You have forgot to start timer T1. What is in fact happening. You have timer T1 stopped and you mannualy trigger interrupt by setting timer 1 overflow flag TF1 in COUNTER routine. This flag should be left hardware to set at timer 1 overflow. It is cleared by hardware when interrupt processed. Timer mode can be set only once.

Hope that this helps.

P.S. Avoid calling the same function from main program and from interrupt. This could be a source of problems some times. (To avoid problems, you should make such functions reentrant)