Sources told Business Recorder here on Saturday that the FBR has reportedly informed IRD-AJK that in view of a decision by the apex court of AJK, the FBR does not consider appropriate to give its opinion and therefore IRD AJK should implement the decision of Supreme Court of AJK. The apex court of AJK had announced decision in favor of IRD AJK.
The issue is related to the tax matter of Chinese contractor of Neelum Jhelum Hydropower Company (NJHPC). The contractor, falling within the jurisdiction of tax department of AJK, engaged in the construction of (NJHPC). The subject matter came into notice of management of WAPDA/NJHPC in June 2016 when Inland Revenue Department AJ&K (IRD) issued notice to recover the impugned tax from NJHPC accounts as Chinese contractor refused to pay the demanded tax (around Rs2 billion) to IRD-AJK.
The case was contested by the Chinese contractor in the court of AJK where finally they lost their appeal in Supreme Court AJK during 2017 against the decision of high court AJK. Though all tax related matters are the responsibility of the Chinese contractor under the contract yet the management of NJHPC/ WAPDA facilitated to all possible extents in arranging several meeting with AJK Council. In the final meeting held in the Federal Ministry of Kashmir Affairs and Gilgit-Baltistan Islamabad, it was mutually decided that the matter may be referred to FBR-Pakistan for the final opinion on the points of views of both parties ie Chinese contractor and IRD-AJK.
It was also decided that till the decision by the FBR Pakistan, NJHPC shall withhold the amount of Rs2 billion from the interim payments of contractor. If the decision comes in favor of the contractor, the payment shall be released to them otherwise on the demand the withheld tax amount shall be released to IRD-AJK by NJHPCC.
Reportedly, FBR Pakistan recently informed IRD-AJK that in view of a decision by the apex court of AJK, FBR does not consider appropriate to give its opinion and therefore IRD AJK should implement the decision of Supreme Court of AJK. After exhausting all possible forums available to contractor, IRD-AJK issued legal notice to the hydropower company during April 2018 for payment of withheld tax failing which legal action would be taken against NJHPC under the law. However NJHPC requested IRD-AJK to defer the recovery proceeding till June 15, 2018 to give time to Chinese contractor to settle their case with IRD AJK failing which the tax will be paid by NJHPCC. Since the apex court of AJK had announced decision to favor of IRD AJK therefore non-compliance could lead to contempt of court proceedings against management of NJHPCC as well, sources added.