2004 P T D 1822

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ENGRO CHEMICALS PAKISTAN LIMITED, KARACHI and another

Versus

Haji GHULAM FAROOQ QURESHI and 3 others

Complaint No. 1005‑K of 2003, decided 7^th July, 2003.

Workers Welfare Fund Ordinance (XXXVI of 1971)‑‑‑

‑‑‑‑Ss. 3 & 4(2)‑‑‑Companies Profits (Workers' Participation) Act (XII of 1968‑‑‑Companies Profits (Workers' Participation) Rules, 1971, R.4A(d), Annexure‑III‑‑‑Income Tax Ordinance (XXXI of 1979), S.92‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Jurisdiction‑‑‑Demand under Workers' Profit Participation Fund (WPPF) by Taxation Officer for deposit into Government treasury by 30th June‑‑‑Validity‑‑‑After receiving payment under the Companies Profits (Workers' Participation) Act, 1968 from the company the Fund could be invested but must allocate amounts due to the workers and then pay over the balance left to the .Fund under the Workers' Welfare Fund Ordinance, 1971 as late as September‑‑‑No Legal obligation existed to pay these amounts by June or any other date prior to 30th September‑‑‑Jurisdiction for receiving monies due under the Workers Welfare Fund Ordinance, 1971 was of the Large Taxpayer Unit and not the Taxation Officer as the complainant/assessee was assessed by the Large Taxpayer Unit‑‑‑Even the jurisdiction of Large Taxpayer Unit was for the purpose of the payment directly due by the Company under the Workers Welfare Fund Ordinance, 1971 and not under Companies Profits (Workers' Participation) Act, 1968‑‑‑Was patently illegal for the Taxation Officer to attempt to attach accounts of the Company as the demands besides being contrary to law were allegedly against the workers participation fund‑‑‑Taxation Officer regretted his misreading of law and had already withdrawn all the notices referred to in the complaint unconditionally‑‑‑Complainant was satisfied with the assurance and did not wish to pursue the complaint‑‑‑Complaint was closed by the Federal Tax Ombudsman.

Barrister Andalib Alavi, Chief Legal Adviser and Company Secretary alongwith Aziz Nishter for the Complainant.

Haji Farooq Qureshi, Taxation Officer for Respondent.

DECISION/FINDINGS

Maladministration was alleged in the instant complaint against the Taxation Officer Haji Ghulam Farooq Qureshi, Circle Ghotki on account of demanding advance payment of Workers' Welfare Fund and using coercive measures to collect demand which besides being contrary to law and arbitrary was also allegedly beyond his jurisdiction.

2. Complainant filed a stay application alongwith the complaint praying to treat the complaint as urgent so that unlawfully threatened attachment of bank accounts was averted.

3. Facts, briefly, were that complainant No.1 Messrs Engro Chemical Pakistan Limited, was a public limited company, listed on the Stock Exchange. The complainant No.2 was Messrs Engro Chemical Pakistan Limited Workers Participation Fund set up by the complainant No. 1 under Companies Profits (W.P) Act, 1968. Complainant No. 1 was engaged in the manufacture and marketing of fertilizer with manufacturing facility located at Daharki in the Province of Sindh.

4. The Taxation Officer requested vide letter, dated June 13, 2003 that "in view of shortfall being faced toward budget achievement by close of June, 2003, the complainant put before their Board his earnest request for deposit of at least Rs.20.000(M) out of gross settled amount of W.P.P.F. into W.W.F on or before 30‑6‑2003. He stated in the said letter that, "no doubt the complete deposit is to be received within. this calendar year but part payment is needed for finality of achievement for the current financial year, on the contrary there is no bar upon the Board for making part payment 3 months early to the tune of only 20% of gross amount payable by 30th September, 2003".

5. Consequent upon the inaction of the complainant on his request, the Taxation Officer demanded vide letter, dated June 18, 2003 to deposit entire amount of W.P.P.F. into Government Treasury.

6. The complainant thereupon submitted that the Taxation Officer Ghotki Circle had no jurisdiction over W.P.P.F. or W.W.F. amount as the jurisdiction was. of the Large Taxpayers Unit (LIU) Karachi where the complainant No.1 was assessed. The Taxation Officer however, continued pressing the matter through letter, dated June 24 and 25, 2003.

7. The complainant further submitted vide letter, dated June 25, 2003 that the complainant No.1 was entitled to invest the same and allocate amounts due to its workers in September and only thereafter pay over the balance amount to the W.W.F. Fund and that this had been the established practice for the last dozens of years. However, the Taxation Officer threatened vide letter, dated June 26 to attach the Account No. 03 of the complainant No.1 with UBL Jung Branch simply because the Secretary of the Board of Trustees of the complainant No.2 was also a signatory on the said account. The respondent No. 1 has also written to the respondent No.3 to approve the said attachment.

8. The relevant provisions of Companies Profits (W.P.) Act, 1968 (the "Act") provide for setting up of W.P.P.F. Fund by Companies and section 3 (i)(b) provides for payment to the Fund of 5 % of the companies profits not later than nine months after the close of that year (i.e. by end September) and section 3(i)(c) provides that the company shall furnish to the Federal Government not later than nine months after the close of the year (i.e. by end September) its Audited Accounts. By Para. 3(i) of the Scheme to Act it is provided that the Board of the Fund may invest the amounts received from the company. Para. 4 (d) of the Scheme provides that from the amounts received as provided by section 3(i)(b) above the Fund shall allocate amounts to eligible workers and "any amount left out of the annual location ...shall be transferred to the Fund constituted under section 3 of the Workers Welfare Fund Ordinance, 1971 ("the Ordinance").

9. Rule 4A (d) of the Companies Profits (W.P.) Rules, 1971 require the Fund to furnish information to the Federal Government as per annexure III within one month of the annual allocation to the workers as aforesaid to transfer any amount left over to the fund constituted under section 3 of the Workers Welfare Ordinance, 1971.

10. A totally separate payment of 2% of its profits is required to be made by a company to the Fund under the 1971 Ordinance and section 4(2) of the 1971 Ordinance provides that the company shall pay such amount "to the ITO having jurisdiction over the industrial established.."

11. It is clear from the perusal of foregoing provisions that after receiving payment under the W.P.P.F Act from the company the Fund can invest the same but must allocate amounts due to the workers and then pay over the balance left to the fund under the 1971 Ordinance as late as September. It is under no legal obligation to pay these amounts by June or any other date prior to 30th September. This had been the established practice of the company and most other companies. Pakistan. It is also clear that the jurisdiction for receiving monies due under the 1971 Ordinance is of the LTU and not the respondent No. 1 as the complainant is assessed by the LTU. Further, even the jurisdiction o LTU is for the purpose of the payment directly due by the Company under the 1971 Ordinance and not under the W.P.P.F. Act, 1968.

12. It was found patently illegal for the respondent No. 1 to attempt to attach accounts of the complainant No.1 as the demands besides being contrary to law were allegedly against the complainant No.2. Accordingly a notice for hearing of stay application on 30‑6‑2003 was served.

13. The respondent No.1 appearing in person submitted that he regrets his misreading of law and has already withdrawn all the notices referred to in the complaint unconditionally.

14. The complainant's representatives are satisfied with the assurance and do not wish to pursue the complaint. No further action is required and investigation is closed.

C.M.A./980/FTOOrder accordingly.