According to the FTO, the workers’ welfare fund is hardly a tax covered by the Income Tax Act, 2001, nor does it belong in the categories of “other taxes” such as sales tax and customs as it is a non-tax charge.
Consequently, the adjustment of non-tax cess (i.e., WWF) of an established tax refund amounts to blatant discrimination and is therefore unconstitutional.
The Workers Welfare Fund (WWF) modification against the authorized income tax return amount was found unconstitutional by the FTO while considering the matter of M/s Wah Nobel Chemicals Limited.
WWF is neither a tax covered by the Income Tax Ordinance, 2001, nor does it fall within the category of “other taxes,” such as ST/FED/Customs, as FTO noted in its decision. Tax officials are the only ones who are able to collect this non-tax charge. As a result, the adjustment of a decided tax refund against a non-tax cess, such as WWF, is an unlawful and discriminatory deviation from the norm.
According to C. No. 1(10) ST-LP & E/2020 66012-R dated May 25, 2021, all field formations were banned from adjusting liabilities of WWF and WPPF against refunds of Income Tax. The adjustment order issued by LTO goes against the advice of FBR.
To this end, the Federal Tax Office (FTO) instructed the Federal Bureau of Revenue (FBR) to inform the Centralized Income Tax Refund Office (CITRO) Chief to promptly transfer refund amounts for Tax Years 2013 to 2016 to the taxpayer’s account under an order issued on January 31, 2022.
Refund claims for 2018 and 2019 must be handled in line with the law and a proper hearing must be given to the Commissioner in charge. Please figure out and arrange additional payment for delayed refunds under Section 171(1) of the Ordinance pertaining to the years 2013, 2014, 2015, 2016, and 2020, as well as any future TYs. Under Section 170(4) of the Income Tax Act, ask the Commissioner of Inland Revenue to review the order from March 18, 2022, and the wrong adjustment that was made to WWF’s refund it.
The FBR gives more instructions, such as the fact that the officer who made the wrong change must be counseled after giving an explanation.