Professional Documents
Culture Documents
Dated:-
Member (Accounting),
Federal Board of Revenue,
Islamabad.
Subject:-
Please refer to Federal Board of Revenues letter No. C.No.3(9)S(IROPERATIONS)/2016/17832-R dated: 11.02.2016 on the above noted subject.
Following Audit Observations were made by the Audit Authorities in the subject
mentioned case.
Para/
PDP #
Tax Year
Loss
of
revenue
pointed out
Audit Observations
1.1/244
2001-02
32,243,730
//
//
1.3/257
3.4/254
4.1/245
2002-03
2003
2003
2003
1997-98
63,280,035
56,763,472
61,499,074
55,349,170
81,679,059
Questions
Whether Audit
correct?
Observation is
Answers
No
The Audit Observation whether exchange gain/loss is to be
treated as other income as held by External Audit
Authorities or is part of business income/ (loss as carried
forward) by the taxpayer. Brief such of the case are such that
the External Audit Authorities treated the exchange gain as
declared by the taxpayers as part of other income and proposed
to assess as a separate block. The department initially
contested the audit observation on the ground that in another
similar case of M/s AES Lal Pir (Pvt) Ltd the similar audit
observation was made and the department proceeded to
finalize the same as proposed by Audit. However, the said
treatment could neither with stand the said treatment the test of
the first appeal nor that or ATIR and was ultimately deleted.
The Para in the case of M/s Hyundai Engineering &
Construction Co, Ltd was contested as under:
CONTESTED
The unrealized foreign exchange gain / loss relates to assets
and liabilities of the taxpayer which were receivable / payable
in foreign currency. In case of fluctuation in PKR-USD parity,
the loss or gain is recognized as the case may be on the basis
of year-end translation of assets / liabilities in PKR. This
treatment is in line with the financial reporting framework
envisaged under the corporate laws of Pakistan.
For taxation purpose, the foreign exchange gain or loss is
recognized at the extent it relates to a payment made or
received by the person. The gain or loss resulting from yearend translation of assets is classified as Notional Income
which does not attracts the incident of taxation.
b)
c)
whether
has taken
of revenue?
department
responsibility
on
the
officers/officials involved?
Names of the officers/officials
involved and disciplinary action
e)
be
explanation/clarification
before PAC.
As regard the Para 4.1/245 excess determination of refund was also contested. During DAC meeting
on 19/04/2010 reply of the department was under examination with Audit Authorities (Copy enclosed).