Tag: PTBA

ISLAMABAD: Pakistan Tax Bar Association (PTBA) has raised objections to amendments proposed in format as 16 million returns have already been filed for tax year 2022.

In a letter sent to the chairman of the Federal Board of Revenue (FBR) on Monday October 10, 2022, the PTBA submitted objections and suggestions on the proposed amendments to be made in the Second Schedule, in part-II-V, in the heading “Tax chargeable / payments” in the Income Tax Rules, 2002 as published vide S.R.O. 1829(1)/2022 dated October 03, 2022.

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The PTBA said that amendment in the format of return had been proposed vide notification under S.R.O. 1829(1)/2022 dated October 03, 2022. Whereas, as per FBR declaration, returns above 16 million for the tax year 2022 have already been received. What would be the status of the said returns? Taxpayer in future may face undue litigations.

It is submitted that tax is charged on the net value of the capital assets whereas, no row has been provided to declare the amount of liabilities as well as net value of capital assets.

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PTBA said that the federation has no power to levy tax on agricultural income whether real or deemed as it is the domain of the provinces. “Every province of the country is charging Income Tax on the holding exceeding 12.5 Acres. The charge u/s 7E amounts to double tax,” it added

It is further submitted that self-owned agricultural land where agricultural activity is carried out by a person has been excluded under clause (C) of sub section (2) of section 7E. No column has been provided to claim exemption in this respect.

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It is not clear that whether a landlord who has leased out his agricultural property, is obliged to file the return, particularly, when he does not have any other source of income, except the agricultural income.

For the sake of brevity, the relevant section 41 of the income Tax Ordinance, 2001 is reproduced hereunder;

“S. 41. Agricultural Income.-

(1) Agricultural income derived by a person shall be exempt from tax under this Ordinance.

(2) In this section, “agricultural income” means, –

(a) any rent or revenue derived by a person from land which is situated in Pakistan and is used for agricultural purposes;

(b) any income derived by a person from land situated in Pakistan from –

(i) agriculture;

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by such person to render the produce raised or received by the person fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by such person, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); or

(c) any income derived by a person from –

(i) any building owned and occupied by the receiver of the rent or revenue of any land described in clause (a) or (b);

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(ii) any building occupied by the cultivator, or the receiver of rent-in-kind, of any land in respect of which, or the produce of which, any operation specified in subclauses (ii) or (iii) of clause (b) is carried on, but only where the building is on, or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue, or the cultivator, or the receiver of the rent-in-kind by reason of the person’s connection with the land, requires as a dwelling-house, a store-house, or other out-building.

The PTBA said that one Capital Asset owned by the resident person has been excluded from deeming income under clause (a) of sub section (2) of section 7E. But to claim such exemption no column has been provided in the proposed draft.

Furthermore, self-owned business premises (which may be more than one) from where the business is carried out by the person is excluded under clause (b) of sub section (2) of section 7E. No column to claim the said exemptions has been provided in the draft.

Likewise, to claim exemption under sub clauses (i), (ii), (iii) and (iv) of clause (d) of sub section (2) of section 7E, no column has been provided in the draft.

No space to claim exemptions under clauses (e), (f), (g), (h), (i) of sub section (2) of section 7E has been provided in the draft.

In order to claim the basic exemption of Rs. 25,000,000/- from the aggregate value of the Capital assets to be assessed u/s 7E, the space column may be provided.

It is suggested that the auto shifting data from wealth statement regarding immovable asset including its costs be made possible, to avoid extra labour of the tax consultants who are already facing a lot of burden and as well have a short time in filing tax returns.

Pakistan Tax Bar Association (PTBA) has suggested measures to tax authorities to resolve the issue of refund adjustment just ahead of the deadline to file income tax return tax year 2022.

It is important to note that the last date for filing income tax return is September 30, 2022.

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The Federal Board of Revenue (FBR) has blocked the adjustment of previous years’ refunds in the income tax return form for the tax year 2022. PTBA and its affiliated tax bars raised the issues on various times but the issue is not resolved so far.

The PTBA on September 24, 2022 once again approached the FBR chairman to resolve the issue and the apex tax bar also suggested measures to facilitate taxpayers in this regard.

It said that adjustment of earlier refunds due, in the cases against admitted tax liability for Tax Year 2022 is a statutory right of a taxpayer, which has always been acknowledged, even by the system of IRIS from years to years.

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Tax Year 2022 is the first Tax Year where for the key to claim adjustment of refund in the return form available on portal, has been blocked without assigning any plausible legal justification.

The sole stance of the officials of FBR in this respect is that various tax payers claim refunds in their returns which is not admissible.

“We wish to bring on record that PTBA would never support any such illegal action of any person and at the same time it is submitted that the responsibility to verify the authenticity of refund was on the field formations of the FBR who never took any pain to verify the claim of refunds at their own.”

On the other side facility to adjust refund against admitted tax liability for Tax Year 2022 has been taken away due to which the taxpayers have been forced to pay tax in cash, no matter how much refund is due to them.

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It would not be out of place to mention here that there are plethora of cases decided by the Courts of the Country that the taxpayer cannot be deprived of his right to claim admissible refunds either in cash or through adjustment of same against his any tax liability payable under the law.

The Federal Tax Ombudsman (FTO) Vide order dated 27-05-2022 in an own motion case has recommended to grant adjustment of the refund against admitted tax liability in terms of section 170(3)(a) of the Ordinance

The PTBA suggested following steps to resolve the issue of adjustment of refunds:

1. In the column of refund adjustment in return available on portal there may be a link to specify the Tax Year where from the tax payer is making adjustment of Refund.

2. The returns from Tax Year 2014 onward have been submitted through IRIS and every return submitted by the tax payer is clearly depicting the amount of refund claimed by the tax payer.

3. For example, if the tax payer claims the refund adjustment from Tax Year-2016, the system should automatically check that either any refund for Tax Year 2016 is claimed and appearing on the return for Tax Year 2016 or not.

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4. If refund is claimed and appearing on the return of Tax Year 2016, the system should allow the tax payer to claim refund adjustment against his tax demand for Tax Year 2022.

5. After submission of tax return for Tax Year 2022, the concerned officer holding jurisdiction over the case be made responsible to first verify the withholdings/payments made by the tax payer in the year from which refund adjustment has been claimed by the tax payer through ITMS.

6. If the data available on ITMS verifies the deductions, collections and payments made and claimed by the taxpayer, no further action would be required except making adjustment entries in the DCR regarding adjustment of refund for Tax Year 2016 against tax demand for Tax Year 2022, so that the taxpayer may not be able to claim the same refund again.

7. If data available on ITMS does not match with the claim of the taxpayer, then the concerned officer should call the tax payer to explain his position in line with post refund audit under the Sales Tax Act.

8. If the tax payer fails to verify his claim of refund, then a strict action may be taken against that tax payer in accordance with the relevant provisions of law.

9. A time line be fixed for verification of the claim of refund by the concerned officer, so that, the matter may not be kept pending for indefinite period.

The PTBA said that in the light of the submissions made above it is requested that the taxpayers may not be deprived from their statutory right to claim the refund adjustment of other year(s) against demand of this year.

Moreover, timely decision taking in this regard by this good office would not only be appreciated by the taxpayers/legal fraternity, who are working very hard day & night by playing their part towards the legal responsibility for contributing towards national exchequer but also in collection of taxes at the appropriate time.

Pakistan Tax Bar Association (PTBA) has urged the Federal Board of Revenue (FBR) to fix glitches in Iris portal for smooth return filing for tax year 2022.

In a letter sent to FBR chairman, the PTBA advised that the taxpayers should be provided the statutory period of clear 90 days for submission of their income tax returns from the day the Iris – the portal – is error free.

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The apex tax bar stated that the matter regarding filing of income tax returns for tax year 2022, it endorsed the observations about system errors / glitches highlighted by the regional affiliated bars, including Karachi Tax Bar Association (KTBA).

“Till to date the present IT team has failed in providing the efficient, user friendly and hassle free IT system in professional manners,” it added.

The PTBA informed the FBR chairman that as per law the taxpayer is entitled to claim adjustment of his previous refunds against tax liability for the current tax year but the relevant column for adjustment of refund has illegally been locked, which is against the fundamental rights and present scheme of law under the Income Tax Ordinance, 2001.

Similarly, the draft of manual return of income for the individuals and Association of Persons (AOPs) for the Tax Year 2022 was issued as late as on August 26, 2022, whereas the final SRO 1733(I)/2022 was issued on September 13, 2022. “It means only 17 days have been allowed to file the manual returns, which is insufficient as provided under the law,” the PTBA pointed out.

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It further pointed out that the income tax return form introduced for SMEs sector has been issued on the IRIS system without sharing a draft, which is mandatory under the law. “The simplified return for SME uploaded without issuing the draft return, the same may lead to illegality,” the PTBA said and suggested that issue draft following by final return should be issued to meet with the requirement of the law.

The PTBA said that the IRIS portal is calculating incorrect normal as well as initial depreciation allowance on purchase of plant and machinery against the provision of Section 23 read with the Part II of Third Schedule of the Income Tax Ordinance, 2001.

The IRIS portal is calculating incorrect/excess tax liability on gain on sale of immovable properties in violation of Section 37(1A) of the Income Tax Ordinance, 2001.

It is noted that rate of tax collection under section 153(I)(c) for individuals and AOPs contractors is 7 per cent, which is minimum tax. “In the relevant part of return for working of attributable income neither there is any row having rate at 7 per cent rate of tax nor the system is allowing credit to the said deduction.

Presently, IRIS portal is calculating the incorrect tax liability on income covered under Section 153 of the Ordinance, on the basis of fixed/predefined wrong formulas due to which the taxpayers are bound to pay high tax instead of their actual tax liability, which is against the spirit of self-declaration and present scheme of law. “De-freezing of attribution and enabling the taxpayers to enter correct figures/data to filed their return in time may resolve the issue,” the PTBA suggested.

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The apex tax bar highlighted that the IRIS portal is calculating incorrect tax at profit/yield Bahbood Certificates / Pensioner’s Benefit Account / Shuhada Family Welfare Account, whereas clause (c) of sub-section (I) of Section 39 provides that tax shall not exceed 10 per cent of such profit/yield read with clause (6) of Part-III of Second Schedule of Income Tax Ordinance, 2001.

The IRIS portal is treating normal income for the tax year 2022 instead of final income at interest/profit on debts on government securities as per clause (20( of Part III of Second Schedule of the Income Tax Ordinance, 2001, wherever, the said clause was omitted through Finance Act, 2022 and is applicable for the tax year 2023, which cannot be applicable retrospectively.

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The PTBA said that the taxpayers in general and legal fraternity in particular are facing acute hurdles in preparation of tax payment challans because response of the system in this regard is dead slow. “Most of the time it requires many attempts for preparation of the tax challan due to website issue and preparation of tax challan in single attempt is difficult and it is very common practice/issue faced by almost every taxpayer while preparing the tax challan, hence the website/system issue should be resolved immediately and sufficient time is also required for timely filing of returns.”

In cases where revised wealth statement under Section 116(3) of the Income Tax Ordinance, 2001 for the tax year 2021 resulting into change in closing balance of net wealth for the tax year 2021 has been filed, the system does not carry forward opening balance of net wealth for the tax year 2022 (showing the opening balance of original wealth statement of last year’s closing balance).

Lastly, the PTBA pointed out issue regarding the downloading of computerized payment receipt (CPR) and statement that the system shows message ‘challan/CPR does not exist’ against the valid CPR duly deposited in the national exchequer.

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