ISLAMABAD: The National Highways Authority (NHA) has challenged the Federal Board of Revenue’s move of attachment of bank accounts of the authority for recovery of advance tax by declaring it as a private limited company.
In this connection, the NHA has shared the details of the case with Business Recorder.
When contacted, relevant sources informed that the FBR has proceeded in the case of the NHA strictly in accordance with law and has provided it maximum opportunities/facilitation to discharge its tax liabilities in accordance with the law. The legal stand on the basis of which taxes have been levied and recovery proceedings have been initiated by the FBR in the case of the NHA has been endorsed, both by the Appellate fora and the Islamabad High Court, despite which NHA is making various excuses to avoid its tax liabilities, sources added.
On the other hand, the NHA opined that the FBR wrongly assessed NHA as a private limited company despite the fact that NHA was created, in 1991, through an Act of the Parliament, for planning, development, operation, repair and maintenance of national highways and strategic roads specially entrusted to NHA by the federal government or by a provincial government or other authority concerned.
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The FBR, on February 9, 2022, created demand of tax liability amounting to Rs119.111 billion against eight different tax cases pertaining to the tax years from 2015 till 2020. This huge demand was created without contesting the grounds of appeal filed by NHA neither confronting any written arguments and documentations submitted by the NHA.
In this regard, the IHC had already granted stay order against the recovery of Rs26.203 billion for 2016 and 2017 tax year and the remaining amount of tax liability was sub judice before the Commissioner Appeal.
In this continuation, the FBR vide its communication No 597 dated February 10, 2022 issued notices to banks for recovery of assessed liability amounting to Rs55 billion from the NHA and seized the bank accounts till the recovery of liability though the NHA has the right to file appeal u/s 131 of the Income Tax Ordinance 2001 within 60 days of the issuance of the impugned order. Till date, the FBR has made recoveries of Rs8.360 billion (being 15 percent of the assessed liability, ie, Rs55.735 billion) and still insisting and pursuing NHA to share the payment schedule for the remaining amount, the NHA stated.
The NHA has already taken up the matter of tax notices issued to the Authority at various fora. In this regard, a meeting was also held on February 25, 2022 in the Finance Division under the chairmanship of Federal Minister for Finance in which representatives of NHA, FBR, and the Finance Division were present.
In the said meeting, the following actionable points were agreed and also endorsed by chair of the meeting: i. The FBR to make changes in the law through Finance Act 2022 to differentiate the treatment of taxes applicable to government entities/autonomous bodies under the ministries from other commercial business entities.
ii. Till amendment in the relevant clauses, the FBR will not issue further notices/orders to NHA by treating it as a commercial business entity.
iii. Resolution of the outstanding tax issues through Alternate Dispute Resolution to be constituted under the Income Tax Ordinance 2001, as committed by the FBR.
The said actionable points were forwarded to the chairman FBR on March 18, 2022.
The response received from the office of Secretary (IR-Operations) FBR revealed that the changes in law will be considered by FBR in the next available legislative opportunity; payment of advance tax by NHA and extending coordination to the FBR and request from NHA for the constitution of Alternative Dispute Resolution Committee (ADRC).
The NHA on March 29, 2022 conveyed its stance regarding issues highlighted by FBR, which are reproduced below: The proposed changes in Income Tax Law forwarded for soliciting approval in upcoming legislative through federal budget 2022-2023.
Regarding coordination with FBR, it was conveyed that NHA has already provided complete record to assessing officer for proceeding under section 161/205 of the Income Tax Ordinance, 2001. Further, NHA will be pleased to provide any additional record, if required, to ensure the compliance of tax laws.
It was also requested to constitute the Alternative Dispute Resolution Committee (ADRC) under section 134A of the Income Tax Ordinance, 2001 for the resolution of the outstanding tax issues of NHA.
Surprisingly despite of responding back to NHA, FBR attach bank accounts of the Authority and recovered Rs1,215,916,213 as advance tax from different bank accounts of NHA irrespective of clear provisions of section 147 of Income Tax Ordinance 2001 on March 31, 2022 on the basis of amended assessment, which is not only unjustified but violation of law, and NHA has every right and authority to challenge before the court of law when particularly the correspondence was made after court proceedings and submitted the law, relevant documents and tax estimation along-with returns. Further, stated that in view of declared accounts the notices issued under section 147 and 138 of Income Tax Ordinance 2001 for second and third quarter and withdrawing the huge amount without any backing of law was completely unjustified and against the assurances given to NHA at every level by the FBR that it will remain positive for smooth nationwide operations of the Authority, the NHA maintained.
In addition to above, the NHA has already provided the estimated quarterly accounts of financial year 2021-22 and annual return filed for the tax year 2021 clearly shows that the NHA is not in a position to pay any advance tax under section 147 of the Income Tax Ordinance, 2001 and have also requested the FBR to withdraw the notices issued to the NHA, and return the illegal deducted amount referred above from the bank account of the NHA.
Copyright Business Recorder, 2022
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