11

22

PRESENTATION BY MR. MUMTAZ AHMAD PRESENTATION BY MR. MUMTAZ AHMAD

MEMBER LEGALMEMBER LEGAL

FEDERAL BOARD OF REVENUEFEDERAL BOARD OF REVENUE

33

Dealing with the appeal matters at the Tribunal, High Court and Dealing with the appeal matters at the Tribunal, High Court and

Supreme Court level.Supreme Court level. MonitoringMonitoring and overseeing work of 06 Collectors (Appeals and 08 and overseeing work of 06 Collectors (Appeals and 08

Commissioners (Appeals) Commissioners (Appeals) Vetting of contracts, rendering of opinion and advice to the line Vetting of contracts, rendering of opinion and advice to the line

Members in disputes resolution. Members in disputes resolution.

Federal Services Tribunal and Supreme Court matters (service Federal Services Tribunal and Supreme Court matters (service

matters assistance). matters assistance).

FTO matters. Complaints responses. Representation to the FTO matters. Complaints responses. Representation to the

President.President.

Alternative Dispute Resolution matters.Alternative Dispute Resolution matters.

Support to the reforms process.Support to the reforms process.

OVERALL FUNCTIONS OF THE LEGAL WINGOVERALL FUNCTIONS OF THE LEGAL WING

COORDINATION WITH OTHER FBR WINGSCOORDINATION WITH OTHER FBR WINGS

44

Contd…Contd… Assistant on Legal Issues;Assistant on Legal Issues; Assistance to all Wings of FBR on Legal Matters.Assistance to all Wings of FBR on Legal Matters. Transition from the CBR to the FBR. Main statute, IJP Transition from the CBR to the FBR. Main statute, IJP

rules, uniform and accommodation regulations, rules, uniform and accommodation regulations, Employees Foundation matter etc.Employees Foundation matter etc.

Liaison with the Officers of Courts, Ministries, Law Liaison with the Officers of Courts, Ministries, Law Division and managing work of over 100 advocates on Division and managing work of over 100 advocates on Panel approved by the Law Division.Panel approved by the Law Division.

Comments: The FBR’s Tax Administration Reforms Comments: The FBR’s Tax Administration Reforms Program has enabled the Legal Wing of FBR to Program has enabled the Legal Wing of FBR to introduce reforms in the matter of reduction in introduce reforms in the matter of reduction in litigation and creating better environment for litigation and creating better environment for taxpayers to discharge their obligation to the state.taxpayers to discharge their obligation to the state.

..

55

Remedy available to the Taxpayers.Remedy available to the Taxpayers.

(A) Appeals hierarchy – (A) Appeals hierarchy –

(i)(i) within the department, Collector/Commissioner, within the department, Collector/Commissioner,

(II)(II) Tribunals, Tribunals,

(iii)(iii) High Court, High Court,

(iv)(iv) Supreme Court.Supreme Court.

(B) Writ and Civil Jurisdiction(B) Writ and Civil Jurisdiction

66

Contd….Contd….(C)(C) Federal Tax OmbudsmanFederal Tax Ombudsman

- - Indirectly controls the mal-administration of the department’s Indirectly controls the mal-administration of the department’s officers and officers and grants relief to the taxpayers where instances of the grants relief to the taxpayers where instances of the mal-mal-administration are administration are pointed out.pointed out.

-- Representation against the decision of FTO lies with the Representation against the decision of FTO lies with the President President of Pakistan (through Law & Justice Ministry).of Pakistan (through Law & Justice Ministry).

(D)(D) Representation to the Chairman, FBR.Representation to the Chairman, FBR.

A taxpayer may submit a representation under section 7 of the FBR Act, 2007 to the A taxpayer may submit a representation under section 7 of the FBR Act, 2007 to the Chairman, FBR who may issue appropriate order.Chairman, FBR who may issue appropriate order.

(F)(F) For foreign investment/N.R companies:For foreign investment/N.R companies:

Concept of “advance ruling”. Implementation of the provisions of the agreement for Concept of “advance ruling”. Implementation of the provisions of the agreement for avoidance of double taxation is faithfully done. We have such agreements with 55 avoidance of double taxation is faithfully done. We have such agreements with 55 countries.countries.

77

IMPACT OF ALTERNATE DISPUTE RESOLUTION ON IMPACT OF ALTERNATE DISPUTE RESOLUTION ON APPEALS AND LITIGATIONAPPEALS AND LITIGATION

Common Complaints of taxpayers within the existing system used to involve lengthy Common Complaints of taxpayers within the existing system used to involve lengthy litigations, extending over decades. In order to eliminate such delays in deliverance of litigations, extending over decades. In order to eliminate such delays in deliverance of justice and redressal of grievances, the system of ADR has been introduced.justice and redressal of grievances, the system of ADR has been introduced.

It is resolving of the tax or duty disputes out of court, between the person and the It is resolving of the tax or duty disputes out of court, between the person and the institution. Parties to the dispute may arrive at a mutually agreed solution of the institution. Parties to the dispute may arrive at a mutually agreed solution of the dispute.dispute.

The system of ADR aims at providing the aggrieved tax payer a platform to raise his The system of ADR aims at providing the aggrieved tax payer a platform to raise his dispute at a forum separate from the conventional forum.dispute at a forum separate from the conventional forum.

In this system, there are no “Losers” or “Winners”. It is about deciding disputes which In this system, there are no “Losers” or “Winners”. It is about deciding disputes which are set and rest on the method of “win-win situation for all”. In fact, ADR is a “hybrid are set and rest on the method of “win-win situation for all”. In fact, ADR is a “hybrid system” in tax matters.system” in tax matters.

ADR is yet another example of FBR’s commitment to revamp the existing system.ADR is yet another example of FBR’s commitment to revamp the existing system.

88

Reduces the number of litigation cases and the burden on the courts Reduces the number of litigation cases and the burden on the courts Saves the management time of litigants. Saves the management time of litigants. Saves litigation costs. Saves litigation costs. Controls mal-administration. Controls mal-administration. Avoids diversions of time in bringing cases to the courts. Avoids diversions of time in bringing cases to the courts. Settles disputes through tax experts and recognized institutions. Settles disputes through tax experts and recognized institutions.   It directly goes to the root of dispute instead of periphery. It directly goes to the root of dispute instead of periphery.   Preservation of business relationships. Preservation of business relationships. Better case management. Better case management. Greater satisfaction with instant results/outcomes-more options. Greater satisfaction with instant results/outcomes-more options. Confidentiality. Confidentiality. Flexibility of procedures. Flexibility of procedures. Quicker resolutions. Quicker resolutions.   Lower costs for all parties to the dispute. Lower costs for all parties to the dispute.

Benefits of ADR for FBR and Taxpayer

99

Referring Disputes for ADRReferring Disputes for ADR

Present rules prescribe the stages at which disputes could be referred for ADR Present rules prescribe the stages at which disputes could be referred for ADR subject to FBR’s agreement to form the Committee.·subject to FBR’s agreement to form the Committee.·

  A matter can be referred for ADR from either of the following stages:A matter can be referred for ADR from either of the following stages:

o    o     After adjudication or assessment, i.e. during pendency of appeal before After adjudication or assessment, i.e. during pendency of appeal before the Collector (Appeals) or Commissioner (Appeals)the Collector (Appeals) or Commissioner (Appeals)

o   After decision of appeal by the Collector (Appeals) or Commissioner o   After decision of appeal by the Collector (Appeals) or Commissioner (Appeals), i.e. during pendency of appeal before the Appellate (Appeals), i.e. during pendency of appeal before the Appellate Tribunal;Tribunal;o      o      After decision of appeal by the Appellate Tribunal, i.e. during pendency After decision of appeal by the Appellate Tribunal, i.e. during pendency

of appeal before a High Court; of appeal before a High Court; o       After decision of appeal by High Court, i.e. during pendency of appeal o       After decision of appeal by High Court, i.e. during pendency of appeal before before the Supreme court.the Supreme court.

ADR does not involve any fee, charges or costs. There is no time limit for applying for ADR does not involve any fee, charges or costs. There is no time limit for applying for ADR. The application can be submitted any time during the pendency of the matter ADR. The application can be submitted any time during the pendency of the matter before any appellate authority, tribunal or court and that it should not be a past and before any appellate authority, tribunal or court and that it should not be a past and closed transaction.  closed transaction. 

1010

Provisions in Various Tax Laws Pertaining to ADRProvisions in Various Tax Laws Pertaining to ADR

The Legislature has provided following provisions regarding the ADR in various tax laws The Legislature has provided following provisions regarding the ADR in various tax laws through the Finance Bill, 2005:through the Finance Bill, 2005:

Income TaxIncome Tax Sales TaxSales TaxSection 134 A of the Income Tax Section 134 A of the Income Tax Ordinance, 2001 and Rule 231 C of the Ordinance, 2001 and Rule 231 C of the Income Tax Rules,2002. Income Tax Rules,2002.

Section 47 of the Sales Tax Act,1990 and Section 47 of the Sales Tax Act,1990 and Chapter X of the Sales Tax Rules,2004.Chapter X of the Sales Tax Rules,2004.

Customs Customs Federal Excise:Federal Excise:Section 195 C of the Customs Act, 1969 Section 195 C of the Customs Act, 1969 and Chapter XVII of the Customs Rules, and Chapter XVII of the Customs Rules, 2001.2001.

Section 38 of the Federal Excise Act, 2005 Section 38 of the Federal Excise Act, 2005 and Rule 53 of the Federal Excise Rules, and Rule 53 of the Federal Excise Rules, 2005.2005.   

1111

AMENDMENTS MADE BY FINANCE ACT,2007 & 2008AMENDMENTS MADE BY FINANCE ACT,2007 & 2008

INCOME TAX INCOME TAX ORDINANCE, 2001 ORDINANCE, 2001

SALES TAX SALES TAX ACT,1990ACT,1990

CUSTOMS ACT,1969CUSTOMS ACT,1969 FEDERAL EXCISE FEDERAL EXCISE ACT, 2005ACT, 2005

SECTION 134 ASECTION 134 A SECTION 47ASECTION 47A SECTION 195CSECTION 195C SECTION 38SECTION 38

1. Sub-section (4A) 1. Sub-section (4A) inserted by the Finance inserted by the Finance Act, 2008..Act, 2008..

[(4A) Notwithstanding [(4A) Notwithstanding anything contained in anything contained in sub-section (4), the sub-section (4), the Chairman may on the Chairman may on the application of an application of an aggrieved person, for aggrieved person, for reasons to be recorded reasons to be recorded in writing, and on being in writing, and on being satisfied that there is an satisfied that there is an error in order or decision error in order or decision may pass such order may pass such order may be deemed just and may be deemed just and equitable.] equitable.]

1. Sub-section (4A) 1. Sub-section (4A) inserted by the Finance inserted by the Finance Act,2008..Act,2008..

[(4A) Notwithstanding [(4A) Notwithstanding anything contained in anything contained in sub-section (4), the sub-section (4), the Chairman may on the Chairman may on the application of an application of an aggrieved person, for aggrieved person, for reasons to be recorded in reasons to be recorded in writing, and on being writing, and on being satisfied that there is an satisfied that there is an error in order or decision error in order or decision may pass such order may may pass such order may be deemed just and be deemed just and equitable.] equitable.]

1. Sub-section (4A) inserted by 1. Sub-section (4A) inserted by the Finance Act,2008..the Finance Act,2008..

[(4A) Notwithstanding anything [(4A) Notwithstanding anything contained in sub-section (4), contained in sub-section (4), the Chairman may on the the Chairman may on the application of an aggrieved application of an aggrieved person, for reasons to be person, for reasons to be recorded in writing, and on recorded in writing, and on being satisfied that there is an being satisfied that there is an error in order or decision may error in order or decision may pass such order may be pass such order may be deemed just and equitable.] deemed just and equitable.]

(3). The committee constituted (3). The committee constituted under sub-section (2) shall under sub-section (2) shall examine the issue and may, if it examine the issue and may, if it deems necessary, conduct deems necessary, conduct inquiry, seek expert opinion, inquiry, seek expert opinion, direct any of customs or any direct any of customs or any other person to conduct an other person to conduct an audit and make audit and make recommendations [, within recommendations [, within “[sixty] days of its constitution,] “[sixty] days of its constitution,] in respect of the resolution of in respect of the resolution of dispute as it may deem fit’[:] dispute as it may deem fit’[:]

1. Sub-section (4A) 1. Sub-section (4A) inserted by the Finance inserted by the Finance Act,2008..Act,2008..

[(4A) Notwithstanding [(4A) Notwithstanding anything contained in anything contained in sub-section (4), the sub-section (4), the Chairman, FBR, and a Chairman, FBR, and a Member nominated by Member nominated by him, may, on the him, may, on the application of an application of an aggrieved person, for aggrieved person, for reasons to be recorded reasons to be recorded in writing, and on being in writing, and on being satisfied that there is satisfied that there is an error in order or an error in order or decision may pass decision may pass such order may be such order may be deemed just and deemed just and equitable.] equitable.]

1212

AMENDMENTS MADE BY FINANCE ACT,2007 & 2008AMENDMENTS MADE BY FINANCE ACT,2007 & 2008

INCOME TAX RULES, INCOME TAX RULES, 2001 2001

SALES TAX SALES TAX RULES, 2006RULES, 2006

CUSTOMS CUSTOMS RULES,2001RULES,2001

FEDERAL FEDERAL EXCISE EXCISE

RULES, 2005RULES, 2005

RULE 231RULE 231 CHAPTER XCHAPTER X CHAPTER XVIICHAPTER XVII RULE 53RULE 53

1. “within ninety days of receipt 1. “within ninety days of receipt of such recommendations” of such recommendations” inserted by S.R.O.771(I)/2008 inserted by S.R.O.771(I)/2008 dated 21.07.2008 to sub-rule 15dated 21.07.2008 to sub-rule 15

(15). The Board, after (15). The Board, after examining the examining the recommendations of the recommendations of the Committee shall finally decide Committee shall finally decide the dispute or hardship and the dispute or hardship and make such orders as it may make such orders as it may deem fit for for the resolution of deem fit for for the resolution of the dispute or hardship [ within the dispute or hardship [ within ninety days of receipt of such ninety days of receipt of such recommendations] under recommendations] under intimation to the application, intimation to the application, Chairman of the Committee and Chairman of the Committee and the concerned Commissioner the concerned Commissioner

1313

Contd…Contd… Finance Act 2006 has made ADRC available where appeal has been filed. Finance Act 2006 has made ADRC available where appeal has been filed.

Supreme Court in its recent judgment decided that where criminal Supreme Court in its recent judgment decided that where criminal proceedings have been initiated, the ADR process would not be available. proceedings have been initiated, the ADR process would not be available.

Amendment made by FBR Act, 2007.Amendment made by FBR Act, 2007.

By the Finance Act 2005, Wealth Tax disputes of the erstwhile Wealth Tax By the Finance Act 2005, Wealth Tax disputes of the erstwhile Wealth Tax Laws have also been made a subject matter of ADR. Laws have also been made a subject matter of ADR.

Insertion of these related provisions in various tax laws will provide another Insertion of these related provisions in various tax laws will provide another venue to the taxpayers to have easy “access to justice” and to resolve venue to the taxpayers to have easy “access to justice” and to resolve disputes at private/public institutions, with no costs and delays. disputes at private/public institutions, with no costs and delays.

Pakistan is Pioneer and fore-runner in introducing the Alternate Dispute Pakistan is Pioneer and fore-runner in introducing the Alternate Dispute Resolution mechanism in the tax laws. Resolution mechanism in the tax laws.

The ADR coupled with reduction in the litigations (150,000 appeals were The ADR coupled with reduction in the litigations (150,000 appeals were finalized at the Commissioners and Collectors level, within span of three finalized at the Commissioners and Collectors level, within span of three years), and special bench of Supreme court deciding appeals, will have years), and special bench of Supreme court deciding appeals, will have impact on the litigation at High court and Tribunal level and will provide easy impact on the litigation at High court and Tribunal level and will provide easy access to justice. access to justice.

1414

Conted…Conted…

This strategy is a part of the Reforms Program which is This strategy is a part of the Reforms Program which is on the right track. FBR has now been declared as 98% on the right track. FBR has now been declared as 98% responsive in the direct tax matters (American Business responsive in the direct tax matters (American Business Council Survey). Council Survey).

The Alternate Dispute Resolution mechanism The Alternate Dispute Resolution mechanism supplements traditional mode of dispensation of justice. supplements traditional mode of dispensation of justice. The recommendations/decisions of the ADRC are non-The recommendations/decisions of the ADRC are non-binding on Parties or FBR. binding on Parties or FBR.

1515

Contd….Contd…. FBR may, in case of accepting the recommendations, FBR may, in case of accepting the recommendations,

pass a formal order/judgment and on payment of tax, all pass a formal order/judgment and on payment of tax, all the proceedings abate, and the orders/judgments made the proceedings abate, and the orders/judgments made are taken as modified to that extent. are taken as modified to that extent.

In case when the matter is subjudice before the Court In case when the matter is subjudice before the Court the recommendations and order/agreement are to be the recommendations and order/agreement are to be placed before the Court/Authority, which can then, pass placed before the Court/Authority, which can then, pass an appropriate order. an appropriate order.

The number of applications for the ADRC is growing. The number of applications for the ADRC is growing. Once the awareness level is raised, small taxpayers will Once the awareness level is raised, small taxpayers will

also prefer this mode, henceforth the number of appeals also prefer this mode, henceforth the number of appeals at the High Court and Tribunal level will decline. at the High Court and Tribunal level will decline.

1616

Contd….Contd…. The ADR works on the method of “discovery”; hence “knowing” The ADR works on the method of “discovery”; hence “knowing”

the weaknesses and strengths of both the parties to the dispute; the weaknesses and strengths of both the parties to the dispute; through mediation and/or negotiation, and settlement, as through mediation and/or negotiation, and settlement, as compared with adversarial litigation under the traditional system. compared with adversarial litigation under the traditional system.

  The ADR has been termed by some taxpayers as a breath of The ADR has been termed by some taxpayers as a breath of fresh air; a paradigm shift, and a window of opportunity to have fresh air; a paradigm shift, and a window of opportunity to have easy access to justice. easy access to justice.

  Through the ADR and the consequent reduction in the litigation; Through the ADR and the consequent reduction in the litigation; the taxpayer is facilitated to pay his tax dues with certainty, the taxpayer is facilitated to pay his tax dues with certainty, accuracy and in accordance with the law. accuracy and in accordance with the law.    

The ADR will go a long way to resolve the disputes and reduce The ADR will go a long way to resolve the disputes and reduce litigation. The credibility, impartiality and integrity of the ADRCs litigation. The credibility, impartiality and integrity of the ADRCs will provide impetus to the working of the ADR System.will provide impetus to the working of the ADR System.

1717

TAX WISE PROGRESS ADRC TAX WISE PROGRESS ADRC Total Total App. App. ReceivedReceived

App. App. Rejected/Rejected/WithdrawnWithdrawn

No. in No. in which which comm. comm. FormedFormed

No. in No. in which which Recom. Recom. ReceivedReceived

Recom. Recom. Not Not acceptedaccepted

Recom. Recom. ImplemeImplementednted

Cases Cases Pending Pending with ADR with ADR Comm.Comm.

Custom Custom (Jud-(Jud-ADRC)ADRC)

276276 6060 187187 141141 2929 8383 4646

Sales Tax Sales Tax (Jud/ (Jud/ ADRC)ADRC)

10081008 111111 897897 490490 9999 391391 409409

Income Income Tax Jud/ Tax Jud/ ADRC)ADRC)

286286 107107 178178 134134 8989 401401 4040

TOTALTOTAL 15701570 218218 12621262 765765 217217 515515 495495

90 App. 90 App. PendingPending

Recomm Received 765Recomm Received 765

Action Taken Action Taken 732732

Bal. Order to be Passed 33Bal. Order to be Passed 33

Approx Approx 40%40%

1818

DIFFICULTIES.DIFFICULTIES.

Generally old and complicated applications/cases are received Generally old and complicated applications/cases are received which are difficult to dispose off.which are difficult to dispose off.

The non-departmental members i.e Retd. Judges, Chartered The non-departmental members i.e Retd. Judges, Chartered Accountant, advocates and businessman are reluctant to join Accountant, advocates and businessman are reluctant to join committees. committees.

Chairman/Members of ADRC already on panel do not take keen Chairman/Members of ADRC already on panel do not take keen interest in disposing the cases as no remuneration is paid.interest in disposing the cases as no remuneration is paid.

Tax payers are not well informed about the ADR mechanism.Tax payers are not well informed about the ADR mechanism. Applicants do not file applicants properly.Applicants do not file applicants properly.

No time limit is observed either by the committee or the department.No time limit is observed either by the committee or the department.

ADRC appeals are accepted if covered under the prescribed rules ADRC appeals are accepted if covered under the prescribed rules and laws, except those which do not cover under the law.and laws, except those which do not cover under the law.