Cases of telecom operators: No maladministration committed by FBR during implementation of ADRC’s recommendations: FTO

ISLAMABAD: The Federal Tax Ombudsman (FTO) has observed that no maladministration has been committed by the Federal Board of Revenue (FBR) during implementation of the Alternate Disputes Resolution Committee (ADRC)’s recommendations in cases of telecom operators.

The FTO has disposed of various complaints filed by major telecom player through an order issued on Tuesday.

Departmental action has been found in order, well taken in the light of relevant legal provisions and in the best interest of state, FTO order stated.

Brief facts of the case are that, as per complaint, the complainant company is principally engaged in providing cellular telecommunication services and has established a cellular mobile network in Pakistan under the licenses issued by the Pakistan Telecommunication Authority. Over the years, amendments in the company’s income tax returns have resulted in various tax disputes spanning the Tax Years from 2006 to 2017.

Consequently, the company suffered a reduction in its assessed tax losses while simultaneously forced to contest these disputes with LTO. Fed up with the litigation, the company decided to take up the following disputes for settlement (that were pending adjudication before various appellate fora), before the ADRC which provides for the settlement of disputes outside the normal appellate process u/s 134A of the Income Tax Ordinance, 2001 (the Ordinance).

The complainant alleged that applications for the constitution of an ADRC to resolve the above-mentioned disputes. Covering various Tax Years, were filed with the FBR, which were admitted and an ADRC was constituted on 24.08.2021.

The committee was chaired by the chief commissioner-IR, LTO Islamabad. The committee’s deliberations were held from the period between 15.09.2021 and 01.11.2021, As a result of these deliberations and the evidence, the ADRC issued certain recommendations for the settlement of the subject disputes.

According to the complainant company, the above recommendations were subject to payment of PKR 8.25 billion by the company. The committee further recommended that payment of Rs 8.25 billion be made against income tax demand/liability of any tax year between 2009 and 2021.

The complainant company further stated that after fulfilling all the requirements as laid down in the ADRC order as well as Section 134A of the Ordinance, the concerned commissioner was requested to give effect to the ADRC’s recommendations as stated in his order. However, the DCIR rejected plea of the complainant which, according to the complainant, violated his legal rights and justice due to them under the ADRC ruling by unlawfully declaring ADRC recommendations as null and void.

On the other hand, the department in its comments before FTO, stated that the subject complaint mainly revolve around the taxpayer’s demand for giving effect to the recommendations of the ADRC’s in its order dated 10.11.2021.

The department stated that complainant had filed applications for the implementation of the ADRC orders on June 1, 2022. The said applications were scrutinized and accordingly disposed of on its merits, wherein, it was explained that the taxpayer’s plea to effectuate the ADRC’s recommendations could not be upheld for its failure to fulfill the requirements as given in ADRC’s order.

While concluding the subject investigations, the FTO has observed that the ADRC recommendations bound the taxpayer to make payment against income tax liability for any year from 2010 to 2020. However, as per record, the payment of Rs 3.25 billion has been made against the liability of tax year 2021.

Record further revealed that there were no tax arrears outstanding for tax year 2021 on the date ADRC’s decision was made. Therefore, the stance of the department to the effect that no demand for tax year 2021 existed at the time of decision of the ADRC on 10.11.2021 and that payment of tax was not permissible against tax year 2021 carries weight.

The payment of Rs 3.25 billion was therefore made against future tax liability against the demand raised after the issuance of ADRC recommendation through an order passed on 23.12.2021 u/s 122 5(A) of the Ordinance.

Furthermore, the record shows that when the complainant took up the matter for getting effect of the recommendations of ADRC with the concerned tax office, they disagreed with the contention of the complainant and passed an order adopting detailed reasons for not putting into effect recommendations of ADRC. The said order was made after considering written correspondence and lengthy deliberation held with tax authorities.

The Tax Ombudsman has, therefore, concluded that payment of Rs 3.25 billion has been made by the complainant company against tax liability of the year which was not subject matter of ADRC and the same was, in fact, current demand of tax and not the arrear demand.

It is further observed by the FTO that the concerned tax authorities have considered observations of the complainant and passed a detailed order containing reasons for not given effect to the recommendations of the ADRC. The procedure followed by the tax authority doesn’t suffer from legal infirmities and the passing of the order has been found in accordance with law and facts of the case.

It is a matter of record that FTO in large number of Cases has held FBR responsible for maladministration that, inter alia, include the cases pertaining to the delay in sanctioning of refunds, procedural lapses and non-implementation of decisions favouring the tax payers by various tax adjudicating authorities.

However, the subject order of the tax ombudsman is an evidence to the fact that wherever tax authorities have handled the taxpayers in a professional manner, they have been able to defend their stance before legal fora, including FTO.

In yet another case FTO office declined to interfere where on one hand a telecom giant had obtained stay against massive recoverable taxes but on the other approached this Secretariat for an expeditious disposal & issuance of refund.

Copyright Business Recorder, 2023