Cir Sahiwal vs Syed Waseem Shah

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, MULTAN BENCH,

MULTAN

JUDICIAL DEPARTMENT

I.T.R. No.74 of 2025 Commissioner Inland Revenue, Sahiwal Zone, Regional Tax Office, Sahiwal

Versus

Syed Wasim Shah, Prop: Wasim Gillani Tyre House, Sahiwal

JUDGMENT

Date of hearing: 07.10.2026.

Applicant by: Mr. Abdul Razzaq Raja, Advocate.

Respondent ex parte.

MUHAMMAD SAJID MEHMOOD SETHI, J.:- Through instant Reference Application under Section 133 of the Income Tax Ordinance, 2001 (“the Ordinance of 2001”), following question of law, asserted to have arisen out of the impugned order dated 05.03.2025, passed by the learned Appellate Tribunal Inland Revenue, Government of Pakistan, Single Bench, Multan (“Appellate Tribunal”), has been pressed and argued for our opinion:- “Whether in the facts and circumstances of the case, the learned Appellate Tribunal Inland Revenue, Multan Bench, Multan was justified to ignore that as per taxpayer’s registration profile, the appellant is a retailer / trader of tyres which does not entitle him to 80% reduction in tax liability under Section 113 of the Ordinance, 2001 which is only available to the distributors of FMCGs as provided in Serial No.2 of Division IX of Part I of 1st Schedule (later provided in Part-I), Division-IX of 1st Schedule) to the Income Tax Ordinance, 2001?”

2.Briefly stated, the taxpayer filed a return of income for tax year 2016, declaring turnover of Rs.19,837,000/- from the retail sale of tyres. The return was treated as an assessment order under Section 120 of the Ordinance. Subsequently, the Additional Commissioner Inland Revenue examined the assessment record and considered the deemed assessment erroneous insofar as it was prejudicial to the interest of

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revenue. Proceedings under Section 122(5A), read with Section 122(9) of the Ordinance, were initiated on the ground that the taxpayer had failed to pay minimum tax at the rate of 1% of turnover under Section 113. As no substantive response was furnished to the notices issued, the assessment was amended and minimum tax of Rs.198,370/- was charged. The taxpayer challenged the amended assessment before the learned Commissioner Inland Revenue (Appeals), who, through order dated 23.09.2019, deleted the demand by extending the benefit of an 80% reduction in minimum tax under clause (8) of Part III of the Second Schedule to the Ordinance. The department challenged that order before the learned Appellate Tribunal, contending, inter alia, that the taxpayer was a retailer/trader of tyres and was not entitled to the reduced rate available to qualifying distributors. The learned Appellate Tribunal dismissed the department’s appeal through the impugned order dated 05.03.2025.

3.The learned counsel for the applicant-department contends that the impugned order dated 05.03.2025 passed by the learned Appellate Tribunal was contrary to law and the statutory provisions applicable to tax year 2016. He argues that the learned Appellate Tribunal had erroneously extended the benefit of an 80% reduction in minimum tax under Section 113 of the Income Tax Ordinance, 2001, by relying upon clause (8) of Part III of the Second Schedule, without considering that the said clause had been omitted by the Finance Act, 2014. He further contends that tyres are durable goods and do not qualify as fast-moving consumer goods, while the taxpayer’s registration profile reflected its business as retail sale or trading of tyres. He maintains that the certificates issued by private companies, even if accepted as evidence of dealership or distributorship, could neither override the taxpayer’s declared registration particulars nor independently confer a statutory tax concession. He maintains that the impugned order suffered from a material error of law and that the question referred merited an answer in favour of the applicant- department.

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4.We have heard the learned counsel for the applicant-department and examined the material placed before us. The controversy raises a question of law concerning the availability and scope of a statutory concession in the relevant tax year, together with the legal effect of the taxpayer’s registration particulars and the dealership certificates relied upon by the learned Appellate Tribunal. Since the matter comes before this Court in reference jurisdiction, the question is not to undertake a fresh appraisal of the entire factual record but to determine whether the impugned order reflects a legally sustainable interpretation and application of the governing provisions.

STATUTORY FRAMEWORK AND THE CLAIMED

CONCESSION

5.Minimum tax under section 113 of the Income Tax Ordinance, 2001, is chargeable in accordance with the statutory provisions and the Schedule applicable to the relevant tax year. A concession reducing the tax otherwise payable must have an independent statutory foundation. The person claiming such benefit is required to bring his case within the express terms of the provision granting it. The burden of establishing entitlement to an exemption or concession rests on the person who claims it (Collector of Customs, Model Customs Collectorate, Peshawar v. Waseef Ullah and others (2023 SCMR 503). Neither an administrative practice, a commercial description nor an interpretation adopted in relation to an earlier statutory provision can, by itself, create or perpetuate a concession which is unavailable under the law applicable to the relevant period. The governing principle is that fiscal liability and any preferential treatment must be determined in accordance with the law enacted by the legislature, and there can be no estoppel against a statute.

6.The principle that no estoppel lies against a statute merits separate emphasis. The Hon’ble Supreme Court has held that, although estoppel may be invoked by a party as a rule of evidence, it cannot operate against a statute or rules having statutory force, so that the conduct, waiver or omission of a person cannot defeat a right or

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liability fixed by law. In Mst. Haseena Bibi v. Abdul Haleem and others (PLD 2024 Supreme Court 291) and University of Malakand through Registrar and others v. Dr. Alam Zeb and others (2021 SCMR 678), following Zarai Taraqiati Bank Limited v. Said Rehman and others (2013 SCMR 642), it was held that the doctrine has no application where statutory rights and liabilities are involved, and that one wrong cannot be acted upon as a precedent so as to defeat the express words of a statute. Although those cases concerned individual statutory entitlements, the rule is expressed in general terms and governs statutory rights and liabilities alike. Its consequence here is twofold. First, no departmental practice, no acceptance of the return as a deemed assessment under Section 120 of the Ordinance, and no earlier allowance of a concession can create an entitlement which the statute in force does not confer. Second, the extension of the concession by the learned Commissioner Inland Revenue (Appeals) and the learned Appellate Tribunal does not, by itself, establish a legal entitlement; the legality of that extension is the very matter requiring examination.

7.The learned Commissioner Inland Revenue (Appeals) and the learned Appellate Tribunal Inland Revenue founded their decisions upon clause (8) of Part III of the Second Schedule to the Ordinance, which had provided an 80% reduction in the rate of minimum tax under section 113 for specified categories, including distributors of pharmaceutical products, fertilizers and consumer goods, including fast-moving consumer goods. However, the said clause was omitted by the Finance Act, 2014. The omission is also discussed in Commissioner Inland Revenue v. Messrs Haier Pakistan (Pvt.) Ltd. (2018 PTD 1582), wherein this Court examined the scope and statutory context of the former provision. Consequently, the availability of the concession for tax year 2016 had to be determined in the light of the law then in force, rather than by reference to the wording of a provision which had already been omitted.

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8.The decisive question, therefore, is whether any provision in force for tax year 2016 authorised the 80% reduction claimed by the taxpayer. The impugned order does not identify any such provision continuing or restoring the concession under the omitted clause. Instead, the learned Appellate Tribunal proceeded substantially on the basis of the taxpayer’s asserted status and the classification of the goods dealt in by him, without first determining whether the concession itself remained legally available. This reverses the proper order of inquiry. The existence of a subsisting statutory entitlement is anterior to the question whether the taxpayer satisfies the conditions attached to it. Unless the law applicable to the relevant tax year provides the concession, questions concerning the taxpayer’s status or the nature of the goods cannot independently sustain the claimed reduction.

9.The above approach is consistent with the statutory philosophy subsequently applied by this Court in Commissioner Inland Revenue, Sahiwal v. Muhammad Rashid Javed [2026 LHC 6278 (LHC Website)], wherein the entitlement to a concessional minimum-tax rate was examined by reference to the precise language and requirements of the applicable statutory scheme. The underlying principle is that a concession cannot be enlarged beyond the class or conditions prescribed by the legislature, nor can a taxpayer derive a statutory benefit merely from an earlier interpretation concerning a differently worded or subsequently omitted provision. A Court, moreover, cannot supply a casus omissus or read into a statute words which are not there; the omitted clause cannot therefore be revived by interpretation or inference. The settled rule that a taxpayer who falls within the plain terms of an exemption cannot be denied its benefit, and that a genuine ambiguity is resolved in favour of the assessee (ibid.), presupposes a subsisting provision whose terms are satisfied. It cannot operate where, as here, no operative provision exists. The fact that clause (8) had previously conferred a reduction of 80% did not preserve that benefit after its omission. The failure of the learned Appellate

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Tribunal to address this threshold issue materially undermines its conclusion.

CONSUMER GOODS AND FAST-MOVING CONSUMER

GOODS

10.The impugned order also relies upon the proposition that tyres and tubes fall within the category of consumer goods, including fast- moving consumer goods. These expressions, however, are not interchangeable and must be construed in accordance with the statutory language relevant to the controversy. Section 2(22A) of the Ordinance defines “fast-moving consumer goods” by reference to consumer goods supplied in retail marketing according to the daily demand of consumers. The words “excluding durable goods” were inserted into that definition by the Finance Act, 2017. Since the present controversy concerns tax year 2016, the later exclusion cannot be applied retrospectively to determine the taxpayer’s liability unless the amending legislation expressly or by necessary implication provides otherwise. This accords with the settled rule that, in the absence of any indication of retrospective operation, an amendment must not be given retrospective effect, and that fiscal provisions are interpreted prospectively; even beneficial legislation operates retrospectively only where it is curative, remedial or clarificatory in nature. Reference can be made to Pak Telecom Mobile Limited through Authorized Representative v. Federal Board of Revenue (FBR0 through Chairman (2025 PTD 757). The exclusion of durable goods is restrictive in effect and neither curative nor clarificatory, so the reason for denying it retrospective operation applies with greater force.

11.The distinction between consumer goods and fast-moving consumer goods nevertheless remains relevant to the extent that the taxpayer relies upon the latter classification or upon a judicial interpretation of the former expression. In The Commissioner of Inland Revenue, Peshawar v. Messrs Sufi Tahir Nadeem (2025 SCMR 1687), the Hon’ble Supreme Court of Pakistan considered the

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statutory definitions contained in sections 2(13AB) and 2(22A), emphasising the need to examine the nature and use of the goods against the statutory distinction between goods consumed by the end consumer and goods used as inputs in producing another good. The decision reinforces the principle that classification cannot be determined merely by identifying the ultimate purchaser or the commercial channel through which a commodity is sold; the statutory requirements must be considered as a whole.

12.Applying that approach, tyres are ordinarily manufactured and sold for continued use on vehicles over a period of time. They are not consumed upon purchase or ordinarily exhausted within a short period. Their eventual replacement, or the frequency with which they are sold through retail outlets, does not by itself establish that they constitute fast-moving consumer goods. Their ordinary commercial character must be distinguished from the frequency of their sale. Nevertheless, because the present case concerns tax year 2016, the later statutory exclusion of durable goods cannot independently determine the classification applicable to that year. The relevant inquiry must remain confined to the definition and statutory provisions then in force.

13.In Messrs Haier Pakistan’s case supra, this Court considered the expression “consumer goods” in the context of the former clause (8) of Part III of the Second Schedule and distinguished it from the narrower expression “fast-moving consumer goods”. That decision must be understood in its particular statutory context. It does not establish that the former concession continued after its legislative omission, nor does an interpretation of the expression “consumer goods” under the omitted provision independently confer a right to a reduction under section 113 for a subsequent tax year. The classification of goods and the legal availability of a concession are separate questions, and the former cannot answer the latter.

14.Accordingly, even if the taxpayer’s contention regarding the classification of tyres were examined on its own merits, it could not

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overcome the absence of an operative statutory provision authorising the claimed 80% reduction for tax year 2016. The reasoning in Sufi Tahir Nadeem, supra, is relevant to the proper method of statutory classification, but it must not be applied retrospectively so as to import into tax year 2016 an amendment enacted in 2017, consistently with the rule of prospective of fiscal amendments noticed above. The impugned order is unsustainable primarily because it proceeded upon the former concession without determining whether that concession remained available under the law governing the relevant tax year.

REGISTRATION PROFILE AND DEALERSHIP

CERTIFICATES

15.A separate aspect of the controversy concerns the taxpayer’s registration profile, which described the business as retail sale or trading of tyres, and the certificates issued by private companies upon which the learned Appellate Tribunal relied to infer distributorship. These matters must be assessed according to their evidentiary value and the statutory question to which they relate. A registration profile may constitute relevant evidence of the business activity declared to the tax authorities, while a dealership certificate may evidence a commercial relationship between a supplier and a dealer. Neither document, considered in isolation, conclusively determines the taxpayer’s entitlement to a statutory concession.

16.The certificates issued by the tyre companies could, at most, constitute evidence of the commercial arrangement described therein. They could not independently create a statutory entitlement or substitute for a concession authorized by the Ordinance. The Hon’ble Supreme Court has held that even a departmental circular, issued under the guise of a clarification, cannot add to or alter the substance of a statutory notification. Private commercial certificates, by themselves, would not ordinarily warrant an extension of the scope of a statutory concession. If the taxpayer maintained that the registration profile did not accurately reflect the nature of the business actually carried on, the discrepancy required consideration on the basis of the

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available record. The learned Appellate Tribunal was required to assess the relevant material and record a reasoned finding on the issue actually arising before it, rather than treating the certificates as conclusive proof of entitlement to the claimed reduction.

17.The same principle is reflected in Muhammad Rashid Javed, supra, wherein this Court held, in the context of a different concessional minimum-tax rate, that the taxpayer’s asserted commercial status and the nature of the goods could not dispense with the statutory conditions governing the benefit claimed. The case is relevant for that general principle, although its specific findings concerning cement and the statutory definition of FMCGs must not be transposed mechanically to tyres. More importantly, even if the certificates were accepted as establishing that the taxpayer was an authorised dealer or distributor, such status could not cure the absence of a statutory provision authorising the claimed reduction for tax year 2016. The taxpayer’s commercial status and the legal availability of the concession are distinct considerations; proof of the former cannot replace the latter.

18.The impugned order thus proceeds upon an incomplete legal analysis. It places substantial reliance upon the dealership certificates and the classification of the goods, but fails to address the anterior question whether the concession under clause (8) of Part III of the Second Schedule remained in force for tax year 2016. The conclusion that the taxpayer was entitled to an 80% reduction in minimum tax was consequently reached without identifying a subsisting statutory basis for that benefit. The impugned order cannot, therefore, be sustained on the reasoning adopted by the learned Appellate Tribunal.

OPINION AND ORDER

19.For the foregoing reasons, we hold that the learned Appellate Tribunal was not justified in sustaining the benefit of an 80% reduction in minimum tax for tax year 2016 without establishing that the concession was legally available under the applicable provisions

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of the Ordinance. Clause (8) of Part III of the Second Schedule, upon which the impugned order relied, had been omitted by the Finance Act, 2014. The subsequent exclusion of durable goods from the definition of fast-moving consumer goods further confirms that tyres cannot be treated as FMCGs under the amended definition, although that later amendment is not applied retrospectively to determine the taxpayer’s liability for tax year 2016. The dealership certificates, even if accepted as evidence of a commercial relationship, could not independently confer a statutory tax benefit or displace the need to apply the law in force for the relevant tax year. Neither the extension of the concession by the fora below nor any earlier treatment of the taxpayer could create an entitlement which the statute does not confer, there being no estoppel against a statute.

20.Accordingly, the question of law is answered in the negative, against the respondent-taxpayer and in favour of the applicant- department.

Consequently, the instant Reference Application is decided in favour of the applicant-department.

21.Office shall send a copy of this judgment under the seal of the Court to the learned Appellate Tribunal in terms of Section 133(8) of the Ordinance of 2001.

(Sultan Tanvir Ahmad) (Muhammad Sajid Mehmood Sethi) Judge Judge

APPROVED FOR REPORTING

Judge Judge *Sultan / A.H.S.*