CBR examining budget proposals of PCOs' operators

The Central Board of Revenue (CBR) is examining budget proposals of operators of Public Call Offices (PCOs) pertaining to levy of withholding tax on the sale of prepaid calling cards.
Sources in the CBR told this correspondent that the revenue involved in the cases of PCO operators is not substantial. The CBR will review their proposals for giving them possible relief in the budget.
The operators of Public Call Offices (PCOs) have proposed amendment in Income Tax Ordinance 2001 for withdrawal of withholding tax on telecom services.
Moreover, new provisions should be included in the Ordinance 2001 to eliminate arbitrary and unilateral interpretation of tax laws by the income tax officials.
In the budget proposal, the Association of Payphone Card Operators (ACPO) contested that the CBR has wrongly placed the association within the ambit of section 236(1)(b) of the Income Tax Ordinance 2001.
The association has further suggested that equipment imported for telecommunication sector should be brought at par with IT equipment ie total exemption from customs/import, GST and withholding tax.
The association claimed that operators are already paying income tax under the existing billing system. They are not collecting any income tax from the telephone users, neither they have a duty to do so under any specific provision of the Income Tax Ordinance 2001.
The section 236(1)(b) refers to "Pre-paid cards for telephones". The business and functions performed by the ACPO members do not involve "prepaid cards for telephones". The business that is carried on by them is completely different and distinguishable from "prepaid cards for telephones".
The business of the operators is in respect of operating the PCOs. Their business has not been mentioned at all specifically in section 236(1)(b) of the Income Tax Ordinance and therefore no liability arises as alleged in the show-cause notices issued by the department.
Moreover, the distinction between the operators of public calls offices and those mentioned in 236(1)(b) as 'prepaid card' operators can be further strengthened by the fact that both are dealt with by a separate legal regime.
It is important to mention here that the pay card phone operators have received notices under sections 161 and 236 of the Income Tax Ordinance 2001, wherein it has been asked to furnish details of 10 percent deduction made on the 'pre-paid cards' sale.