The Central Directorate of National Savings (CDNS) has asked the Federal Board of Revenue (FBR) to issue an income tax clarification to the directorate to legally clarify exemption of withholding tax on profit of National Savings Schemes earned through investment made by Board of Intermediate & Secondary Education, Bahawalpur. Sources told Business Recorder here on Friday that the CDNS has issued a reminder to the FBR seeking guidance/clarification of the tax authorities on the said issue.
The CDNS has also highlighted the decision of High Court regarding exemption of withholding tax. As per CDNS, the amount of profit accrued from said investment made in NSS seems exempted from deduction of withholding tax as per court decision. According to the CDNS, refer to the judgment sheet of Lahore High Court Rawalpindi Bench received from Board of Intermediate & Secondary Education Bahawalpur wherein the Federal Board of Intermediate & Secondary Education, Islamabad has been declared exempt from any tax deduction under Income Tax Ordinance, 1979 & 2001. Based on the subject judgment Board of Intermediate & Secondary Education Bahawalpur has requested this directorate not to deduct withholding tax on profit on National Savings Schemes.
CDNS has requested the Federal Board of Revenue to guide the directorate whether the plea of Board of Intermediate & Secondary Education Bahawalpur for exemption of withholding tax on profit on the basis of subject court order is correct or otherwise. It has been submitted that Board of Intermediate & Secondary Education Bahawalpur has invested in Special Savings Certificates and requested not to deduct withholding tax on profit in the light of decision of Lahore High Court, Rawalpindi Bench and copy of the judgment of Lahore High Court, Rawalpindi Bench (W.P. NO.121/2004) has been communicated. As per judgment the act of the respondents i.e. FBR etc deducting or causing or directing to deduct any tax under the repealed Income Tax Ordinance, 1979 & Income Tax Ordinance, 2001 on the said deposit is declared to be void and without lawful authority.
The Directorate is of the view that amount of profit accrued from said investment seems exempted from deduction of withholding tax as per decision of Lahore High Court, Rawalpindi Bench. However, necessary guidance may be provided by the FBR to proceed further into the matter, CDNS added.