ISLAMABAD (November 15 2005): Fulfilling a major demand of foreign investors and corporate companies, the Central Board of Revenue (CBR) has withdrawn the condition of retrospective recovery from manufacturers-cum-suppliers who operated under the Presumptive Tax Regime (PTR) facility.
The CBR has amended Second Schedule of the Income Tax Ordinance 2001 through SRO 1130(I)/2005 issued on Monday.According to the decision, the CBR has restored the previous position of law, which was applicable prior to enforcement of Finance Act 2005. No retrospective recovery would be made against companies which operated under this optional scheme.
In this regard changes have been introduced in the income tax law giving legal backing to PTR transactions made up to June 30, 2005. Moreover, past judgements of courts/tribunals pertaining to PTR would remain valid, as earlier the Finance Act, 2005 provided that any past court decision would not have any effect.
Sources told Business Recorder that the CBR had taken a U-turn to deal with the companies which operated under PTR. On the one hand, the CBR issued an 'income tax circular' after 2005-06 budget elaborating the modus operandi used by companies which misused the PTR facility and caused huge loss to the national exchequer, and on the other, the CBR has now issued an SRO declaring transactions made by the same companies as legal, and nothing would be questioned about transactions made under this scheme in the past.
They said: “Who will decide about the legal status given by the CBR to the companies which used PTR prior to 2005-06 budget? If the legal status of the companies given by CBR through 'income tax circular' was correct, then how the government could change its stance by declaring wrong transactions as valid?” Secondly, if private sector's viewpoint was correct, then why the CBR earlier declared that the manufacturers misused the facility.
Details show that in the 2005-06 budget, the CBR had withdrawn this facility for the manufacturers-cum-suppliers due to its misuse resulting in revenue leakage.
FOLLOWING IS THE TEXT OF THE NOTIFICATION ISSUED ON MONDAY: In exercise of the powers conferred by sub-section (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendment shall be made in the Second Schedule to the said Ordinance, namely:-
In the aforesaid schedule, in Part IV, after clause (41), the following new clause shall be inserted, namely:
“(41A) Notwithstanding anything contained in the Finance Act, 2005 (VII of 2005), with respect to the omission of clause (40) of Part IV of the Second Schedule to this Ordinance, nothing in sub-section (6A) of Section 153 of this Ordinance shall apply to any person being a manufacturer, where declaration of option for the presumptive tax regime has been furnished and transactions pertaining to such option have been undertaken and completed on or before the 30th June, 2005:
Provided that all declaration of options already furnished shall cease to have effect after the 30th June, 2005″.