The Federal Tax Ombudsman has held that a petrol filling station has fulfilled its tax obligation if the tax has been deducted at the source and it has no other source of income. In such a case tax deducted by Wapda is refundable.
The FTO, Saleem Akhtar, found that the complainant, Forest View Filling Station, Changa Manga, Chunian, had applied for the refund as the department had made excess deduction of tax of Rs 20,000 for the assessment years 2000-01 to 2002-03 but the department gave no response to repeated requests for refund.
According to it, the petrol pump received commission income from PSO for supply of petrol and tax was deducted at source.
The department, in its reply to FTO's notice, admitted that under section 80 C (4) of the repealed Ordinance, if an assessee has no other income, tax deducted at source is the final discharge of tax liability.
However, the complainant's claim of refund on account of tax withheld on electricity bills under section 50 (7E) was not tenable. The claim is not admissible, under section 80 (C) which reads as under:
"Nothing contained in this ordinance shall be so construed as to authorise any allowance or deduction against the income as determined under sub-section (1) or any refund of tax deducted or collected u/s 50 or set off any loss under any provisions of the Ordinance."
During hearing, the authorised representative of the complainant, Mushtaq Ahmed, submitted that PSO deducted the tax under section 50 (7H) for its supplies which was the final discharge of tax liability.
The complainant was not claiming any refund thereof but of the tax collected by Wapda on electricity u/s 50 (7E).
He also pointed out that the department in its order dated 6.11.03 passed in the case of Iqbal filling station had allowed refund of tax amount of Rs 6,750 paid under section 50 (7E). The complainant is thus being discriminated against.
Further he argued that sub-section (2) of the section 80C(2) does not declare that the amount of tax collected by Wapda on account of consumption of electricity would be payable in addition to the tax payable by the complainant on its income.
To counter this, the departmental representative argued that the case of Iqbal filling station was prejudicial to revenue and needed rectification because no refund could be allowed in view of the express provision of law.
After hearing both sides and examining the record, the Tax Ombudsman noted that the complainant had filed statements under section 143B of the repealed Ordinance.
The tax on income was deducted on its receipts/commission in the subject assessment years by the PSO, which supplied petrol to the complainant. The tax so deducted represented full and final discharge of liability.
However, complainant's application for refund of the amount of tax collected by Wapda on account of consumption of electricity is not being processed by the respondents for one reason or the other.
The main contention is that refund is not payable because no refund on account of deduction or collection under section 50 of the repealed Ordinance is admissible in a case where receipts are covered under section 80C(3) of the repealed Ordinance.
No doubt, Section 80C(3) of the repealed Ordinance does not allow any refund of tax deducted or collected under section 50 or set off any loss under any provision of the ordinance.
However, in the case of the complainant tax was deducted by PSO in respect of its income (commission so received) under section 50(7H) of the repealed Ordinance which constituted final discharge of complainant's tax liability. Section 80C(3) of the repealed Ordinance cannot be stretched to cover collection by Wapda on account of consumption of electricity so as to declare it as non-refundable deduction or collection made under section 50.
The amount of tax chargeable under sub-section (1) of section 80C was deducted by PSO and the refund of collection made on electricity bills by Wapda cannot be held back because the complainant's tax liability stood finally discharged. The tax deducted by Wapda being in excess of the total liability under section 80C is refundable.
THE FTO'S ORDER FURTHER READS: It is worthwhile to recall that the CBR has already explained in Circular No.18 of 1993 dated 13.10.1993 as under:
"....the tax liability of a person under Section 80C would be restricted to the extent of tax deductable under sub-section (4) and (5) of Section 50. Any amount deducted or collected in excess of the required amount of tax under Section 80C would constitute the amount of tax paid by or on behalf of the assessment in excess of the amount with which he was properly chargeable.
The provision of Section 96 of the Income Tax Ordinance, 1979 duly entitles such assesses to refund of the excess amount so paid".
Quite obviously, collection by resort to Section 50(7E) falls beyond the scope of deduction/collection on the refund of which restriction has been imposed in Section 80C(3).
There is, therefore, no justification for withholding refunds due to the complainant because of collection under Section 50(7E) which is in excess of the requisite amount of tax under Section 80C.
The department's refusal to respond to the refund application and reluctance to allow refund to the complainant of the amount of tax collected by Wapda on electricity bills is arbitrary and unjust amounting to maladministration as defined under the provisions of section 2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.
Whereas the complainant is being denied the refund, similar refund has already been allowed by the department in the case of Equable Filling Station (case cited by the complainant), which is discriminatory. This is case of obvious maladministration.
Accordingly, it is recommended that the CBR direct the competent authority to:
i. Allow refund of Rs 20,060 collected by Wapda through electricity bills as the complainant has discharged its tax liability by way of deduction of tax at source by PSO.
ii. Compliance be reported within 30 days.