FBR issues Rs992m tax notice to private tv channel

Accuses channel of evading taxes through misrepresentation, concealment, and misuse of exemptions

ISLAMABAD: The Federal Board of Revenue (FBR) has served Rs992 million tax notice on ARY Communications (ARY), claiming that the private television network has evaded taxes through misrepresentation, concealment and misuse of exemptions.

The FBR order was issued on June 30 in the wake of a detailed exchange with the TV channel and its representatives. The channel was apparently not able to clarify with regard to misrepresentation of facts in its Income Tax Returns to avoid taxes.

The FBR alleged that during these exchanges, it found that the ARY in order to escape fresh tax demand tampered with previously-submitted official agreement documents. The FBR notice said: “other consequential proceedings of penalty and prosecution will be initiated separately.”

Responding to the FBR through letters dated May 13 and June 25, the channel blamed the board for targeting it. It claimed that the proceedings were based on guesswork and assumptions. The FBR also did not allow it ample time for replies, it said.

The media house has, however, not responded to the allegation of tampering with agreement documents.

The tax demand belongs to the year 2012-13. The tax body discovered the alleged wrongdoing while assessing previous tax statements. It said after unearthing the misrepresentation, it gave the ARY an amended assessment of Rs992 million. The media house challenged these finding in its replies.

This amended amount of Rs990 million is just for the one year, assessed under Section 122 (5A). If the FBR claims also apply to subsequent years, the ARY will have to pay close to Rs5 billion.

The FBR has made four accusations against the channel, which has replied to only one.

The FBR said ARY Communications allegedly inflated its cost by buying from a company – ARY FZLLC – based in Dubai which it also significantly owns. It said ARY Communications buys content from the same company. ARY FZLLC undertakes transactions with the other two companies, ARY COMM and ARY Films and TV Productions Pvt, which are its associates.

ARY Productions and TV company is showing all sales to Dubai company as exports which are tax exempt but ARY uses the content primarily in Pakistan. While sending money abroad for purchasing air time – exempted from withholding tax – it sends money for content for which there is no tax exemption.

The FRB also claimed that ARY Communications tampered with documents to later on show that content was part of a contract between Dubai and Pakistan based company.