At loggerheads: FBR claims Rs4 billion in taxes from PEDO

Organisation plans to knock Supreme Court’s door for exemption from income tax

PESHAWAR: The Khyber-Pakhtunkhwa government is all set to knock the doors of the Supreme Court to demand exemption for Pakhtunkhwa Energy Development Organization (PEDO) from income tax.

Officials close to the development said the government has discussed the case with former chairperson of the Senate and lawyer, Wasim Sajjad, who will be pleading the case in the apex court. Federal Board of Revenue (FBR) has been claiming Rs4 billion of income tax outstanding to PEDO, but the K-P government wants income tax exemption for the organisation as it is a government body.

Tussle over tax

FBR freezed all bank accounts of PEDO across the country on August 31, leaving the organisation with no options in hand to pay salaries to its employees.

The K-P  finance department sent a letter on May 29, a copy of which was procured by The Express Tribune, to the Federal Ministry of Finance and FBR chairperson, requesting income tax exemption for PEDO, but the federal government did not approve the request. The letter proposed amendments in the Income Tax Ordinance, 2001 and its amendments of 2015. It proposed a new entry in the clause (66) of Part-1 of second schedule of the ordinance under which PEDO shall be included in the list of entities whose income is exempt from tax. It also proposed an amendment in clause 132 of the Part-1 of the second schedule of the ordinance.

An official said the federal government turned down that request and FBR took the opportunity to freeze the bank accounts of the organisation. “We have been limited to no other options than to take the matter to the court,” said an official of PEDO. The official further said the chief minister held a meeting with officials of K-P Energy and Power Department and PEDO, asking the officials to prepare a summary for him to provide a clear picture of the issue so that he can take it up with the federal minister for finance, Ishaq Dar. “We are preparing the summary in a day or two and would send it to the chief minister,” said the official, refuting the news that the summary had already been sent.

Comparing

He added FBR has inflated the figures by claiming Rs4 billion income tax, moreover, PEDO and Wapda are both government entities so if one has got tax exemption why not the other.

“Like Wapda, PEDO also sells electricity to National Transmission and Despatch Company Limited (NTDC) but the former is exempted from income tax and the latter is not,” he said. “We want income tax exemption for PEDO and we will fight our case in the court and take up the issue politically.”

According to the relevant officials, FBR claims its dues against PEDO in terms of income tax over the revenue PEDO generated by selling electricity to NTDC.

PEDO took all its money from its banks across the country and handed it over to the K-P finance department so that FBR may not deduct its claimed money from PEDO’s bank accounts. “FBR has also sent a letter to the K-P finance secretary pressing him to pay PEDO’s income tax,” said the official. “We would first try to negotiate to waive off the income tax claims of FBR via table talks but if that does not work, we are preparing our case in the court,” said the official.

The government can also give protection to PEDO from taxes by amending its act and in case it fails at every platform and it has to pay the tax, the consumers have to lift the burden since electricity is ‘a pass through item.’ The government would ask National Electric Power Regulatory Authority to put the income tax in the tariff and thus increase the cost of electricity.

Published in The Express Tribune, September 6^th, 2016.