LAHORE: Corporate firms are found deducting contributions made to unapproved gratuity funds while computing the income of their employees under the head of “income from business,” said sources from among tax authorities.

The sources pointed out that leading corporate firms are doing such mistakes and misinterpreting the income tax law on misguided advice from their tax consultants. They said the corporate firms prefer to approach the appellate tribunals as and when the department confronts this approach. In most of the cases, they added, the interpretation from the courts of law justified the viewpoint of the department and reject all such expeditions on the part of taxpayers.

Sources have further pointed out that all such endeavours fall under the category of tax avoidance, which ultimately hit the revenue generation task of the department.

They said it is generally understood on the part of corporate firms that once the contributions have been made to the gratuity fund, it automatically authorizes them to deduct it while computing their incomes.

They said the Income Tax law clearly envisages that such contributions could not be deducted when the gratuity fund is not duly approved.

They further pointed out that any such approach on the part of taxpayer totally negated the purpose and object of the statutory requirement of an approved gratuity fund.

Copyright Business Recorder, 2023