The Punjab government and the Federal Board of Revenue (FBR) have locked horns over an amount of Rs 949 million the latter had deducted as withholding tax from the accounts of the Directorate General of Health Services (DGHS), Punjab, thus adversely affecting the financial matters of the Directorate.
Official sources said that an appeal for reimbursement of Rs. 949 million of the Punjab government is pending with the Commissioner (Appeals) of Income Tax. The deputy commissioner of FBR recovered the amount from the accounts of the Punjab government as withholding tax after, allegedly ignoring rates mentioned in the withholding tax schedule.
DGHS authorities alleged the FBR had been delaying the reimbursement of the amount to the Punjab government before the end of the first half of the fiscal year to show its performance of having achieved the target of tax collection whereas the FBR rejected the allegation as ridiculous by claiming that it would not reimburse the tax, which had been deducted as per law, rather than meeting its target.
The FBR deputy commissioner assessed that the office of DGHS Punjab should have deducted and deposited an amount of Rs. 949 million as withholding agent. The office of DGHS Punjab informed the Income Tax DC concerned that he had included the irrelevant amounts, which were even not released to any office by the Finance Department of Punjab and the office deducted the income tax from all relevant payments. Directorate officials regretted that stance of the DGHS was badly ignored by the FBR officers and recovery of Rs.949 million was made from different accounts of DGHS accounts.
The officials said that withholding tax was income tax deductible by a withholding agent at prescribed rates while making payment to a supplier or contractor. The Directorate, while acting as withholding agent during 2015-16, deducted the due income tax from all payments made to suppliers and contractors. But, it is informed, the Income Tax DC recovered the amount from Punjab government accounts, considering the allocated amounts as payments.
The officials said the Punjab chief minister had taken notice of it and constituted a committee to pursue the case. The additional chief secretary (ACS) is the convener of the committee and special secretary finance, special secretary Primary & Secondary Healthcare Department and Director General of Health Services, Punjab, are the members of the committee. The officials said the committee, after its constitution a couple of months ago, had not done enough to recover the amount from the FBR.
Meanwhile, the Directorate has taken punitive action against the Director Finance and suspended him from his post despite acting in accordance with the law.
When contacted, the then Director Finance Muhammad Arif said the Finance Department had properly pursued the case as the record was available to prove the deputy commissioner’s (Income Tax) irregular deduction of the amount from DGHS accounts.
When contacted, Director General Health Services, Punjab, Dr Mukhtar Hussain said the FBR had deducted the amount from DGHS accounts directly through the State Bank of Pakistan after the Directorate obtained stay with regard to tax deduction from the Bank of Punjab. He said the committee had approached the relevant quarters for reimbursement of the amount, but apparently the FBR had withheld the reimbursement till the end of the first half of the financial year.
He said that the case was still pending with the Appellate Commissioner but hoped that the amount would be reimbursed into the accounts of DGHS with the start of the second half of the fiscal year on January 1, 2017.
When asked about the punitive action against its official, he said that Director Finance had been suspended for not bringing the matter into his notice at the beginning when the tax officials were dealing with the Finance Department since May/June 2016.
When contacted, Hassan Mabroor, Deputy Commissioner of Income Tax, declined to comment on the matter by saying that he had been transferred to Corporate Regional Tax Office (Corporate-RTO) and the case was being dealt by the Regional Tax Office-II (RTO-II). He admitted that he had deducted the amount from the DGHS accounts but was no longer dealing with the matter.
Talking to The News, Commissioner Withholding Tax, Shahid Siddique Bhatti, said that the FBR had recovered the amount as withholding tax from DGHS under the law and would not reimburse it. “The FBR had to recover its withholding tax even if DGHS did not deduct the tax from contractors/suppliers while making payments to them,” he said, adding that DGHS should now recover their amount from the contractors/suppliers.
However, the Punjab government had appealed against FBR’s recovery to Appellate Commissioner, which would take the decision. “We will reimburse the amount if the decision is given in favour of the DGHS,” he said. In case of the decision against either of the parties, he said, the aggrieved party can then appeal against it in Appellate Tribunal Inland Revenue (ATIR). “We will appeal in ATIR in case of a decision against the FBR or vice versa if DGHS desires so,” he added.
When asked about FBR’s authority to deduct the amount directly from State Bank of Pakistan, he said that Section-140 allowed the FBR to recover the outstanding amount from any institution/individual on default. “The State Bank or any other bank facilitates the FBR in tax recovery,” he added.
He also rejected Directorate’s assumption of FBR’s meeting the tax collection target, saying it had been dealing with DGHS since May 2016 and it should have deducted the tax before 30th June 2016 i.e. the end of the financial year if there was any such necessity to meet the tax collection targets. “It is our duty to recover taxes regardless of whatever the targets may be,” he added.