KARACHI (June 29 2009): The State Bank of Pakistan (SBP) has detected and paid to FBR income tax amounting to Rs 110.56 million on commission of foreign funds managers (FFM) for technical services. Sources told Business Recorder on Saturday that the Department had raised demand of Rs 128 million in this account under section 2 (23), section 6 and section 152 (1) of Income Tax Ordinance 2001, saying that the SBP should deduct income tax on the gross amount of payments made to non-resident funds managers as service charges. According to the section 152(1), "every person paying an amount of royalty or fees for technical services to a non-resident person that is chargeable to tax under section 6 shall deduct tax from the gross amount paid at the rate specified under first schedule." SBP was earlier reluctant to pay income tax, saying that the income and other operations carried out by the central bank were completely exempted from all taxes, as the entire profit of the bank was already being transferred to federal government by the end of every fiscal year. Hence, the stance showed by the tax department was illegal. Sources said that SBP had not provided details pertaining to the FFM. Consequently, the department had charged income tax on the commission of eleven FFM for the period of July 1, 2006 to April 18, 2009 at the rate of 15 percent. Following long correspondence for about six months, the SBP has released Rs 110.56 million, and has adjusted the remaining amount of Rs 17.44 million as double taxation treaty, they said. They said the government of Pakistan has signed double taxation treaties with different countries. Consequently the income tax would be computed at the rate applied at source. They said the department has also asked the SBP to provide all foreign consultants\' records, to ascertain amount of income tax determined by the SBP is accordingly computed, and if not, the remaining amount would be collected.