IQ STUDIO (PVT.) LTD. VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2015 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 485 (2013)

Income Tax Ordinance (XLIX of 2001)---

----Ss.12, 153 & 171---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10---Excess deduction of income tax at source---Delayed refund---Maladministration---Refunds in the case arose as a result of excess deduction of income tax at source on payments received for service rendered---Refund pertaining to tax years 2007 to 2009, was issued by the department on 17-8-2012, which prima facie was delayed one---Refund claim was required to be processed within the timeframe, stipulated in the statute after the deemed assessment made under S.120(1) of Income Tax Ordinance, 2001---In the tax year 2009, the time limit was 45 days, after the return was admitted and acknowledgment issued to the taxpayer---Refund due for tax years 2007 to 2009, having not been determined by the department within the stipulated time period of 45 days from the date of deemed assessment in each year, delay had occurred, and compensation under S.171 of Income Tax Act, 2001, was payable---Compensation amount was to be reckoned from the date of deemed assessment, and not from the date of any order for issuance of refund passed belatedly by the department---Delay in issuance of refund, was tantamount to "maladministration" under S.2(3)(ii) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Such delay also created the right to receive compensation under S.171 of Income Tax Ordinance, 2001---Ombudsman recommended that Federal Board of Revenue to direct the Chief Commissioner to issue compensation due as per law and report compliance within 30 days.

2010 PTD (Trib.) 519 ref.

Muhammad Munir Qureshi, Advisor, Dealing Officer.

Muhammad Waseem Chaudhry Authorized Representative.

Usman Asghar, DCIR, Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---This complaint is against non-issuance of refund/ compensation for Tax Year 2009.

2.The Complainant Company claimed refunds of Rs.1,686,711, Rs.1,986,963, Rs.2,104,716 and Rs.4,756,052 respectively in Tax Years 2007 to 2010, aggregating to Rs.10,534,442. The refunds arose as a result of excess deduction of income tax at source on payments received for services rendered. The complainant received refund voucher No.38/14350 dated 17-8-2012 for Rs. 3,206,685, for Tax Years 2007 to 2009. In Tax Year 2010 the charge of Minimum Tax under Section 153 of the Income Tax Ordinance 2001 offset the refund claim. For Tax Year 2009, only an amount of Rs.18,959 had been refunded against claimed amount of Rs.2,104,716. According to the complainant, the withholding agent inadvertently deposited the withheld tax pertaining to the tax period 1-7-2008 to 30-6-2009 in tax year 2010, instead of Tax Year 2009, and resultantly, the Deptt. could not take cognizance of tax withheld for Tax Year 2009. Although the matter was clarified to the Deptt. no remedial action was taken. Hence the intervention of the Hon'ble FTO has been sought.

When confronted, the Deptt. filed a reply contending that the complainant had claimed refund for Tax Years 2007 to 2010 but the refund claim for Tax Year 2010 was misconceived as minimum tax under Section 153(6)(iii) of the Income Tax Ordinance, 2001 (the Ordinance) was payable in Tax Year 2010. As for alleged incorrect tax credit given by the Deptt. in Tax Year 2009, the final position would emerge after the complainant reconciled the deposit of tax in different tax periods. So far as compensation payment was concerned, the Deptt. denied that the same was payable as refund had been paid by the Deptt. within the statutory period permissible after issuance of refund order.

4.Both sides have been heard and the record examined.

5.Refund pertaining to Tax Years 2007 to 2009 was issued by the Deptt. on 17-8-2012. Prima facie, the same is delayed. As explained in ATIR judgment 2010 PTD (Trib.) 519, a refund claim was required to be processed within the timeframe stipulated in the statute after the deemed assessment made under section 120(1) of the Ordinance. In Tax Year 2009, the time limit was 45 days after the return was admitted and acknowledgment issued to the taxpayer. As the refund due for Tax Years 2007 to 2009 was not determined by the Deptt. within the stipulated time period of 45 days from the date of deemed assessment in each year, a delay had occurred and compensation under section 171 of the Ordinance was therefore payable. As per law, the compensation amount is to be reckoned from the date of deemed assessment and not from the date of any order for issuance of refund passed belatedly by the Deptt. So far as deposit of deducted tax is concerned, the complainant did not produce original payment challans to establish the alleged incorrect deposit of tax pertaining to Tax Period 2008-2009 in Tax Year 2010. Findings:--

6.The delay in issuance of refund is tantamount to maladministration under section 2(3)(ii) of the FTO Ordinance. The delay also creates the right to receive compensation under Section 171 of the Ordinance.

Recommendations:

7.FBR to direct the Chief Commissioner to -

(i)issue compensation due as per law: and

(ii)report compliance within 30 days.

HBT/174/FTOOrder accordingly.