The National Highway Authority (NHA) has strongly protested against the Federal Board of Revenue (FBR) enforcement action of attachment of bank accounts of the NHA for recovery of billions of advance tax by declaring it as a private limited company.
Sources told ProPakistani that the NHA has expressed serious concern about the FBR’s action against the authority. The FBR wrongly assessed NHA as a Private Limited Company despite the fact that NHA was created, in 1991, through an Act of the Parliament, for the Planning, Development, Operation, Repair, and Maintenance of National Highways and Strategic Roads specially entrusted to NHA by the Federal Government or by a Provincial Government or other authority concerned.
The FBR, on February 9, 2022, created a demand for tax liability amounting to Rs. 119.111 billion against eight different tax cases pertaining to the tax years from 2015 to 2020. This huge demand was created without contesting the grounds of appeal filed by NHA nor confronting any written arguments and documentation submitted by NHA.
In this regard, the Islamabad High Court had already granted a stay order against the recovery of Rs. 26.203 billion for the 2016 and 2017 tax years and the remaining amount of tax liability was subjudice before the Commissioner’s Appeal.
In this continuation, FBR vide its communication No. 597 dated February 10, 2022, issued notices to banks for recovery of assessed liability amounting to Rs. 55 billion from NHA and seized the bank accounts till the recovery of liability though NHA has the right to file an appeal u/s 131 of the Income Tax Ordinance 2001 within 60 days of the issuance of the impugned order. To date, FBR has made recoveries of Rs. 8.360 billion (being 15 percent of the assessed liability i.e., Rs. 55.735 billion) and still insisting and pursuing NHA to share the payment schedule for the remaining amount, NHA stated.
NHA has already taken up the matter of tax notices issued to the Authority at various fora. In this regard, a meeting was also held on February 25, 2022, in the Finance Division under the Chairmanship of the Federal Minister for Finance in which representatives of NHA, FBR & Finance Division were present.
In the said meeting the following actionable points were agreed upon and also endorsed by the Chair of the meeting:
- FBR to make changes in the law through Finance Act 2022 to differentiate the treatment of taxes applicable to Govt Entities/ Autonomous Bodies under the Ministries from other commercial business entities.
- Till amendment in the relevant clauses, FBR will not issue further notices/ orders to NHA by treating it as a commercial business entity.
- Resolution of the outstanding tax issues through Alternate Dispute Resolution to be constituted under the Income Tax Ordinance 2001, as committed by FBR.
The said actionable points were forwarded to Chairman FBR on March 18, 2022. The response received from the office of Secretary (IR-Operations) FBR revealed that the changes in the law will be considered by FBR in the next available legislative opportunity; payment of advance tax by NHA and extending coordination to FBR and request from NHA for the constitution of Alternative Dispute Resolution Committee (ADRC).
NHA on March 29, 2022, conveyed its stance regarding issues highlighted by FBR, which are reproduced below:
The proposed changes in Income Tax Law forwarded for soliciting approval in upcoming legislative through federal budget 2022-2023.
Regarding coordination with FBR, it was conveyed that NHA has already provided a complete record to the assessing officer for proceeding under section 161/205 of the Income Tax Ordinance, 2001. Further, NHA will be pleased to provide any additional records, if required, to ensure compliance with tax laws.
It was also requested to constitute the Alternative Dispute Resolution Committee (ADRC) under section 134A of the Income Tax Ordinance, 2001 for the resolution of the outstanding tax issues of NHA.
Surprisingly despite responding back to NHA, FBR attach bank accounts of the Authority and recovered Rs. 1,215,916,213/- as advance tax from different bank accounts of NHA irrespective of clear provisions of section 147 of Income Tax Ordinance 2001 on March 31, 2022, on the basis of amended assessment, which is not only unjustified but a violation of law and NHA has every right and authority to challenge before the court of law when particularly the correspondence was made after court proceedings and submitted the law, relevant documents and tax estimation along-with returns.
Further, stated that in view of declared accounts the notices issued under sections 147 and 138 of Income Tax Ordinance 2001 for the second and third quarter and withdrawing the huge amount without any backing of law was completely unjustified and against the assurances given to NHA at every level by the FBR that it will remain positive for smooth nationwide operations of the Authority, NHA maintained.
In addition to the above, NHA has already provided the estimated quarterly accounts for the financial year 2021-22 & annual return filed for the tax year 2021 clearly shows that NHA is not in a position to pay any advance tax under section 147 of the Income Tax Ordinance, 2001 and have also requested FBR to withdraw the notices issued to NHA, and return the illegal deducted amount referred above from the bank account of NHA.
The NHA being an executing agency is not in a position to pay such a huge amount of tax liability which is merely incurred by treating NHA as a private limited company and by invoking the provisions of Income Tax Ordinance 2001 pertaining to purely commercial and profit-oriented entities, which otherwise imposition of taxes as a commercial entity, will have severe implications on NHA financial position to continue even the existing strategic projects and routine maintenance work, NHA added.
