Taxing times: FBR warns civic agency of accounts’ attachment

Asks CDA to explain non-payment of Rs662m in income taxes by month’s end.

ISLAMABAD:

The Federal Board of Revenue (FBR) has served a show-cause notice on the capital’s civic agency for recovery of millions in income taxes for the year 2013-14.

In case of non-compliance with the notice, the FBR has warned the Capital Development Authority (CDA) to attach its bank accounts for recovery of the amount.

“Why income tax of Rs662.046 million should not be recovered from it [the CDA] along with default surcharge under section 205 of the ITO, 2001,” the notice reads.

The CDA has been asked to explain the situation regarding the issue by October 30. A hearing into the case has been fixed on that date in the Islamabad Regional Tax Office.

The revenue collecting body has found discrepancies in collection and deduction of taxes from different vendors by the Capital Development Authority (CDA).

FBR findings

The notice says the civic agency has failed to discharge its statutory obligations in collection or deduction of withholding tax from various firms and individuals citing a number of cases of either non-collection or short-deduction.

During the examination of details regarding sale of plots, provided by the Estate Management Wing of the authority, the FBR observes that residential and commercial plots have been auctioned without proper collection of advance withholding tax from successful bidders.

It further says that under the head of land auction during the period under review, the CDA made short deductions of Rs283.52 million.

Similarly, the CDA’s Directorate of Municipal Administration has also failed to collect withholding tax on the auction of signboards, banners and wagon stands within its municipal limits.

It says that during the same period, the administration auctioned advertisement rights to firms amounting to Rs189.7 million, however, it did not collect the tax amount of Rs14.23 million from vendors.

The same directorate also failed to collect Rs9 million tax from vendors who were given advertisement rights of fascia signboards, petrol and CNG pump signboards and shops and buildings wraps.

The revenue board also said the CDA has also failed to reconcile tax deduction on supplies and services, raising a question mark over the total payments made during the period.

“Discrepancies and short payment of tax [under this head] stands at Rs343.8 million,” says the notice.

Moreover, the CDA also failed to withhold Rs11.2 million against payments on supplies and services during July 2013 and December 2014.

Similarly, the CDA’s directorate of sports and culture generated Rs2.2 million by renting out its sporting facilities during the period July 2013 to April 2014 but did not collect Rs0.22 million tax payable on the earned amount.

The CDA has been directed through the notice to explain these cases by appearing before the tax officer and by placing before it the documentary evidences.

In case the CDA’s representative did not come up to the hearing, the FRB has warned that it would decide the case on the basis of documentary evidences already available with it.

It’s worth remembering that the authority’s bank accounts were last attached by the FBR in 2012 for recovery of outstanding taxes. Due to the situation, the authority had delayed the payment of monthly salary to it nearly 15,000 employees.

CDA Finance Member Sher Bahadur Arbab was not available for comment despite multiple attempts to contact him via phone and text message.

Published in The Express Tribune, October 15^th, 2014.