ISLAMABAD (March 03 2003) : The Central Board of Revenue has been asked to pay over Rs 160 million to Emirates Bank International as compensation for assessment years 1979-80 to 1988-89.
Announcing this order, the Federal Tax Ombudsman, Justice Saleem Akhtar stated that the period of limitation does not apply to the claim of compensation. Once the refunds created were not paid in time, the assessee is legally entitled to compensation under section 102 of the repealed Income Tax Ordinance.
The bank was represented by Farrukh V Janaidy, FCA, Naveed Alam, ACA, and Muqteda Karim, while the department was represented by Imtiaz Ahmed Barakzai, LTU, Misri Ladhani, IAC, Aslam Ali, DCIT, Karachi and Dr Hamid Atiq Sarwar DCIT, Lahore.
The grievance of the complainant was non-issuance of compensation u/s 102 of the Income Tax Ordinance 1979, (now repealed).
The complainant had pleaded that repeated requests were made for issuance of compensation relating to these years and, despite written efforts and personal contacts, the compensation was not paid.
The compensation had accrued on account of accumulation of refunds due to excessive withholding taxes for several years. Since the refund claims were not issued in time for several years, the claim for compensation had been filed.
The department first took the plea that the compensation claimed is highly exaggerated. Later, it also pleaded that the claim was hit by limitation.
But during the hearing by the FTO , the parties had agreed that after due verification and checking jointly, it was agreed that the compensation in the instant case comes to Rs 160,653,400. But it was subject to legal objections by the department.
It was argued on behalf of the complainant that a massive refund of approximately Rs one billion had been paid to EBI between the period April/June, 2002.
The assessment in this case stood finalised up to the assessment year 2001-02.
It was further argued that the provisions of Section 102 of the Income Tax Ordinance, 1979 (Repealed) is self-executory and does not require any application on the part of the assessee.
Compensation under this provision of law is the vested right of the assessee and the department is legally bound to allow the same as the law does not place any bar to the claim of compensation.
Once refund is created and is not paid in time ie within three months, the assessee is legally entitled to compensation under section 102 of the Income Tax Ordinance, 1979.
It was, therefore, the liability of the Tax Department to issue compensation within three months of the creation of refunds if the refund was not paid or adjusted. The Section imposes a duty on the Assessing Officer in this regard.
On the other hand, the respondents have taken the plea that compensation in this case involved a period of nearly 20 years and the said compensations have not been claimed within reasonable time. The claim is hit by bar of limitation.
The complainant held that the arguments advanced by the departmental officers were misconceived. The refunds for various years were withheld by the department for a long time and hence the compensation is due to the complainant under the provisions of Section 102.
The FTO's order says that the representatives of the complainant have produced evidence to show that request for compensation was made in writing. This was also followed by personal visits to the department.
Necessary documents and evidence were also produced before the concerned officers such as assessment orders, appellate orders and evidence of payments.
Despite all this, the respondents had not responded to the request and the amount of compensation agreed upon by the parties was not refunded by the department.
No convincing arguments have been advanced by the respondents that the claim of compensation is barred under law.
The order adds that the department seems to have agreed at a figure of Rs 160,653,504 as amount of compensation for these years. This figure is based on detailed joint calculation in respect of number of days, rate and the assessment years involved.
NO LIMITATION INVOLVED: The order stated that the period of limitation did not apply to the claim of compensation.
Once the refunds created were not paid in time the assessee is legally entitled to compensation under section 102 of the Repealed Ordinance.
The arguments of the complainant have established maladministration in this case. The legitimate claim for compensation made from time to time were not attended to by the department.
The lack of response in this behalf and delay without reasonable ground shows inefficiency, ineptitude and incompetence.
This falls within the definition of maladministration as defined under section 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000. The figure of Rs 160,653,504 is a result of joint calculation of the compensation amount.
As the legal objections have been over-ruled, this amount is payable as compensation under section 102 of the Income Tax Ordinance, 1979 (Repealed). This amount be paid within 45 days and the compliance be reported within a week of this payment.