Deduction of income tax irks KPT

[Lahore_Real_Estate]

ISLAMABAD: The federal authorities have deducted Rs8.224 billion from the Karachi Port Trust as income tax for 2008 and 2009 at the end of the 2009-10 fiscal year.

KPT officials have opposed the move and termed it unprecedented. At a presentation in the Senate standing committee on ports and shipping in July this year, they said the KPT had never paid any tax. They accused the federal government of taking away the money ‘through manipulations’.

The officials said the Economic Coordination Committee of the cabinet had decided in 1995 that the KPT would not be subjected to income tax. The decision was not challenged by any successive government.

Even after the Finance Act 2007 removed corporations from the list of entities exempted from income tax, the KPT continued to get exemption certificates from the income tax department on the grounds that it was a local authority and, therefore, did not fall into the category of entities liable to pay income tax.

However, the Finance Act 2008 replaced ‘local authority’ with ‘local government’ and, as a result, the exemption previously granted to the local authorities is now available to local governments.

It was because of this change that the income tax department served a notice on KPT and asked it to file returns. In response, the KPT filed ‘nil’ returns.

Subsequently, the port authorities filed a constitutional petition in the Sindh High Court which directed them to contact the income tax authorities. The KPT filed appeals with the Appellate Commissioner and Appellate Tribunal which granted a stay order.

Despite this, the federal government deducted Rs8.224 billion as income tax for 2008 and 2009.

A KPT official told Dawn that because of shortage of funds the federal government had been eyeing financially viable organisations. “Throughout its history of 100 years, the KPT never paid any kind of taxes, leave alone income tax. The federal government, through manipulation, has transferred the funds, and we have moved the SHC for retrieving the money,” he said.

The official said that if the federal government wanted to tax the KPT it should also provide development grants to the trust. He added that the move would force the KPT to increase port charges.

Federal Ports and Shipping Minister Babar Ghauri, who belongs to the MQM, was not available for comments.

However, Minister of State for Ports and Shipping Nabil Ahmad Gabol of the PPP defended the tax deduction. He said the KPT was earning profits on a regular basis and there was nothing wrong in paying income tax.

“Everyone knows how the KPT is being mismanaged. Irregular recruitments and sheer misuse of funds are the order of the day at the trust. Although I am a state minister, I have not gone to my office for one year because of differences with my minister,” he added.