FBR Recovers Rs. 300 Million from Karandaaz on Account of Income Tax Default

The Federal Board of Revenue (FBR) has recovered Rs. 300 million from Karandaaz Pakistan on account of income tax default. It has been learnt through reliable sources that the enforcement zone of Large Taxpayers’ Office Islamabad has successfully made recovery of income tax default of Rs. 300 million from “Karandaaz Pakistan”, an Islamabad based company that claims to be an NGO. The recovery of income tax default was realized through the attachment of the company’s bank accounts by FBR. Sources 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, its application was rejected by the Commissioner Inland Revenue, on the grounds that Karandaaz Pakistan is operating as a commercial entity and the company is engaged in numerous commercial ventures and corporate investments and regularly earns a profit. Hence, as such the company is not entitled to a hundred percent tax credit under section 100C of the Ordinance, which is only available to not-for-profit organizations. On March 31, the appeal of Karandaaz against the imposition of tax liability amounting to Rs. 300 million was rejected by Commissioner Appeals, who held that Karandaaz is just a facilitator for promoting financial inclusion activities, however, it is not undertaking any charitable activities itself as required in terms of clause (e) of subsection (2) of section 100C of the Ordinance itself. Moreover, it was also observed that as per the financials of the company, expenditure amounting to Rs. 550 million was claimed on account of salaries, rent, travelling and utilities, while the company only employees 50-60 persons. The decision rejecting the NPO status of Karandaaz Pakistan 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.