Foreign company refund cases: LTUs, RTOs told to give uniform treatment

After issuance of show cause notice by the Federal Tax Ombudsman (FTO), the Federal Board of Revenue has directed the Large Taxpayer Units and Regional Tax Offices (RTOs) to give fair, uniform treatment in refund cases to the permanent establishments of foreign companies in Pakistan under Income Tax Ordinance 2001 and conventions on avoidance of double taxation.
Sources told Business Recorder on Thursday that the FBR has issued instructions to the field formations to comply with the show cause notices issued by the FTO office to the tax department. According to the show cause notice of the FTO office, whereas complaint number 189 of 2011 was investigated by this office and by his findings, the Federal Tax Ombudsman had recommended in accordance with Section 11(1) of the Establishment of Office of the Federal Tax Ombudsman Ordinance 2000 (hereinafter the Ordinance) that:
1. Formulate a uniform policy regarding assessment of income and admissibility of refunds in cases of permanent establishments of foreign companies.
2. The FBR should direct the Chief Commissioners to decide the cases of permanent establishments of foreign companies fairly and uniformly.
3. The FBR should furnish compliance report within 30 days thereafter.
Whereas, under section 11(2) of the Ordinance you were required to inform the Federal Tax Ombudsman by December 12, 2011 about the action taken with regard to implementation of the Findings of the FTO, it maintained.
Whereas the record shows that the FBR has not so far informed this office about the action taken for implementing the recommendations by the due date. Now, therefore, you are called upon to explain why proceedings under section 12(2) of the Ordinance may not be initiated against the concerned officials, show cause notice added.
Responding to the notice, the FBR has directed the field formations to decide the cases of the permanent establishments of foreign companies in accordance with the prevalent provisions of law and double taxation agreement, if any. The field formations have been directed to comply with the directions of the FTO, FBR's instructions added.
When contacted a tax expert said that the notice issued by the FTO is a Show Cause notice for initiating Defiance of Recommendations Proceedings against the FBR for not implementing the order of FTO while the letter of FBR to the LTUs/RTOs is actually compliance to the Original Recommen-dations issue by FTO in C.No 23/ISD.IT(8)/189/2011, he added.