Issuance of SRO: FM's mere signing of a letter to NA Speaker meaningless: FTO

The Federal Tax Ombudsman (FTO) has ruled merely signing of a letter regarding issuance of SRO by the finance minister addressing the Speaker National Assembly is meaningless, if it was not made part of the Finance Bill to be approved by the National Assembly.
According to a latest order, the FTO ruled that FBR's claim that insertion of Clause 79 in the Second Schedule of the Ordinance through SRO No 1003(1)/2011 was placed before the National Assembly does not seems correct.
Sources told Business Recorder that in a recently issued order wherein review petition filed by the Federal Board of Revenue (FBR) has been dismissed, it was observed by the FTO, it is not understandable as to why the FBR functionaries are defending a position against the unambiguous provisions of law with conflicting acts of omission and commission. It is also a matter of grave concern that the FBR functionaries, instead of correcting the unlawful errors are defending vested interests against the interest of Government revenues, whereas in medium and small cases of taxpayers, petty amounts of refunds are blocked on the pretext of 'interest of revenue'.
When contacted tax lawyer Waheed Shahzad Butt told this correspondent that this review Petition was filed by the FBR against Recommendations "FBR to (i) initiate appropriate disciplinary action against the officials found responsible for issuing Circular No 6/2009 and inserting Clause 79 in the Second Schedule of Income Tax Ordinance 2001 (ii) take immediate measures either to delete the Clause 79 from the Second Schedule of the Ordinance or to get it approved retrospectively by the Parliament."
Tax lawyer further added that earlier FBR's and former FBR Member's petitions against the order passed by the FTO in R.A 12/12 titled (Secretary Revenue Division Vs Waheed Shahzad Butt) had been rejected by the FTO.
The FTO order states "senior officers of FBR have been heard and record perused. As thoroughly discussed in the earlier Findings/Recommendations, the levy of MTR was clearly made applicable to all categories of taxpayers: Individuals, AoPs and Companies. In para 34 of Circular No 3 of 2009, it was again emphasised with three examples of tax calculations, particularly for corporate sector, stating that "henceforth all the taxpayers" fall in the ambit of Section 153(1)(b) of the Ordinance which was relevant to service providing taxpayers. However, subsequently the FBR issued Circular No 6 of 2009 claimed that service providing corporate sector was not liable to pay minimum tax. This Circular invited reaction in the press and on complaints against issuance of Circular No 6, the FBR withdrew this circular on 26-04-2011 clearly stating that: "in supersession of earlier instructions issued through Circular No 6 of 2009 it is clarified that tax deducted on payments made for rendering or providing of services is to be treated as MTR.
Through SRO No 1158(1)/2010 dated 30-12-2010, electronic returns of income were notified with calculation of minimum tax @ 6% under Section 153(1)(b) for all service sector receipts. Almost twelve Circulars/Clarifications on different occasions were issued by the FBR before and after issuance of impugned Circular No 6 of 2009 clearly stating that service provider companies were liable to be charged minimum tax @ 6%. Then SRO No 850(1)/2011 dated 17-09-2011 was also issued in support of previous SRO No 1159(1)/2010, again to notify electronic returns with calculation of minimum tax for all service providing taxpayers.
It is evident beyond any doubt that statutory provisions of Section 153 of the Ordinance were very clear as amended through Finance Act 2009. This fact has been admitted by the FBR itself in the comments submitted before the Lahore High Court in two identical cases, wherein the same issue was disputed by the service providing companies.
The revenue involved in such cases is reported to more than Rs 20 billion per annum. Moreover, it is simply elucidating a crystal clear legal proposition that has been promulgated by the FBR through various circulars, as embodied in Section 153 of the Ordinance and in fact has also been adopted by the FBR in two references before the High Court. The FBR's reliance, on a letter issued by the Finance Minister to the Secretary of the National Assembly that has not yet become an act of Parliament, is wholly mistaken.
The FTO observed "The background based on plethora of circulars and clarifications clearly indicated the mala fide and improper motives on the part of the FBR functionaries who still try to attach incorrect and wrong meanings to the explicit provisions of Section 153 of the Ordinance. The SRO No 1003(1)/2011 was issued on 31-10-2011, whereas it was not made a part of the Finance Bill/Act 2011 which was passed only three months earlier, nor it was made a part of Finance Bill 2012. The comments and guidelines issued by the FBR on the Finance Act 2012 through Circular No 2 of 2012 dated 27-07-2012 did not contain any word about the insertion of Clause 79, as there was no amendment in the provisions of Section 153 of the Ordinance".
No case could be made out for revising the earlier Recommendations in the instant case and the Review Petition stands dismissed, the FTO order added.