Corporate sector service providers: President confirms FTO's order on minimum tax issue

President of Pakistan has confirmed the Federal Tax Ombudsman (FTO) order on the issue of minimum tax under section 153(1)(b) of the Income Tax Ordinance, 2001 chargeable in case of all corporate sector service providers companies for the Tax Year 2014.
It is learnt that the President has rejected a representation against recommendations issued by the FTO on the issue of minimum tax chargeable u/s 153(1)(b) of the Ordinance, wherein FTO ruled as per Finance Act-2015 charge of minimum tax u/s 153(1)(b) through Finance Act 2009, onwards is leviable. The matter has been decided in the complaint number 32/2015. The only difference is that previously chargeable tax was 6 percent of gross turnover whereas now it stands at 8 percent. The amendment made in Clause-79, Part-Ill of the Second Schedule to the Ordinance through SRO-1003 of 2011 also stands deleted. As a result of the statutory enactments, no adjustment of tax deducted u/s 153(l) (b) of the Ordinance is possible and no refund arises therefrom.
When contacted a tax expert told this correspondent that National Accountability Bureau (NAB) has also decided to inquire the matter of Minimum Tax under Section 153(1)(b) for service provider companies and examine the issuance and subsequent withdrawal of Circular No. 6 of 2009 as well as SRO 1003 of 2011.
Tax expert further said that law was amended by Parliament through Finance Act 2009 and the service providing companies were made chargeable to 6% Minimum Tax under Section 153(1)(b). The FTO took notice under own motion intervention in "Waheed Shahzad Butt Vs Secretary Revenue Division - 2012 PTD 554" and recommended action against the FBR officers. Although FBR had withdrawn the Circular 6, yet Review Petition "Secretary Revenue Division Vs Waheed Shahzad Butt-2013 PTD 2159" was filed before the FTO which was rejected and the FTO held, on the strength of judgement of Supreme Court in an identical case that insertion of clause 79 was against the provisions of law and, therefore, malafide and unlawful.
President's order states "This representation has been filed against the findings of FTO dated 22.9.2015. The brief fact of the case is that this is a complaint against non-issuance of income tax refund for Tax Year 2014. This is a case of corporate service provider and refund is claimed on account of excess deduction u/s 153(1)(b) of the ITO 2001.
Tax deductions u/s 153(l)(b) of the Ordinance constitute Minimum Tax. No refund therefore emerges in this case as adjustment of such deductions is not permissible. The AR of the complainant argued that as per clause-79 Part-III of the second schedule, corporate service providers did not fall within purview of minimum tax u/s 153(1) (b) of the Ordinance.
As explained supra, the said amendment in the Second Schedule stands deleted through changes in the statute brought about through Finance Act-2015. As a result corporate service providers are subject to charge of minimum tax u/s 153(I)(b) of the Ordinance in the same manner as non-corporate service provider, as also held by this office in all complaint cases of service providers. The investigation is closed and case file consigned to record. Thus FTO has issued the aforementioned findings. The complainant has prayed that order of the FTO may be set aside. On the contrary, the FBR has offered comments against the instant representation of complainant and supported the impugned recommendations of FTO with prayer that representation of the taxpayer may be rejected. It has been settled by the Supreme Court of Pakistan case of Mst. Kaniz Fatima reported in 2001 SCMR 1493, that where a particular statute provides self contained machinery for determination of questions arising under the statute, and law provides a remedy by appeal or revision to another forum fully competent to give any relief, any indulgence to the contrary by any other forum is bound to produce a sense of distrust in statutory forums and writ petition will not be maintainable without first availing the alternate statutory legal remedy.
The FTO has no jurisdiction to set aside the order where the forum of appeal is available to the complainant. Hence FTO has rightly closed the investigation in the matter. Accordingly, the President has rejected the representation of the complainant and recommendations /findings of FTO should sustain, according to President's order.