Karachi, November 1, 2024 – The Federal Board of Revenue (FBR) has imposed a substantial tax demand against Bank Makramah, citing discrepancies in its financial reporting. According to the bank’s recently published financial statement, the FBR has disputed various tax treatments applied by Bank Makramah, leading to huge tax demand, which the bank has challenged through appeals.
The bank, which had submitted its Income Tax Returns up to the financial year ending December 31, 2023 (tax year 2024), revealed that the FBR disputed its tax assessments from as early as 2003, across various regions and former entities now consolidated under Bank Makramah. These amended assessments reflect the FBR’s concerns regarding the bank’s accounting of several key financial treatments.
For assessments from tax years 2009 through 2023, the FBR issued an additional tax demand of Rs. 418.48 million. This demand, contested by the bank, was paid, stayed, or offset against available refunds. In a similar vein, for assessments related to Bank Makramah’s AJK Region from tax years 2013 to 2017, the FBR issued a further Rs. 57.96 million in tax demands. Moreover, assessments concerning the legacy of ex-My Bank Limited, acquired by Bank Makramah, led to a disputed tax demand of Rs. 456.62 million for the tax years 2003 to 2011. An additional Rs. 89.74 million tax demand was also raised regarding ex-Atlas Bank Limited, now under Bank Makramah, for the years 2003 to 2010.
Key issues cited in the amended assessments include disallowances of mark-up payables, reclassification of mutual fund distributions to corporate tax rates, disallowances of provisions for non-performing loans, adjustments of Head Office expenses, and allocation of expenses against dividend and capital gains income. These matters, still pending across various appellate forums, have led Bank Makramah to file appeals challenging the amended orders.
Further complicating the matter is the introduction of SRO 1588(I)/2023, dated November 21, 2023, which designates banking companies as a sector under section 99D of the Income Tax Ordinance 2001, specifically affecting tax years 2022 and 2023. Bank Makramah, alongside other financial institutions, has legally contested this additional levy. The Sindh High Court, Islamabad High Court, and Lahore High Court have granted stay orders, suspending the application of this SRO, leaving the matter unresolved.
Despite these substantial tax demands, Bank Makramah’s management remains confident of a favorable outcome, and no financial adjustments or provisions have been made in its unconsolidated financial statements pending the appeal results.