C.B.R'S. DISTRUST TOWARDS ALL

C <!--[if gte mso 10]> C.B.R'S. DISTRUST TOWARDS ALL By Dr. Ikramul Haq, Advocate, Lahore Central Board of Revenue (C.B.R.), the apex body responsible for tax collection and administration at federal level, is showing mistrust, suspicion and dissatisfaction towards all: taxpayers, assessing officers, tax professionals, Courts, Federal Tax Ombudsman and now even the Federal Secretary of Law. Tax bureaucrats sitting in C.B.R. are suffering from syndrome of self-righteousness. They believe whatever they do is perfectly just and according to law and all taxpayers in connivance with Assessing Officers and tax professionals are making their policies fail. They are highly critical of recent bold, well-founded and remarkable rulings of Federal Tax Ombudsman [of course in private meetings while appreciating his role publically] that have utterly exposed their maladministration and highhandedness. Their disrespect toward higher Courts is well‑documented as on more than one occasions, the Courts have passed strictures against the C.B.R. and tax officials for flouting their decisions and showing no respect for due process of law. Recently in a most undesirable manner, the C.B.R. has expressed its dissatisfaction with certain decisions taken by the Federal Law Secretary [Dawn, 15th November, 2002]. According to the report, the C.B.R. has told the Government in certain disputed tax issues with Government-owned corporations unfavourable rulings given by the Law Secretary are not acceptable to it. The story published in the English newspaper reveals: "the Government has asked the Attorney-General of Pakistan to settle all outstanding tax disputes 'involving billions of rupees between Government organizations and the Central Board of Revenue (C.B.R.)". The Government has made it clear that the decision and advice given by the Attorney General would be binding on both sides. The Income-tax Authorities had been pursuing tax liability cases against the Government owned organizations like TCP, Karachi Shipyard and Engineering Works (KS&EW), Karachi Dock Labour Board; Federal Bank for Cooperatives and Agricultural Development Bank of Pakistan for the last so many years. Whenever assessment starts and tax demands are raised the Government owned organizations dispute the assessment. When the income tax department pursues recovery of tax, these organizations start agitating the matter through their respective ministries. "However, for early resolution of tax disputes the Government in the year 1998 directed all the organizations through their ministries to withdraw all Court cases against the C.B.R. and tax departments. The government objective was to settle such disputes outside the Courts through inter-ministerial consultation. And those unresolved matters of such cases were referred to the Ministry of Law, Justice and Human Rights. But to utter dismay of the C.B.R. in most cases, the Law Secretary gave decision against the Income-tax Department on points of law and in some of the decisions it contravened the verdict of the superior Courts on similar issues", the report said. The report is certainly spoon-fed by the C.B.R. as its `utter dismay" on orders passed by Law Secretary is a subjective conclusion. The report has been published without knowing and investigating the actual legal position involved and without appreciating the facts and circumstances of each and every case. The Federal Law Secretary, a Judge of High Court, has served the Government as Deputy Attorney-General for a long time before being elevated as Judge of High Court. He has been arguing tax cases on behalf of the C.B.R. in a most impressive manner (though C.B.R. now is totally dissatisfied with his performance as unfavourable ruling have been pronounced against it) and has knowledge, experience and legal acumen to adjudicate intricate tax issues. C.B.R., according to the newspapers' report, after showing its "utter dismay" with the decisions of the Federal Law Secretary approached the Federal Government "for setting aside the decision of secretary law because apart from causing loss in revenue his decisions were also having a negative impact on non-public cases". After taking stock of the situation the Cabinet decided to 'refer all those cases which were decided by law secretary but are not acceptable to the C.B.R. to the Attorney-General of Pakistan for his advice and decision. The cause of dispute between tax authorities and Government owned organization, besides many other points, is mainly over the "subsidy" given by the Government to these organizations to salvage them from financial crisis. The Income-tax Department treats such a subsidy given by the Government to these organizations on suffering losses as their income which is taxable but Government owned organizations are disputing the same and they say "subsidy" is not a revenue receipt but a contribution by the Government towards their capital. The C.B.R. itself accepted the arbitration of Federal Law Secretary and now it is refusing to accept the decision of the arbitrator. It is surely a bizarre situation. It is totally unprecedented in any civilized society. It shows how much respect the C.B.R. has for due process of law. The worthy Law Secretary as a Judge of Lahore High Court passed a historic order in which he struck down the selection of cases by the C.B.R. for total audit on parametric basis rather than on random basis as promised in the Self-Assessment Scheme. The highhandedness of the C.B.R. and its insistence to be allowed to proceed with illegal process was taken due note of by the Honourable Judge in a most appropriate manner by passing the following observations in Messrs Akhlaque Cloth House Faisalabad v. Assistant Commissioner of Income Tax, Circle 12, Faisalabad Zone, Faisalabad and three others 2001 PTD 3121: "..:Admittedly respondent while promulgating self-assessment scheme for the year 2000-2001 made a clear representation that cases for selection of audit would be made through random computer ballot. This was the promise given out by the Government to the taxpayer and the citizens. It has a binding effect in law and jurisprudence. It is commended by the God Al-Mighty through the passages contained in Qur'an-e-Hakeem in Surah Baqara, Surah Al Maida and Surah Bani Israel that the 'promises made to each other should be adhered to. This solemn transcendental principle is to be followed and is not merely decorative. The promise becomes more imperative when it is given out by the Government. Therefore, such promise has a binding force and cannot be allowed to be breeched more so by the hierarchy of respondent No. 4. The device or parametric computer balloting, therefore, has no place in the self-assessment scheme under consideration and it is alien to the scheme. It, therefore, follows that the parametric computer balloting is contrary to the law under the said scheme and has to be declared as such." In another case the learned Judge made similar remarks when the C.B:R. in violation of its own scheme selected a case for total audit though a promise of immunity from such selection was given. While deciding the petition in Millat Bottle Store Faisalabad v. C.B.R. and others (1998) 78 Tax 173 (HC Lah.) it was observed: "...The theory of vested right as well as promissory estoppel has been applied by the Courts of this country since long. It is unnecessary to burden this judgment by mention of all cases as reference to Army Welfare Sugar Mills Ltd. etc. v Federation of. Pakistan and others 1992 SCMR 1652 and Al-Samrez Enterprises v. The Federation of Pakistan and others 1966 SCMR 1917 would suffice. Another aspect of the matter which is to be noted is that under Islamic dispensation of justice, the parties including State should be bound down to the terms of the contract arrived at between them and they must be made to adhere to their promises. In view of Article 2A of the Constitution and promulgation of Shariat (Application) Ordinance, 1990, Islamic principles of interpretation or statutes are to be kept in view by the Court. It follows, therefore, that the respondents cannot be wriggled out of the clear promises which they made while promulgating self‑assessment scheme for the year 1993-94." The issue in conflict between C.B.R. and Government owned organisations is taxation of grant-in-aid or subsidy given to them by the State to meet their losses or other capital investment needs. It is a tragic situation that two wings of the Government are quarrelling over something which is totally futile. It is just a matter of taking out money from one pocket of the Government (Government organistaions) and putting into another (C.B.R.). The purpose is obviously to show higher collection figures to impress the IMF by fleecing government bodies and then giving the same back to them in the form of subsidies. This is the whole drama that the Government is engaged in keeping the public in the dark and trying to hoodwink the international donors. As regards taxation of grant-in-aid or any similar receipt, it cannot be treated as income of a person by any established principles of law. There is no dearth of case law on this point that such amounts are capital receipts 2001 PTD 2282, 1987 PTD 482, 1991 PTD 991 and 2000 PTD 823. Although from the Press report, the exact nature of the subsidy is not clear (as in some cases it can be treated as revenue receipt) but it appears that the C.B.R. has a weaker case as compared to Government owned corporations. Obviously the C.B.R. is irked by revenue implication of the decision of the Federal Law Secretary and is not at all interested in understanding with an open mind the legal point involved. In recent years it has become easier for the C.B.R. to milk the Government owned corporations, banks and other financial institutions, which are easy prey for undue tax collections, rather than going for the tougher ones who are habitual, hard-core tax evaders having strong political clout. C.B.R's. stalwarts run from pillar to post to secure lucrative positions and have, therefore, neither will nor capacity to net these tax dodgers. The problem of the C.B.R., it seems is unfavourable decisions and not the office of Law Secretary. It has become a regular practice on the part of C.B.R. that it rejects anything that is unfavourable. It has become allergic to criticism. It wants that everybody should unconditionally endorse all its decisions and policies no matter how illogical, harsh and unreasonable they may be. The C.B.R. wants that nobody should come in its way, and a free hand should be given to it to collect taxes by hook or by crook. This attitude of highhandedness on the part of C.B.R. has discredited the entire tax system where no one is ready to pay taxes as a matter of duty. The image of C.B.R. that has emerged over the time is that of a ruthless tax collecting machinery having no regard for taxpayers' rights. One wonders what will happen if the learned Attorney-General also gives a decision in favour of the Government owned corporations. Perhaps then the C.B.R. will write to IMF to intervene, as the Pakistan Government has become an impediment in its way for collection of taxes! Or it may lodge a complaint with George W. Bush against its own people as its attitude appears more loyal to its foreign masters than Pakistani taxpayers from whose money its salary is derived.