SEVEN ELEVEN CNG STATION, BAHAWALNAGAR VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2018 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 943 (2017)

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----Ss. 2(3)(i)(a)(ii), 9(2)(b) & 10(1)(4)---Income Tax Ordinance (XLIX of 2001), Ss.234-A & 235---Federal Board of Revenue---Clarification No.4(19).T.Budget/2017-23670-R, dated 23-2-2017---Non-issuance of refund amount---Complainant filed return of income at Rs.10.288 million, tax payable at Rs.0.411 million and refund amounting to Rs.0.227 million of the tax deducted under S.235 of the Income Tax Ordinance, 2001---Complainant, submitted application for refund along with original bills and statement of tax deduction under S.234-A of the Income Tax Ordinance, 2001, but said application was not disposed of, which according to the complainant tantamounted to maladministration under S.2(3)(i)(a)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Department raised preliminary objection of jurisdiction under S.9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, on the ground that the matter pertained to the assessment and determination of tax in respect of which remedy was available by way of appeal to Appellate Fora---Validity---Objection of the department was misconceived, as refund claim was not an issue pertaining to assessment of income or determination of tax liability---Federal Board of Revenue had issued clarification vide letter No.4(19)T-Budget/2017-23670-R, dated 23-2-2017; whereby, it had been clarified that in the light of provisions of subsection (4) of S.234-A of the Income Tax Ordinance, 2001, CNG Station was not entitled to claim adjustment of withholding tax collected or deducted under any other head/provision of said Ordinance; even in instances where tax collected/deducted under any other head, was in excess of final tax liability discharged by the taxpayer under S.234-A of the Income Tax Ordinance, 2001---Ombudsman observed that Department should dispose of refund application in accordance with said clarification after providing opportunity of hearing to the complainant, expeditiously.

Messrs Khalid Modern Industries (Pvt.) Ltd.'s case C.No. 564/ LHR/ST(157)/999/13 and Messrs Libra International, Karachi's case No.154/KHI/ST-(66)/527/2015 ref.

Abdur Rehman Dogar, Advisor, Dealing Officer.

Riaz Ahmad Raja, ITP, Authorized Representative.

Muhammad Sultan, Addl. CIR, RTO, Bahawalpur, Departmental Representative.

FINDINGS/RECOMMENDATIONS

ABDUR RAUF CHAUDHARY, FEDERAL TAX OMBUDSMAN.---This complaint has been filed under section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (the FTO Ordinance) against non issuance of refund amounting to Rs.0.227 million with compensation for tax year 2016.

2.Brief facts of the case are that the Complainant an AOP deriving income from running "Seven Eleven CNG Station" e-filed return on 06.09.2016 declaring income at Rs.10.288 million, tax payable at Rs.0.411 million and refund amounting to Rs.0.227 million of the tax deducted under Section 235 of the Ordinance on electricity. Application for refund along with original bills and statement of tax deduction under section 234A was submitted on IRIS as well as sent through Leopard Courier on 07.09.2016, but the same was not disposed of as per Circular No.5 of 2003 dated 30.06.2003. According to the complainant, the Deptt's neglect and inattention was tantamount to maladministration under section 2(3)(i)(a) & (ii) of the FTO Ordinance.

3.The complaint was sent for comments to Secretary Revenue Division, in terms of section 10(4) of the FTO Ordinance. In response, the Deptt vide letter No.RTO-BWP/SO-III/FTO-304/6771 dated 12.04.2017 raised preliminary objection of jurisdiction under section 9(2)(b) of the FTO Ordinance on the ground that the matter pertained to the assessment and determination of tax in respect of which remedy was available by way of appeal to the appellate fora. In support, decisions of the Hon'ble President of Pakistan in C.No.564/LHR/ ST(157)/999/13 (M/s. Khalid Modern Industries (Pvt.) Ltd. and No.154/KHI/ST-(66)/527/2015 (M/s. Libra International, Karachi) were quoted. On merits, it was stated that the Complainant was not entitled to refund of tax deducted under section 235 as per provisions of sub-section (4) of Section 234A of the Ordinance and FBR's clarification vide letter No.4(19)IT-Budget/2017-23670-R dated 23.02.2017.

4.The DR reiterated the stance taken in the written comments. Whereas, the AR contended that the Complainant was entitled to claim refund of tax deduction under section 235 of the Ordinance. According to him, under section 120(1)(b) of the Ordinance, return filed had attained status of deemed assessment and so claimed refund became due unless any amendment in the assessment was made. It was obligatory for the Deptt to pass appropriate order. This has not been done. By not issuing refund, the Deptt committed maladministration which was cognizable under the FTO Ordinance.

5.Both the parties heard and record perused. The Deptt keeps raising preliminary objection unnecessarily just for the sake of objection which displays mediocrity and lack of understanding of legal provisions of FTO Ordinance, 2000 read with the tax laws. As refund claim is not an issue pertaining to assessment of income or determination of tax liability, the Deptt'l objection is misconceived. However, on the issue of refund in CNG cases, FBR has issued clarification vide letter No.4(19)T-Budget/2017-23670-R dated 23.02.2017. It has been clarified that in the light of provisions of subsection (4) of section 234A of the Ordinance, a CNG station is not entitled to claim adjustment of withholding tax collected or deducted under any other head/provision of the Ordinance even in instances where tax collected/deducted under any other head is in excess of final tax liability discharged by the taxpayer under section 234A of the Ordinance.

6.In view thereof, the Deptt. should dispose of refund application in accordance with the said clarification after providing opportunity of hearing to the Complainant expeditiously

7.The complaint stands disposed of in the above terms.

HBT/7/FTO Order accordingly.