Author: Mrs. Anjum Shahnawaz

Tax cases involving over Rs250 billion decided at various judicial forums: FBR

ISLAMABAD: Tax cases involving over Rs250 billion have been decided at the various judicial forums during the quarter ended December 2020, Federal Board of Revenue (FBR) said in a statement.

The FBR said that it had geared up the efforts for resolving tax cases laying pending at various judicial forums.

As a result of these ongoing efforts, in the last quarter (ending December, 2020) 934 tax cases have been disposed of by the high courts and the supreme court with the revenue involved amounting to Rs81.7 billion.

Moreover, 1240 cases with the revenue involved of Rs168.5 billion have been decided by the Appellate Tribunal Inland Revenue (ATIR) during the same period.

The FBR said that it is making all out efforts by taking several steps to improve the disposal of tax litigation cases pending in different appellate fora including Commissioners Inland Revenue (Appeals), Appellate Tribunal Inland Revenue, High Courts and the Supreme Court of Pakistan.

The FBR has launched the simplified process at the first Appeal i.e. Commissioners Appeals level by implementing the e-filing of appeals since January 01, 2021.

Through e-filing, taxpayers can simply file appeals against an appealable order, online, without hassle of going to their respective field office. Even prior to launching of E-filing, disposal of cases have been surpassing the assigned targets as per the Performance Agreement.

For the period from July to December, 2020, the target of disposal assigned to the CsIR (Appeals) was 7818 appeals against which a total of 17,768 appeals were disposed of which is in excess of the target by a huge margin.

Similarly on FBR’s request, special benches for hearing of tax cases have been constituted by Sindh High Court, Lahore High Court and Islamabad High Court for early hearings and speedy disposal of tax related cases.

In addition to that a new policy has been introduced for the induction of competent lawyers so that government revenue is not left at the stake of amateur lawyers.

It is also informed for the benefit of taxpayers’ that the institution of ADRC (Alternate Dispute Resolution Committee) has also been mobilized by virtue of which taxpayers’ are encouraged to get their cases settled through these committees in a much lesser time and without incurring litigation cost.

So far on application by the taxpayers’ 18 committees have started working for resolution of cases.

FBR further clarifies that by virtue of a major facilitative change in law vide Finance Act-2020, an applicant taxpayer, in order to apply for resolution of case by ADRC, is not required to withdraw his case pending in any other appellate forum.

In order to win trust of the taxpayers’ in this system, the law requires that members of ADRC apart from the relevant Chief Commissioner would also include respectable reputable judges, chartered accountants and businessmen nominated by chambers of commerce.

The committee is also empowered to stay the process of recovery in hardship cases. FBR also clarifies that taxpayers’ application has to be finalized by the Committee within a short period of 120 days which in itself is a big relief considering the usual time taken in various appellate fora before a case attains finality.

February 3, 2021
Associates defined under Sales Tax Act 1990

Associates or Associated Persons have been defined under Sales Tax Act, 1990.

Section 2 of Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained associates as:

(3) associates (associated persons) means, –

(i) subject to sub-clause (ii), where two persons associate and the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person;

(ii) two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person;

(iii) without limiting the generality of sub-clause (i) and subject to sub-clause (iv), the following shall be treated as associates, namely: –

(a) an individual and a relative of the individual;

(b) members of an association of persons;

(c) a member of an association of persons and the association, where the member, either alone or together with an associate or associates under another application of this section, controls fifty per cent or more of the rights to income or capital of the association;

(d) a trust and any person who benefits or may benefit under the trust;

(e) a shareholder in a company and the company, where the shareholder, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons–

(i) fifty per cent or more of the voting power in the company;

(ii) fifty per cent or more of the rights to dividends; or

(iii) fifty per cent or more of the rights to capital; and

(f) two companies, where a person, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons –

(i) fifty per cent or more of the voting power in both companies;

(ii) fifty per cent or more of the rights to dividends in companies; or

(iii) fifty per cent or more of the rights to capital in both companies.

(iv) two persons shall not be associates under sub-clause (a) or (b) of paragraph (iii) where the Commissioner is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other.

(v) In this clause, “relative” in relation to an individual, means–

(a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or

(b) a spouse of the individual or of any person specified in sub-clause (a).

(3A) “association of persons” includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;

(3AA) “banking company” means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes anybody corporate which transacts the business of banking in Pakistan;

February 3, 2021
Active taxpayer under Sales Tax Act 1990

Sales Tax Act, 1990 (updated up to June 30, 2020) has defined the active taxpayer. The term ‘active taxpayer’ was introduced through Finance Act, 2015. It has been defined as a registered person who does not fall in any of the following categories, namely:-

(a) who is blacklisted or whose registration is suspended in terms of section 21 of the Act;

(b) fails to file the return under section 26 of the Act by the due date for two consecutive tax periods;

(c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and

(d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.

The Federal Board of Revenue (FBR) further explained:

The Active Taxpayer List (Sales Tax) is a central record of online active Sales Tax Return filers.

To become part of the Active Taxpayer List (ST), the Active Taxpayer must be a registered person who does not fall in the following categories:

Blacklisted or whose registration is suspended or blocked;

Failed to file return by the due date for two consecutive tax periods;

Failed to file Income Tax Return by the due date;

Failed to file withholding tax statement.

Active Taxpayer status (ST) can be checked through the online portal.

The ATL status check allows you to confirm your Active Taxpayer status.

The Commissioner may suspend registration of a Taxpayer, if the person is found to have issued fake invoices, evaded tax or committed tax fraud without prior notice, pending further inquiry.

Suspension of registration can occur due to the following possibilities:

Non-availability of the registered person at the given address;

Refusal to allow access to business premises or refusal to furnish records to an authorized Inland Revenue Officer;

Abnormal tax profile, such as taking excessive input tax adjustments, continuous carry-forwards, or sudden increase in turnover;

Making substantial purchases from or making supplies to other blacklisted or suspended person;

Non-filing of sales tax returns by a registered person for six consecutive months;

On recommendation of a commissioner of any other jurisdiction;

Any other reason to be specified by the Commissioner;

Impact of Suspension

Commissioner shall issue written order to the concerned registered person detailing the reasons for suspension. The order shall also be provided to all other Large Taxpayer Units (LTUs)/Regional Tax Offices (RTOs), the FBR‘s computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law;

Suspension of registered person will make them ineligible to avail input tax adjustment/refund. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the basis of invoices issued by such suspended person (whether issued prior to or after such suspension);

The suspended registered person will be issued a show cause notice (through registered post or courier service) within seven days of issuance of order of suspension by the Commissioner. The registered person will have an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that the will be blacklisted. In case of non-availability of the suspended person at the given address, the notice may be placed on the main notice Board of the LTU/RTO;

Where the show cause notice is not issued within seven days of the order of suspension, the order of suspension shall become invalid;

For restoration of Active Taxpayer (ST), Sales Tax General Order No. 34/2010 dated 16-9-2010 may be followed.

A non-active taxpayer may be restored to active taxpayer status:

If the respective RTO/LTU recommends the same to FBR after conducting audit or other investigation;

Compotent Authority, Appellate Authority, Court or FTO orders for the restoration.

February 3, 2021
Law authorizes customs officials to X-Ray suspects for detection of concealed goods

KARACHI: Customs authorities have been empowered to screen or X-Ray bodies of suspected persons for detection of concealed goods.

According to Customs Act, 1969, an officer not below the rank of an assistant collector of customs can order to screen or X-Ray a person for detection of concealed goods.

Section 160 of the Act explained regarding the power to screen or X-Ray bodies of suspected persons for detecting secreted goods.

(1) Where the appropriate officer has reason to believe that any person liable to search has any goods liable to confiscation secreted inside his body, he may detain such person and produce him without unnecessary delay before an officer of customs not below the rank of an Assistant Collector of Customs.

(2) The aforesaid officer, if he has reasonable grounds for believing that such person has any such goods secreted inside his body and that it is necessary to have the body of such person screened or X-Rayed, may make an order to that effect , or else discharge such person forthwith, except where he is held on any other grounds.

(3) Where the aforesaid officer orders such person to be screened or X-Rayed, the appropriate officer shall, as soon as practicable, take him to a radiologist possessing such qualifications as may be recognized by the Federal Government for that purpose and such person shall allow the radiologist to screen or X-Ray his body.

(4) The radiologist shall screen or X-Ray the body of such person and forward his report thereon, together with any X-Ray picture taken by him to the aforesaid officer without unnecessary delay.

(5) Where on the basis of a report from a radiologist or otherwise, the aforesaid officer is satisfied that any person has any goods liable to confiscation secreted inside his body, he may direct that suitable action for bringing such goods out of his body be taken on the advice and under the supervision of a registered medical practitioner and such person shall be bound to comply with such direction:

Provided that in the case of a female no such action shall be taken except on the advice and under the supervision of a female registered medical practitioner.

(6) Where any person is brought before an officer of customs not below the rank of an Assistant Collector of Customs as aforesaid, he may direct that pending completion of all action under this section such person be detained.

(7) No person shall be subjected to screening or X-Ray if he confesses that goods liable to confiscation are secreted inside his body and of his own consent agrees to suitable steps being taken to bring out such goods.

February 2, 2021
Sales of petroleum products grow by 9 percent in seven months

KARACHI: The sales of petroleum products have posted a 9 percent growth during the first seven months of the current fiscal year mainly due to increasing economic activities and trade.

The sales of oil market companies (OMCs) increased to 11,269,000 tons during July – January of 2020/2021 as compared with 10,309,000 tons in the corresponding period of the last fiscal year, showing an increase of 9 percent.

Analysts at Taurus Securities attributed the increase in sales of POL products to increasing economic activity and trade compared to last year as well as the government’s efforts at reducing sale of HSD in the black market.

The sale of furnace oil posted a 36 percent growth to 1,915,000 tons during the first seven months of the current fiscal year as compared with 1,413,000 tons in the corresponding period of the last fiscal year.

The analysts attributed the significant increase to the shortage for LNG and demand for furnace oil by the power sector.

The analysts said that on the contrary, POL sales registered a decline of 5 percent Month on Month (MoM). The demand for high speed diesel (HSD) and motor spirit wavered on a MoM basis, down 13 percent and 5 percent, respectively, as economic and construction activity decelerated during winters.

The sales of Pakistan State Oil (PSO) for the month posted a drop of 4 percent wherein Year on Year (YoY) sales increased by 12 percent.

APL’s sales increased 5 percent MoM mainly due to growth in FO sales by 38 percent YoY. 1MFY21 sales declined 2 percent.

February 2, 2021
Bank holiday on Kashmir Day announced

KARACHI: The State Bank of Pakistan (SBP) on Tuesday announced bank holiday on occasion of Kashmir Solidarity Day on February 05, 2021.

The SBP said that it would remain closed on February 05, 2021 (Friday) on the occasion of “Kashmir Solidarity Day”.

On this day, one-minute silence shall be observed at 10:00 a.m. to honor Kashmiris Shuhada, as announced by the Government of Pakistan.

The SBP communicated the announcement to all the presidents and chief executives of banks, development financial institutions and microfinance banks.

February 2, 2021
Pakistan starts coronavirus vaccination

ISLAMABAD: Prime Minister Imran Khan on Tuesday launched the vaccination against the coronavirus. The vaccination will be initially for health workers.
(more…)

February 2, 2021
Cell phone of Justic Qazi Faez Isa hacked

ISLAMABAD: Information has been circulated on Tuesday by the government authorities that the cell phone of Justice Qazi Faez Isa was hacked.

A statement said that it is intimated to all and sundry that the cell phone of Justice Qazi Faez Isa has been hacked and there is suspicion that misguiding communication can be made from his lordship’s number to anyone with ulterior motives, therefore, the communication purportedly made from his lordship’s cell phone, which his lordship had not sent, may be treated as fake and false.

February 2, 2021
Share market up by 332 points on power purchase agreement

KARACHI: The share market gained 332 points on Tuesday following positive sentiments on initiation of agreement between HUBCO and Central Power Purchasing Agency.

The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) closed at 46,580 points as against previous day’s closing of 46,248 points showing an increase of 332 points.

Analysts at Arif Habib Limited said that signing of IPP’s agreement by HUBCO motivated the Investors to take positions in PSO and HUBCO, resulting in HUBCO driving the market with an overall increase of 394 points during the session.

Similarly, overnight increase in crude oil prices by 3.5 percent caused the E&P sector stocks to react late but assertively contributed to the upsurge in Index.

PSO made a new high on the back of closure of deal with IPPs, which opens the door for resolution of circular debt to O&GMCs.

Banking, Refinery and Cement sector stocks saw profit booking that brought the index in the closing session to a net increase of 332 points (unadjusted).

Among scrips, HASCOL led the table with 43.9 million shares, followed by KEL (34.2 million) and PIBTL (22.5 million).

Sectors contributing to the performance include E&P (+101 points), Power (+88 points), O&GMCs (+61 points), Banks (+34 points) and Pharma (+30 points).

Volumes declined further from 693.6 million shares to 468.1 million shares (-33 percent DoD). Average traded value also dipped by 24 percent to reach US$ 145.2 million as against US$ 190.6 million.

Stocks that contributed significantly to the volumes include HASCOL, KEL, PIBTL, TELE and PRL, which formed 30 percent of total volumes.

Stocks that contributed positively to the index include HUBC (+87 points), PSO (+65 points), OGDC (+39 points), POL (+36 points) and MCB (+27 points). Stocks that contributed negatively include HBL (-21 points), HASCOL (-12 points), INIL (-11 points), MEBL (-8 points) and DGKC (-5 points).

February 2, 2021
Hubco initiates agreement with Central Power Purchasing Agency

KARACHI: The Hub Power Company Limited (Hubco) on Tuesday said that it has initiated agreement with Central Power Purchasing Agency (Guarantee) Limited (power purchaser) in furtherance of the Memorandum of Understanding dated August 21, 2020.

In a communication sent to Pakistan Stock Exchange (PSX), the company said that under the agreement, the payment of overdue receivables is an integral part of the agreement and the payment mechanism envisaged is two instalments, with 40 percent of the overdue receivables payable within 30 business days of signing the Agreement (comprising 1/3^rd cash and 2/3^rd financial instruments of PIBs and Sukuks) and the remaining 60 percent payable 6 months thereafter through the same method as that of the first instalment.

In addition, payment of all invoices will be made in order of its submission so that invoices that have been outstanding the longest (in whole or in part) shall be paid first.

At the request of the Government of Pakistan, in the larger national interest and sectoral sustainability, the Parties have agreed to reduce the existing Fixed Operating Costs Element by 11 percent, whilst keeping the existing arrangement of indexations.

At the same time, the Parties have agreed to discontinue the US$ Exchange rate and US CPI indexation on the Project Company Equity and fix the same on National Bank of Pakistan’s TT/OD selling PKR/USD exchange rate prevailing as on August 21, 2020 and US CPI for the month of August 2020; till the current exchange rate reaches that of August 21, 2020 i.e. PKR 168.60/USD, the existing arrangement under Power Purchase Agreement (PPA) for the current half year shall apply for future billing.

The parties have also agreed to engage without delay, on signing of the Agreement, in good faith negotiations and discussion and use their best endeavors to achieve pre-mature termination of the PPA, which will be mutually beneficial, resulting in compensation to the Company, while saving GOP substantial sums in lieu of capacity payments till the expiry of the Power Purchase Agreement (PPA).

In parallel, the Parties have also agreed that certain outstanding dispute(s) shall be resolved through arbitration under the PPA. The terms of the Agreement are subject to approval of the Board of Directors of Hubco, the Federal Cabinet and execution of a final binding agreement.

February 2, 2021