KARACHI: The Sindh High Court (SHC) on Monday barred the Federal Board of Revenue (FBR) and banks from recovering withholding tax on provident fund of the Trustees of Pakistan Oman Investment Company Limited Provident Fund and Philip Morris (Pakistan) Limited Employees Contributory Provident Fund Trust.
This restraining order came on petitions filed by the above-mentioned two firms , making the FBR chairman, DG (WHT) FBR, secretary finance, State Bank of Pakistan (SBP) and private banks as respondents.
Advocate Ijaz Ahmed, representing the petitioners, submitted that his clients are trustees of the provident fund established for their employees. Provident fund is exempted from income tax under the relevant clauses of the Income Tax Ordinance 2001, he added.
He argued that in view of exemptions no amount is required to be withheld on account of income tax from dividends as well as profit on debt payable to the provident fund.
He told the judges that the DG (WHT) FBR had issued a clarification through a letter dated May 12, 2015 whereby it has been clarified that exemption from withholding tax on provident fund accounts is subject to issuance of an exemption certificate to be issued by the relevant commissioner of Inland Revenue under section 159 of the Income Tax Ordinance 2001.
On account of the above-mentioned clarification, the private banks are demanding an exemption certificate or else withholding tax will be deducted from the amounts payable to the provident fund, he added.
The petitioners requested the judges to declare as illegal the clarification issued by FBR and annul the same. The court was further pleaded to declare that no exemption certificate is required to avail the benefit of exemption from withholding tax on the accounts of provident funds under clause of 47 B of Part IV of the Second Schedule to the Income Tax Ordinance.
After preliminary hearing, a division bench headed by Justice Munib Akhtar issued notice to the respondents. The court restrained the respondents from recovering withholding tax on provident fund accounts of the petitioner companies.
