Presidency officials did not pay Rs 6.9m tax on ‘Eidi’

0
122
  • Audit 2013-2014 observes President’s Secretariat management did not deduct Rs 6.960m as income tax from 61 officers while making payment in cash from Contingent Grant
  • Presidency says there’s no mechanism for income tax deduction at sources, notes audit observations for future compliance
  • DAC February meeting decides that income tax be recovered from officers as pointed out by audit

Audit report for year 2013-14 observes that not only the top officers at the Presidency made away with legal payment” in the name of “Eidi” out of the Contingent Grant but also refrained from paying income tax totaling Rs 6.960 million on the amount withdrawn from the exchequer.

Section 149 (1) of the Income Tax Ordinance, 2001 states that every employer paying salary to an employee shall, at the time of payment, deduct tax from the amount paid at the employee’s average rate of tax computed at the rates specified in Division I of Part I of the First Schedule on the estimated income of the employee chargeable under the head “Salary” for the tax year in which the payment is made.

The First Schedule, Part I, Division I to Section 12 of Income Tax Ordinance, 2001 provides the rates of income tax for individuals, including salaried persons.

The Islamabad AGPR deducted income tax from the monthly salaries of the officers of President’s Secretariat (Public and Personal) during 2012-13.

AUDIT OBSERVATIONS:

According to the audit observations, the management of President’s Secretariat paid four additional gross salaries in cash from the Contingent Grant during 2012-13 without deducting income tax at source.

The audit observed that the management of President’s Secretariat did not deduct an amount of Rs 6.960 million as Income Tax from 61 officers while making payment in cash from the Contingent Grant.

Audit is of the view that failure to deduct Income Tax deprived the government of its due receipts.

PRESIDENCY RESPONDS:

Responding to the allegations, the management replied that the president had been granting ex-gratia to the employees of President’s Secretariat for past many years as “Inaam” for the services rendered by them beyond their normal duties at odd hours even on holidays. It was never objected at any forum that income tax should be deducted from the recipients of the ex-gratia, the response added.

Further, the ex-gratia payment was not granted as “honorarium” or any other regular head of account, and was paid from the President’s Contingent Grant, the management claimed.

The President’s Secretariat had no mechanism to deduct income tax at source, however, observation had been noted for future compliance, the reply added.

The recipients of the ex-gratia may show the amount so received in their annual income tax returns.

The President’s Secretariat in their revised reply dated January 2, 2014 reiterated that they had no mechanism to deduct income tax at source, which would be devised in consultation with AGPR and FBR.

REPLY NOT ACCEPTED BY AUDIT:

The presidency’s reply was not accepted because the payment was made in cash by the President’s Secretariat and the Drawing and Disbursing Officer was bound under Section 149 of Income Tax Ordinance, 2001 to deduct the Income Tax and deposit it in the treasury and be personally liable under Section 161 of Income Tax Ordinance, 2001 for non-deduction of tax.

The annual tax returns of the officers were verified by the management, and were thus aware that income tax had not been deducted.

Moreover, the DAC meeting held on January 8, 2014 under the chairmanship of President’s Secretariat (Public) additional secretary remained inconclusive.

On the request of the principal accounting officer (PAO), another DAC meeting was held on February 13, 2014 in which it was decided that income tax would be recovered from officers concerned as pointed out by audit after reconciliation of amounts with the audit team while audit would be kept posted about progress.

Audit recommends that the income tax amount should be recovered from the officers and deposited into government treasury.