President Asif Ali Zardari has upheld the Federal Tax Ombudsman’s (FTO) decision in cases involving telecom operators, confirming that no maladministration occurred by the Federal Board of Revenue (FBR) during the execution of the Alternative Dispute Resolution Committee’s (ADRC) recommendations.
In this context, the President of Pakistan issued a formal order concerning the telecom operators’ cases, affirming the FTO’s findings.
Background of the Case
The case centers around complaints from a telecom company engaged in providing cellular services and maintaining a mobile network in Pakistan under licenses issued by the Pakistan Telecommunication Authority (PTA). Over the years, amendments to the company’s income tax returns led to various tax disputes spanning from Tax Years 2006 to 2017. These disputes resulted in a reduction of the company’s assessed tax losses and forced it to engage in ongoing litigation with the Large Taxpayer Office (LTO).
Tired of the prolonged litigation, the company decided to settle the disputes, which were pending before various appellate forums, through the ADRC. The ADRC is a mechanism provided under Section 134A of the Income Tax Ordinance, 2001, that allows for the resolution of disputes outside the traditional appellate process.
ADRC Recommendations and Subsequent Actions
Following extensive deliberations and the presentation of evidence, the ADRC issued recommendations for settling the disputes. According to the complainant, these recommendations required the company to pay Rs. 8.25 billion against its income tax demand or liability for any tax year between 2009 and 2021.
After fulfilling the necessary requirements outlined in the ADRC order and Section 134A of the Income Tax Ordinance, the company requested the concerned commissioner to implement the ADRC’s recommendations. However, the Deputy Commissioner of Inland Revenue (DCIR) rejected this request, declaring the ADRC recommendations null and void, which the complainant argued was a violation of their legal rights.
FBR’s Position and FTO’s Findings
In response, the FBR explained that the company’s request to implement the ADRC’s recommendations could not be upheld because the company failed to meet the requirements specified in the ADRC order. Specifically, the FBR noted that the ADRC’s recommendations required the payment to be made against income tax liabilities for any year from 2010 to 2020. However, the company had paid Rs. 3.25 billion against its tax liability for 2021, which was not covered by the ADRC’s decision.
The FTO, after concluding its investigation, supported the FBR’s position. The FTO noted that when the company approached the tax office to implement the ADRC’s recommendations, the office reviewed the request and, after thorough deliberation, issued an order rejecting the implementation. This order was based on written correspondence and discussions with the tax authorities.
The FTO found that the Rs. 3.25 billion payment made by the telecom company was against a tax liability for the year 2021, which was not part of the ADRC’s original recommendation. Therefore, this payment was deemed a current tax demand rather than an arrear demand, which aligned with the FBR’s stance that no tax arrears were outstanding for the 2021 tax year when the ADRC issued its decision.
Presidential Review and Final Decision
Displeased with the FTO’s decision, the telecom company filed a representation before the President of Pakistan. On August 12, 2024, President Asif Ali Zardari reviewed the case and upheld the FTO’s decision, thereby endorsing the FBR’s actions and the findings of the FTO.
This decision serves as a significant precedent in tax-related disputes, particularly concerning the implementation of ADRC recommendations and the obligations of taxpayers in fulfilling the requirements laid down by such committees. The President’s ruling reinforces the importance of adhering to the specific conditions outlined in ADRC orders to avoid complications in tax dispute settlements.
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