On account of income tax default, the Federal Board of Revenue (FBR) has recovered Rs. 300 million from Karandaaz Pakistan. As per details, the attachment of the company’s bank accounts by FBR resulted in the recovery of income tax default. Karandaaz Pakistan is a company established to promote access to finance for small businesses through a commercially directed investment platform.
FBR made a successful recovery of income tax default from Karandaaz Pakistan
As per sources, the enforcement zone of large Taxpayers’ Office Islamabad has successfully made recovery of income tax default of Rs. 300 million from Karandaaz Pakistan. Sources also revealed that Karandaaz Pakistan submitted a request for recognition as an NPO (Non-profit organization) under section 2(36) of the ordinance to get exemption from payment of income tax.
However, the request was rejected by Commissioner Inland Revenue as Karandaaz Pakistan is operating as a commercial entity and the company is engaged in numerous commercial ventures and corporate investments and generates profit regularly. Hence, it is not entitled to a tax credit of 100% under section 100C of the Ordinance, which is only available to not-for-profit organizations. Furthermore, it was revealed that as per the financials of the company, expenditure amounting to Rs. 550 million was claimed on account of salaries, rent, travelling and utilities, even though the company barely employs 50-60 people.
The rejection of Karandaaz’s NPO status
The ruling regarding the rejection of the NPO status of Karandaaz further stated that merely facilitating or promoting activities such as financial inclusion, and disbursement of loans to SMEs through the auspices of agreements executed with other entities is not adequate to claim that purported charitable activities are being performed by the company itself. The Commissioner of Appeals dismissed Karandaaz’s appeal against the imposition of tax liability of Rs. 300 million on March 31, ruling that Karandaaz is merely a facilitator for promoting financial inclusion activities, rather than engaging in charitable activities as required by clause (e) of subsection (2) of section 100C of the Ordinance itself.
Source: Pro Pakistani