clause (IB) was inserted in the Second Schedule, Part III to the Income Tax Ordinance through the Finance Ordinance, 2000. The words "including Government training and research institution" did not appear in sub‑clause (2) of the said clause (IB) at the time of its insertion and these words were later introduced through the Finance Ordinance, 2001. The explanatory Circular No. 16 of 2000, dated 3‑7‑2000 issued by the C.B.R. in the light of the Finance Ordinance, 2000 specifically dealt with the computation of income‑tax payable by salaried persons for the income year beginning from 1‑7‑2000 as clause. (IB) applied to tax deduction under section 50(1) for the said income year relevant to the assessment year 2001‑02. In this circular the reduction in tax liability for salaried persons as contained in sub‑clause (1) of clause (IB) was explained in para. 1 while para. 2 of the said circular read as under:

"2. The aforementioned relief would be admissible for purposes of deduction of tax from salaries paid for income year commencing from 1st July, 2000. Besides, further relief equal to 50% of the liability would be admissible to full time teachers and researchers serving in non‑profit institutions including Government training and research institutions, duly recognized by a Board of Education or a University or the University Grants Commission."

4. As already mentioned above, however, the words "including Government training and research institution" which were later inserted through Finance Ordinance, 2001 had not been inserted at the time of the issuance of the C.B.R. circular dated 3-7‑2000 based on the Finance Ordinance, 2001. The representative of the respondent was, therefore, asked to seek further instructions and to explain how a reference was made in the circular, dated 7‑3‑2000 to the teachers and researchers of Government training and research institutions when there was no such provision in clause (IB) (ibid) at that time. The representative after obtaining instructions from the C.B.R. stated that the Board stood by the contents of the explanatory circular, dated 7‑3‑2000 and that the decision with regard to the further 50% tax relief for teachers of Government training institutions had already been taken as being applicable to salaries received from 1‑7‑2000. The said provisions were, however, formally introduced through the Finance Ordinance, 2001. In view of this the respondent's contentions in the reply have in effect been withdrawn.

5. The C.B.R. on its own interpretation of sub‑clause (2) of clause (IB) prior to amendment by Finance Ordinance 2001 had held Government training and research. institution to be covered by it. This was a beneficial circular and did not suffer from any illegality. However, the Legislature by amendment as stated above clarified the doubt, if any. There was no need to issue letter, dated 14‑12‑2000 without any valid reason or justification which amounts to maladministration. The excess tax deducted at source from the salary of the complainants, for the period July, 3000 to June, 2001 are refundable.

6. The respondent has contended that the complaint is barred by time. The undisputed facts create special circumstances justifying condonation of delay, which is hereby condoned. The other contention that the complaint is not competent as there is no maladministration has' no merit. In view of the above discussion the action of the C.B.R. suffers from maladministration which is arbitrary, unreasonable and without any justifiable ground.

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

(i) The C.B.R. Letter No. 16(1) ITP/2000‑SAL, dated 14‑11‑2000 addressed to the A.‑G., Punjab be withdrawn.

(ii) Further relief equal to 50% be allowed to the complainants in 'their income‑tax assessments in accordance with sub‑clause (2) of clause (IB) of the Second Schedule, Part III to the Income Tax Ordinance after taking steps for early finalization of the assessments.

(iii) Compliance regarding (i) above be reported within 30 days and regarding (ii) above within 60 days.

C.M.A./538/FTO Order accordingly.