Author: Mrs. Anjum Shahnawaz

ISLAMABAD: Federal Board of Revenue (FBR) may invoke provisions related to third party recovery of tax defaulted by a taxpayer.

FBR sources said that the tax authorities may invoke Section 140 of Income Tax Ordinance, 2001 in order to make recovery from a defaulter.

The FBR recently notified draft rules through SRO 111(I)/2020 dated February 14, 2020 to implement Section 140 of the Ordinance.

As per the draft rules the tax authorities would be empowered to recover tax from a defaulter through third party, who owes money to the defaulted taxpayer.

The sources said that the FBR soon issue the notification to make draft rules to part of the statute.

The FBR is facing huge revenue shortfall for achieving this revenue collection target. Therefore, the tax machinery may apply all possible ways to recovery outstanding amount.

The Section 140 explains the procedure of recovery through third party.

Section 140: Recovery of tax from persons holding money on behalf of a taxpayer

Sub-Section (1): For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –

(a) owing or who may owe money to the taxpayer; or

(b) holding or who may hold money for, or on account of the taxpayer;

(c) holding or who may hold money on account of some other person for payment to the taxpayer; or

(d) having authority of some other person to pay money to the taxpayer, to pay to the Commissioner so much of the money as set out in the notice by the date set out in the notice:

“Provided that the Commissioner shall not issue notice under this sub-section for recovery of any tax due from a taxpayer if the said taxpayer has filed an appeal under section 127 in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), subject to the condition that ten per cent of the said amount of tax due has been paid by the taxpayer.”

Sub-Section (2): Subject to sub-section (3), the amount set out in a notice under sub-section (1) —

(a) where the amount of the money is equal to or less than the amount of tax due by the taxpayer, shall not exceed the amount of the money; or

(b) in any other case, shall be so much of the money as is sufficient to pay the amount of tax due by the taxpayer.

Sub-Section (3): Where a person is liable to make a series of payments (such as salary) to a taxpayer, a notice under sub-section (1) may specify an amount to be paid out of each payment until the amount of tax due by the taxpayer has been paid.

Sub-Section (4): The date for payment specified in a notice under sub-section (1) shall not be a date before the money becomes payable to the taxpayer or held on the taxpayer’s behalf.

Sub-Section (5): The provisions of sections 160, 161, 162 and 163, so far as may be, shall apply to an amount due under this section as if the amount were required to be deducted from a payment under Division III of Part V of this Chapter.

Sub-Section (6): Any person who has paid any amount in compliance with a notice under sub-section (1) shall be treated as having paid such amount under the authority of the taxpayer and the receipt of the Commissioner constitutes a good and sufficient discharge of the liability of such person to the taxpayer to the extent of the amount referred to in such receipt.

Sub-Section (10): In this section, “person” includes any Court, Tribunal or any other authority.