FBR creates tax demand of over Rs667 million against Bank Alfalah

FBR creates tax demand of over Rs667 million against Bank Alfalah

KARACHI: Tax authorities have created an income tax demand of over Rs667 million against Bank Alfalah for default in payment and wrongly allocation of expenses.

According to official documents made available on Wednesday, a tax office of Federal Board of Revenue (FBR) had issued notice to the bank for recovery of amount.

The bank said in respect of tax years 2008, 2014, 2017 and 2019, the tax authorities had raised certain issues including default in payment of WWF, allocation of expenses to dividend and capital gains, dividend income from mutual funds not being taken under income from business and disallowance of Leasehold improvements resulting in additional demand of Rs. 667.746 million.

As a result of appeal filed before Commissioner Appeals against these issues, relief has been provided for tax amount of Rs. 184.218 million appeal effect orders are pending. Bank has filed appeals on these issues which are pending before Commissioner Appeals and Appellate Tribunal.

“The management is confident that these matters will be decided in favour of the bank.”

The bank further said that the income tax assessments of the bank had been finalized up to and including tax year 2020. Matters of disagreement exist between the bank and tax authorities for various assessment years and are pending with the Commissioner of Inland Revenue (Appeals), Appellate Tribunal Inland Revenue (ATIR), High Court of Sindh and Supreme Court of Pakistan.

These issues mainly relate to addition of mark up in suspense to income, taxability of profit on government securities, bad debts written off and disallowances relating to profit and loss expenses.

Besides income tax, the bank has received an order from a tax authority wherein Sales tax and Further Tax amounting to Rs.8.601 million [excluding default surcharge and penalty] is demanded allegedly for non-payment of sales tax on certain transactions relating to accounting year 2016. The bank is in process of filing an appeal against this order in consultation with Tax Consultant.

Furthermore, the bank has received orders from a provincial tax authority wherein tax authority demanded sales tax on banking services and penalty amounting to Rs.488.211 million (December 31, 2020: Rs.488.211 million) excluding default surcharge by disallowing certain exemptions of sales tax on banking services and allegedly for short payment of sales tax covering period from July 2011 to June 2014. Bank’s appeals against these orders are currently pending before Commissioner Appeals.


“Apropos the news item circulating in media about “FBR creates tax demand of Rs.667m against Bank Alfalah” is misperceived. It seems that Tax Contingency Note of the bank is taken as source. Tax contingency note is generally a part of financial statement of almost every bank wherein tax matters are disclosed for users of financial statements. In tax contingency note of the bank Rs.667m is only a number relates to tax matters of past many years and not a new tax demand which is created by FBR.”

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