The following taxation proposals for the budget 2004-05, have been submitted to the government by the Multan Chamber of Commerce and Industry:
Income tax
1)STAFF PRACTICE: The employees, of the tax department are involved in tax practice and 85% of the tax cases are being handled by them. They have full access to the record and are in a position to give undue benefits to the taxpayers at the cost of govt. revenue.
In order to avoid the loss of revenue, caused by the staff in tax practice, it is proposed that stern action, including the removal from service, be taken against tax employees involved in the tax practice.
2)BROADENING OF TAX BASE: At present there are only 17 million taxpayers, while the actual number of persons liable to tax is many times more than this figure. Due to the less number of taxpayers, the entire revenue requirements are being met from the existing tax payers and now the tax burden has become unbearable for them.
These tax payers also suffer further loss of business as they cannot compete with those businessmen who are not paying taxes. In order to increase revenue and also to share the burden of the existing tax payers, it is proposed that:
i) Rates of tax be reduced to such a level that there should be a charm in becoming a taxpayer rather becoming a tax evader.
ii) The person whose tax is withheld should be located/identified and brought on the tax record. His assessment be made and the credit of tax deducted be allowed to him and if tax deduction is more than the tax demand, the excess, deduction of tax be refunded to him and, in case the tax deduction is less than the tax collected, then the difference be recovered from him.
iii) It may be insured that each and every category of person required to file a tax return under the law has filed his return of total income.
iv) All transactions be made on the basis of national identity cards and this information be passed to the tax department for locating potential tax payers.
By adopting the above measures, the number of tax payers be increased upto five times of the existing tax payers which will reduce the tax burden of the existing tax payers and also increase tax govt. revenue many times.
3)FIXATION OF TARGETS: Targets for the collection of taxes are fixed and the officers tries to meet their targets in order to maintain their efficiency. For this purpose, they impose heavy taxes which causes unrest amongst the tax payer and increases appeal work.
The targets are fixed as net off refunds and, in order to meet targets, the tax officer hesitate to allow refunds in genuine cases.
The fixation of targets is also against natural justice, because targets are fixed before the filing of tax returns, without considering good/bad business conditions and are always increased in subsequent years. Fixation of targets also results in injustice to the tax payers.
It is, therefore, proposed that instead of fixing targets of revenue collection, the target for disposal of cases be fixed so that pendency of cases be disposed off
4)LAW SHOULD BE MADE ONE YEAR BEFORE ITS APPLICATION: The government tries to keep the taxation proposal a secret just like the draw of prize bonds. When the law is made and it comes into the knowledge of the tax payers, then only do the tax payers become able to review it and point out deficiencies/practical problems in it. In other words, the law becomes a draft and necessary amendments are made thereafter. All this results in delay in the implication of law and creates problems to the tax payers as well as to the government.
To overcome these problems, it is proposed that the law should be made one year before its implementation and the law should not be changed subsequently.
5)PROMOTION OF TAX CULTURE: The tax payer should be respected and be given a VIP status in society. They should - be given privileges in certain formalities with the government. This will provide the incentive to be a tax payer.
6)PROMOTION OF CORPORATE CULTURE: In our country most of the tax payers do not maintain a record and also do not declare their actual income.
In this culture of an undocumented economy, it is only the corporate sector which maintains a proper record and gets it audited from chartered accountants.
The documentation of the corporate sector brings on record all other persons dealing with this sector and thereafter they are not in a position to avoid any transaction relating to the corporate sector.
Consequently the corporate sector is working as helping hand to the government, in the broadening of the tax base.
The corporate sector is also paying maximum tax, as compared to other class tax payers.
Instead of giving any incentive/relief or benefit to the corporate sector, this sector is being discouraged permanently by making such policies which discourages the corporate sector (documents economy and encourages the non-corporate sector (undocumented economy).
THE MAIN POLICIES WHICH ARE DISCOURAGING THE CORPORATE SECTOR AND ENCOURAGING THE NON-CORPORATE SECTOR ARE GIVEN BELOW:
i) The corporate sector is liable to withhold tax @ 3.5% from supplies, 5% on contracts and services rendered, while the non-corporate sector has not deducted this tax. It makes the purchases of the corporate sector costier and also helps the non-corporate sector, and all the persons dealing with them to conceal/hide these transactions.
ii) There is no basic exemption to the corporate sector, while the basic exemption of 80,000 is available to the non-corporate sector.
iii) The minimum rate for the non-corporate-sector is 7.5% and it increases gradually to a maximum rate of 30%. On the other hand, the tax rate for the corporate sector is a standard rate.
For example, tax on an income of Rs l00,000 of a non-company case is Rs 1,500 (Rs 80,000 exempt + 7.5% on Rs 20,000). While the tax on the same income of a private company is Rs 43,000 (no basic exemption + standard rate of 43% on the entire income).
In order to encourages the corporate sector, it is proposed that same law of withholding tax and tax rates be applied on both types of categories of tax payers.
In addition to this, some incentives be given to the corporate sector, helping the CBR in enhancing the tax base, promoting a tax culture and, above all, promoting documentation in the society.
7)DOUBLE STANDARDS FOR RECORD KEEPING: On the one hand the govt. is trying to improve documentation, while on the other hand it is making such policies, which promote the undocumented economy.
The government requires a small businessman to maintain a record, while big businesses/industries are exempted from maintaining a record, under the shadow of presumptive tax.
All commercial importers/exporters, contractor's cotton ginners and all other manufacturers who may opt for the presumptive tax are not only exempted from maintaining any record but they are also exempted from filing their tax returns.
This double standard, promoted by the govt, is badly effecting documentation in the country.
It is proposed that no sector of the society be exempted from maintaining record, so that business transactions of all persons comes into the notice of the department and, consequently a two tax base could be produced.
8)COMPENSATION TO WITHHOLDING AGENTS: Out of the total tax collection, 80% of the tax is collected by withholding agents, 10% by the voluntary contribution of tax payers and only 10% tax is collected by the tax department.
In other words, the withholding agents collects eight times more tax than the tax collected by the department, the tax payers are working as agent of the govt. to collect this tax.
They have to do extra work to deduct tax, its proper recording and to file various statement prescribed under the law, for which no compensation is paid to him. On the other hand, in case of default of deduction of tax, the withholding agent has to pay this tax from his own pocket along-with additional tax for delayed payment and, in case, default in filing of prescribed statements is made, they have to pay a penalty on a daily basis for as long as the delay continues.
In order to meet the natural justice and to compensate the withholding agent for doing extra work, it is proposed that compensation equal to 10% of the tax withheld be allowed to the withholding agents, it will not only compensate the expenses of the withholding agent but also create incentives to collect more taxes out of which 90% shares goes to the government.
9)SECTION-2(1A):
SET OFF OF BUSINESS LOSS OF AMALGAMATION: The provisions of section 57A is available to banking companies and NBFIs only, and not to other companies. Moreover, the section 2(1A) defines the term "amalgamation" with reference to the merger of one or more banking companies or NBFIs or a company incorporated under any law, other than the Companies Ordinance, 1984.
The definition of "amalgamation" section 2(1A) may be revised and its scope may be expand to include all corporate mergers, whether or not in banking sector,
10)SECTION-152(2):
TAX ON SHIPPING AND AIR TRANSPORT INCOME OF NON RESIDENT: Under section 7 a tax at 3% and 8% is payable on income of air transport business or shipping business, respectively, and such a tax is a final tax.
Whereas, section 152 requires the deduction of tax @ 30% on payments to a non resident and this section does not exclude payments for shipping, air transport charges to non residents. Therefore, there is a contradiction between the two sections.
Amend section 152(2) to exclude payments for shipping and air transport business.
11)SECTION-20(1):
DEDUCTION FROM BUSINESS INCOME: Under section 20(1), in determining the permissible allowances and deductions for computing the income from business or profession, only those expenditures are permitted as deductions, which are incurred in deriving income from business, chargeable to tax.
Whereas, the clause (xviii) of section 23(1) of the Repealed Ordinance, 1979, provided for the deduction of expenditure which is incurred wholly and exclusively for the purpose of such a business.
It is not always necessary that an income is earned only when an expenditure is incurred.
Therefore, the words "expenditure incurred in deriving income from business chargeable to tax" in section 20(1) of ITO, 2001 is required to be replaced by the words "expenditure incurred for the purpose of business."
The words, "expenditure incurred in deriving income from business chargeable to tax" in section 20(1) of the ITO 2001 needs to be replaced by the words "expenditure incurred for the purpose of business."
12)SECTION-21(C):
ALLOWABILITY OF EXPENSES IF TAX NOT DEDUCTED: Withholding tax is an advance tax adjustable against the final tax liability of the recipient.
The revenue suffers no loss in case withholding tax is not deducted from the specific transaction.
Therefore, treating a legitimate business expenditure as inadmissible merely for the non-deduction of tax by the payee is not in accordance with the spirit of natural law of justice.
Therefore, expenditure should not be treated as inadmissible when revenue has not suffered a loss.
Delete or amend by providing that a valid expense is allowed if tax is paid by the recipient in the hands of payer, if mistakenly tax not deducted;
13)SECTION-21(K):
ALLOWABILITY OF PERQUISITES EXCEEDING 50 PERCENT: The section 21(k) disallows payment of perquisites in excess of 50% of salary as permissible business expenditure for the employer.
In the Repealed Ordinance, the reason for providing the same provision was the exemptions available to the employee in the specified threshold.
Whereas, now, the value of perquisites in the case of an individual with a salary in excess of Rs 600,000 are taxable.
The disallowance of excess perquisites amounts to double taxation, first in the hands of the employee and then in the employer's assessment.
Amendment should be made to exclude perquisites paid to employees, whose taxable salary exceeds Rs 600000 for calculating excess perquisites under section 21(k)
14)SECTION-22(3):
DEPRECIATION OF PARTLY USED ASSETS: Under section 22(3), where an asset is used in a tax year partly in deriving income from business chargeable to tax and partly for another use, the deduction for depreciation allowed shall be a fair proportionate part of the amount that would be allowed if the asset were wholly used to derive income from business.
In this case, the ascertainment of the business or non-business use of a depreciable asset is a subjective approach and shall cause disputes on different counts.
Moreover, there is a contradiction because, the depreciation is proportionately allowed, whereas for the opening WDV of a depreciable asset of the next year, the whole year's depreciation shall be accounted for.
Therefore, the tax payer would need to keep track of each asset every year, which would increase administrative costs of the tax payer.
Moreover, at the time of disposal, under sub section 9, the disallowed portion of depreciation is added to the tax WDV of the asset.
Therefore, application of sub section 3 is just a matter of timing difference which will only enhance complications for the tax payer in maintaining records.
Delete along-with consequential provisions contained in section 2(6) and 22(9)
15)SECTION-24(8):
COLLECTION OF AMORTISATION ALLOWANCE: Where an intangible is not used for the whole tax year in deriving income from business, an amortisation allowance shall be limited to the number of days for which it was used for deriving business income.
Whereas, on the other hand, no amortisation is allowed in the year of disposal. Therefore, sub sections 6 and 8 are conflicting with each other.
Delete the words no amortisation deduction shall be allowed under this section for the year
16)SECTION-24(11):
ALLOWABILITY OF AMORTISATION OF GOODWILL: Goodwill is an important intangible asset which arises in business in accordance with the matching principle of accounting. Therefore, its amortisation should also be allowed.
The term "goodwill" should be inserted in the definition of intangible assets.
17)SECTION-29(1):
ALLOWABILITY OF BAD DEBITS: There are three conditions for claiming bad debts, one of which under subsection 1 (c) is that there are reasonable grounds to believe that the debt is irrecoverable.
This condition is odd and irrelevant. A business considers writing off only when it establishes that a receivable cannot be recovered for various reasons, otherwise it will never write off its receivables, which are its assets.
The section 29(1)(c) may be deleted.
18)SECTION-32(3):
ACCOUNTING SYSTEM FOR COMPANIES: The section 32(2), with subject to section 32(3), provides that companies shall follow accrual basis of accounting which is in accordance with the requirements of the Companies Ordinance, 1984.
But in section 32(3), the CBR is empowered to prescribe cash or accrual basis of accounting for any class of persons which may conflict with section 32(2). It should be amended by giving exception to companies.
In section 32(3) after the words "any class of persons insert "other than companies governed under the Companies Ordinance 1984"
19)CALCULATION INCOMPLETE LONG TERM CONTRACTS: Under sub-section 2 of section 36, for the purpose of determining income on incomplete long term contracts, the percentage of completion shall be determined by the ratio which the contract cost incurred upto the end of the tax year, has with the total estimated contract cost as "determined at the commencement of the contract."
The prescribed basis of using contract cost "at the commencement of the contract" for estimating the stage of completion is not appropriate; Practically, the initial contract and related cost may be amended or revised as the work progresses.
This makes necessary the re-evaluating of the whole contract, re-estimating the entire cost and the percentage of completion of the contract.
Replace "commencement of the contract" with "commencement of the year."
20)SECTION-50:
WORKING OF FOREIGN SOURCE INCOME OF EXPATRIATE: Under clause 26, Part-IV, Second Schedule of Repealed Ordinance, 1979, a foreign source of income of an expatriate individual, who due to his employment in Pakistan becomes a resident of Pakistan, was provided to be exempt from tax unless such income was brought into Pakistan.
But now this section of ITO, 2001, provides that the stay of the said expatriate should not exceed the period of three years in aggregate.
Therefore, if a salaried expatriate stays in Pakistan for a period of three or more years his world income would become taxable in Pakistan. This will create problems for expatriates in Pakistan living for a period of more than three years.
In section 50(1)(b), the condition of three years should be deleted to facilitate foreigners staying in Pakistan whose stay exceeds such time limit.
21)SECTION-75(3) AND (6):
USE-OF-BUSINESS ASSET FOR PERSONAL/BUSINESS USE: This section provides criteria for determining the acquisition and disposal of assets. Section 75(6) provides that the application of a personal asset to business use is to be treated as an acquisition of asset at the time such asset is so applied.
Similarly, application of a business's asset to a personal use is treated as disposal of asset under section 75(3).
Practically, there are many possibilities when personal assets are put up for private use and vice versa on a temporary basis, ie for one or two days only, and in such a situation to keep a record every time such an event occurs is a lengthy and cumbersome exercise.
Insert before the last words "permanently"
22)SECTION-92 (2):
DECLARATION OF INCOME OF PROFESSIONALS AS AOP: Under section 92(2), the Association of Persons, comprising professional firms as its members, is not taxable and the members are to be taxed individually for their shares in the profit/loss of such AOP.
However, under section 92(4) such an AOP is required to file its return of total income. It is un-understandable as to what would be declared by an AOP, if its income would not be chargeable to tax.
What is the purpose of filing a return of total income by the AOPs instead, the members of such an AOP should file the returns by declaring their respective share in the results of AOP.
23)SECTION-104:
DEDUCTION OF EXPENSE/ADJUSTMENT OF LOSS FROM FOREIGN SOURCE INCOME: Business conducted by an assessee should be viewed in its entirety and not from its individual segments.
Whereas, this section provides that deductible expenses incurred to earn foreign source income, can be deducted only against foreign source income. Similarly, any loss can only be set off against such foreign source income.
This provision splits the business into a Pakistani source and foreign source, the business of a resident person should not be seen on a geographical basis but as an entity.
When a resident person pays tax on income on Pakistani and a foreign source income without any distinction in the tax rate etc, therefore deductibility of expenses and bases should not be discriminated.
Delete to allow any loss on foreign income (exports etc) incurred on gaining market share to be set off against local income.
24)SECTION 105, 105A, 106, 107, 107A AND 107AA OF INCOME TAX ORD.1979:
TAX CREDITED ON INVESTMENTS: The Income Tax Ordinance, 2001 has withdrawn the incentives, which were available in the Income Tax Ordinance, 1979, such as: Tax credit for investment in shares or debentures of Equity Participation Fund (S. 105): Tax credit for investment in debentures or negotiable bonds (S 105A): Tax credit for investment in share capital of industrial companies (S 106): Tax credit for BMR of machinery (S 107): Tax credit under section 107A and 107 AA.
For the purpose of encouraging industrialisation in the country the incentives under section 105, 105 A, 106,107, 107A and 107AA of Repealed Ordinance 1979, should be restored.
25)SECTION 122(4):
LIMITATION FOR AMENDMENT OF ASSESSMENT: This section provides that an order which is issued under section 120 and 121 of ITO 2001, or under sections 59, 59A, 62, 63, and 65 of ITO, 1979 can be amended by the commissioner within 5 years from the original assessment and within 1 year from the amended assessment.
Therefore, an additional assessment for the A.Y. 1995-96, made under section 65 of ITO, 1979 on 30 June, 2002, stands open to modification for a further period of 5 years, as provided in this section.
Had the provisions of ITO, 1979 prevailed, the provisions of modification/re-opening would stood time-barred as on 1st July, 2002. But now, due to this provision, an assessment stands open to modification for a total period of ten years, which is unjustifiable.
Subsection 10 should be added to this section, which should provide that nothing contained in this section shall apply to assessment orders where re-opening or rectification under section 65, 156 and 66 4 stands time-barred on 30-06-2002.
26)SECTION.124(1) AND (2):
TIME LIMITATION FOR GIVING EFFECT OF DIRECTIONS OF THE APPELLATE AUTHORITIES: Sub-section 1 of section 124 provides that the commissioner shall be required to give effect to an order of CIT(A), ITAT, High Court or Supreme Court, wherein any finding or direction is given within two years from the end of the financial year in which the said order was served to the commissioner.
Whereas, sub-section 2 provides the limitation of one year from the end of the financial year in which the order was served to the commissioner, where an assessment order has been set-aside or modified.
It is difficult to distinguish between finding or direction and set-aside or modification.
Usually, in all cases of set-aside the appellate authorities give direction to the assessing officer for re-adjudication of issues involved.
Therefore, all the finding or direction and set-aside are more or less of the same nature. Therefore, it would be appropriate to merge sub-section 1 and 2 for simplicity.
An appropriate amendment is made in sub-section 1 and 2 of section 124.
27)SECTION-127(2)(B):
15 PERCENT PAYMENT OF TAX DEMAND FOR FILING APPEAL: The provisions relating to payment of 15% of disputed tax demand before filing of first appeal is harsh and unjustified and should be removed;
Requirement for payment of 15% of disputed tax demand for filing of first appeal is removed.
28)SECTION-132(2):
EX-PARTE PROCEEDINGS IN THE APPELLATES TRIBUNAL: According to section 132(2), the Appellate Tribunal in case of default by any party, on the date of the hearing, may dismiss the appeal in default or proceed to decide the case ex-parte, based on the available record.
However, Rule 20(2) and 20(3) of the Income Tax Appellate Tribunal Rules, l981 seem to conflict with the above powers of the tribunal.
In case of the non appearance of either party, the tribunal may proceed ex-parte and decide the case on merit.
Moreover, in case of dismissal of appeal, even if the appeal has merit it may cause hardship to the tax payers.
Delete the words of "if it deems fit, dismiss the appeal in default" from section 132(2) to bring it equal to ITAT Rules.
29)SECTION-136:
The burden of proof should rest on the one who finalises and imposes tax on the tax payers. Therefore, requiring the tax payer how to prove not only the correctness of the return filed but also the incorrectness of the tax liability determined by the commissioner is inequitable and unjust.
Amendment should be made to make this provision more logical and justifiable.
30)SECTION- 233 AND 152:
RATE OF WITHHOLD TAX ON COMMISSION/BROKERAGE OF NON-RESIDENT: The payments of brokerage and commission are subject to withholding-tax under section 233.
Although the words "any person" have been used in section 233, which covers a non resident person as well, there is a conflict in that section 233 has not specifically been excluded in clause (a) of sub-section 3 of section 152.
Therefore, payment of brokerage or commission to a non resident is liable to withholding tax @30% instead of 5%.
Such interpretation may cause hardship to non-resident persons therefore, the relevant provisions of law should be clear.
In sub-section 3 of section 152, the section 233 must be excluded.
31)FIRST SCHEDULE:
TAX RATES OF AN INDIVIDUAL: The maximum tax rate in the case of an individual is 35%. On the other hand, in the case of companies, the lowest tax rate is 35% for public companies. It means an individual shall be paying tax at a corporate rate for certain amount. Therefore, some relief should be provided to individuals.
Maximum tax rate in the case of individuals may restricted to not more than 30%.
32)SECOND SCHEDULE:
EXEMPTION FROM MINIMUM TAX OF A NON-PROFIT COMPANY: The clause provides exemption to a "non profit company" engaged in the securitization of receivables from a levy of minimum tax, under section 113 of the Ordinance. However, this term has not been defined anywhere in the Ordinance.
Assign appropriate to the term "non profit" the purpose of clause (20) of Part IV Second Schedule.
33)THIRD SCHEDULE:
RESTORATION OF INCENTIVE WITHDRAWN: The following incentives as provided in the Third Schedule to the Repealed Ordinance, 1979 have been withdrawn in the Income Tax Ordinance, 2001. Such as Extra Depreciation Allowance for multiple shifts working (Rule-3): First year Allowance (Rule-5A):
REINVESTMENT ALLOWANCE (RULE- 5B): These should be restored as incentives.
The allowances under third schedule of Repealed Ordinance should be restored.
34) The appeals, particularly at ITAT level remain pending for years, delaying justice and causing inconvenience to the appellants at a later stage.
There should be a time limit to dispose off appeals so that the uncertainty caused by the pendency be removed.
35) The facility of automatic stay of payment of tax should be given to the appellants during the pendency of appeal before the CIT(A) and ITAT to avoid undue hardship to the appellants, upon creation of unjustified demand.
36) The department should also be required to deposit appeal fee and its budget be fixed to discourage filing of frivolous and unnecessary appeals by the department.
37) In order to avoid uncertainty, amendments in the law should always be for the forthcoming tax period.
38) The appellate authorities should be under the Ministry of Law, Justice and Parliamentary Affairs so that they decide appeals without any influence.
39) There shall be equal rate of additional tax on tax demands and compensation for delayed refunds.
40) Refund voucher must be issued along with assessments orders, failing which, strict disciplinary action is proposed for the responsible officials.
41) Accountant Member of the Tribunal must have academic qualifications in Accountancy so that he understands accounts and, consequently, play his role properly.
Presently, the departmental officers are posted as an Accountant Member, who by virtue of their experience, are revenue minded and do not necessarily possess the accountancy knowledge.
42) Legal provisions should ensure that the departmental employees are debarred from giving consultancy services to the assessees during their employment.
43) Appropriate provisions should be made in law to keep a check on the use of powers of the income tax authorities and their service record should include a summary of assessment orders passed by them and their conclusion in higher appellate forums.
44) Sources of investment should not be questioned upto the investment of Rs 500000, in case of new investors, so as to encourage an investment environment.
45) Under section 2(22)(b) of the income tax ordinance 2001, employment includes a position entitling the holder to a fixed or ascertainable remuneration.
A person entitled to a fixed or an ascertained remuneration, therefore, shall be treated as an employee regardless of other pre-requisition of employment.
This (for instance) may have serious implications on similar payments to consultants.
46) Section-28(1) of the income tax ordinance 1979 allowed expenditure incurred wholly and exclusively in connection with the transfer of capital assets.
On the other hand, section 37(2) of the income tax ordinance 2001, allows only, cost to be reduced from the consideration received to compute taxable gain, or loss. Income tax ordinance 2001 needs to be modified to bring it at par with income tax ordinance 1979.
47) Any amount received as loan, advance or gift from another person, other than by a crossed cheque or through a banking channel (from a person holding NTN) by an assessee is deemed to be the income of the assessee u/s 39(3).
This provision is creating harassment among the taxpayers, as the tax authorities hit the transactions without going into the nature.
Appropriate provisions should be added to remove the above hardship, regarding advance received and non-applicability in case of spouse and blood relations, if source of funds is appropriately explained.
48) Section-133 of the income tax ordinance 2001 provides reference to the High Court where Appellate Tribunal has made another, on an appeal u/s 132.
The reference be substituted with appeal to High Court to facilitate the taxpayers with an additional forum for ensuring justice.
49) Section 116 of the income tax ordinance 2001 requires every person to file a wealth statement. The income tax ordinance 1979 required a wealth statement only if the income declared was Rs 200000 or more.
This facility for the assessees, earning less than Rs 200000, needs to be restored in the income tax ordinance 2001.
50) It is mandatory to deposit a certain amount of tax levied, in order to file an appeal before the CIT(A).
This amendment is being used by the tax authorities for the collection of levied tax before an appeal is filed.
This harsh provision needs to be withdrawn. The Honourable High Court in a recently announced decision has already held this provision unlawful.
51) Section 122 needs to be reviewed in the light of following situations:
a. After the amendment of assessment, the Commissioner is empowered to again make further assessment,
b. The extent to which the assessment can be amended has not been specified,
52) Under income tax ordinance 1979, CIT(A) was authorised to grant stay under section 132(7) of the said ordinance. No such provision exists in the income tax ordinance 2001 which is causing hardship to the appellants.
53) Some provisions of section 175 of the income tax ordinance 2001, regarding power to enter and search premises without prior notice and to impound the account, document, hard copy or computer disk against fundamental rights.
The discretionary powers of the tax authorities need to be eliminated.
INCOME TAX RULES:
CONFLICT IN FILING OF STATEMENTS U/S 153: Section 165 prescribes annual statements for all sections requiring deduction/collection of tax under ITO, 2001. However, Rules 5lA and 56 do not prescribe annual statements for the deduction of tax under section 149 and 153.
Insert the word and "annual" after the word "Quarterly"
2RULE 52:
CONFLICT IN FILING OF STATEMENTS U/S 150: Rule 52 requires filing of tax deduction details from dividend six monthly and annually, under section 150. Whereas, Rule 51(5) requires filing of a statement within 60 days of declaration of dividend for the tax deducted on dividends.
Amend to include statement required under Rule 51(5).
3RULE 53:
MISTAKE IN REFERRING SECTION 151 (A): Rule 53 refers to deduction of tax under section 15l(c) of ITO - 2001, in respect of deduction of tax from profit paid on bonds, debentures, etc. The correct reference is 151(d) not 151 (c).
Replace the reference of section 151 (c) with Section 151 (d)
4RULE 59 AND 60:
CONFLICT IN FILLING OF STATEMENTS U/S 154: Rule 51(3) requires filing of annual and quarterly statements of tax deducted under various sections including section 154. However, Rule 59 and 60, only prescribes annual statements under section 154.
There is no mention of filing of quarterly statements anywhere.
Insert the word "Quarterly" before the word "Annual,"
5RULE 65:
EFFORT OF OMISSION OF SECTION 157 ON RULE 65: The section 157 of ITO 2001 has been omitted vide Finance Ordinance, 2002. The statement prescribed under Rule 65 no longer required.
It should be deleted.
6RULE 211(1)(6):
CORRECT REFERENCE OF RATE FOR NON-PROFIT ORGANISATION: Application for the approval of non-profit organisation, prescribed under Rule 211, requires conformity of the rules/trust deed/constitution with the requirements of Rule 220(1). The reference of Rule 220(1) is not correct
The correct reference is Rule 213(1).
Replace the reference to Rule 220(1) with 213 (1).
7RULE 213:
CORRECT REFERENCE OF RULE OF NON-PROFIT ORGANISATION: Rule 213(1)(a) defines the grounds for refusing an application for recognition of a non-profit organisation, under clause (a) to sub-rule (1) refers to Rule 218(2)(f), which is not correct. The correct reference is Rule 211(2)(f).
Replace the reference to Rule 218 with 211.
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