Income Tax Ordinance (XLIX of 2001)---
----Ss. 114, 115(3)(d), 231-A & 236-P---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 10---Federal Ombudsman Institutional Reforms
Act (XIV of 2013), S. 9(1)---Tax deduction---Foreign remittances---Non-Resident / Overseas Pakistani---Exemption ---Complainant was a Non-Resident/Overseas Pakistani who was aggrieved of deduction of tax on his remittances exceeding fifty thousand rupees---Validity---Complainant, who was Non-Resident working abroad and who had no source of income in Pakistan was exempt from filing of return in terms of S. 115(3)(d) of Income Tax Ordinance, 2001--- Non-Resident who had no Pakistan-source taxable income was exempt from filing return of income under S. 114 of Income Tax Ordinance, 2001--- Federal Tax Ombudsman declared that application of Ss. 231-A & 236-P of Income Tax Ordinance, 2001 on money remitted by Non-Residents expatriates through proper banking channels who were otherwise exempt from filing their returns of income, tantamount to negate benefit of S. 115(3)(b) of Income Tax Ordinance, 2001---Federal Tax Ombudsman directed Federal Board of Revenue to issue necessary clarification/explanation to bring conformity in case of non-filer Non-Resident expatriates in application of Ss. 231-A & 236-P of Income Tax Ordinance, 2001 with S.115(3)(b) of Income Tax Ordinance, 2001---Federal Tax Ombudsman further directed the authorities to facilitate complainant in getting refund of amount deducted/collected from his Bank withdrawals under S.231-A of Income Tax Ordinance, 2001---Complainant was allowed the deduction accordingly.

FINDINGS/RECOMMENDATIONS
MUSHTAQ AHMAD SUKHERA, FEDERAL TAX OMBUDSMAN:---.---

The complaint was e-filled in terms of Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against tax deduction on withdrawal from bank account of the Complainant. 

2. The Complainant, an Overseas Pakistani/Non Resident (NR) is working in Saudi Arabia. According to the Complainant, he remits money from abroad through proper banking channel. However, at the time of withdrawal, the bank deducted/collected tax when the transaction exceeds fifty thousand rupees. He contended that as he is an overseas Pakistani working abroad and is not under obligation to file return of income under section 114 of the Income Tax Ordinance, 2001 (the Ordinance), the tax deduction/collection on cash withdrawals by the Bank is against law. 

3. The complaint was referred to the Secretary, Revenue Division for comments in terms of section 10(4) of the FTO Ordinance read with section 9(1) of the Federal Ombudsmen  Institutional Reforms Act, 2013. In response thereto, the Commissioner-IR Zone-1, RTO Hyderabad submitted parawise comments dated 05.11.2018. It was contended that in terms of Section 231A of the Ordinance, banks were bound to withhold/collect tax on cash transactions aggregating from all the bank accounts in a single day exceeding fifty thousand rupees. The amount so deducted is adjustable credit of which the Complainant could claim in his return of income for relevant tax year. It was averred that as the Complainant had failed to make out case of administration against the Deptt, the complaint may be rejected.

4. Arguments of both the parties have been considered and record perused.

5. It is observed that under Section 231A of the Ordinance;
“Every banking company shall deduct tax at the rate specified in the Division VI of Part IV of the first Schedule of the Ordinance, if the payment for cash withdrawal or the sum total of the payments for cash withdrawal in a day exceeds fifty thousand rupees.” Explanation-For renewal of doubt, it is clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank account in a singly day.]”

6. The tax so deducted under section 231A of the Ordinance at the rate of 0.3% for filers and 0.6% for non-filers is adjustable. However, in order to get credit of the amount so withheld/collected above, the return at the end of the financial year is required to be filed under Section 114(1) of the Ordinance. In the instant case the Complainant, who is NR working abroad and who has no source of Income in Pakistan is exempt from filing of return in terms of Section 115(3)(d) of the Ordinance. So a NR, Who has no Pakistan source taxable income, is exempt from filing return of income under Section 114 of the Ordinance. However, tax is being collected on cash withdrawals exceeding fifty thousand rupees as non-filer. Moreover, other than the above cash transactions under Section 236P of the Ordinance, advance tax adjustable on bank transactions transferred from all bank accounts aggregating fifty thousand rupees in a single day, tax is being collected from non filers, who are not on the FBR’s Active Tax Payers (ATL) list. This obviously is a travesty of law for the overseas Pakistanis who earn money abroad and have no taxable income inPakistan and have been allowed exemption from filing returns of income, under Section 114 of the Ordinance. On the other hand, they are forced to file returns so as to get credit of taxes deducted/collected under sections 231A and 236P of the Ordinance. The laws with penal consequences are made for those who do not comply with law and those who break the law. The overseas Pakistani expatriates who are working abroad are on the contrary contributing every year around $20 billion to national kitty by sending their money for their kith and kin, through proper banking channel. Thus arbitrary and indiscriminate application of provisions of Sections 231A and 236P of the Ordinance for NRs is source of intense discouragement for the law-abiding expatriates, having no Pakistani source of Income, who send their hard-earned money through proper banking channel. As a result in the case of NRs application of Sections 231A and 236P of the Ordinance, would only provide an incentive for illegal channels through ‘hawala/hundi’ etc. This obviously is not the intent of the legislature, which needs to be clarified by the F.B.R.

FINDINGS

7. The application of Sections 231A and 236P of the Ordinance on money remitted by NR expatriates through proper banking channel, who are otherwise exempt from filing their returns of income, does tantamount to negate the benefit of Section 115 (3)(b) of the Ordinance.

RECOMMENDATIONS:
8. FBR to -
i. to issue necessary clarification/explanation to bring conformity in case of the non-filer NR expatriates in application of sections 231A and 236P with Section 115(3)(b) of the Ordnance;

ii. to direct the Commissioner-IR Zone-I, RTO-Hyderabad to facilitate the Complainant in getting refund of the amount deducted/collected from his bank withdrawals under Section 231A of the Ordinance; and

iii. report compliance within 45 days.

SD/-
MUSHTAQ AHMAD SUKHERA
FEDERAL TAX OMBUDSMAN