IFTIKHAR HUSSAIN JANJUA VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2008 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 1936 (2004)

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(7E) & 50(7H)---Income Tax Ordinance (XLIX of 2001), S.170(4)-Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.2(3)---Refund--Maladministration---Tax paid in electricity bills---Income tax collected with electricity bills---Complainant alleged that Income Tax at Rs.21900 was collected under section 50(7E) of Income Tax Ordinance, 1979 was refundable but same was not refunded to him, nor any reply was given by the Income Tax Authorities---Validity---Taxes deducted/collected under Ss.50(7E) & 50(7H) Income Tax Ordinance, 1979 were acknowledged---Taxes deducted/collected under Ss.50(4), 50(4A), 50(5), 50(5AAA), 50(7A) & 50(7H) of the Ordinance were covered by the provisions of S.80C(3) read with Ss.80C(1) & 80C(2) of the Income Tax Ordinance, 1979---Any tax charged in excess of the amount was refundable---Once application for refund was filed under S.170(2) of the Income Tax Ordinance, 2001 Commissioner of Income Tax was bound to pass order under S.170(4) of the Income Tax. Ordinance, 2001 within 45 days---No such action was taken by the Commissioner which constituted "maladministration" on account of inattention, negligence, inefficiency and inaptitude in performance of duties---Commissioner of Income Tax shall issue order under S.170(4) of the Income Tax Ordinance, 2001 and direct the concerned Taxation Officer to issue refund at the earliest---Compliance report was directed to be submitted within 30 days of the receipt of the recommendations of the Federal Tax Ombudsman by the Revenue Division.

Muhammad Mushtaq, Adviser (Dealing Officer).

Rana Mushtaq Ahmed Toor, ITP for the Complainant.

Mr. Karamat Ullah, DCIT, for the Revenue.

FINDINGS/DECISION

JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---The complainant is an individual earning income from running a Petrol Pump. He receives commission from Pakistan State Oil on sale of Petroleum products. Tax is deducted at source under section 50(7H) of the repealed Ordinance (R.O.). Besides Income Tax is also collected with the electricity bills by WAPDA Authorities under section 50(7E) of the R.O. The commission earned by the complainant on sale of Petroleum products is covered by the provision of section 80C of the R.O. under the presumptive tax regime and tax deducted at source under section 50(7H) constitutes his final tax liability but tax collected under section 50(7E) with the electricity bills is claimed to be refundable as according to law it is not covered by the presumptive tax regime. It was alleged that income tax at Rs. 21,900 was collected under section 50(7E) of R.O. from him for the assessment years 2000-2001 to 2002-2003. It was alleged for that the complainant made application for issue of refund on 3-3-2004 under the R.O. and also made application for this purpose under Rule 71 of I.T. Rules 2002 read with section 170 of I.T. Ordinance 2001 on 3-3-2004. In spite of these applications, neither any refund was issued nor any replay given by the I.T. Authorities. This was `maladministration' and caused grievance to the complainant.

2. In his parawise comments, the RCIT, Eastern Region, Lahore denied any maladministration. However taxes deducted/collected under sections 50(7E) and 50(7H) of the repealed Ordinance were acknowledged. The RCIT submitted that the provisions of section 80C(3) clearly indicated that tax deducted or collected under provisions of section 50 was not refundable. Therefore, the complainant was not entitled to any refund in respect of tax deducted/collected under any provisions of section 50 including tax deducted under section 50(7E) or 50(7H) of R.O. The RCIT also submitted that the complainant did not file statement under section 143B of the repealed Ordinance for the assessment year 2001-2002.

3. Rana Mushtaq Ahmed Toor, ITP, attended on behalf of the complainant. He reiterated the contentions made in the complaint and has submitted that the assertion of the RCIT that the complainant did not file statement under section 143B for the assessment year 2001-2002 was not correct because statement under section 143B was received by the Record-Keeper of the Circle concerned (Mr. Khalid Mehmood) on 29-9-2001 and his acknowledgement was available with the complainant. The AR further submitted that not only statements under section 143B were filed for the said years but the complainant in order to claim the refund also filed regular Income Tax Returns under section 55 of the repealed Ordinance. The AR also submitted that applications for issuance of refund were made on 3-3-2004 but there was no response from the Revenue Authorities. The AR explained that reliance of the Revenue Authorities on provisions of section 80C (3) is simply to deprive the complainant of his legitimate claim of refund otherwise the provisions of section 80C were quite clear. The AR argued that Section 80C(2) of the repealed Ordinance clearly enumerated the categories of the tax deducted at source which constitute final tax liability of a taxpayer under the presumptive tax regime. Section 80C(2) indicated that the tax deducted under sections 50(4), 50(4A),50(5A), 50(5AAA), 50(7A) and 50(7H) constituted final tax liability of the complainant. The AR continued that tax deducted under section 50(7E) was not part of final tax liability. The AR submitted that actually 50(7E) was a mode collection of advance tax under section 53 of the R.O. The provisions of section 50(7E) clearly indicated that the tax deducted under section 50(7E) will be given credit while computing the final tax liability of a taxpayer. Hence tax deducted under section 50(7E) was refundable. The AR also relied on decision in C.No.81-L/2004 decided recently wherein, on the basis of identical facts, tax collected under section 50 (7E) was held to be refundable. The Revenue Authorities illegally withheld the refund due to the complainant, it was asserted.

4. Mr. Karamat Ullah, DCIT, attended for the Revenue. The DR forcefully reiterated the submissions made by the RCIT in his parawise comments. The DR relied on the provisions of section 80C(3) and argued that provisions of section 80C of the R.O. had overriding effect and the provisions of section 80C(3) clearly indicating that the tax deducted under section 50 will not be refunded, will prevail.

5. The complaint and respondent's reply have been examined and rival arguments considered. Under Income Tax Ordinance the tax is to be collected/deducted at rates specified in the first schedule of the relevant Finance Act/Finance Ordinance. The provisions of sections 80C(1) and 80C(2) of the repealed Ordinance are quite clear. These provisions indicate that the tax deducted/collected under sections 50(4), 50(4A), 50(5), 50(5AAA), 50(7H) will be covered by the provisions of Section 80C of the repealed Ordinance. The taxi deducted/collected at source under other provisions of Section 50 will not be covered by the presumptive tax regime. The provisions of Section 80C(3) are produced as under:---

"(3) Nothing contained in this Ordinance shall be so construed as to authorize any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collected under section 50 or set off of any loss under any provision of this Ordinance".

The above provisions of section 80C(3) of the repealed Ordinance are to be read along with the provisions of sections 810C(1) and 80C(2) of the repealed Ordinance. An assessee is liable to tax according to the provisions of Finance Act/ Finance Ordinance of the relevant year. Any tax charged in excess of the amount is refundable. This fact has also been acknowledged and clarified by the C.B.R. vide Circular No.18 of 1993 dated 30-6-1993. This circular is reproduced as under:-

"Section 80C of the Income Tax Ordinance, 1997 provides for presumptive tax in case of certain contractors, suppliers and importers which are liable to deduction of tax under sub-sections (4) & (5) of section 50 of the said Ordinance. In these cases the amount of tax deducted under the said subsections of section 50 in accordance with the relevant rates prescribed in the First Schedule constitutes their final tax liability.

2. Apprehensions have been shown in such cases that the amount of tax deducted in excess of the rates prescribed under the relevant subsection of section 50 is not refundable on the grounds that subsection (3) of section 80C debars issuance of any refund in cases covered under that section 80C.

3. The issue has been examined and the Board is of the view that the amount of tax chargeable under subsection (1) of section 80C is the amount deductible/deducted under subsections (4) and (5) of section 50 in accordance with the rates specified in the First Schedule. In this view of the matter the tax liability of a person under section 80C would be restricted to he extent of tax deductible udder subsections (4) and (5) of section 50. Any amount deducted or collected in excess of the requisite amount of tax under section 80C would constitute the amount of tax paid by or on behalf of the assessee in excess of the amount with which he was properly chargeable under the Income Tax Ordinance for the said year. The provisions of section 96 of the Income tax Ordinance duly entitle such assessees to refund of the excess amount so paid.

6. The issue of refund of tax collected under section 50(7E) in cases of Petrol Pump owners has already been examined recently in C.No.181-L/2004 decided on 4-5-2004 and it had been held that tax collected under section 50(7E) along with electricity bills in the said cased is refundable. The complainant made application for refund under the R.O. for all the years on 3-3-2004 and also made separate applications for issuance of refund for all the years separately under section 170(2) of I.T. Ordinance 2001 read with rule 71 I.T. Rules, 2002 on 3-3-2004. The AR submitted that the claim of the complainant for refund was to be processed according to the provisions of Section 100 of repealed Ordinance and applications under section 170 of I.T. Ordinance, 2001 for refund were filed on the insistence of the Taxation Authorities. This plea of the complainant is not acceptable because once applications for refund have been filed under section 170(2) the CIT is bound to pass an order under section 170(4) within 45 days. But so far no action has been taken by the CIT which constitutes `mal-administration' on account of inattention, negligence, inefficiency and inaptitude in performance of duties falling within the provisions of section 2(3)(i)(b) of the Establishment of Office of the Federal Tax Ombudsman Ordinance, 2000.

7. It is therefore recommended:

(i) The Commissioner of Income Tax to issue order under section 170(4) of the I.T. Ordinance, 2001 and direct the concerned Taxation Officer to issue the refund at the earliest.

(ii) Compliance report be submitted within 30 days of receipt of these recommendations by the Revenue Division.

M.I./259/Tax(Trib.)Order accordingly.