DECISION /FINDINGS ' JUSTICE (RETD.) SALEEM AKHTAR (FEDERAL TAX OMBUDSMAN).---Facts of the complaint are that the complainant, as income tax assessee, applied on 10-1-2004 for refund of an amount of Rs,20,060 on account of deduction of tax in excess of the tax payable in Assessment Years 2000-01 to 2002- 03 but the department has neither responded to his application nor have so far issued the refund voucher. The respondents may be directed to issue the refund voucher for the requisite amount.
2. In parawise comments the respondents have submitted that the complainant, an A.O.P., deriving income from running a Petrol Pump had filed statements under section 143B of the Income Tax Ordinance, 1979 (now repealed) for A.Ys. 2000-01 to 2002-03 in respect of commission receipts on sale of petrol and tax was deducted thereon under section 50(7H) of the repealed Ordinance at Rs,32,449, 61,862 and 43,713 respectively. Such commission receipts are covered under section 80C of the repealed Ordinance and tax deducted thereon represents full and final discharge of liability.
According to section 80C(4) of the repealed Ordinance if an assessee has no income other than income referred to in subsection (1) in respect of which tax has been deducted or collected under section 50 of the repealed Ordinance the deducted or collected amount is deemed final discharge of tax liability. Since the complainant had no other income except commission receipts covered under section 80C the tax deducted represented final discharge of tax liability. Such an order is deemed to have been made under section 59A of the repealed Ordinance as per provisions of subsection (7) of section 80C of the repealed Ordinance. Complainant's claim of refund of Rs,20,060 for the assessm ent on account of tax withheld on electricity bills under section 50(7E) of the repealed Ordinance is not tenable. The claim is not admissible under section 80C(3) which reads as under:-- "Nothing contained in this Ordinance shall be so constructed as to authorize any allowance or deduction against the income as determined under subsection (1) or any refund of tax deducted or collected under section 50 or set-off any loss under any provisions of this Ordinance."
' Thus no refund on account of deduction or collection under section 50 is admissible in cases where receipts are covered under section 80C of the repealed Ordinance. The complainant is not entitled to any refund on account of tax deducted on electricity bills under section 50(7E) of the repealed Ordinance. The complaint may be rejected as devoid of merit.
3. During the hearing the A.R. Submitted that the complainant an A.O.P., had filed statement for all three years under section 143B of the repealed Ordinance and the P.S.O. Deducted tax under section 50(7H) of the repealed Ordinance. That being a final discharge the complainant is not claiming any refund thereof. What is being claimed is refund of Rs,20,060 being tax collected by WAPDA on electricity under section 50(7E). Collection by WAPDA is not a tax deduction out of complainant's income or commission. Being collection under section 50(7E) it does not fall within the purview of section 80C and, therefore, it does not constitute part of final discharge of tax liability on income, The department has, vide its order dated 6-11-2003 (on record) passed in the case of Messrs Iqbal Filling Station, allowed refund of tax of an amount of Rs,6,750 paid under section 50(7E). The complainant is thus being discriminated against. Referring to the provisions to section 80C(2) the A.R. Argued that where the "amount" referred to in subsection (2) of the aforesaid section is received by or accrues or arises or is deemed to accrue or arise to such person the whole of such amount shall be deemed to be income of the said person and tax thereon shall be charged....". He added that subsection (2) of the aforesaid section does not declare that amount of tax collected by the WAPDA on account of consumption of electricity would be payable in addition to tax payable by the complainant on its income.
4. The D.R. Reiterated the arguments advanced in the parawise comments emphasizing that as per the provisions of section 80C(4) of the repealed Ordinance where the assessee has no income other than income referred to in subsection (1) in respect of which tax has been deducted or collected under section 50 the deducted or collected tax is deemed to be a final discharge of tax liability. As to the case of Messrs Iqbal Filling Station cited by the A.R. The D.R. Submitted that the cited decision, being prejudicial to the Revenue, needed rectification because no refund could be allowed in view of the express provisions of law.
5. The arguments of the parties to the dispute and the record of the case have been considered and examined. The complainant had filed statements under section 143B of the repealed Ordinance. The tax on income was deducted on its receipts/commission, in the subject assessm ent years by the P.S.O. Which supplied petrol to the complainant. The tax so deducted represented full and final discharge of liability. However complainant's application for refund of the amount of tax collected by WAPDA on account of consumption of electricity is not being processed by the respondents for one reason or other. The main contention is that refund is not payable because no refund on account of deduction or collection under section 50 of the repealed Ordinance is admissible in a case where receipts are covered under section 80C(3) of the repealed Ordinance. No doubt, section 80C(3) of the repealed Ordinance does not allow any refund of tax deduction or collected under section 50 or set-off any loss under any provision of the Ordinance.
However, in the case of the complainant tax was deducted by P.S.O. In respect of its income (commission so received) under section 50(7H) of the repealed Ordinance which constituted final discharge of complainant's tax liability. Section 80C(3) of the repealed Ordinance cannot be stretched to cover collection by WAPDA on account of consumption of electricity so as to declare it as non-refundable deduction or collection made under section 50. The amount of tax chargeable under subsection (1) of section 80C was deducted by P.S.O. As aforesaid and the refund of collection made on electricity bills by WAPDA cannot be held back because the complainant's tax liability stood finally discharged. The tax deducted by WAPDA being in excess of the total liability under section 80C is refundable.
6. It is worthwhile to recall that the C.B.R. Has already explained in Circular No,18 of 1993 dated 13-10- 1993 as under:- "....The tax liability of a person under section 80C would be restricted to the extent of tax deductable under subsections (4) and (5) of section 50. Any amount deducted or collected in excess of the required amount of tax under section 80C would constitute the amount of tax paid by or on behalf of the assessm ent in excess of the amount with which he was properly chargeable....The provision of section 96 of the Income Tax Ordinance, 1979 duly entitle such assessees to refund of the excess amount so paid." (here underlined for emphasis)
' Quite obviously collection by resort to section 50(7E) falls beyond the scope of deduction/collection on the refund of which restriction has been imposed in section 80C(3). There is', therefore, no justification for withholding refunds due to the complainant because of collection under section 50(7E) which is in excess of the requisite amount of tax under section 80C.
7. The department's refusal to respond to the refund application and reluctance to allow refund to the complainant of the amount of tax collected by WAPDA on electricity bills is arbitrary and unjust amounting to maladministration as defined under the provisions of section 2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000. Whereas the complainant is being denied the refund, similar refund has already been allowed by the department in the case of Iqbal Filling Station (case cited by the complainant), which is discriminatory. This is case of obvious maladministration. Accordingly, it is recommended that the C.B.R. Direct the competent :authority to:
(i) Allow refund of Rs,20,060 collected by WAPDA through electricity bills as the complainant has discharged its tax liability by way of deduction of tax at source by P.S.O.
(ii) Compliance by reported within 30 days.