PPL pays Rs27.6 billion to settle tax demand

KARACHI: Pakistan Petroleum Limited (PPL) has paid and adjusted Rs27.609 billion in income tax demand created by the tax authorities for 15 years, the company said on Friday.

“The tax authorities have amended the assessments of the company for the tax years 2003 to 2018 raising an aggregate demand of Rs29.384 billion; which primarily relates to rate issue, depletion allowance, decommissioning cost and tax credits under sections 65A, 65B and 65E of the Income Tax Ordinance, 2001,” PPL said in an annual report. “The company has paid / adjusted an amount of Rs27.609 billion out of the said aggregate demand.”

The energy exploration and production company said the outstanding demand is related to tax years 2003 to 2009, which has been stayed by the Sindh High Court (SHC). The appeals in respect of assessments made by the tax authorities are pending at the Appellate Forum, SHC, Appellate Tribunal Inland Revenue, and Commissioner Inland Revenue (Appeals), it added.

PPL said it has sound grounds to defend the appeals on the issues.

“The company as a matter of prudence, has continued to provide for tax liabilities in respect of tax rates, depletion allowance and tax credits under sections 65A, 65B and 65E relating to Agreement Areas in the books of accounts,” it said. “In case the appeals relating to the said issues are decided in favour of the company, an amount of Rs20.187 billion (2018: Rs18.197 billion) will be credited to the profit or loss for that year.” The company said a court also granted an interim stay for tax demand of more than Rs700 million.

PPL acquired shares of MND Exploration and Production Limited – now PPL Europe E&P Limited and a tax resident of United Kingdom – from MND E&P A.S. – a tax resident of Czech Republic during the year ended June 30, 2013. The tax authorities, while amending the assessment of MND E&P A.S., raised demand of Rs700.650 million in respect of the transaction, the company said.

“After raising the said demand, the tax authorities have issued a show-cause notice to the company intending to recover the said amount by making the company representative of MND E&P A.S.,” it added. “Based on the advice of the legal counsel, the company has filed a suit before the honourable SHC challenging the impugned show-cause notice on the ground that the company does not have a business connection with MND E&P A.S. and therefore, it could not be treated as the representative of MND E&P A.S.” The court granted interim stay with the directions to tax authorities to maintain status quo in respect of the said notice.