2022 PLP (Trib (PTD)

Ss.12, 149 & 153

Salary

Payment for goods, services and contracts

Scope

Complainant was a temporary lecturer at a government college

College deducted income tax at the rate of 20% from salary of the complainant

Contention of complainant was that his salary was below the taxable limit of salaried persons

Contention of department was that the complainant was a lecturer hired by government college as such the payment made to the complainant fell under S. 153(1)(b) of the Income Tax Ordinance, 2001

Validity

Legal provisions governing "Salary Taxation" under Ss.12 & 149 of Income Tax Ordinance, 2001, neither obligated any valid contract of employment, nor placed any other condition for a case to be treated as a salaried case except for employer-employee equation based on master and servant relationship

Such criterion formed the basic parameter for any employment

Regular/ad-hoc/temporary/hired/daily wages, all were different shapes and forms of employment and the law had not created any distinction among all the said forms

Department's treatment of the case under S.153(1)(b) of the Income Tax Ordinance, 2001, was against the dictates of law and excessive tax detection from the wages of a hired employee of educational institution was tantamount to maladministration in terms of Federal Tax Ombudsman Ordinance, 2000

Department was directed to ensure that the lecturers were not burdened with excessive tax deductions at withholding stage. Ziauddin Wazir, Advisor Dealing Officer. Muhammad Tanvir Akhtar, Advisor-Appraisal. Nemo for Authorized Representative. Nemo for Departmental Representative. FINDING/RECOMMENDATIONS DR. ASIF MAHMOOD JAH, FEDERAL TAX OMBUDSMAN.

This complaint has been filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against Commissioner IR, D.I. Khan Zone.

2. Briefly, the facts of the case that complainant is a temporary lecturer at Post Graduate College, Bannu. The said college deducted income tax at rate of 20% from salary of the complainant. According to complainant his salary is not liable to tax.

3. Identical complaints have been filed by lecturers of education institutions tabulated below: S.No. Complaint No. Name of Complainant CNIC No. Designation / Place of Posting 1 C.No.1068/PWR/IT/ 2022 Mrs, Firdous Syed 11101-9572167-4 Government Girls Post Graduate College, Bannu 2 C.No.1069/PWR/IT/ 2022 Mrs. Tamheeda 36302-3962680-0 DO 3 C.No.1070/PWR/IT/ 2022 Mrs. Mahwish Iqbal 11101-0223917-8 DO 4 C.No.1071/PWR/IT/ 2022 Mrs.Farheen Khan 11101-1439183-4 DO 5 C.No.1076/PWR/IT/ 2022 Mrs. Memoona Gul 11101-1531484-0 Government Girls Degree College KDA Karak 6 C.No.1126/PWR/IT/ 2022 Mr.Waqar Ali Shah 11101-4018827-7 Lecturer / Post Graduate College, Bannu 7 C.No.1128/PWR/IT/ 2022 Rauf Khan 11101-7097390-7 DO 8 C.No.1129/PWR/IT/ 2022 Mr. Muhammad Fawad 11101-2818717-9 DO 9 C.No.1131/PWR/IT/ 2022 Mr. Sohail Khan 11101-5790572-3 DO 10 C.No.1133/PWR/IT/ 2022 Mr. Faizan Ullah 11101-0371048-5 DO 11 C.No.1134/PWR/IT/ 2022 Mr. Rehmat Ullah Khan 11101-8397498-5 DO 12 C.No.1135/PWR/IT/ 2022 Mr. Mansoor Khan 11101-9251482-5 DO 13 C.No.1136/PWR/IT/ 2022 Mr. Muhammad Aqib Khan 11101-4370502-1 DO 14 C.No.1138/PWR/IT/ 2022 Mr. Israr Ullah 21505-471900-7 DO 15 C.No.1140/PWR/IT/ 2022 Muhammad Tayyab Khan 11101-8904438-9 DO 16 C.No.1143/PWR/IT/ 2022 Mr. Sufian Mehmood 11101-3334971-3 DO 17 C.No.1166/PWR/IT/ 2022 Mrs. Asma Gul 11101-5525406-4 Government Girls Post Graduate College, Bannu 18 C.No.1168/PWR/IT/ 2022 Mrs. Laila Amin 11101-5720278-2 DO 19 C.No./1169PWR/IT/ 2022 Mrs. Hassina Bibi 11101-899752-8 DO 20 C.No.1170/PWR/IT/ 2022 Mrs. Shumaila Bibi 11101-2038286-2 DO 21 C.No.1171/PWR/IT/ 2022 Mrs. Noreen Jamal 11101-3654826-0 DO 22 C.No.1172/PWR/IT/ 2022 Mrs. Haseena Khan 11101-9764618-8 DO 23 C.No.1176/PWR/IT/ 2022 Mrs. Shandana Mahnoor 11101-4356028-4 DO 24 C.No.1178/PWR/IT/ 2022 Mrs. Sajila Karim Khan 11101-5359458-2 DO 25 C.No.1181/PWR/IT/ 2022 Mrs. Noor Nama Jamal 11101-4609763-8 DO 26 C.No.1193/PWR/IT/ 2022 Mrs. Nudrat Shaheen 11101-8778405-8 DO 27 C.No.1194/PWR/IT/ 2022 Mrs. Muzdalfa Rehman 11101-6916231-6 DO 28 C.No.1195/PWR/IT/ 2022 Mrs. Faiza Sarwar 11101-1813737-4 DO 29 C.No.1196/PWR/IT/ 2022 Mrs. Rimsha Younas 11101-3732023-2 DO As the issue raised in the above 29 complaints is identical therefore, all cases are being disposed of through single order.

4. The instant 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, Chief Commissioner RTO Peshawar forwarded comments vide letter dated 17.03.2022, reproduced as under: "the complainant is a lecturer, hired by Govt. Post graduate College, Bannu. The payment made to the complainant falls under the head services and tax under Section 153(1)(b) is deductible under Division III, of the 1st Schedule to the Income Tax Ordinance, 2001 @ 10% of the gross amount payable and when the recipient is non filer/not appearing on active taxpayer's list, then the tax required to be deducted or collection shall be increased by 100% of the rate specified in accordance with the rules in Tenth Schedule of the Income Tax Ordinance, 2001." EXAMINATION OF RECORD AND FINDINGS:

5. Under section 153(1)(b) of Income Tax Ordinance, 2001, income tax is deducted at rate of 10% in case of filer and 20% in case of non-filer. The complainant has, however, agitated vide his application dated 16.01.2022, that after paying tax, he is not given any solid proof and slip where it is mentioned that he has paid 20% income tax out of this. The complainant has prayed that his salary is below the taxable limits for salaried persons.

6. Contention of the department has been examined in the light of submissions by the complainant as above and relevant legal provisions i.e. sections 12 and 149 of the Income Tax Ordinance, 2001. Resulting position is as under: (a) any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements (such as for unpleasant or dangerous working conditions). Section

149. Salary.

(1) Every [person responsible for] paying salary to an employee shall, at the time of payment deduct tax from the amount paid at the employee's average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head "Salary".

7. Examination of FBR's reply dated 09.02.2022, has been examined in depth but found deficient due to the following: i. Legal provisions governing "Salary Taxation" i.e. Sections 12 and 149 of Income Tax Ordinance, 2001 neither obligate any valid contract of employment, nor place any other condition for a case to be treated as a salaried case except for employer-employee equation based on "Master-Servant Relationship". This criterion forms the basic parameter for any employment. Regular / Adhoc / Temporary / Hired / Daily Wages, all are the different shades and forms of employment and law doesn't create any distinction among all the above forms. ii. While law treats hired employee's wages at par with PAY, while defining salary, how hired lecturer's salary can be excluded from the ambit of salary taxation? In view of above FBR's treatment of the instant cases under section 153(1)(b) of the Ordinance is against the dictates of law and excessive tax deductions from the pay / wages of a hired employee of educational institution tantamount to maladministration in terms of FTO Ordinance, 2000.

8. This office has already issued recommendations in a similar Complaint No. 2538/ISB/1T/2021 filed by an employee of Pakistan Broadcasting Corporations, wherein during Investigation and Review proceedings, the FBR conceding the wrong being done in such cases has not only implemented the recommendations rather widely circulated the same among all concerned. RECOMMENDATIONS: