SHC decries FBR officials’ incompetence, callous attitude towards taxpayers

KARACHI: The Sindh High Court has taken exception to the conduct of Federal Bureau of Revenue officials with regard to dealing with revenue-related cases and observed that FBR offiicals’ conduct as well as that of respective commissioners/collectors is by itself a major impediment in timely disposal of revenue cases.

Allowing petitions of recognised provident funds, approved superannuation funds and approved gratuity funds against the denial of exemption certificates by the FBR, a division bench comprising Justice e Junaid Ghaffar and Justice Agha Faisal observed that most of the cases crop up due to the conduct of FBR officials, and the conduct includes incompetence, ill-advice, mala fide, and callous attitude towards taxpayers and so on and so forth.

The court observed that the FBR must act fairly in dealing with taxpayers and abide by the law governing it, and if any benefit accrues to taxpayers under the law, it must not be withheld and the assessee’s and its own time and resources should not be needlessly wasted.

The judges observed that on several occasions courts have tried to apprise the officials at the FBR, including its chairman and members, but of no avail.

The court observed that the matter pertaining to exemption certificates of the petitioners had already been decided by the Lahore High Court, but despite that the issue was still being agitated by the department with no justifiable cause and reason.

The petitioners claiming to recognised provident funds, approved superannuation funds and approved gratuity fund had approached the court against the denial of respective exemption certificates, making them liable for tax deductions on various transactions, including but not limited to, profit on debts, dividends, advance payments on brokerage and commission, capital gains, etc.

They submitted that the FBR issued a letter to all commissioners on July 30, 2021 with some directions on the issue of trust laws and specialised trusts related to pensions, gratuity and superannuation fund.

They said the FBR insisted that such an act was pursuant to provincial legislation in respect of trusts by way of independent acts, including the Sindh Trust Act, 2020, and the petitioners are liable for compulsory registration, and in the absence of such registration are not entitled to any exemption certificate.

The FBR counsel submitted that the matter was referred to the ministry of law and justice for opinion and pursuant to such opinion it has been decided that until the trusts are registered under the provincial laws they are not entitled to exemption under the Income Tax Ordinance, 2001.

The court observed that the stance of the FBR, as well as of the commissioners, is ill-founded and does not appear to be correct inasmuch as no corresponding amendment was made in the Income Tax Ordinance, 2001 after the promulgation of the Trust Acts by the respective provinces.

It observed that such conduct on the part of the FBR as well as of the commissioners was not justified; rather, it has resulted in unnecessary litigation by burdening the court and in addition causing great inconvenience to the petitioners. The court observed that the advice sought by the FBR was premised on a wrong assumption of facts and law as firstly it was not mandatory for the petitioners to get themselves registered under the Trust Act, 1882, and secondly, the 2001 Ordinance neither prior to the said repeal nor as of today mandates that the petitioners be registered under the provincial laws.

It allowed the petitions with the observation that the petitioners are not required to obtain respective registration under the Sindh Trust Act, 2020 for the issuance of exemption certificates as it is not a precondition under the 2001 tax Ordinance.