Islamabad: The Supreme Court (SC) has decreed that the compensation amounts for delayed income tax refunds can only be claimed against the timeframe that the tax authorities initially allowed for their processing, a news source reported.
The petitioner had requested the court to direct the Federal Board of Revenue (FBR) to compensate him for delaying his refunds. The decision was announced by a three-member bench of the apex court.
According to the report, the government is expected to save at least PKR 40 billion – in view of the decision, if the existing due income tax refunds are taken into account for just the past year. However, some refunds have been outstanding for nearly a decade and this will save the government hundreds of millions.
According to the compensation mechanism under the Income Tax Ordinance, if the refund is delayed within three months of becoming due, the taxpayer is entitled to KIBOR+0.5% per annum in compensation.
Now, according to the Supreme Court’s decision, the compensation will become due three months after the date of refund order and not from date of deemed assessment under Section 120 of the Income Tax Ordinance.
