KARACHI: All Pakistan Textile Mills Association (APTMA) has demanded compensation for delayed refunds from the date of deemed refund order.
In its proposals for budget 2018/2019, the textile association said presently, refund application is required to be filed through e-portal within three years and section 170(4) of Income Tax Ordinance, 2001 provides that Commissioner within sixty days of the receipt of refund application shall pass an order. In case order is not passed within the aforesaid period the aggrieved person can file an appeal before the Commissioner (Appeals).
It is suggested that on failure to pass the order within sixty days, the refund order is deemed to be passed and compensation / additional payment for delayed refund provided under section 171 is made applicable from the date of deemed refund order.
The provision under section 170(4) for filing appeal in case of non-processing of refund claim is deleted being infructuous.
Unlike sales tax there is no electronic processing of income tax refund though the electronic data of tax deduction / tax payment is readily available with the Department. Rather the income tax refunds are processed manually and the deadline given is never adhered with. The remedy of filing appeal to the Commissioner (Appeals) for not passing order within sixty days is not an adequate and efficacious remedy as Commissioner (Appeals) can only issue direction for processing the refund claim.
Therefore, it is imperative that electronic processing of refund is prescribed in the rules on the pattern of sales tax and in case of failure to pass the order within sixty days the refund order sanctioning claimed refund is deemed to be passed with accrual of additional payment for delayed cheque.
The textile association also highlighted that presently, manufacturer companies are entitled to exemption certificate in respect of collection of income tax under section 148 by the customs authorities on their import of raw material and under section 153 on supply of manufactured goods.
There are certain preconditions for issuance of certificate. The conditions for import are prescribed in clause (72B) of Part IV of Second Schedule read with SRO — and includes condition of tax liability of the current year being paid with reference to higher amount of tax liability in the preceding two tax years, whichever is higher.
Whereas, for exemption certificate under section 153 there is no express condition prescribed in the statute but practically the Commissioners ensure that the advance tax liability under section 147 is paid as a pre-requisite.
It is suggested that an explanation is added to clause (72B) that the tax liability paid includes tax payment through deduction at source during the current year and adjustment of refund where refund application is pending.
Whereas, in case of exemption certificate under section 153, the condition of payment of advance tax liability under section 147 of the period for which Exemption Certificate is being issued.
Due to existing ambiguous provision of payment of tax liability the Commissioners across the country interpret the tax payment under section 130 in cash only and not the tax payments through deductions/collection of tax at source and adjustment of refunds.
Since refunds are not promptly issued therefore to clear the backlog of refunds, it would be imperative to incorporate the adjustment of refund in the provision and issue directions to issue exemption certificate in the first week of July 2018 for the full tax year against pending refund claims.
