Federal Tax Ombudsman (FTO) has declared that the workers’ welfare fund is neither a tax covered under Income Tax Ordinance, 2001, nor falls in the category of “other taxes” such as sales tax, federal excise duty, and customs as it is a non-tax levy.
Therefore, the adjustment of a determined tax refund against non-tax Cess i.e. WWF is patently illegal, a departure from the norm, and discriminatory.
The FTO while deciding the case of M/s Wah Nobel Chemicals Limited has declared the Workers Welfare Fund (WWF) adjustment against the approved Income Tax refund amount as illegal.
While deciding the case, FTO has observed that WWF is neither a tax covered under Income Tax Ordinance, 2001 nor falls in the category of “other taxes” i.e. ST/FED/Customs. This is a non-tax levy that is only collected by tax authorities. Thus adjustment of a determined tax refund against non-tax Cess i.e. WWF is patently illegal, a departure from the norm, and discriminatory.
Furthermore, FBR had itself issued clear instructions vide C. No. 1(10) ST-LP & E/2020 66012-R dated 25 May 2021, wherein all field formations were prohibited to adjust liabilities of WWF and WPPF against refunds of Income Tax. LTO’s adjustment order is in defiance of FBR’s instructions on the subject.
The FTO has accordingly ordered FBR to direct the Centralized Income Tax Refund Office (CITRO) Chief to ensure that the amounts of refund for Tax Year 2013 to 2016 vide order dated 31-01-2022 are transferred to the taxpayer’s account immediately.
To direct the Commissioner concerned to dispose of refund applications for Tax Years 2018 and 2019 strictly in accordance with law and after giving a proper hearing.
To direct the concerned Commissioner Inland Revenue (CIR) to work out and arrange additional payment for delayed refund u/s 171(1) of the Ordinance for TYs 2013, 2014, 2015, 2016, and 2020. To direct the concerned Commissioner Inland Revenue to revisit the order u/s 170(4) for Tax Year 2020 passed on 18-03-2022 and subsequent illegal adjustment of refund against WWF.
The FBR has further been directed that the officer who has made illegal adjustment needs to be counselled after obtaining his explanation.