The Central Board of Revenue (CBR) has proposed audit of selected income tax returns filed under section 153 of Income Tax Ordinance 2001 by the transport services providers to probe investment made in the transport business and verify authenticity of their returns filed during tax years 2003 to 2005.
It has also been proposed that the commissioners may impose penalty in cases where the persons providing transport services filed delayed returns/statements.
This has been specified in a draft of a CBR''s clarification issued to the Director Generals, Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs), Karachi/Lahore and Regional Commissioners of Income Tax (RCITs) for comments.
The draft clarification has been dispatched to the field formations to resolve the issue of pending refunds to the transporters for tax years 2003 to 2005. It would also help to correctly interpret section 153 (1) (b) of the Income Tax Ordinance 2001 evolving e a uniform mechanism for the assessment of transport services.
In this regard, the board has finalised instructions to the RCITs etc for the assessment of income tax on transport services. This relates to the period under review. Sources said that the clarification would be shortly issued after obtaining the viewpoint of field formations.
According to the directive, it has been represented to the Board that divergent views prevail on the mechanism of assessment for tax years 2003 to 2005 pertaining to payments made on account of "transport services" falling under section 153. This has resulted in litigation. It was, therefore, desired that clarification may be issued to resolve the controversy.
The matter has been considered in the board. It is clarified that statement filed under section 115 cannot be equated with filing of return of income u/s 114 of the Income Tax Ordinance 2001, the CBR said.
The board further clarified that Income Tax Ordinance 2001 does not explicitly provide any provision for revising the statements filed under section 115. However, there could be cases where law makes it mandatory to file statement u/s 115 but the taxpayer had filed return. Conversely, a return is required to be filed but the taxpayer files a statement inadvertently. Subsequently, if the taxpayer correctly files, a return or statement, as required by the law in such situations, the subsequent statement or return being considered as revision of statement or return, be treated as a return/statement filed for the first time.
The board has also referred to the clarification issued by the FATE Wing of December 20, 2005 pertaining to services rendered and provided. It was clarified that the "rendered" fall under section 153(1)(b) and is assessable under normal law. The "provided" fall under section 153(1)(c) and is assessable under Presumptive Tax Regime (PTR) and the applicable tax rate will be 5 percent or 6 percent depending upon the value of each contract for the tax years 2003 to 2005.