Telenor refuses to pay $39.5 million advance tax, takes matter to court

Telenor Pakistan has refused to pay an advance tax of $39.5 million for the 4G spectrum that it was awarded earlier this month. In this regard, Telenor has taken the matter to court terming this advanced tax as unlawful. A petition has been filed in the Islamabad High Court by the telco against the government of Pakistan, Pakistan Telecommunication Authority (PTA), and the Federal Bureau of Revenue (FBR).

Telenor was declared the clear winner of the 850 MHz 4G spectrum at a base price of $395 million. Telenor recently made half the payment for the 4G spectrum while the rest of the amount will be given in installments set by the PTA. However, the spectrum hasn’t been handed over to Telenor for use because they refused to pay a withholding tax which is 10% of the base price. PTA, in this case, is acting as a withholding agent of the government and falls under the jurisdiction of Large Taxpayer Unit (LTU) Islamabad. LTU had obligated PTA to recover any taxes before finalization of the transaction.

Telenor has made their case by saying that the FBR is misinterpreting the law. Telenor submitted to the court that advance tax under the section 236A of the Income Tax Ordinance 2001 is payable where there is a sale by public auction or auction by tender of any property or goods. Their petition went on to say that for a certain transaction to be classified as sale it has to fulfill a criteria. There must be a property, an owner of property, a person willing to buy property, an agreement to transfer title and an actual transfer of title in the property.

Whereas the case of awarding Telenor the 4G spectrum does not fulfill the above criteria and cannot be called a sale. A radio spectrum does not hold any proprietary qualities. The government does not own the radio spectrum but merely has the right to maintain control over its use under the laws of Pakistan. Hence the 4G spectrum does not qualify as sale and renders the withholding tax as unlawful.

Islamabad High Court has issued notices to the FBR to submit their comments and next date of hearing has been fixed for June 29, 2016.

Source – ProPakistani