The Federal Board of Revenue (FBR) is likely to approach the Law and Justice Division for obtaining legal opinion whether the Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 permit the Board to seek information about the accountholders from the banks.
Sources told Business Recorder here on Wednesday that presently there is a controversy whether the FBR is legally empowered to obtain information about the accountholders as per Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992. The tax advisors of the FBR have strongly recommended to the FBR to have legal opinion on seeking information about the accountholders from banks. In the presence of ruling of Law Division, the FBR would be in a better position to obtain information about the accountholders from the banks. The accurate interpretation of Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 would facilitate the Board in obtaining information about the accountholders of banks.
According to FBR tax advisors, banking companies, financial institutions etc, are mainly non-compliant in providing information under the grab of fidelity, confidentiality and secrecy by invoking section 33A of the Banking Companies Ordinance, 1962, Section 3 and 9 of the Protection of Economic Reforms Act, 1992.
Contrary to this Section 3 of the Income Tax Ordinance, 2001 reads as under: "3. Ordinance to override other laws.- The provisions of this Ordinance shall apply notwithstanding anything to the contrary contained in any other law for the time being in force." Similarly, Sub-section (5) of Section 176 of the Income Tax Ordinance, 2001 reads as under:
"This section shall have effect notwithstanding any rule of law relating to privilege or the public interest in relation to the production of accounts, documents, or computer-stored information or the giving of information.", FBR's tax advisors stated. Tax advisers of the FBR further pointed out that since Income Tax Ordinance, 2001 is later in time, the provisions of section 33A of the Banking Companies Ordinance, 1962 and Section 3 and 9 of the Protection of Economic Reforms Act, 1992 do not prevail over the provisions of the Income Tax Ordinance, 2001.
In addition, banking companies and financial institutions are also non-compliant in view of Para (8) of Circular No 13 of 1991 dated June 30, 1991 which reads as under: "The banks shall not be required to disclose the accounts and names of recipients of interest or profit. However, the banks shall continue to provide information under Section 144 of the Income Tax Ordinance, 1979 in respect of particular bank accounts to which the Commissioner of Income Tax or the Central Board of Revenue gives permission to any of the Income Tax authorities mentioned therein."
The FBR consultants have recommended to the FBR to confirm legal opinion from the Ministry of Law on the aforesaid provisions of law and their applicability. Secondly, the issue of non-compliance needs to be discussed and resolved with intervention of Ministry of Finance, State Bank of Pakistan and Pakistan Banking Council. The para (8) of Circular No 13 of 1991 dated June 30, 1991 should be withdrawn immediately, FBR's tax advisors stated.