Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 50(5)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deduction of tax at source‑‑ Exemption certificate, non‑issuance of ‑‑‑Maladministration‑‑ Complainant/assessee fulfilled all the requirements of law and qualified for issuance of exemption certificate under S.50(5) of the Income Tax Ordinance, 1979, as their deposits exceeded the requisite amount and they had prayed that the surplus be either refunded or adjusted against demand‑‑ Validity‑‑‑Representative of Revenue could not rebut the factual position and had no basis to disagree with such calculation ‑‑‑Complainant/assessee was illegally deprived of his right to get an exemption certificate under S.50(5) of the Income Tax Ordinance, 1979 and such a denial was not the first occasion of such nature in the complainant/assessee's case thus making "Maladministration" more glaring‑‑‑Federal Tax Ombudsman recommended Central Board of Revenue to direct (i) the Regional Commissioner of Income Tax to issue exemption certificate within two weeks; (ii) the Regional Commissioner of Income‑tax to issue instructions emphasizing that where requirements of law stood fulfilled, as in the present complainant/ assessee's case, requisite exemption certificates should invariably be issued promptly.

M.A. Hadi, Chartered Accountant for the Complainant.

Habib Ahmad, D‑C.I.T. for Respondent.

DECISION/FINDINGS

The complainant accuses the R‑CIT, Central Region, Multan for maladministration on account of omission to issue exemption certificate under section 50(5) much against the history of the case and without valid reason, as well as causing delay in the discharge of duties and responsibilities resulting in administrative excess for recovery of tax, not legally due, from the complainant.

2. The Respondent's Report vide No.RCIT/SO‑III/FTO- BWP/4421 dated 8‑2‑2002 explains that the complainant did apply for exemption certificate under section 50(5) on 6‑12‑2001, "but the complainant company did not qualify for issuance of certificate as it did not fulfil actual requirement of law". It also stated that applications for exemption certificate were received on 31‑12‑2001 and 28‑1‑2002 and the certificate was in fact issued, hence no maladministration was occasioned. The last para. of the report reads as under:‑‑

"As per latest application dated 28‑10‑2002 the complainant company has claimed credit of additional deduction of Rs.1,391,485. Evidence of this deduction has also been provided. This alongwith the adjustment of refund of Rs.126,408 for the assessment year 1999‑2000 brings current years deduction at par with the last year's deduction/payment of tax. As all the requirements of law have been fulfilled, exemption certificate has, therefore, been issued to the complainant. No 'maladministration' is involved in this case."

Further:

"Section 50(5)(b) provides issuance of the exemption certificate to a manufacturer who imports raw material for its own consumption on the condition that tax paid or collected/withheld during the current year equals the tax paid by that person in the immediately preceding year."

In the instant case the tax paid and collected‑ in the financial year 2000‑2001 was as under:‑‑

Recalling constant discriminatory treatment the learned A.R., Mr. M.A. Hadi (F.C.A.) submitted that unwarranted additions were made in 1998‑99 under section 12(18) and section 13(1) which the CIT (Appeals) deleted and the Appellate Tribunal concurred. Similarly in 1999‑2000 section 66A was resorted to make addition under section 12(18) which could not stand the test of appeal before the Appellate Tribunal. In 2000‑2001 an Auditor was appointed under section 4A but his report is not being acted upon.

3. The respondent reports in the rejoinder that up to the time of the receipt of the application for issuance of exemption certificate i.e. from July, 2001 to December, 2001, total tax deductions stood at Rs.5,352,650 which fell short by Rs.1,456,088 when compared with the benchmark amount of Rs.6,808,738. Therefore, the complainant was requested to first meet the requirements of law by meeting the base figure to quality for issuance of exemption certificate. As soon as compliance was made, the exemption certificate under section 50(5) was issued.

4. The complainant's‑A.R submitted a rejoinder on 9‑4‑2002 by way of rebuttal of respondent's plea that the requirements of law had not been fulfilled to earn entitlement for issuance of the exemption certificate. It is asserted that factual position was as under:‑‑

The above chart clearly suggests that the complainant‑Company fulfilled all the requirements of law and qualified for issuance of exemption certificate under section 50(5) of Income Tax Ordinance, as their deposits exceeded by Rs.728,271 over the requisite amount of Rs.6,330,167, as explained above. It was prayed that the surplus be either refunded or adjusted against demand for assessment year 2002‑2003. The representative of Revenue could not rebut this factual position and had no basis to disagree with the above calculation. Obviously, the complainant was, illegally deprived of his right to get an exemption certificate section 50(5), and such a denial is not the first occasion of such nature in the complainant's case thus making maladministration more glaring. It is, therefore, recommended that the C.B.R. to direct:

(i) The RCIT to issue exemption certificate within two weeks.

(ii) The R‑CIT to issue instructions to emphasizing that where requirements of law stand fulfilled, as in the present complainant's case, requisite exemption certificates should invariably be issued promptly.

(iii) Compliance report be submitted within 30 days of the receipt of this order.

C.M.A./534/FTO Order accordingly.