AIRLINK 197.55 Increased By ▲ 7.91 (4.17%)
BOP 10.27 Increased By ▲ 0.18 (1.78%)
CNERGY 6.95 Increased By ▲ 0.27 (4.04%)
FCCL 34.42 Increased By ▲ 0.28 (0.82%)
FFL 17.66 Increased By ▲ 0.57 (3.34%)
FLYNG 24.60 Increased By ▲ 0.77 (3.23%)
HUBC 127.73 Increased By ▲ 1.68 (1.33%)
HUMNL 13.83 Increased By ▲ 0.04 (0.29%)
KEL 4.88 Increased By ▲ 0.11 (2.31%)
KOSM 6.69 Increased By ▲ 0.11 (1.67%)
MLCF 44.15 Increased By ▲ 0.87 (2.01%)
OGDC 224.91 Decreased By ▼ -0.05 (-0.02%)
PACE 7.50 Increased By ▲ 0.12 (1.63%)
PAEL 42.86 Increased By ▲ 1.12 (2.68%)
PIAHCLA 17.22 Increased By ▲ 0.03 (0.17%)
PIBTL 8.54 Increased By ▲ 0.13 (1.55%)
POWER 9.12 Increased By ▲ 0.07 (0.77%)
PPL 194.30 Increased By ▲ 1.21 (0.63%)
PRL 38.76 Increased By ▲ 1.42 (3.8%)
PTC 24.34 Increased By ▲ 0.32 (1.33%)
SEARL 99.87 Increased By ▲ 5.33 (5.64%)
SILK 1.00 Increased By ▲ 0.01 (1.01%)
SSGC 43.76 Increased By ▲ 3.83 (9.59%)
SYM 18.58 Increased By ▲ 0.81 (4.56%)
TELE 9.12 Increased By ▲ 0.46 (5.31%)
TPLP 12.96 Increased By ▲ 0.57 (4.6%)
TRG 64.10 Increased By ▲ 1.45 (2.31%)
WAVESAPP 10.37 Increased By ▲ 0.09 (0.88%)
WTL 1.78 Increased By ▲ 0.03 (1.71%)
YOUW 4.02 Increased By ▲ 0.05 (1.26%)
AIRLINK 197.55 Increased By ▲ 7.91 (4.17%)
BOP 10.27 Increased By ▲ 0.18 (1.78%)
CNERGY 6.95 Increased By ▲ 0.27 (4.04%)
FCCL 34.42 Increased By ▲ 0.28 (0.82%)
FFL 17.66 Increased By ▲ 0.57 (3.34%)
FLYNG 24.60 Increased By ▲ 0.77 (3.23%)
HUBC 127.73 Increased By ▲ 1.68 (1.33%)
HUMNL 13.83 Increased By ▲ 0.04 (0.29%)
KEL 4.88 Increased By ▲ 0.11 (2.31%)
KOSM 6.69 Increased By ▲ 0.11 (1.67%)
MLCF 44.15 Increased By ▲ 0.87 (2.01%)
OGDC 224.91 Decreased By ▼ -0.05 (-0.02%)
PACE 7.50 Increased By ▲ 0.12 (1.63%)
PAEL 42.86 Increased By ▲ 1.12 (2.68%)
PIAHCLA 17.22 Increased By ▲ 0.03 (0.17%)
PIBTL 8.54 Increased By ▲ 0.13 (1.55%)
POWER 9.12 Increased By ▲ 0.07 (0.77%)
PPL 194.30 Increased By ▲ 1.21 (0.63%)
PRL 38.76 Increased By ▲ 1.42 (3.8%)
PTC 24.34 Increased By ▲ 0.32 (1.33%)
SEARL 99.87 Increased By ▲ 5.33 (5.64%)
SILK 1.00 Increased By ▲ 0.01 (1.01%)
SSGC 43.76 Increased By ▲ 3.83 (9.59%)
SYM 18.58 Increased By ▲ 0.81 (4.56%)
TELE 9.12 Increased By ▲ 0.46 (5.31%)
TPLP 12.96 Increased By ▲ 0.57 (4.6%)
TRG 64.10 Increased By ▲ 1.45 (2.31%)
WAVESAPP 10.37 Increased By ▲ 0.09 (0.88%)
WTL 1.78 Increased By ▲ 0.03 (1.71%)
YOUW 4.02 Increased By ▲ 0.05 (1.26%)
BR100 11,968 Increased By 154.1 (1.3%)
BR30 36,684 Increased By 449.7 (1.24%)
KSE100 114,230 Increased By 982.8 (0.87%)
KSE30 35,984 Increased By 272.3 (0.76%)

ISLAMABAD: In a landmark judgment, a division bench of the Sindh High Court (SHC) has held that in case of service provider the amount on which tax is to be deducted by a withholding agent is the net amount excluding the reimbursable expenses like salary.

Multiple writ petitions were filed before the SHC seeking declaration that withholding tax under section 153(1)(b) of the Income Tax Ordinance, 2001 has to be deducted on the amount of their service fee and not the gross amount received from the recipient of the services, which includes amount of salaries, contributions and insurance etc.

The petitioner had also sought a declaration that whether the word “turnover” has been used in this respect, including for obtaining an exemption certificate, it is only the gross service fee and not the entire amount of gross receipts.

When contacted, Muhammad Taimoor Ahmad Qureshi, Counsel of ASK Development Limited explained that the Company is a human resource and manpower service provider and renders such services to large corporate recipients by providing employees under agreement and employees so engaged work under the control of service recipient, whereas the Petitioner Service Provider are paid charges for such services, which includes their fee for services and the reimbursement of salaries and dues of employees. The recipient of services are deducting tax at source of the service provider on the gross receipts and not on their fee and as such excessive deduction at source is made on that part of gross receipt which are actually reimbursement of salaries of the employees.

Whereas, the tax deducted has been made minimum tax which means that neither it is refundable nor can be carried over whereas actual tax liability on the income of the service provider is much less than the tax deducted at source.

He explained that the learned Division Bench after an exhaustive discussion of the relevant provisions has accepted the writ petitions and the operative part of the order is as under: In view of hereinabove facts and circumstances of the case, the petitioners have made out a case and it is accordingly held hat for the gross amount referred to in section 153(1)(b) on which advance tax has to be deducted at the rate specified in Division III of part III of the First Schedule to the Ordinance, is the gross fee received in lieu of services excluding the amount of reimbursable expense. It is further held that for the purposes of clause 94 in Schedule II Part IV of the Ordinance (Since repealed) the turnover would be as defined in section 153(7)(b)(v) which is gross referred for rendering services excluding the amount of reimbursable expenses.

All petitioners are accordingly allowed to this extent. All impugned actions of the respondents stand modified accordingly.

Copyright Business Recorder, 2021

Comments

Comments are closed.