Recovery of tax under section 140
Recovery of tax under section 140: Reduction of minimum threshold of payment of tax to prevent recovery through attachment under section 140 of the Income Tax Ordinance, 2001.
Section 140 of the Ordinance enables a Commissioner to recover outstanding tax due by a taxpayer from persons holding money on behalf of the taxpayer.
A proviso was introduced through the Finance Act, 2016 whereby Commissioner was restrained to issue notice for recovery of tax due during the pendency of First appeal u/s 127 of the Ordinance provided that payment of 25% of the disputed tax demand has been made by the taxpayer.
In order to alleviate the difficulties faced by taxpayers in payment of outstanding demand during pendency of First appeal the minimum threshold of payment of tax has been reduced from payment of 25% of the outstanding demand to payment of 10% of the outstanding demand.
Therefore, if a taxpayer makes payment of 10% of the outstanding demand pending adjudication before the Commissioner (Appeals), recovery under this section, shall not be made.
140. Recovery of tax from persons holding money on behalf of a taxpayer.— (1) For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –
(a) owing or who may owe money to the taxpayer; or
(b) holding or who may hold money for, or on account of the taxpayer;
(c) holding or who may hold money on account of some other person for payment to the taxpayer; or
(d) having authority of some other person to pay money to the taxpayer,
to pay to the Commissioner so much of the money as set out in the notice by the date set out in the notice
“Provided that the Commissioner shall not issue notice under this sub-section for recovery of any tax due from a taxpayer if the said taxpayer has filed an appeal under section 127 in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), subject to the condition that 4[ten] per cent of the said amount of tax due has been paid by the taxpayer.”
(2) Subject to sub-section (3), the amount set out in a notice under sub-section (1) —
(a) where the amount of the money is equal to or less than the amount of tax due by the taxpayer, shall not exceed the amount of the money; or
(b) in any other case, shall be so much of the money as is sufficient to pay the amount of tax due by the taxpayer.
(3) Where a person is liable to make a series of payments (such as salary) to a taxpayer, a notice under sub-section (1) may specify an amount to be paid out of each payment until the amount of tax due by the taxpayer has been paid.
(4) The date for payment specified in a notice under sub-section (1) shall not be a date before the money becomes payable to the taxpayer or held on the taxpayer’s behalf.
(5) The provisions of sections 160, 161, 162 and 163, so far as may be, shall apply to an amount due under this section as if the amount were required to be deducted from a payment under Division III of Part V of this Chapter.
(6) Any person who has paid any amount in compliance with a notice under sub-section (1) shall be treated as having paid such amount under the authority of the taxpayer and the receipt of the Commissioner constitutes a good and sufficient discharge of the liability of such person to the taxpayer to the extent of the amount referred to in such receipt.
(10) In this section, “person” includes any Court, Tribunal or any other authority.