Treatment of taxes under sections 158 160 and 166 to 169
There are various sections in the Ordinance that deal with treatment of tax deducted or collected on behalf of the State. These are discussed and summarized as under:
Time of deduction of tax
In the case of deduction under section 151
At the time the amount is paid or credited to the account of recipient whichever is earlier.
In other cases at the time the amount is actually paid.
It means that in all cases except for profit on debt, tax is to be deducted when actual payment is made.
Payment of tax collected or deducted
Priority of tax collected or deducted
(a) held by the person in trust for the Government; and
(b) not subject to attachment in respect of any debt or liability of the person.
In the event of liquidation or bankruptcy of a person who has collected tax, the amount collected or deducted shall not form part of the estate of the person in liquidation or bankruptcy and the Commissioner shall have the first claim for that amount before any distribution of property is made.
Every amount that a person is required to deduct from a payment under any provision of this Ordinance will be –
- a first charge on the payment; and
- deducted prior to any other amount that the person may be required to deduct from the payment by virtue of an order of any Court or under any other law.
- Where an amount of tax has been collected from a person under Division II of Part V of Chapter X or deducted from a payment made to a person under Division III of the same chapter; or Chapter XII, the person is entitled to a tax credit for that tax in computing the tax due by the person on the taxable income of the person for the tax year in which the tax was collected or deducted.
- However, no tax credit is to be allowed for any tax collected or deducted that is a final tax, under clauses (a). (b) and (d) of sub-section (1) of section 151, sub-section (1B) of section 152, sub-section (6) of section 153, sub-section (4) of section 154, sub-section (3) of section 156. sub-section (2) of section 156A, section 233, clauses (a) and (b) of sub-section (1) of section 233A or sub-section (5) of section 234.
- A tax credit or part of a tax credit allowed for a tax year that is not able to be credited under sub-section (3) of section 4 of section 168 for the year will have to be refunded to the taxpayer in accordance with section 170.
- Tax collected or deducted as a final tax
- Tax collected or deducted as a final tax.— (1) This section shall apply where—
- (a) the advance tax required to be collected or paid is a final tax under sub-section (7) of section 148, 148A or section 234A on the income to which it relates; or
- (b) the tax required to be deducted is a final tax under sub-section (3) of section 151, sub-section (1B) or sub-section (1BB) of section 152, sub-section (3) of section 153, sub-section (1AAA) of section 152, sub-section (4) of section 154, sub-section (3) of section 156, sub-section (1) and (2) of section 156A or sub-section (3) of section 233 on the income from which it was deductible.
- (2) Where this section applies—
- (a) the income shall not be chargeable to tax under any head of income in computing the taxable income of the person;
- (b) no deduction shall be allowable under this Ordinance for any expenditure incurred in deriving the income;
- (c) the amount of the income shall not be reduced by—
- (i) any deductible allowance under Part IX of Chapter or
- (ii) the set off of any loss:
- (d) the tax deducted shall not be reduced by any tax credit allowed under this Ordinance;
- (e) there shall be no refund of the tax collected or deducted unless the tax so collected or deducted is in excess of the amount for which the taxpayer is chargeable under this Ordinance; and
- (f) tax deductible has not been deducted, or short deducted, the said non-deduction or short deduction may be recovered under section 162, and all the provisions of this Ordinance shall apply accordingly.
- Where all the income derived by a person in a tax year is subject to final taxation under the provisions referred to in sub-section (1) or under sections 5, 6 and 7, and assessment shall be treated to have been made under section 120 and the person shall not be required to furnish a return of income under section 114 for the year.
- — The expression, “an assessment shall be treated to have been made under section 120” means,—
- (a) the Commissioner shall be taken to have made an assessment of income for that tax year, and the tax due thereon equal to those respective amounts specified in the return or statement under sub-section (4) of section 115; and
- (b) the return or the statement under sub-section (4) of section 115 shall be taken for all purposes of this Ordinance to be an assessment order.
- (4) Where the tax collected or deducted is final tax under any provision of the Ordinance and separate rates for filer and non-filer have been prescribed for the said tax, the final tax shall be the tax rate for filer and the excess tax deducted or collected on account of higher rate of non-filer shall be adjustable in the return filed for the relevant tax year.