The Federal Board of Revenue (FBR) has issued a notice to ARY Communication Limited for allegedly evading tax worth hundreds of millions of rupees through concealment and misrepresentation of facts.
The notice states that the TV channel has to pay a gigantic Rs. 992 million in taxes since 2013.
The Large Tax Unit, Karachi served the notice to the TV network. ARY has already filed an appeal against the LTU’s findings under the Income Tax Appeal.
According to the chief commissioner of LTU, the tax department had found irregularities in the statement and the documents submitted by ARY Communication in its defense.
The tax authorities say that the notice was served after fulfilling all the legal formalities. The chief commissioner then refrained from making further comments since the matter was under appeal.
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The Background
It all started in 2013 when the revenue board found that ARY Communications had not paid millions of rupees in taxes. For its part, the network produced documents and exemption certificates to ‘prove’ that it did not owe those extra taxes.
The matter remained in jeopardy for years until the bureau became active again under new management.
Earlier this year, the LTU reopened the case and found out irregularities between ARY’s original statement and the presented documents.
The Case Against ARY
According to the LTU’s notice, ARY Digital FZLLC Networks is registered with FBR as a non-resident, UAE-based company, running a satellite TV channel in Pakistan.
The channel holds 45.5 percent shares in ARY Communications – a resident company while ARY Communications owns another resident company, ARY Films, and TV Productions.
These companies are in a tripartite agreement regarding the purchase and production of content from Pakistan and selling it to ARY Communications. According to the order, they need to settle their outstanding balances at the end of every fiscal year.
However, the tax department found that ARY Communications and ARY Films locally produced the content in Pakistan and then “exported” it to ARY Digital.
By doing so, FBR believes that the company made use of a loophole to gain exemption from taxes. Later, the same content that was exported to ARY Digital could be repurchased and aired in Pakistan, while avoiding all the taxes due on it.
“The same content was subsequently bought from the same Dubai entity and then telecast in Pakistan to avoid local tax.”
Upon realizing the possible concealment and misrepresentation of facts, the LTU issued an order on June 30 demanding the payment of Rs.991.84 million on the annual income of Rs. 2.804 billion.
The network was asked to pay the taxes by July 30. Instead, the company has filed an appeal in the Income Tax (Appeals), Zone-I, Karachi.
