Regional Tax Offices (RTOs) of the Federal Board of Revenue (FBR) have adopted discriminatory and conflicting treatments for payment of refunds to the CNG stations. It is learnt that the issue is under investigation of the Federal Tax Ombudsman (FTO) for implementation on a uniform policy for issuance of refunds to the CNG stations.
According to details, under the provisions of Section 234A of the Income Tax Ordinance, 2001, the CNG stations are liable to pay tax @4% on their gas purchases, which means that they are not liable to pay any tax paid/deducted under any other head/section. That is why almost all the RTOs in the country have been treating the tax deducted in their cases u/s 235 (electricity bills) as adjustable/ refundable and refunds in such cases were issued. Later, however, in some cases, some officers refused refund deducted u/s 235 of the Ordinance by referring to Subsection 4 of Section 234A of the Ordinance.
The taxpayers filed writ petitions in such cases in Lahore High Court and Peshawar High Court. In a detailed judgement, Lahore High Court had declared that deduction u/s 235 of the Ordinance was not covered under FTR in CNG cases and it was adjustable. On the contrary, Peshawar High Court held that tax deducted u/s 235 of the Ordinance was not double taxation, although its judgement did not elaborate the issue.
The RTO Islamabad had sought clarification from FBR in view of the conflicting judgements of the two high courts and in response the FBR issued clarification. On the basis of this clarification, the RTO Islamabad as well as other RTOs started issuing refunds.
However, RTO Rawalpindi abruptly started refusing refunds of tax deducted u/s 235 of the Ordinance in CNG cases. On filing complaints by the aggrieved taxpayers, FTO office had directed that refunds be issued. The RTO Rawalpindi and later RTO Peshawar filed representations in certain cases. In some other cases, refunds were issued by these RTOs. In some such cases, the President held that conflicting decisions of two high courts is to be decided by the Supreme Court and not by the FTO.
In later decisions, the FTO office had cited a judgement of Supreme Court wherein it was held that the tax deducted u/s 235 in cases of all taxpayers was not confiscatory but it was adjustable like advance tax u/s 147 of the Ordinance. On the basis of this decision, the President had endorsed later findings/ recommendations of FTO office and RTO Rawalpindi and RTO Peshawar had also been issuing refunds. However, just recently, representations were filed by the RTO Peshawar in certain cases of CNG stations and the President had endorsed the RTO's view that under Subsection 4 of Section 234A of the Ordinance, tax deducted u/s 235 of the Ordinance was not adjustable. This development has created confusion and ambiguity, although Section 169(2)(e) of the Ordinance provides: "Where this Section applies, there shall be no refund of tax deducted or collected unless the tax so collected is in excess of the amount for which the taxpayer is chargeable under this Ordinance". It is evident that tax chargeable u/s 234A of the Ordinance @ 4% on CNG cases would be covered under FTR and any excess tax paid/ collected under any other head of the Ordinance would be refundable.
It may be added that earlier FBR was directed in various complaint cases of CNG stations that uniform policy be adopted in cases of CNG stations but nothing has been done so far and there are conflicting decisions, particularly in the cases of RTO Rawalpindi and RTO Peshawar, whereas refunds are being issued in all other RTOs in such cases. Even RTOs Rawalpindi and Peshawar have recently issued refunds in certain cases of CNG stations whereas in certain other cases, they have been filing representations, which is a discriminatory and conflicting treatment. The FBR, therefore, must issue directions to the field formations to adopt uniform policy.