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Official Citation: 2025 IHC 384
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2025
Decision Date: 2025-06-11
Parties: Pakistan Mobile Communications Limited (PMCL) vs The Commissioner Inland Revenue (Zone-IV) Large Taxpayers Unit, Islamabad and others
Ruling Summary: This decision was rendered by the Islamabad High Court on 2025-06-11, officially reported as 2025 IHC 384. In this matter between Pakistan Mobile Communications Limited (PMCL) and The Commissioner Inland Revenue (Zone-IV) Large Taxpayers Unit, Islamabad and others, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2025IHC384
Court Name: Islamabad High Court Judge(s): Babar Sattar, Saman Rafat Imtiaz Title:Pakistan Mobile Communications Limited (PMCL) vs The Commissioner
Inland Revenue (Zone-IV) Large Taxpayers Unit, Islamabad and others Case No.: I.T.R No. 32 of 2020 Date of Judgment:2025-06-11 Reported As: 2025 IHC 384 Result: Order Accordingly Judgment
JUDGEMENT BABAR SATTAR, J.- The applicant has impugned a judgment rendered by the Appellate Tribunal Inland Revenue ("Tribunal") dated 22.09.2020, pursuant to which the applicant's appeal against Order-in-Appeal No. 248 of 2020 dated 03.02.2020, was dismissed. The questions framed for our consideration were recorded in order dated 22.10.2020, as follows: i. Whether on facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue has erred in law in upholding that the Commissioner had the jurisdiction to pass the amended assessment order as the Commissioner retains concurrent powers of amendment of assessment under S. 122(5A) and of passing an amended assessment order under S. 122(6), despite delegation of both powers by him to the Additional Commissioner? ii. Whether on facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue erred in law in failing to remand the question of jurisdiction to the Commissioner (Appeals-I)? iii. Whether on facts and in the circumstances of the case the Appellate Tribunal Inland Revenue has blatantly erred in holding that all shares of the applicant are held by a non-resident company, International Wireless Communications Pakistan Limited (IWCPL), and in turn upholding that the applicant does not fulfill the requirement of S.97(1)(a) of the transaction to fall within the ambit of S.97 of the Income Tax Ordinance, 2001? iv. Whether on facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue has erred in law in relying upon the alleged admission of the applicant before the Commissioner
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(Appeals-I) and failing to decide the matter in terms of the written position on record to the contrary before the fora below and also before the Tribunal in writing? v. Whether on facts and in the circumstances of the case the Appellate Tribunal Inland Revenue has erred in holding that the provisions of S. 97(4)(b) of the Ordinance are applicable in this case? vi. Whether on facts and in the circumstances of the case the Appellate Tribunal Inland Revenue has erred in law in failing to decide the following ground of appeal: "Section 148 (7) Applies Only to Income from Imports 3.4 The Learned CIR Appeals has erred in upholding the learned Commissioner s contention that the imports made by the Appellate Company fall within the ambit of Final Tax Regime under section 148 (7) of the Ordinance." vii. Whether on the facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue has erred in law in failing to appreciate that the applicant has not earned any income on import of equipment installed and used by the Applicant to provide Telecommunication Services to its customers and that the tax deducted at the import stage is final only on income of the importer arising from imports in terms of S. 148(7)? viii. Whether on facts and in the circumstances of the case the Appellate Tribunal Inland Revenue has erred in law in holding that the provision of telecommunication services by the applicant does not fall within the ambit of Industrial Undertaking? ix. Whether on facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue has erred in law in failing to remand to the Commissioner the factual determination as to whether the business of the applicant falls within the ambit of Industrial Undertaking as defined in Section 2(29C) of the Income Tax Ordinance, 2001 and thus depriving the applicant of the statutory fora below? x. Whether on facts and in the circumstances of the case, the Appellate Tribunal Inland Revenue has erred in law in failing to decide the following ground of appeal: Inapplicability of Section 113C "3.2 The Learned CIR Appeals has erred in upholding the learned Commissioner s contention that the accounting gain received by the Appellant Company from the disposal of assets to its subsidiary does not fall within the ambit of "gain or loss" which "shall not be taken to arise" under Section 97 of the ordinance and in upholding his decision to subject the transaction to tax". xi. Whether on facts and in the circumstances of the case the order passed by the Appellate Tribunal Inland Revenue despite knowledge of status quo order in Writ Petition No. 480/2020 dated 14.02.2020 is void? xii. Whether on facts and in the circumstances of the case the Appellate Tribunal Inland Revenue has erred in law in failing to hold that in case earlier tax years of the applicant currently under litigation get decided in favour of the applicant any benefit ensuing therefrom should be available for the tax year 2018 to the applicant as consequential relief? 2. The manner in which the aforementioned questions have been framed creates an overlap amongst them. The questions of law to be addressed by us can be simplified as follows. i. Whether the reassessment order suffered from jurisdictional defect as it had been passed by Commissioner Inland Revenue, even though power for purposes of section 122(5A) had been delegated to the Additional Commissioner? ii. Whether the applicant was entitled to the benefit of section 97(1) of the Income Tax Ordinance ("ITO") by virtue of the transaction undertaken by Pakistan Mobile Communication Limited ("PMCL") being a transaction for disposal of assets between wholly owned companies? iii. Whether a demand in view of alternative corporate tax in terms of section 113C of the ITO could be raised against PMCL in the event that its asset disposal transaction qualified for the benefit of section 97(1) of the ITO?
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iv. iv. Whether PMCL qualified as an industrial undertaking for purposes of section 2(29C) of the ITO and could be treated as such for purposes of section 148(7) of the ITO? v. Whether the Tribunal ought to have passed any consequential directions in relation to amortization and/or depreciation etc. sought by PMCL in relation to previous tax years? 3. The matter was heard at length and was reserved for judgment. It was then re-fixed for further arguments and assistance in relation to questions framed by the Court by order dated 07.03.2025. 4. Sardar Ahmed Jamal Sukhera ASC, learned counsel for the applicant, and Ms. Asma Hamid ASC, learned counsel for the tax department, made extensive arguments, which were documented and filed in the form of written submissions as well. For the assistance of the Court, they also submitted almost two dozen paper books comprising case law and legal literature on the questions to be adjudicated, including the question of interpretation of fiscal statutes from Pakistan and other jurisdictions. In order not to burden this judgment, the arguments will be dealt with in relation to each question being addressed, to the extent that engaging with such argument is essential for the conclusions drawn. Otherwise, for purpose of record, written arguments of their parties are appended to their pleadings and can be taken note of, if required. Can the Commissioner concurrently exercise the power under section 122(5A) of the ITO, which has also been delegated to the Additional Commissioner? 5. Mr. Sukhera submitted that section 211(2) of the ITO provided that the exercise of a power by an Officer of Inland Revenue would not prevent the exercise of such power by the Commissioner. This provision was misinterpreted by the Tribunal to hold that despite delegation of power by the Commissioner, he retained concurrent power to exercise the delegated power. He submitted that section 211(2) of the ITO did not deal with delegated powers, but was a provision introduced in the context of the power of the Federal Board of Revenue ("FBR") or the Chief Commissioner Inland Revenue to assign powers of the Commissioner to any officer of Inland Revenue in terms of section 209(2) of the ITO. Even to the extent that section 211(2) of the ITO was relatable to delegated power, it was only relevant where a delegated power had been exercised by an officer of Inland Revenue. But where power had been delegated to an Additional Commissioner, the Commissioner did not retain concurrent power, as by virtue of the delegation the function and power essentially stood vertically transferred. He relied on Muhammad Rafiq vs. State (2019 SCMR 846) for the proposition that the principles of contract law in relation to delegation of power between a principal and an agent were not applicable when it came to delegation of powers within a statutory scheme. The power to amend an assessm ent order in terms of section 122(5A) could only be exercised by the delegatee (i.e. Additional Commissioner), and not by the Commissioner himself, as had been done in the instant case. The reassessm ent order was, therefore, coram non judice. 6. Ms. Asma Hamid, submitted on behalf of tax department that a combined reading of sections 209, 210 and 211 clearly established that the purpose of delegation of power to an Additional Commissioner and/or Officers of Inland Revenue was administrative convenience. The scheme of the ITO was now well understood. By virtue of a legal fiction, the assessment orders under the ITO were deemed to have been passed by the Commissioner. Section 209 through 211 granted statutory authority to delegate the power of the Commissioner to Officers of Inland Revenue. Such delegation, however, did not mean that the Commissioner was bereft of the power vested in him under provisions of the ITO. Section 211(2) clarified that the Commissioner could continue to exercise delegated power, as had correctly been held by the Tribunal. 7. Since the enactment of the ITO, one of the most litigated aspects of the said law has been its scheme of delegation. A tax return filed by a taxpayer in terms of section 114 of the ITO is deemed to be an assessm ent made by the Commissioner by virtue of the legal fiction incorporated within section 120 of the ITO. Section 209(2) vests authority in the FBR or the Chief Commissioner to "confer upon or assign any officer of Inland Revenue all or any of the powers and functions conferred
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upon or assigned to the Commissioner, under this Ordinance..." Section 209(8) provides that, "Notwithstanding anything contained in the section, every Commissioner shall have all the powers conferred by, or under, this Ordinance on him in respect of any income arising within the area assigned to him." Section 210(1) authorizes the Commissioner to "delegate to any Officer of Inland Revenue, subordinate to the Commissioner all or any of the powers or functions conferred upon or assigned to the Commissioner under this Ordinance, other than the power of delegation." Section 210(1A) provides that the powers of assessment under section 122(5A) cannot be delegated to an officer below the rank of Additional Commissioner Inland Revenue. Section 211(1) clarifies that where by virtue of an order under section 210, power has been exercised by an Officer of Inland Revenue, such power shall be deemed to have been exercised by the Commissioner. Section 211(2) then provides that, "[t]he exercise of a power, or the performance of a function, of the Commissioner by an Officer of Inland Revenue shall not prevent the exercise of the power, or the performance of the function, by the Commissioner." The language of section 211(2) does not limit the scope of the clarification provided therein in any way or link it either to the power conferred on an Officer of Inland Revenue in terms of section 209(2) or pursuant to section 210(1) of the ITO. The broader contention of the applicant has been that a statutory power, once delegated, can no longer be exercised by the delegator. It can only be exercised by the delegatee, unless the order of delegation is withdrawn and the power is resumed by the delegator. 8. Mr. Sukhera while making such argument cited Muhammad Rafiq v. State (2019 SCMR 846), which had cited an excerpt from Administrative Law (Eleventh Edition) by H.W.R. Wade and C. F. Forsyth implying that where public authority delegates its power, it may not retain the power to act concurrently in view of controversy surrounding such question within the jurisprudence produced in UK. In Muhammad Rafiq the question before the Supreme Court was whether a reference filed by Director General NAB was competent where the authority to file such reference had been delegated by Chairman NAB, but the office of Chairman NAB was vacant at the time when the reference was filed. The Supreme Court distinguished the nature of delegation under agency law with that under statutory provisions and cited the following text from the Administrative Law: "although there are similarities between the two concepts, the differences should be noted an authorised act of an agent may be generally ratified by the principal but the unauthorised act of the delegate, in the absence of statutory authority, cannot be ratified by the delegator ... in appointing an agent a principal does not divest himself of his powers in the same matter, but whether the public authority that delegates its powers retains the power to act concurrently with its delegate is a matter of controversy" 9. The Supreme Court cited this in order to create a distinction between the principles of delegation as applicable in the context of contract law versus those applicable in administrative law. It held that "restricting the validity of the said delegated authority to the Director General, NAB to file a reference till the Chairman, NAB holds office would be reading beyond the letter of the law." Dicta from Al-Jehad Trust vs. Federation of Pakistan (PLD 2011 SC 811) was relied upon wherein it was held that, "Under the law of contract a delegation comes to an end when the delegator vanishes from the scene and an agent loses his authority to act on behalf of his principal when such principal is removed from the picture" but "the delegation of powers involved in the present case is a statutory delegation which, in an appropriate case, can survive a vacancy in the office of the delegator." It was in this context that the Supreme Court held in Muhammed Rafiq that the authority delegated to a delegatee survived a vacancy in the office of the delegator, while clarifying that such survival of authority can otherwise not be contemplated in terms of agency law. The Supreme Court noted that while construing the statutory authority to delegate, the legislative purpose of administrative convenience must also be borne in mind. It held that, "[T]here is nothing in the language of the statute which requires the conclusion that a delegation should
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cease to operate in such an event [i.e. the Office of Chairman NAB becoming vacant]. And convenience of administration suggests that a statutory power to delegate should not be construed so as to produce such an inconvenient result unless that construction is compelled by clear and unambiguous language, language which is nowhere to be found in the provisions now under consideration." 10. The oft-cited English precedent in relation to the scope of delegation is Huth vs. Clarke [25, QBD 391], in which Coleridge, C.J., observed that, "Delegation does not imply denudation, and to my mind the very expression implies that the powers which are the subject of the delegation are always, or as a rule, subject to resumption. Unless controlled by statute, or by particular words, any body, which entrusts another with the exercise of a power belonging to itself, has from time to time the right to resume the power which it has delegated." Wills, J., in his opinion, observed that, "The word 'delegation; as generally used, in my opinion does not imply any parting with the power or authority which is the subject of the delegation, but merely implies that the person to whom the power is delegated has authority to do that which the person delegating may do himself." In Gordon, Dadds & Co v. Morris [1945] 2 All E.R. 616 Chancellery Division, the principle laid down in Huth was reiterated. The question of whether delegation of authority amounted to denudation of the powers of the delegator came before the Sindh High Court in Abdullah vs. Crown (PLD 1955 Sindh 384), in which it was held that, "We therefore have no hesitation to come to the conclusion that the delegation of powers does not amount to renunciation or abdication of powers on the part of the delegator. It is inherent in every delegation that the delegator can at any time revoke the delegation and the power reverts to him." The same question was then considered by the Lahore High Court in Nasim Fatima vs. Governor of West Pakistan (PLD 1967 Lahore 103), where while considering the law laid down in Daya Shankar Malaviya v. Emperor (AIR 1948 All. 321), Huth and Abdullah, it held that by delegating powers under provisions of the Security of Pakistan Act, 1952, neither the Central Government nor the Provincial Government was denuded of the power delegated to the Chief Commissioner. 11. It has also been settled in our jurisdiction that once delegated power has been exercised, it stands exhausted and the delegator cannot exercise the same in a different manner. It was held by the Supreme Court in W.P. Land Commission vs. Fatehullah (PLD 1971 SC 393) that, "[T]he ordinary incident of delegated authority is that if once it is competently exercised by the delegatee, it gets exhausted and there is no power left in the delegator to exercise the same authority in a different manner. If both were allowed to exercise their co-ordinate powers independently of each other simultaneously or successively, the possibility of a conflict between the two, leading to an insoluble contradiction is unavoidable." It was similarly held in Majid vs. Qutb-ud-Din (1982 SCMR 212) that, "[T]he revisional powers having been once exercised by the Additional Settlement Commissioner and exhausted, the other, delegatee, namely, the Settlement Commissioner could not exercise this power..." It was held in Haji Muhammad Ismail vs. Government of Punjab (1987 MLD 2457) that in the context of delegation, "[I]t is one of the basic principles that the delegators by delegating their powers do not get denuded of those powers... The powers vested in a delegator by a statute can always be exercised by it unless on being already exercised by the delegatee they stand exhausted." It was held in Tanvir Ahmed Khan vs. Deputy Commissioner, Islamabad (1992 MLD 2146) that, "After delegation, the delegator is not divested of his powers or authority under the law." This body of case law was then relied upon in Dilshad Kausar vs. Azad Jammu and Kashmir Government (2005 PLC (CS) 1048) and it was concluded that, "By now it is well-settled law that a delegator by delegating his powers does not get denuded of those powers. Nor the delegation implies a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself."
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12. There are some English precedents which suggest that delegation is tantamount to temporary divestment of the powers by the delegator (see for example Blackpool Corporation v. Locker [1948] 1 KB 349 and Department for Environment, Food and Rural Affairs v. Robertson and others [2004] ICR 1289; [2005] EWCA Civ 138). Locker was cited before the Sindh High Court in Abdullah. It did not impress the Sindh High Court, which held that delegation did not constitute denudation of power while relying on Huth, as has already been discussed above. The reasoning from Abdullah has since prevailed in Pakistan. 13. The scheme of ITO wherein by virtue of a legal fiction any authority exercised in terms of section 122(5A) of the ITO is deemed to be a decision rendered by the Commissioner, was endorsed most recently in Allied Bank Limited vs. CIR (2023 SCMR 1166). In view of the case law cited above, the general principle that emerges is that delegation means the entrustment of a power or responsibility by a person who is vested with such power/responsibility to another who is to exercise such power/responsibility in the stead of the delegator. Statutory delegation is different from contractual delegation to the extent that in case of the former even a vacancy in the office of the delegator does not denude the delegatee of the power or responsibility duly delegated. Further, in exercise of delegated authority, the delegatee is not bound to act on the instruction of the delegator. Once the delegatee has exercised delegated power, it stands exhausted and the delegator cannot resume such power and exercise it all over again in a manner different from how it stands exercised by the delegatee. 14. In interpreting section 211(2) of the ITO, there is no textual basis to hold that the Commissioner may itself exercise a power or perform a function conferred on an officer of Inland Revenue has been rendered either in relation to conferral of power under section 209(2) of the ITO or in relation to section 210(1) of the ITO. The scheme of delegation and conferral of powers in terms of section 209 and 210 of the ITO are meant for purposes of administrative convenience, in view of the legal fiction under the ITO that all assessme nt orders are passed by the Commissioner. The fact that the power of the Commissioner can be conferred on another officer of Inland Revenue, in terms of section 209(2) and/or 210(1) of the ITO, does not mean that such conferral or delegation denudes the Commissioner of his/her powers under the ITO. Section 209(8) and 211(2) affirm this reading of provisions of the ITO. Contrary to the argument made by Mr. Sukhera, once an officer of Inland Revenue has exercised the power delegated to him/her, the same stands exhausted and can no longer be exercised by the Commissioner himself by taking a fresh view of the matter, as explained by the Supreme Court in Fatehullah. However, till such time the delegated power remains to be exercised or has not been conclusively exercised, there is nothing preventing the Commissioner from exercising such power and performing a function vested in him under the provisions of the ITO. The statutory clarification provided in section 211(2) of the ITO, is in the nature of express statutory retention of the delegated authority in the office of the Commissioner, should he/she choose to exercise it directly. The Commissioner thus need not pass a formal order to recall a delegation order to signify that he/she is resuming delegated power. To reiterate, the delegation for purposes of sections 209 and 210 of the ITO are to be seen not as a transfer or divestment of power, but as entrustment of power to a subordinate officer that does not denude the Commissioner himself/herself of the power that he/she remains vested with despite the delegation order. 15. In the instant matter, it is not the applicant's claim that the Commissioner sought to simultaneously or successively exercise the powers and functions delegated to the Additional Commissioner for purposes of section 122(5A) of the ITO. The delegation of 122(5A) powers in an Additional Commissioner was for purposes of administrative convenience. As explained above, such delegation did not and could not denude the Commissioner himself of the power vested in him to undertake a reassessm ent for purposes of section 122(5A) of the ITO. The argument that the
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reassessm ent order was coram non judice as it was passed by the Commissioner and not the Additional Commissioner is therefore misconceived. 16. Before we address the questions of law in relation to the merit of the demand generated by the tax department, there are two conceptual issues that need to be addressed. The first relates to the principle of interpretation that is to be followed while construing provisions of the ITO and whether purposive interpretation can be adopted for purposes of re-characterizing a transaction where the taxpayer is claiming the benefit of section 97 of the ITO. The second relates to the distinction between financial accounting and tax accounting and whether the Commissioner can take into account the financial statements and financial accounts prepared by a taxpayer for purposes of determining the tax due from the taxpayer. Interpretation of Fiscal Statutes: Textual or Purposive Interpretation 17. Ms. Hamid, learned counsel for tax department has invited this Court to undertake purposive interpretation of section 97 to determine whether the legislature had intended the transaction undertaken by PMCL to be granted the benefit of section 97 of the ITO. She cited Bank of Punjab vs. Haris Steel…
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