ISLAMABAD: The Large Taxpayers Unit (LTU), Karachi, requested ARY Communications (ARY) to pay Rs992 million as taxes for 2013 claiming that the media house had evaded taxes through "misrepresentation, concealment and misuse of exemptions" .
The alleged tax evasion for 2013 came to light at a time when FYY already questioned the findings of the LTU in the Income Tax (Appeals), Zone-I, Karachi.
LTU Chief Commissioner Karachi said Sunrise On Monday the tax department issues orders when it finds some irregularities in the returns and documents submitted by taxpayers. "We have issued the order after complying with all legal formalities," he said, adding that he was not supposed to disclose taxpayer details in public.
According to him, the case was now in the appeal stage since the taxpayer had questioned the LTU findings. "I can't comment on that."
On June 30 of this year, the LTU Karachi issued a 82-page order that determined the total income of ARY at Rs2,804 billion and that the television network had to pay Rs991.94m to the treasury.
ARY was requested to make the payment before July 30. Instead, the network challenged the order on Income Tax (Appeals), Zone-I, Karachi.
According to the Large Taxpayers Unit, ARY Digital FZLLC Networks, a non-resident company, manages a satellite television channel. The company owns 45.5pc shares in ARY Communications. At the same time, ARY Digital FZLLC Networks obtains a certificate of exemption for the non-deduction of taxes from payments on account of the sale of airtime to ARY Communications.
ARY Communications is a resident company and buys airtime in the form of slots from its parent partner, ARY Digital FZLLC Networks, Dubai. Another company, ARY Films and TV Production Private Ltd, a wholly owned subsidiary of ARY Communications, is a resident company.
According to the order, the three companies are in a tripartite agreement for the purchase of Pakistan production and the sale to ARY Communications. This agreement allows the three parties to settle their outstanding balances at the end of each financial year.
The tripartite agreement was used to allow the three companies to settle their accounts receivable and payable in Pakistan on behalf of ARY Digital FZLLC Networks. The tax assessment of the group showed that it had obtained exemptions by stating that it exported locally produced content to the offshore entity "to evade local taxes," said the tax authority. "The same content was subsequently purchased from the same entity in Dubai and then broadcast on television in Pakistan," he added.
A spokesman for the Federal Revenue Board said Sunrise that no new fiscal measures were taken against ARY Communications. The issue is now pending before the commissioner. "Every taxpayer has the right to challenge a decision on appeal," the spokesman said.
According to the LTU order, ARY Communications has submitted an amendment to the tax return for 2013. But during the examination of the tax record of the ARY communication, the amended order was deemed "erroneous to the extent that it harmed the interest of revenue on the subject of airtime transfer pricing / transmission cost. "
After identifying irregularities, on April 29, a justified cause notice was issued to ARY Communications. The ARY submitted its first response on May 13, accusing the tax agency of carrying out the procedures on the basis of "whims, assumptions and conjectures."
Posted on Dawn, September 3, 2019