Collection from commercial consumers: KESC told to deposit Rs 890 million income tax

Regional Tax Office (RTO) Karachi-II has directed the Karachi Electricity Supply Company (KESC) to immediately deposit income tax worth Rs 890 million collected/withheld from the commercial and industrial consumers to avoid recovery proceedings including attachment of bank accounts.
In this connection, the RTO-II Karachi here on Tuesday served a notice upon the KESC pertaining to recovery of tax withheld under section 235 of the Income Tax Ordinance 2001. Sources told Business Recorder that the FBR has given jurisdiction of monitoring/audit of withholding tax deducted by KESC to the RTO-II Karachi under section 161 of the Income Tax Ordinance 2001.
It is public money which has been collected from the commercial and industrial consumers of electricity, but government money has not been deposited in the national exchequer. Now, the regional tax authorities have decided to launch recovery proceedings against the said company to collect tax withheld from the consumer of electricity.
The said company being withholding agent has to deposit the deducted amount of tax in the national exchequer. Due to non-compliance, the tax department would attach the bank accounts of the said company for recovery of defaulted amount of advance tax. The RTO-II Karachi has informed the Chief Financial Officer (CFO) of KESC to clear the past payments to avoid recovery proceedings under the Income Tax Ordinance 2001.
According to the RTO-II Karachi notice dated October 30, 2012 issued to the KESC, as collecting agency under section 235 of the Income Tax Ordinance, 2001, the company was under legal obligation to remit the advance tax collected from the electricity consumers. However, as per record of RTO-II Karachi, the said tax has not been remitted and an amount of Rs 890 million has still been retained without any valid reason. In order to recover the said amount of tax, the company was requested to remit the same as stipulated in section 160 of the Income Tax Ordinance. However, instead of remitting the said tax, it filed a suit in the Sindh High Court on the premise that the RTO does not hold lawful jurisdiction u/s.16l of the Income Tax Ordinance to recover the outstanding tax.
In this connection, jurisdiction under the said section has now been assigned to RTO-II by the competent authority ie FBR. Since the company is holding public money without any valid justification, therefore, the company is hereby reminded of its legal obligation to remit the state revenue retained since July, 2012.
In view of the jurisdiction assumed by RTO-II under section 161 of the Income Tax Ordinance, 2001, recovery proceedings will be initiated as laid down in the Income Tax Ordinance including attachment of bank accounts under section 140 of Income Tax Ordinance, 2001.
Given the peculiar legal position, needful may be done without fail as with the assumption of jurisdiction by RTO-II, the suit before the court has become ''infructuous''. Any further delay in this regard will tantamount to violation of the legal provisions of the Ordinance 2001, RTO-II Karachi added.