The newly introduced Investment Tax Scheme (ITS), 2008 by the Federal Board of Revenue (FBR) is unlikely to provide desired results owing to complex procedure. Talking to Business Recorder on Wednesday, Abdul Qadir Memon, President, Income Tax Bar Association (ITBA) said that ITS has purely been drafted to facilitate taxpayers but it needs some amendments to achieve the desired results.
Keeping all these issues in view, ITBA has sent a letter to the FBR in August, explaining the problems being faced by taxpayers in availing of the scheme. He said the investment tax would be payable at 2 percent of fair market value of the asset at the time of declaration of all moveable or immovable, unexplained investments or assets as declared by taxpayers under ITS, whereas, the fair market value has not been defined and appealed to provide clear guidelines in this regard.
Memon said that ITS would be obliged to file return of income for the tax year 2008, which are due till September 30, however, the scheme is valid till December 21, 2008, creating confusion among taxpayers. ITBA also suggested the FBR to escape the provision for confirmation of declaration in ITS unless any miscalculation has been detected in tax or incomplete filing of the columns of the declaration of form, he added.
He said that the declarer may set off or take credit of undisclosed assets in pending cases other than those in appeal; provided such undisclosed asset is declared under this scheme and tax thereon has been paid.
He said that the declaration made under the scheme was not correct and the acceptance of such declaration would be cancelled with prior approval of the Director General provided that no such order of cancellation would be made without giving an opportunity of being heard to the declarer.
In this scheme the under-declared or undervalued assets can also be declared. The amount suppressed to the extent of under-declaration shall be recorded in the column relating to valuation and proper note must be appended with the declaration, he maintained.
If undisclosed income is utilised in purchase of an asset, which has not yet been transferred in the name of the purchaser, such undisclosed income can be declared by the purchaser, as advance money towards purchase of such asset. However, if the law recognises the purchaser as legal owner of such asset, then he may declare the asset, he added.
Memon said that ITBA letter has been given positive response and the FBR has issued a clarification letter in this regard. While the FBR has made scheme simple and to avoid valuation related complications; board has allowed taxpayers to declare Fair Market Value of the assets.
The FBR clarified that the scheme is applicable for the unexplained assets or income for the period ending on 30-6-2007 while returns would be filed under the normal course of law. The cases pending before the department, appellate authority or in any court are not covered under this scheme, the FBR letter said.
The letter further said that increase in capital out of unexplained income could be incorporated in the wealth statements of individual partners or members. Memon said that ITBA is promoting ITS aimed at making the scheme successful and urged the FBR to review ITS for making reasonable amendments to facilitate taxpayers.