Rs 750 million WHT recovered: FBR freezes 32 bank accounts of all six DMCs

The Federal Board of Revenue (FBR) has frozen 32 bank accounts of all six District Municipal Corporations (DMCs) and recovered withholding tax amounting to Rs 750 million, pending since 2014-15. Reacting to this, DMCs dumped tonnes of garbage in front of the FBR office located at Gulistan-e-Johar. According to FBR sources, the Regional Tax Office (RTO)-III had taken up the issue in December 2015 and asked the DMCs to explain why they failed to collect 6 percent income tax on payments to contractors. However, none of the DMCs gave any response to the RTO-III, despite several reminders.
Consequently, the tax department raised a tax demand of Rs 950 million against all six DMCs and issued an order under section 161 of Income Tax Ordinance 2001 on March 22, 2016. Replying to a question, sources said although the order was appealable within 30 days, no DMCs bothered to take it seriously that led to the recovery of Rs 750 million through accounts' attachment.
They further said that DMCs instead of clearing rest of the pending withholding tax resorted to negative tactics and pressurising the tax officials; adding that DMCs have dumped tonnes of garbage before the tax department. Reacting to this, the tax department moved an application in Shahrae Faisal police station to lodge FIR against DMCs; sources said and added that if they did not register the case they would lodge FIR against them under section 196 of the Income Tax Ordinance 2001.
They said the tax department was also planning to select open cases against DMCs for audit for last five years besides initiating scrutiny of their records under Special Procedure Rule 2007 for sales tax. They hoped to generate the tax demand of around Rs 10 billion against them through the aforesaid exercise and added that the tax department had also detected Rs 4.5 billion discrepancies in the road construction project for Madooh Goth, which would also be forwarded to the NAB, Sindh for further investigation.
Meanwhile, officials in DMCs, who did not want to be named said the tax department had taken the said action at a time when the salaries of DMC workers were about to be released. Hence, the aggression is justified.
They said that FBR had charged income tax on the funds, which were tax-exempted and termed the said move from FBR as unwanted action. They also urged the authorities concerned to look into the matter seriously because if the FBR did not return the amount immediately the whole waste management work would be suspended.