ISLAMABAD: President Asif Ali Zardari has categorically declared that the Sindh Revenue Board (SRB) has full legal authority and powers to levy workers’ welfare fund (WWF) being a trans-provincial subject in the instant case based in Karachi.
According to a ruling of the President of Pakistan endorsing order of the FTO, this representation dated 09.09.2024 has been filed by Federal Board of Revenue (the petitioner) assailing the review order of the learned Federal Tax Ombudsman (FTO) dated 02.08.2024, whereby it was held that: “FBR to direct the Member-IR Policy to issue necessary clarification on the issue in hand; the Commissioner-IR, Zone-IV, RTO-1 Karachi to revisit the impugned order dated 14.03.2024 for Tax Year 2020 in terms of Section I22A of the Ordinance, as per discussions in para 5 & 6 after affording proper opportunity of hearing to the Complainant, on its merit and in accordance with law; and report compliance within 45 days.
Brief facts of the case are that Mr. Saeed Iqbal, Proprietor, M/s Firm Packages, Karachi (the respondent) filed complaint against an alleged illegal order dated 14.03.2024 creating Workers Welfare Fund (WWF) liability of Rs.92,453/- for the Tax year 2020 issued under section 221 of the Income Tax Ordinance 2001 (the Ordinance). He averred that he is an individual conducting business of manufacturing of paper products.
SRB will be sole authority for collection, enforcement
The department issued a notice for rectification under section 221 of the Ordinance on 30.01.2022 for Tax year 2022 to impose WWF @2% on declared income. The respondent submitted reply stating that imposition of WWF could not be made under Section 221 of the Ordinance. Further, after 18th, Amendment to the Constitution of Pakistan, Sindh Revenue Board has the authority to collect WWF in his case. However, the department without considering the reply of the respondent, imposed WWF by making illegal addition u/s 111 (1) (b) and creating liability of Rs.92,453 on 04.03.2024.
The Federal Board of Revenue reiterated the stance taken in the body of the order.
The Federal Tax Ombudsman observed from the impugned order dated 14.03.2024 that the DCIR, Unit I, Zone-IV, RTO-1 Karachi has issued an order without rebutting the reply submitted by the respondent against notice dated 30.01.2023. Further, WWF is a levy under WWF Ordinance and required to be imposed under WWF Ordinance and not under Section 221 of the Income Tax Ordinance 2021. In addition, perusal of the concluding para of the impugned order also reveals that the addition on account of WWF was made u/s 111 (1) (b) of Income Tax Ordinance 2001 (the Ordinance) which does not relate to WWF.
Section 111 (1) (b) of the Ordinance refers to unexplained income or assets where a person has made any investment or is the owner of any money or valuable article.
Moreover, the recovery of the WWF demand is without lawful jurisdiction as the jurisdiction to charge and collect WWF rests with the Sindh Province under Sindh WWF 2014 introduced under 18th Constitutional Amendment w.e.f. 01.07.2015.
The Sindh Workers Welfare Fund Act 2014 was passed on 04.05.2015 with date of enforcement from 21.05.2015. Therefore, the SRB (Sindh Revenue Board) has the legal authority to levy WWF being trans-provincial subject in the instant case based in Karachi.
The department has argued that FBR vide notification no. 1 (110) R&S/2020 dated 03.12.2020 has clarified that in view of the decision by the Council of Common Interest,(CCI), WWF shall remain with the federal government till such time a mutually agreed mechanism is developed. This argument of the Deptt cannot be considered valid because neither CCI nor FBR can override the Constitution of Islamic republic of Pakistan. Further, the Hon’ble Supreme Court of Pakistan in a judgment passed in Civil Appeals Nos. 1049 to 1055 of 2011 has declared the collection of WWF as Fees and not as Tax and any amendment through Finance Act 2006 & 2008 is ultra-vires to the Constitution of Pakistan.
The FTO further observed that the impugned order dated 14.03.2024 imposing WWF under Section 221 of the Income Tax Ordinance 2001 is patently illegal, Coram non judice and ab-initio void attracting maladministration under Section 2 (3) (i) (a) (b) & (c) of FTO Ordinance.
Considering the respective stances, the learned FTO proceeded to pass the impugned order. Hence the representation filed by the FBR.
The hearing of the instant representation was fixed for 03.10.2024. Mr. Naveed Akhtar, Secretary (Court Matters) appeared on behalf of the petitioner/ FBR. No one appeared on behalf of the respondent. The learned representative of the petitioner has expressed serious reservations against the order of the learned FTO. According to the learned representative of the petitioner, the learned FTO has no jurisdiction to order the Member, Inland Revenue to issue clarification referred to in para-7 of the impugned order. The learned representative of the petitioner further stated that the learned FTO in terms of Clause 2(b) of Section 9 of the FTO Ordinance 2000 cannot issue any direction respecting the matters which pertain to assessment of tax, etc. He further stated that an alternate remedy of appeal is available to the respondents and therefore the jurisdiction of FTO is barred. The matter has been heard at considerable length. In this regard, it may be mentioned that there is no infirmity in the order of the learned FTO especially when the learned FTO wants the petitioner to issue clarification on the issue in hand. Keeping in view the provisions of law no exception can be taken, as the learned FTO has not ordered any assessment which could fall under the ambit of Clause 2(b) of Section 9 ibid.
He has only referred to Section 122 (A) of the Income Tax Ordinance 2001 in the light of which he requires the Commissioner Inland Revenue to revisit the order dated 14.03.2024. No exception can be taken to both the directions issued by the learned FTO in the impugned order. The order of the learned FTO is unexceptionable. The same is accordingly maintained; disposed of accordingly.
Accordingly, the President has accorded approval to para-8 above, President of Pakistan added.
Copyright Business Recorder, 2025
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