Income Tax Ordinance 2001: procedure for claiming refund, additional payment for delay

Income Tax Ordinance 2001: procedure for claiming refund, additional payment for delay

KARACHI: A commissioner of Inland Revenue is responsible for making payment at KIBOR plus 0.5 percent per annum for late payment of income tax refund.

Federal Board of Revenue (FBR) recently updated Income Tax Ordinance, 2001 and its Section 170 explained the procedure for availing refunds against tax paid in excess.

Further, Section 171 explained the compensation for delayed payment of refund to the taxpayer.

Section 170: Refunds

Sub-Section (1): A taxpayer who has paid tax in excess of the amount which the taxpayer is properly chargeable under this Ordinance may apply to the Commissioner for a refund of the excess.

Sub-Section (1A): Where any advance or loan, to which sub-clause (e) of clause (19) of section 2 applies, is repaid by a taxpayer, he shall be entitled to a refund of the tax, if any, paid by him as a result of such advance or loan having been treated as dividend under the aforesaid provision.

Sub-Section (2): An application for a refund under sub-section (1) shall be –

(a) made in the prescribed form;

(b) verified in the prescribed manner; and

(c) made within three years of the later of –

(i) the date on which the Commissioner has issued the assessment order to the taxpayer for the tax year to which the refund application relates; or

(ii) the date on which the tax was paid.

Sub-Section (3): Where the Commissioner is satisfied that tax has been overpaid, the Commissioner shall —

(a) apply the excess in reduction of any other tax due from the taxpayer under this Ordinance;

(b) apply the balance of the excess, if any, in reduction of any outstanding liability of the taxpayer to pay other taxes; and

(c) refund the remainder, if any, to the taxpayer.

Sub-Section (4): The Commissioner shall, within sixty days of receipt of a refund application under sub-section (1), serve on the person applying for the refund an order in writing of the decision after providing the taxpayer an opportunity of being heard.

(5) A person aggrieved by—

(a) an order passed under sub-section (4); or

(b) the failure of the Commissioner to pass an order under sub-section (4) within the time specified in that sub-section, may prefer an appeal under Part III of this Chapter.

Section 171: Additional payment for delayed refunds

Sub-Section (1): Where a refund due to a taxpayer is not paid within three months of the date on which it becomes due, the Commissioner shall pay to the taxpayer a further amount by way of compensation at the rate of KIBOR plus 0.5 per cent per annum of the amount of the refund computed for the period commencing at the end of the three month period and ending on the date on which it was paid:

Provided that where there is reason to believe that a person has claimed the refund which is not admissible to him, the provision regarding the payment of such additional amount shall not apply till the investigation of the claim is completed and the claim is either accepted or rejected.

Sub-Section (2): For the purposes of this section, a refund shall be treated as having become due —

(a) in the case of a refund required to be made in consequence of an order on an appeal to the Commissioner (Appeals), an appeal to the Appellate Tribunal, a reference to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the Commissioner; or

(b) in the case of a refund required to be made as a consequence of a revision order under section 122A, on the date the order is made by the Commissioner; or

(c) in any other case, on the date the refund order is made.

Explanation.—For the removal of doubt, it is clarified that where a refund order is made on an application under sub-section (1) of section 170, for the purpose of compensation, the refund becomes due from the date refund order is made and not from the date the assessment of income treated to have been made by the Commissioner under section 120.