Full Judgment Text & Judicial Ruling

2026 P T D 45 [Islamabad High Court] Before Babar Sattar and Saman Rafat Imtiaz, JJ PAKISTAN MOBILE COMMUNICATIONS LIMITED (PMCL) Versus COMMISSIONER INLAND REVENUE (ZONE-IV) LARGE TAXPAYERS, UNIT, ISLAMABAD and others I.T.R. No.32 of 2020, decided on 11th June, 2025. (a) Income Tax Ordinance (XLIX of 2001)--- ----S.109---Tax avoidance---Scope---Tax planning to minimize tax liability is not prohibited under Income Tax Ordinance, 2001---Exception to such rule is where a transaction is structured such that it falls foul of provisions of law including S.109 of Income Tax Ordinance, 2001 for being designed to indulge in tax avoidance in an impermissible manner. (b) Companies Act (XIX of 2017)--- ----S.228---Holding company---Consolidated financial statement---Scope---Holding company, under S.228 of Companies Act, 2017 is required to file consolidated financial statements of the group presented as a single enterprise---Requirement that a company s financial statements present a true and fair view of its state of affairs is coupled with an additional requirement in case of a holding company, which is required to ensure that the financial statements of its subsidiary or subsidiaries also comply with such requirement. (c) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 174, 176 & 177---Books of accounts, maintaining of---Scope---Taxpayer under Income Tax Ordinance, 2001 is obliged to maintain its books of account and financial statements and furnish them to the Commissioner to enable him/her to determine tax liability of taxpayer while taking into account such financial statements. (d) Income Tax Ordinance (XLIX of 2001)--- ----S. 97---Disposal of assets between wholly-owned companies---Principle---Where a parent company does not hold all shares of a subsidiary company, such parent, even where it holds more than three-fourths of the shares of the subsidiary company, cannot be considered a part of a wholly owned group---Provision of S.97(1) of Income Tax Ordinance, 2001 is a tax deferral provision that allows intra group transfer between resident companies constituting a wholly owned group in a tax-neutral manner---As transfer takes place between companies comprising a wholly-owned group, there is no real change in ownership of transferred asset---Transferred asset also undergoes no change in terms of its character and tax basis by virtue of the requirement of S.97 (2) (b) of Income Tax Ordinance, 2001 that transfer of a depreciable asset must be recorded by transferee as written down value of asset in the hands of transferor (even in case of an asset that is not depreciable, the transferee s cost must be the same as the transferor s cost at the time of disposal, in terms of S.97(2)(b)(iii) of Income Tax Ordinance, 2001---In cases of tax-neutral intra-group transfers, often shares of subsidiary company are issued in lieu of consideration for the transfer, which is catered for by S.97 (2) (d) of Income Tax Ordinance, 2001 requiring that any consideration in kind received by transferor may not be greater than the transferee s cost in respect of the acquisition (which, in turn, is the written down value of the asset in the hands of the transferor or cost of the transferor)---This is the principle applicable where an asset changes hands between wholly-owned resident companies, in circumstances where the character and tax basis of the asset undergoes no change and the transaction is recorded in terms of written down value or transferor s cost at the time of disposal, such transaction gives rise to no taxable event---Any gain or loss by virtue of such transaction is neither booked by transferor nor by transferee---Any gain or loss by virtue of such transfer is not realized at the time of transfer and is deferred to be realized at subsequent time, when asset is disposed of, if at all, by transferee company at its fair market value. (e) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 2(29C), 9, 11, 97 113, 113C, 122, 133 & First Schedule, Division II, Part-1---Re-assessment---Turn over and accounting income---Distinction---Telecommunication companies---Status---Assets between wholly-owned companies---Benefit---Alternative Corporate Tax---Applicant / taxpayer was aggrieved of order passed by Appellate Tribunal Inland Revenue in holding that all shares of applicant / taxpayer were held by a non-resident company, therefore, it did not fulfill the requirements for the transaction to fall within the ambit of S.97 of Income Tax Ordinance, 2001---Validity---What is taxable in terms of S.4 read with Ss.9 and 11 of Income Tax Ordinance, 2001 and other related provisions, is the income of a taxpayer---Provision of Ss. 113 and 113C of Income Tax Ordinance, 2001 are exceptions to the rule that only income as determined in accordance with provisions of Income Tax Ordinance, 2001 can be subjected to tax---Provisions of Ss. 113 and 113C of Income Tax Ordinance, 2001 are in the nature of deeming provisions, where under S.113 of Income Tax Ordinance, 2001 turnover of a taxpayer is used as a measure to determine tax liability on a deeming basis, and under S.113C of Income Tax Ordinance, 2001 the accounting income of a taxpayer is used as a measure to determine tax liability on a deeming basis---As such Ss.113 and 113C of Income Tax Ordinance, 2001 are artificial rules that impose a liability on a taxpayer to pay tax even where no real income arise in the hands of the taxpayer---Taxpayer under S.113C of Income Tax Ordinance, 2001 is accordingly liable to pay taxes calculated in terms of income of the company subject to tax under Division II of Part 1 of First Schedule to Income Tax Ordinance, 2001 or the minimum tax due in terms of S.113 of Income Tax Ordinance, 2001 or the alternative corporate tax determined on the basis of accounting income in terms of S.113C of Income Tax Ordinance, 2001 whichever is greater---Exclusions for the purpose of calculating Alternative Corporate Tax are mentioned in S.113C (8) of Income Tax Ordinance, 2001 and do not state that any accounting income in relation to a S.97(1) of Income Tax Ordinance, 2001 as disposal of asset transaction is required to be excluded therefrom---If it was determined by the Commissioner that applicant / taxpayer had generated income from imports in relation to which advance tax was collected in terms of S.148(1) of Income Tax Ordinance, 2001 only then the question of applicant / taxpayer being an industrial undertaking would become relevant---Applicant / taxpayer did not qualify as an industrial undertaking for purposes of tax year 2018---Transaction of disposal of tower business by applicant / taxpayer to its wholly owned subsidiary company, did not qualify for tax deferral in terms of S.97 of Income Tax Ordinance, 2001---Applicant / taxpayer did not qualify as an industrial undertaking in terms of S.2 (29C) of Income Tax Ordinance, 2001 in tax year 2018---High Court directed the Commissioner to undertake an analysis regarding advance tax collected under S.148 of Income Tax Ordinance, 2001 before generating any demand in terms of S.148(7) of Income Tax Ordinance, 2001---High Court further declared that appeals effect order passed in terms of S.124 of Income Tax Ordinance, 2001 did not include no demand in relation to S.148(7) read with S.148(1) of Income Tax Ordinance, 2001 without such prior inquiry---Reference was disposed of accordingly. Muhammad Rafiq v. State 2019 SCMR 846; Al-Jehad Trust v. Federation of Pakistan PLD 2011 SC 811; Huth v. Clarke 25, QBD 391; Gordon, Dadds & Co v. Morris [1945] 2 All E.R. 616; Abdullah v. Crown PLD 1955 Sindh 384; Nasim Fatima v. Governor of West Pakistan PLD 1967 Lahore. 103; Daya Shankar Malaviya v. Emperor AIR 1948 All. 321; W.P. Land Commission v. Fatehullah PLD 1971 SC 393; Majid v. Qutb-ud-Din 1982 SCMR 212; Haji Muhammad Ismail v. Government of Punjab 1987 MLD 2457; Tanvir Ahmed Khan v. Deputy Commissioner, Islamabad 1992 MLD 2146; Dilshad Kausar v. Azad Jammu and Kashmir Government 2005 PLC (C.S.) 1048; Blackpool Corporation v. Locker [1948] 1 KB 349; Department for Environment, Food and Rural Affairs v. Robertson and others [2004] ICR 1289; [2005] EWCA Civ 138; Allied Bank Limited v. CIR 2023 SCMR 1166; Bank of Punjab v. Haris Steel Industries (Pvt.) Ltd. PLD 2010 SC 1109; Saif-ur-Rehman v. Additional District Judge 2018 SCMR 1885; Commissioner for Her Majesty's Revenue and Customs v. UBS AG and another 2016 SCMR 1098; Commissioner Inland Revenue v. IGI Insurance Company Ltd. 2018 PTD 114; Cape Brandy Syndicate v. Inland Revenue Commissioner [1921] KB 64; Commissioner of Agriculture Income Tax v. B.W.M. Abdul Rahman 1973 SCMR 445; Government of Pakistan v. Hashwani Hotel Ltd. PLD 1990 SC 68; A&B Food Industries Ltd. v. Commissioner of Income Tax 1992 SCMR 663; Inland Revenue Commissioners v. Duke of Westminster [1936], AC 1; W.T. Ramsay Ltd. v. Inland Revenue Commissioners [1982] A.C. 300; Furniss v. Dawson [1984] AC 474; Gregory v. Helvering, 293 U.S. 465, 55 S.Ct. 266 [1935]; Rice's Toyota World, Inc. v. Commissioner, 752 F.2d 89 (4th Cir. 1985); McDowell & Co. Ltd. v. CTO `AIR 1986 SC 649; Union of India v. Azadi Bachao Andolan AIR 2004 SC 1107; Vodafone International Holdings B.V. v. Union of India (2012) 341 ITR 1 SC; Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. 1992 PTD 954; B.S.C. Footwear Ltd. v. Ridgway (Inspector of Taxes) [1972] 83 I.T.R. 269; J.K. Industries Ltd. v. Union of India (2007) 13 SCC 673; Commissioner of Income Tax v. Shoorji Vallabhdas and Co. [1962] 46 ITR 144(SC); C.I.T Central v. M/s Excel Industries Ltd. 2014(13) SCC 459; State Bank of Travancore v. Commissioner of Income Tax [1986] 158 ITR 102 SC; Sutlej Cotton Mills Limited v. C.I.T. West Bengal (1979) 116 I.T.R. 1 (SC); Mashreq Bank v. C.I.R. 2012 PTD (Tribunal) 1544; Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue 2017 PTD 1181 and M/s Telenor Pakistan (Pvt.) Ltd. v. Appellate Tribunal Inland Revenue I.T.R No. 63 of 2015 ref. Sardar Ahmed Jamal Sukhera and Sikandar Sukhera for Applicant. Asma Hamid, Mustafa Khalid, Saima Kamila, Zulqarnain Bhatti, Shehr Yar Khan and Khayyam Mushir for Respondents. Dr. Ishtiaq Ahmed Khan, D.G (Law) FBR. Amjad Zubair Tiwana, Commissioner Inland Revenue. Date of hearing: 19th March, 2025. JUDGMENT 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 (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? 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 v. 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 assessment 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 reassessment 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 assessment 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 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 v. 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 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…

Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.

Related Legal Research & Directories

• Browse all judgments from Islamabad High Court
• Search Pakistani statutes: Constitution of Pakistan 1973, PPC, CrPC, CPC & Family Laws
• Analyze this case with Al Wakeelo AI Legal Assistant