Punjab government has knocked the doors of Council of Common Interests (CCI) to get back about Rs 950 million from Federal Board of Revenue (FBR) collected by misusing its authority, sources close to Chief Secretary Punjab told Business Recorder.
Punjab Government, in its summary to the CCI, has stated that provinces maintain their principle account ie. Account No.1 with State Bank of Pakistan (SBP) where the Provincial Consolidated Fund (PCF) is placed and managed.
Punjab government observed with concern that in the recent past FBR directly approached SBP for deduction of certain amounts from the PCF ie. Punjab Government A/c No.1 (non food) on account of recovery of tax from provincial departments, under section 140 of Income Tax Ordinance 2001. Here, attention is drawn to a case in which a total amount of Rs 972.594 million was deducted during 2015-16 and 2016-17 from A/c No.1 on the directions of FBR (Rs 948,908,393 pertains to Directorate General Health Services Punjab, Lahore).
On October 31, 2016, Punjab government requested SBP not to deduct Rs 972.594 million from A/c No.1 without approval and authorisation. The SBP, in its letter of November 11, 2016 informed that section 140 of the Income Tax, 2001 empowers the FBR to issue notice and recover amount from the persons holding money on behalf of tax payer and assessee in default. SBP further stated that compliance of such notices is mandatory for the SBP, since the law passed by legislators/parliament.
Punjab government opposed SBP on the following grounds: (i) PCF has been established under Article 119 of the Constitution and no payments can be made from the Account without the approval/ appropriation of the provincial assembly. Such permission was not obtained in this matter which implies that this deduction/ withdrawal is illegal; (ii) moreover, the Constitution provides proper mechanism for settlement of inter-government disputes and appropriate forum for this purpose in Inter Provincial Coordination Committee (IPCC). In case FBR had any grievance, the matter should have been referred to the Finance Division which could have discussed it at the forum of IPCC; and (iii) further, Income Tax Ordinance, 2001 is subservient to the Constitution and none of its section can overrule the Constitutional cover given to the PCF.
According to the Government of Punjab, as per rule 11(2) of the Treasury Rules (Punjab), "the bank is responsible for safe custody of government money deposited with it. Rule 13 ibid stipulates "money may not be withdrawn from PCF or the public account of the province without the written permission of the treasury offices or an officer of Pakistan Audit Department authorised in this behalf by the Accountant General. It is clear that the act of the SBP of setting off/ adjusting huge amounts from the PCF at the behest of FBR is without lawful authority.
"Moreover, the Finance Department has already advised Provincial Government Department to monitor such deductions by SBP or any other authority on the advice of FBR under section 140 of ITO and ensure compliance of tax and other relevant law and deduct/deposit tax (including any tax withheld) at the appropriate tax authority level and ensure that no at-source deduction from Provincial Account No.1 is done.
Government of Sindh has also placed similar matter before the CCI, in its summary of March 3, 2018. Punjab government endorsed the views of Sindh government before the CCI with the contention that the FBR authorities have illegally drawn Rs 972.595 million (Rs 23,686,577 in 2015-16 and Rs 948,908,393 in 2016-17) from PCF of the Punjab government which needs to be refunded.
According to the Punjab government, the matter was referred to FBR, Islamabad and all Chief Secretaries of other provinces for their views/ comments on May 31, 2018. All provinces endorsed the viewpoint of Punjab Government. Importantly, FBR in a letter on October 11, 2017, asked its field formations to stop this practice and in future no recovery would be affected from Federal Consolidated Fund/ Provincial Consolidated Fund until prior approval of the FBR chairman.
As regard the amount of tax Rs 948,908,393 already recovered from Director General Health Services, Punjab, and FBR in its letter on October 30, 2018 states that the re-assessment proceedings are underway after the case was remanded back by the Commissioner IR (appeals). However, as per DG Health Services Punjab's letter of December 14, 2018, the matter is still pending.
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