SATURDAY FEBRUARY 11: Audit of banks for monitoring WHT: RTOs given concurrent jurisdiction

ISLAMABAD: The Federal Board of Revenue has given concurrent jurisdiction to the Regional tax Offices (RTOs) for initiating audit of banks for monitoring of withholding tax covering salary, profit of debt, interest payments, cash withdrawals, payments of rents, purchases/supplies, etc, under the relevant provisions of the Income Tax Ordinance, 2001.
When contacted, a tax expert told Business Recorder on Friday that the exercise of jurisdictions by 12 RTOs simultaneously by banks would create problems for the banks to fulfil their requirements to the satisfaction of all RTOs. The exercise of monitoring of withholding tax has already been carried out by the respective RTOs where the banks are being assessed. Thus, the FBR exercise of monitoring/audit exercise is going to create problems for banking companies who are already contributing as major taxpayers in both direct and indirect taxes, experts added.
The FBR order of Inland Revenue Services of January 23, 2012 says, the FBR has directed that the Commissioners of Inland Revenue to concurrently exercise the powers and functioning for withholding audit of taxes withheld by the concerned branches of all banks. The Commissioner Inland Revenue (Zone-I) of Regional Tax Offices (RTOs) Rawalpindi, Faisalabad, Multan, Bahawalpur, Sargodha, Sialkot, Gujranwala, Abbottabad, Peshawar, Sukkur, Hyderabad and Quetta shall have the powers for concurrent monitoring of withholding taxes and to perform withholding audit of taxes withheld by the concerned branches of all banks in addition to exercise of powers and functions as already assigned, exercise powers and perform functions as assigned. All bank branches falling under the jurisdiction of concerned Regional Tax Office, office order added.
Meanwhile, Large Taxpayer Unit (LTU) Karachi has sought details of the perks and privileges given to the senior bank officials including memberships of clubs/loans from certain banks for carrying out withholding tax audit of banks under section 149 of the Income Tax Ordinance 2001 for period from January 1, 2011 to December 31, 2011.
Sources stated that the LTU Karachi has issued intimations to some banks for conducting audit of withholding tax under section 149 of the Income Tax Ordinance 2001. According to one of the intimations issued to a bank by the LTU Karachi, in order to monitor the tax deduction u/s 149 of the Income Tax Ordinance, 2001 and its deposition into the government treasury within stipulated period, the team of audit officials of the LTU Karachi would visit the Head office of the bank to conduct audit of the aforementioned withholding tax.
The bank should inform the concerned officials and ensure presence of the following documents for examination by the visiting audit team: Firstly, list of all permanent employees of the bank of all grades along with break-up of salary, perquisites paid for the aforementioned period.
Secondly, list of all contractual employees of the bank given contract in any grade along with break-up of salary, perquisites paid for the aforementioned period. Thirdly, bank officials should also show salary statement e-filed by the bank for the subject period along with supporting challans.
Fourthly, files pertaining to the salary agreement entered into with all the employees (permanent and contractual) of the bank should be readily available for examination as identified by the head of the audit team. Fifthly, if any employee has been made any payment under the head of "services rendered" the contract for such payment should also be arranged for the audit team. Sixthly, as all perks given by the bank to its employees are part of the taxable salary, the list of employees to whom house loans, car loans and personal loans have been granted by the bank, should be ready for examination as the same also fall within the purview of perquisites, being part of taxable salary.
Seventhly, list of employees to whom club memberships have been provided by the bank along with details of club membership fee, subscription/ bill paid for the period under consideration. Eight details/break-up of medical allowances provided to all the employees for the period under review. Nine, details/break-up of Insurance premium paid on behalf of the employees by the bank for the period under review.
LTU Karachi further said that it has been noted that higher officials of the bank are provided several vehicles along with unlimited fuel, lists disclosing all such vehicles along with the quantity of allowed fuel along with the name of officer of the bank to whom the vehicles have been allotted be also made available for examination by the audit team.
As most of the higher officials of the bank are provided fully furnished rented premises along with several security guards, the lists of the same along with details of rent paid by the bank for the property and the cost incurred on the security guards may also be prepared and made available to the audit team, LTU Karachi added.