Two cellular operators applied for ADRC: Raouf

SOHAIL SARFRAZ

ISLAMABAD: Senior Member Policy Federal Board of Revenue (FBR) Asrar Raouf said on Tuesday that two cellular operators have applied for the constitution of the Alternative Dispute Resolution Committee (ADRC) on admissibility of tax on interconnection charges, but it is not mandatory for the FBR to accept the recommendations of the ADRC.

He informed the sub-committee of the National Assembly Standing Committee on Information Technology (IT) that the ADRC will be constituted in due course of time. However, it is not binding on the FBR to accept the recommendations of the ADRC. If the recommendations of the ADRC have been accepted by the Board, the telecom companies have to withdraw their cases from courts.

Senior Member Tax Policy said that FBR cannot influence the ADRC for obtaining early decision/recommendation of the committee. The ADRC operate independently under the law. Legally, the FBR cannot intervene into the working of the ADRC as the FBR cannot give its directions to the committee to submit report in 10 days period. We have to proceed under the law as government revenue is involved in the case.

When asked about criteria for restraining tax defaulting companies to participate in 3G bidding, Asrar Raouf said that Pakistan Telecommunication Authority (PTA) is the regulator who is competent enough to set terms and conditions about the eligibility of the companies for participation in the bidding of 3G licenses and FBR has no role in this regard. The FBR cannot declare or make rules that the tax defaulters should not participate in the bidding process of 3G licenses. When the PTA would float the tenders of 3G auction, the eligibility criteria of companies would be open to everyone.

The FBR is vigorously pursuing the case in the court for vacation of stay order granted to the telecom companies. The next date for hearing has been fixed on October 15, 2012. The tax demand has been raised against two companies. Unless tax demand has been raised, the case cannot be referred to the ADRC.

Explaining the legal provisions of Income Tax Ordinance 2001, Chief Income Tax Policy Dr Muhammad Iqbal informed the committee that the ADRC has given its recommendations within the prescribed time period of 90 days. The maximum time period has been provided in the relevant section of the Income Tax Ordinance 2001. Under the law, the committee has to be constituted within 30 days of receiving an application. The members of the ADRC would include officer of the Inland Revenue; 2 persons from the notified panel, chartered accountant/advocate, retired judges and representatives of trade bodies and any reputable person, who is a taxpayer. Usually, ADRC has been notified from the panel already made by the Board. In this case, amendment in the existing FBR’s panel could be made.

Dr Muhammad Iqbal further informed the committee that the FBR will have to reject an application made by a cellular company for constitution of the ADRC, as the company has not fulfill the legal requirements. Only those companies can apply for the ADRC where case is pending at any stage of appeal or court. In a specific case of a mobile operator, no tax demand has been raised and the company has not gone to appeal in courts. Thus, the company does not meet the criteria for making an application for the constitution of the ADRC and company’s application cannot be accepted by the FBR on legal grounds.

When a chartered accountant pointed out that ADR law has provision to entertain such applications where tax demand has not been raised, Dr Muhammad Iqbal referred to relevant sections of the Income Tax Ordinance 2001 and convinced the committee and representatives of telecom operators about the factual status of the law.

Responding to this, Chairperson of the committee Mrs. Anusha Rahman Khan Advocate informed that the sub-committee has made recommendation that the tax defaulters should not be allowed to participate in the auction of 3-G spectrum. The timely decision of the ADRC would give a clear picture whether the tax is admissible on interconnection charges and the companies are defaulters or not. The sub-committee expects that the FBR will immediately constitute the ADRC without any delay. Secondly, the ADRC will give its recommendations in the minimum possible time. The sub-committee desires that any company should not be out of the bidding process of 3G licenses on the assumption of tax default.

When the committee members insisted that the PTA should be made part of the ADRC, Senior Member Tax Policy FBR informed the committee that PTA or Ministry of Information Technology cannot be made member of the ADRC under the existing tax laws. Mrs. Anusha Rahman asked the tax authorities to operate within the jurisdictions and limitations provided under the law. If ruling for one company has been issued under the ADRC arrangement, the FBR can give written assurance that the same ruling would be applicable for all telecom companies as far as taxation is concerned.