LAHORE: Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to conduct a withholding audit of a state-owned organization for recovery of billions in 2021 & 2022 due to less/ short-deduction of withholding tax (WHT) on the auction of “toll collection rights” at Toll Plazas.
In this regard, the FTO has issued instructions to the FBR through its latest order.
A public interest request was moved by Waheed Shahzad Butt Advocate against discriminatory application of withholding taxes under section 236A of the Income Tax Ordinance, 2001 by Federal Govt Organization wherein after investigation it was found by the FTO that charge of WHT on auction of toll collection rights need comprehensive withholding audit for two tax years.
FTO order stated “complaint has been filed against discriminatory application of withholding taxes by National Highway Authority (NHA) & FBR functionaries, in violation of provisions of sections 236A, 160, 161, 163 & 205, thus depriving the public exchequer from its due, without lawful authority. Surprisingly NHA is deducting WHT at the rate of 5% while Punjab Highways are deducting it at the rate of 10%.
Timely deposit of WHT deduction into Federal Treasury is yet another black hole, which merits probe. NHA &Punjab Highways Department are withholding agents. Withholding statements filed by the taxpayer on IRIS for Tax Years 2017 to 2020 have been examined which show that no collection of tax has been made by NHA @ 5% during these periods.
The respondent (NHA) in its reply to the contents of the complaint has raised preliminary objections with regard to the admissibility of the complaint. It has been argued that the complainant is not an aggrieved person. The plea taken by the NHA representatives is not tenable because the issue raised by the complainant is a case of clear discrimination in application of withholding tax rate being applied by NHA.
It has been pointed out that NHA is collecting withholding tax @ 5% whereas PHD is collecting the same@ 10%. This office has valid jurisdiction to entertain the complaint.
There appears a short deduction and the relevant FBR authorities entrusted with the monitoring jurisdiction needs to take cognizance of these short deductions in terms of sections 161 and 205 of the Income Tax Ordinance involving significant revenue.
FTO order said that it is manifestly clear that discrimination exists on charge of tax deduction on auction of toll collection rights by the two authorities (NHA & PHD) and FBR authorities are not mindful of this discrimination which on one hand is causing hardship to one set of contractors and on the other a significant loss of revenue is being caused to the national exchequer in the case of NHA.
Maladministration is established. FBR is directed to ensure that the Chief Commissioners Inland Revenue (CCIRs) concerned conducts comprehensive withholding audit of NHA for the years 2021 & 2022 and accordingly proceed under the law for the recovery of any short paid amount established as a result of this audit activity, FTO ordered added.
