Federal Tax Ombudsman Munir A Sheikh has ruled that services rendered, whether through contract or otherwise, were not covered under ''presumptive tax regime'' of the repealed Income Tax Ordinance 1979, and the expression ''services'' could not be given restricted meanings.
The FTO gave this ruling on the complaint of a Washerman, Munir Hussain, of Renala Khurd (Okara district).
According to the findings of the FTO, complainant was providing services of clothes washing to Pakistan Army. Due to non-compliance of notice, a consolidated ex parte assessment u/s 63 of the repealed Income Tax Ordinance 1979 was framed on 30.06.1999.
On receipt of the demand notice, the complainant moved an application u/s 156 of the repealed Ordinance for rectification and sought credit of tax paid under section 54 which was rejected on the ground that the complainant was not entitled to refund, being a contractor who should file statement u/s 143B, as deduction u/s 50(4) was to be final discharge of tax liability.
The complainant filed an application in the FTO office, which was accepted, and following recommendations were made:
1) "consolidated ex parte order dated 30,6.99 for the years 1995-96 to 1998-99 as also order passed on 30.06.01 under section 156 of the repealed Ordinance be cancelled by the Commissioner by resort to section 122A of the Income Tax Ordinance 2001.
2) Assessment proceedings may then be taken up to dispose of the Returns in accordance with law."
In pursuance of the recommendations the CIT Sahiwal passed order dated 10.05.04 cancelling the impugned assessment u/s 122A of the Income Tax Ordinance 2001, holding that the tax deducted u/s 50(4) was final liability, and served this order on the complainant on 29.8.2005
The FTO said that the instant complaint has been filed against the order of the CIT dated 10.05 2004 on the ground that services rendered by the complainant as washerman /dhobi are covered by the word ''services'', and therefore the assessment u/s 80(c) are not justified and his case falls u/s 50(4) of the repealed IT Ordinance 1979 and outside the purview of ''presumptive tax regime'', and the tax deducted could not be final discharge of liability.
In reply, the RCIT, Central Region, Multan, took the plea that services rendered by washerman are not covered under the definition of ''services'' which was elaborated in section 153 (9) of the IT Ordinance 2001 and further explained by CBR''s circular dated 09.07.03 include the services rendered whether through a contract or otherwise by professions such as medical practitioners, legal practitioners, accountants and consultants etc and the services by a washerman contractor cannot be termed as ''services'' by professional, as it was purely a contract with Pakistan Army for washing of clothes etc.
The RCIT further argued that the complainant is a contractor and his case falls within the ambit of section 80C (2) and tax deducted at source is final and full discharge of tax liability.
Disagreeing with the submissions of RCIT, the FTO held that the assesssee washerman was very well covered within the definition of the word ''services rendered'' and, therefore, the assessment of the same under section 80 (c) was not justified.
Setting aside CIT order dated 10.05.04, the FTO ordered that the Taxation Officer should assess the complainant''s return under normal law after issuing notices u/s 61 of the repealed Income Tax Ordinance 1979.
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