LAHORE: Federal Tax Ombudsman (FTO) Dr. Asif Mehmood Jah has categorically ruled that all lease agreements are not similar to toll tax and hence are required to be treated separately.
In this regard, the FTO issued an order against the Federal Board of Revenue (FBR) on the issue of refunds.
As per FTO order, the complainant dealt with the leasing contracts of sand and minerals which are governed under provincial law and administered by Mines Labour Welfare Commissioner, Government of Punjab.
The said authority had already clarified the nature of contract and collection of excise duty on the specified minerals. While processing the claim of refund the nature of deduction has to be determined in the light of laws & rules of concerned provincial department.
FTO has, accordingly, observed that Income Tax Ordinance, 2001 creates, categorical defines and distinct Toll, Fee and lease rights.
Section 236A explains that the credit for the tax collected under sub-section (1) in that tax year shall, subject to the provisions of section 147, be given in computing the tax payable by the person purchasing such property in the relevant tax year or in the case of a taxpayer to whom section 98B or section 145 applies, the tax year, in which the “said date” as referred to in that section, falls or whichever is later.
Explanation: – For the purposes of this section, the sale of any property includes the awarding of any lease to any person, including a lease of the right to collect tolls, fees or other levies, by whatever name called.
(3) Notwithstanding the provisions of sub-section (2), tax collected on a lease of the right to collect tolls shall be final tax.
FTO’s finding further stated that through sub section (3) tax collected on a lease of the right to collect tolls only has been categorized as final tax. Thus all leases cannot be treated as tolls.
FTO has further clarified that even otherwise mere mode of collection of tax can neither determine the nature of collection nor truly represents intent of the legislature.
It was pertinent to mention that the complainant filed returns of income under section 114 of the Income Tax Ordinance under normal law and claimed refunds and the same was treated as deemed assessment under section 120 of the Ordinance. If the department is satisfied with sufficient material evidence that receipts and tax collected thereon under section 236A has to be treated under FTR in terms of section 236A (3) of the Income Tax Ordinance, then this power lies with the Additional Commissioner Inland Revenue and action was required to be taken u/s 122(5A) of the Ordinance to amend the deemed assessment order u/s 120 of the Ordinance. Section 170 gives no mandate to the Assessing Officer to take this step.
In such a situation, level of authority is different for different proceedings under the Ordinance. Hence action of refund Officer was not only beyond his legal jurisdiction and lawful authority his action tantamount to superseding CR (Appeals) domain, as well.
Instead of filing second appeal, the department had over ruled CIR Appeals by passing the same orders on the same grounds. Further Department had not filed appeal before Appellate Tribunal Inland Revenue (ATIR); therefore, FBR was bound to give appeal effect to the order of CIR (Appeals) within 60 days which has not been done yet.
FTO has accordingly recommended FBR to direct the Commissioner-IR to revisit the orders passed u/s 170(4) of the Ordinance for Tax Years 2018 & 2019, respectively by invoking provisions of section 122A of the Ordinance and pass fresh orders u/s 170(4) of the Ordinance for Tax Years 2018 &2019 after providing hearing opportunity to the Complainant, in accordance with law.
