Summary: 178ITR (Income Tax Reference) 2468423.293-

Summary: (a) Income tax—Exemptions for income of property held under legal obligation for charitable purposes ----Income Tax Ordinance, 1979, Second Sch., Pt-I, cl. (93); Income Tax Ordinance, 2001, Second Sch., Pt-I, cl. (59); both Ordinances, s. 2 (“charitable purpose”); Income Tax Act, 1922, s. 4(3)(i) (in pari materia) Exemption—Elements and burden—Threefold requirement identified: (i) income derived from “investments in securities of the Federal Government and house property”; (ii) the source or income held under “trust or other legal obligation” wholly or in part for charitable purposes; and (iii) income “actually applied or finally set apart” for those purposes—Principles for construing tax exemptions restated: taxpayer must bring itself within the exemption; ambiguity resolved against taxpayer; yet if case fairly falls within the exemption, benefit not denied—On facts, income was from “house property” (element i satisfied). (b) Company law / charities—Objects clause, Cotman v. Brougham clause, and “charitable purpose” ----Companies law (memorandum: objects & non-distribution clause); Income Tax Ordinances, s. 2 (“charitable purpose”—“advancement of any other object of general public utility”) “Other legal obligation”—Non-distribution clause in memorandum (cl. VII) held to be a binding legal obligation to apply income to the company’s objects—Objects clause concluded with a Cotman v. Brougham–type paragraph; hence each sub-clause stands as an independent object unless inherently only a power—Petitioner’s object cl. IV(2) (“maintain high standards of commercial honor and integrity… discourage malpractices…”) can plausibly operate as a distinct object—Advancement of just and equitable principles of trade, and suppression of malpractices, held to advance “general public utility”—Approach in Merchant Navy Club approved—Accordingly, element (ii) satisfied: income held under legal obligation for a charitable purpose (public utility). (c) Exemptions—Proof of “actual application” or “final setting apart” is a factual prerequisite; failure of proof fatal ----Income Tax Ordinance, 1979, Second Sch., Pt-I, cl. (93) (“actually applied or finally set apart”); Income Tax Ordinance, 2001, Second Sch., Pt-I, cl. (59) (same) Tribunal is last fact-finding forum in tax—While Tribunal correctly treated object as charitable, it recorded no affirmative finding that the relevant income was actually applied or finally set apart for that charitable object—A bare assertion that income “is either actually applied or set apart” is insufficient where the statute demands a clear factual determination—Onus lay on taxpayer to establish element (iii); Department had no negative burden—Absent a proper factual finding by the Tribunal, the third element remained unproven; exemption could not be granted. (d) Result ----Procedure and outcome Although High Court’s reasoning (that activities were not of “general public utility”) is disapproved, the petitions fail for want of proof on element (iii)—Leave to appeal refused; petitions dismissed. Cited Cases: • Oxford University Press v. Commissioner of Income Tax, 2019 SCMR 235 (exemption principles) • Commissioner of Income Tax v. Merchant Navy Club, 2004 PTD 1304 (approved: “general public utility” scope) • Commissioner of Income Tax v. Muhammad Abdur Rauf Khan, PLD 1963 SC 209 • Hamdard Dawakhana v. Commissioner of Income Tax, PLD 1980 SC 84 • Fauji Foundation v. Shamimur Rehman, PLD 1983 SC 457 • Cotman v. Brougham, [1918] AC 514; Re Introductions Ltd., [1968] 2 All ER 1221; [1969] 1 All ER 887; Anglo Overseas Agencies Ltd. v. Green, [1960] 3 All ER 244 Disposition: Leave refused; C.P.L.As. 985-K to 990-K of 2023 and 628-K of 2024 dismissed (Announced 24-10-2025).

Summary: (a) Sindh Sales Tax on Services Act (XII of 2011)--- ----S.24B---Term “may deem fit”---Scope---Deeming provision in S.24B of Sindh Sales Tax on Services Act, 2011, has provided Sindh Revenue Board an opportunity to bring a person within registration process, and then initiate recovery from the date such person becomes liable for tax payment. (b) Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 3 & 9--- Recovery of sales tax on services ---Pre-condition---It is sine qua non for a person to be susceptible to levy of a tax, before the subsequent processes of assessment and recovery can become applicable. (c) Sindh Sales Tax on Services Act (XII of 2011)--- ----Ss. 3, 9, 24A, 24B & 63---Recovery of sales tax on services---Unregistered service provider---Effect---Authorities were aggrieved of judgment passed by Appellate Tribunal, Sindh Revenue Board, holding that no assessment order could be passed against unregistered service provider---Validity---If levying sections of Sindh Sales Tax on Services Act, 2011, remained inapplicable to respondents who were unregistered at the relevant time, then it would follow that the assessment and recovery process also could not be initiated, since the respondents / unregistered service providers fell wide of the levy itself---Authorities did not force registration upon respondents / unregistered service providers during such time, by invoking S. 24B of Sindh Sales Tax on Services Act, 2011 nor at such time the respondents / unregistered service providers voluntarily registered under S. 24A of Sindh Sales Tax on Services Act, 2011---Such tardiness of alleged collection was attributed to authorities as there was a specific clause (i.e. 24B of Sindh Sales Tax on Services Act, 2011) that existed for them to encompass respondents / unregistered service providers into registration and within the tax recovery web, which they failed to do so at such time---Respondents / unregistered service providers could voluntarily register themselves with the Authorities, or could be compulsorily registered by Authorities / Sindh Revenue Board in accordance with law, after which the process for ascertainment and recovery of sales tax on services could be sought from them---Taxable persons avoiding registration would also additionally be answerable to various penalties/ramifications provided under the provision of Sindh Sales Tax on Services Act, 2011, applicable upon them---Reference was answered accordingly. 2019 PTD 2338; 2015 PTD 796; PLD 2018 SC 189; PLD 2020 Sindh 62; 2023 PTD 825; Federation of Pakistan v. Mian Muhd. Nawaz Sharif PLD 2009 SC 644; H.M. Extraction’s case 2019 SCMR 1081; Allied Bank Ltd. v. Commissioner Income Tax Lahore 2023 SCMR 1166; 1970 SCMR 105; 1993 SCMR 1111; 2021 PTD 484 and PLD 1967 SC 241 rel. Malik Waseem Iqbal (in SSTRAs Nos.70/2022, 2092/2023 along with Zamir Ali Khalid, Commissioner (Legal), SRB for the Applicants. Zulfiqar Ali Bhutto, Abdul Manan and Shamshad Ahmed (in SSTRAs Nos.349/2019, 330/2020, 71, 73, 132/2021, 71, 95, 170, 174/2022, 54, 59, 60, 62, 76, 94, 168 of 2024). Muhammad Farhan for Applicant (in SSTRAs No.100 of 2025). Qazi Umair Ali and Muhammad Inzimam Shareef for Respondent (in SSTRA No.73 of 2021). Aqeel Ahmed for Respondent (in SSTRA No.62 of 2024). Shams Mohiuddin Ansari for Respondent (in SSTRA No.60 of 2024) Shoaib Noor for Respondent (in SSTRA No.54 of 2024). Najeebullah for Respondent (in SSTRA No.132 of 2021). Muhammad Farhan for Respondent (in SSTRA No.59 of 2024). Date of hearing: 14 October, 2025. 1. Special Sales Tax Reference Application No.349/2019 Sindh Revenue Board v. M/s. Logon Broadband (Pvt.) Ltd. 2. SSTRA 330/2020 Sindh Revenue Board v. M/s. Logon Broadband (Pvt.) Ltd. 3. SSTRA No.71/2021 Sindh Revenue Board v. M/s. MYN (Pvt.) Ltd. 4. SSTRA No.73/2021 Sindh Revenue Board v. M/s. TCS Logistics (Pvt.) Ltd. 5. SSTRA No.117/2021 Sindh Revenue Board v. M/s. Noor Enterprises Hyderabad 6. SSTRA No.132/2021 Sindh Revenue Board v. M/s. Tracking World (Pvt.) Ltd. 7. SSTRA No.70/2022 Sindh Revenue Board through AC v. M/s. Web DNA Works (Pvt.)Ltd. 8. SSTRA No.71/2022 Sindh Revenue Board through AC v. M/s. Cyber Tech Communication 9. SSTRA No.95/2022 Sindh Revenue Board, Karachi v. Cross Check Communication (Pvt.) Ltd. Karachi 10. SSTRA No.170/2022 Sindh Revenue Board, Karachi v. M/s. Geo Entertainment Television (Pvt.) Ltd. 11. SSTRA No.174/2022 Sindh Revenue Board, Karachi v. M/s. CNPC Chaunqing Drilling Engineering Co. Ltd. 12. SSTRA No.802/2023 Sindh Revenue Board, Karachi v. M/s. Reliance Commodities (Pvt.) Ltd. Karachi 13. SSTRA No.1180/2023 Sindh Revenue Board, Karachi v. M/s. Dadan and Company, Daharki 14. SSTRA No.1856/2023 Sindh Revenue Board, Karachi v. M/s. Sky Canteen Contractor, Karachi 15. SSTRA No.2092/2023 Sindh Revenue Board, Karachi v. M/s. Airspeed Charter (SMC-Pvt.) Ltd., Lahore 16. SSTRA No.2093/2023 Sindh Revenue Board, Karachi v. M/s. Airspeed Charter (SMC-Pvt.) Ltd., Lahore 17. SSTRA No.54/2024 Sindh Revenue Board, Karachi v. M/s. Reliance Commodities (Pvt.) Ltd. Karachi 18. SSTRA No.59/2024 Sindh Revenue Board, Karachi v. M/s. Karsaz (Private) Limited, Karachi 19. SSTRA No.60/2024 Sindh Revenue Board, Karachi v. M/s. Consteel Construction (Pvt.) Ltd., Karachi 20 SSTRA No.62/2024 Sindh Revenue Board, Karachi v. M/s. Hilong Oil Services and Engineering Pak (Pvt.) Ltd. 21. SSTRA No.76/2024 Sindh Revenue Board, Karachi v. M/s. Nawab Brothers (Pvt.) Ltd., Karachi 22. SSTRA No.94/2024 Sindh Revenue Board, Karachi v. M/s. Ericsson Pakistan (Pvt.) Ltd., Karachi 23. SSTRA No.168/2024 Sindh Revenue Board, Karachi v. M/s. Convolair (Pvt.) Ltd., Karachi 24 SSTRA No.100/2025 M/s. Dada Sons, Karachi v. The Commissioner, SRB Unit-30A, Karachi and others

Summary: Further, the inordinate delay in filing the reference applications is fatal in absence of any application for condonation of delay or any explanation demonstrating "sufficient cause" as required under Section 5 of the Limitation Act, 1908. Once the limitation period commences, it runs inexorably and cannot be arrested or extended by administrative lapses or clerical omissions. Neither departmental hardship nor negligence constitutes a valid ground for condoning the delay. The law of limitation must be applied with strict adherence to its terms. Needless to observe that question of limitation cannot be left unattended. Guidance in this respect can be sought from the case of ASAD ALI and 9 others vs. The BANK OF PUNJAB and others (PLD 2020 Supreme Court 736). The relevant extract of said dictum is reproduced below :- "15. The said principle of law has repeatedly been laid down, followed, approved, affirmed and reiterated in a large number of judgments of this Court as well as the High Courts. Starting from the judgment of the Lahore High Court Lahore reported as Ghulam Hussain v. Bahadar (PLD 1954 Lahore 361) till judgment of this Court reported as Lahore Development Authority v. Muhammad Rashid (1997 SCMR 1224), there is consistency in the principle that if objections raised by the office are not removed during the period allowed by the office and meanwhile the limitation period expires, the petition would become barred by time. There are two subsequent judgments of this Court reported as Mst. Sabiran Bi v. Ahmad Khan (2000 SCMR 847) and Farman Ali v. Muhammad Ishaq (PLD 2013 SC 392) which are incorrectly understood to have decided that so long as the initial institution is within the limitation period, removal of objections raised by the office after expiry of the limitation period does not render the petition to be barred by time. The said judgments have been rendered in a different set of facts and circumstances, do not lay down the entire law on the subject and are distinguishable on points of law as well as facts. 16. Be that as it may, since the LDA case (ibid) was decided by three learned Judges, it has to be followed instead of the two subsequent judgments rendered by two learned Judges. In addition to the above, following judgments also hold that if objections raised by the office are not removed within the time specified by the office and in the meanwhile limitation for filing the appeal expires, the appeal would be rendered time-barred: Lahore Development Authority v. Muhammad Rashid (1997 SCMR 1224); Naheed Ahmad v. Asif Riaz (PLD 1996 Lahore 702); Ghulam Hussain v. Bahadar (PLD 1954 Lahore 361); Ellahi Bakhsh and 8 others v. Ahmad Bakhsh and 2 others (1999 YLR 777); Ghulam Dastgir Khan Lak v. Hayat (2000 CLC 781); Muhammad Idrees v. Abdul Rehman (2001 YLR 2294); Mazhar Iqbal v. Muhammad (2001 YLR 819); Protein and Fats International (Pvt.) Ltd. v. Capital Assets Leasing Corporation Limited (2005 CLD 857); and Controller Land Acquisition v. Fazal-ur-Rehman (2009 SCMR 767). 17. In cases in which certain objections are raised by the office which rendered the institution of the case in itself invalid or incompetent should be held to be time-barred unless the objections or deficiencies pointed out by the office are met within the time specified by the office in this regard which in turn should be within the limitation period prescribed by the law. It is trite law that what cannot be done directly can also not be allowed to be done indirectly. If what is filed within the limitation period cannot be said to be a valid appeal, in the presence of deficiencies/objections pointed out by the office, it should be held to be hit by limitation if the objections/deficiencies are remedied beyond the period of limitation." 184Writ Petition 62097/25 Naseeb Masih Vs The President of Pakistan through P.S etc. The Chief Justice 21-10- 2025 2025 LHC 6163

Summary: "Law applicable as on 30th of June governs each tax year" ---- (a) Income Tax Ordinance, 2001 ----Ss. 4, 74(1); Finance Act, 2009, S. 1(3); General Clauses Act, 1897, S. 3(19) Income tax—Applicable law for a given tax year—Whether the 2001 Ordinance applies as it stood on the last day of the tax year (30 June) or on the first day after (1 July)—Held: Under the 2001 Ordinance the charging provision internalizes the entire levy within the “tax year” (S. 4 read with S. 74(1)); unlike the 1922 Act and the 1979 Ordinance, there is no external referent (no separate “assessment year” and no need for an external Finance Act to bring the charge into effect). Each tax year is a self-contained unit; therefore, for any given tax year, the Ordinance applies as it stood on the last day of that tax year (30 June), not as on 1 July. The historical Privy Council rule (first-day-of-assessment-year) flowed from the different structure of S. 3 of the 1922 Act and does not govern the 2001 framework. (b) Income Tax Ordinance, 2001 ----S. 122(2) & (9); Limitation—Amendment of deemed assessment (TY 2009)— Notice issued on 18-06-2015 under S. 122(9), read with Ss. 122(1)/(5)—Whether within time—Held: The controlling text of S. 122(2) for TY 2009 is its form as on 30-06-2009 (pre-substitution), namely “within five years after the Commissioner has issued or is treated as having issued the assessment order.” On that footing, the show-cause was time-barred. No inquiry into “vested rights” is necessary once the correct temporal anchor (end of tax year) is identified. (c) Statutory interpretation—Charging section—Historical and comparative analysis— Indian Income-tax Act, 1922 (S. 3) required annual Finance Acts to give operative effect and referenced an external “year of assessment”; hence the rule that law applies as on 1 April (Privy Council). The 1979 Ordinance partially changed this (rates in Schedule; continuing effect) but retained an external “assessment year,” leaving ambiguity. The 2001 Ordinance removes both externalities: rates are in its own Schedule and the charge is for the “tax year” itself; consequently, applicability is determined by the statute’s position on 30 June of the relevant year. (d) Transitional declaration—Prospective carve-outs (implementation) To avoid practical difficulties: up to and including TY 2025, this judgment does not by itself disturb (i) First Schedule rates, (ii) advance tax deduction/collection rates, (iii) “final” or “minimum” tax imposts, or (iv) special “blocks” or specially designated income. From TY 2026 onward, this judgment applies to those items as well. In all other respects, it applies to past tax years up to and including TY 2025. (e) Fiscal administration—Budgetary impact— Clarified that aligning amendments/effects to 30 June does not impair the Federal Government’s subsequent-year budget: assessment is for the closed tax year but collection occurs in the following financial year; advance-tax mechanisms operate prospectively in that year under the Ordinance as shaped up to 30 June. (f) Practice and Procedure: Leave petition converted into appeal; question of law answered as above; appeal dismissed; impugned High Court judgment maintained. Cited Cases: • Commissioner of Income Tax v. Chitnavis, AIR 1932 PC 178; 6 ITR 453 • Maharajah of Pithapuram v. Commissioner of Income Tax, AIR 1945 PC 89; 13 ITR 221; 72 IA 241 • Scindia Steam Navigation Co. Ltd. v. Commissioner of Income Tax, AIR 1955 Bom 230; 26 ITR 686; aff’d (1961) 42 ITR 589 (SC India) • Mishrimal Gulabchand of Beawar, In re, AIR 1950 All 270 • Fawad Ahmed Mukhtar v. Commissioner Inland Revenue, 2022 SCMR 426 • Commissioner Inland Revenue v. Major General (R) Dr. C. M. Anwar, PTCL 2014 CL 608; leave declined (CP 1306/2014, order dated 03-09-2014) Disposition: Leave petition converted into appeal; appeal dismissed; show-cause under S. 122(9) held time-barred on the basis that S. 122(2) applies as it stood on 30-06-2009; question answered accordingly; approved for reporting.

Summary: Sub-section (4) of Section 24 of the Ordinance introduces a deeming provision that applies in situations where the intangible asset's useful life cannot be reliably determined. In such cases, the law prescribes a fictional or default useful life of twenty-five (25) years, (stood at the relevant tax year in 2022) regardless of the taxpayer's internal assessment or accounting treatment. This provision is designed to prevent the immediate expensing of costs related to intangible assets, whose benefits are spread across multiple tax years, particularly in cases involving goodwill, brand promotion, trademarks, or intellectual property rights. The purpose of these provisions is to ensure fair and orderly recognition of expenses that confer long term economic benefits, preventing taxpayers from front loading deductions to artificially suppress taxable income in a single year. 199Crl. Appeal- Against Conviction- PPC 480-22 IMDAD HUSSAIN VS STATE ETC Mr. Justice Asjad Javaid Ghural 13- 10- 2025 2025 LHC 6397

Summary: In the absence of any formal order under Section 121,122,122A,129, 132,133 or 221 of the Income Tax Ordinance, 2001 (Ordinance) or notice under Section 122(9) of the Ordinance, the revised return could not be invalidated under Section 114(6)(c) or 114(6A) of the Ordinance. 213PTR (P. for Tax Reference) 928038.203-

Summary: (a) Income Tax Ordinance, 2001 ----Ss. 21(c), 153(1)(b), 161 & 163—Advance tax deduction at source—Scope and applicability—Strict construction of deduction and collection provisions—Held, provisions requiring deduction or collection of advance tax are to be construed strictly owing to their penal consequences; they are akin to charging provisions and cannot be expansively interpreted merely as recovery mechanisms—For S.153(1)(b) to apply, an actual payment must move from the payer to the payee; notional or constructive adjustments are insufficient—In the present case, the “rebate” allowed by the taxpayer to its customer, resulting in a reduced sale price, did not constitute any payment for “services rendered” and therefore did not attract withholding obligation. (b) Taxation—Withholding tax ----Discounts and rebates—Nature—When not “payments” within meaning of S.153—Taxpayer sold products to its customer at a reduced price to secure exclusivity; difference between list price and actual price treated by Department as “royalty” for “advertising services”—Held, the rebate merely represented a commercial discount and not consideration for services—No amount was actually paid by taxpayer; hence, S.153(1)(b) inapplicable—The Department’s claim under S.21(c) and related penal provisions misconceived. (c) Statutory interpretation—Charging and penal provisions ----Interpretation of tax deduction/collection provisions—Duty to deduct advance tax under S.153 entails personal liability under Ss.161 and 163; such provisions being penal in nature must receive strict and narrow construction—Court emphasized that where tax liability depends on the existence of an actual payment, it cannot be extended to notional or deemed transactions—Absence of actual disbursement defeats applicability of S.153(1)(b). Held: Section 153(1)(b) of the Income Tax Ordinance, 2001 requires an actual monetary payment for services rendered; a commercial rebate or discount does not amount to such payment. As no payment moved from the taxpayer to its customer, withholding provisions were not attracted. The Department’s disallowance under S.21(c) was rightly set aside by the High Court and Tribunal. Leave to appeal was refused; petition dismissed. Cited Provisions: Income Tax Ordinance, 2001, Ss. 21(c), 153(1)(b), 161, 163 Disposition: Leave to appeal refused—petition dismissed.

Summary: Income Tax Ordinance (XLIX of 2001)--- ----Ss.2(10), 209(2), 239(1) & 239(2)---Income Tax Ordinance (XXXI of 1979), S.13(1) [since repealed]---Addition of amount on account of unexplained investment/money---Prior approval, requirement of---Approval by “Inspecting Additional Commissioner”, validity of---Whether it satisfies mandatory statutory condition to sustain addition of amount---Brief facts of the matter was that for the tax year 2001-2002, the Revenue invoked S. 13(1)(d) of the Income Tax Ordinance, 1979 and, after relying on an approval letter issued by the “Inspecting Additional Commissioner,” made an addition of Rs.42,760,140/-; the High Court had earlier decided the reference, but the Supreme Court remanded the matter to High Court to determine whether that approval was sufficient to empower the taxation officer to make the addition, particularly in view of S. 239 of the Income Tax Ordinance, 2001 and the second proviso to S. 13(1) of the 1979 Ordinance requiring prior statutory approval---Held: The tax year in question was 2000-2001, which was relevant and fell in assessment year 2001-2002---It was also an admitted position that on the touchstone of S. 239 of the Ordinance, 2001, the applicable law for the purpose of the proceedings initiated by the Revenue in this case was Ordinance, 1979 as S. 239(1) of the Ordinance, 2001 clearly stipulated that ‘subject to subsection (2) in making any assessment in respect of any income year ending on or before the 30th day of June, 2002, the provisions of the repealed Ordinance in so far as these relate to computation of total income and tax payable thereon shall apply as if this Ordinance had not come into force’, however, it was also to be noted that although the applicable law was the Ordinance, 1979 but similarly, subsection (2) of S.239 of the Ordinance, 2001 required that the assessment referred to in subsection (1) was mandatorily to be made by an income tax authority, which was competent under this Ordinance to make an assessment in respect of a tax year ending on any date after the 30th day of June, 2002---The only inference which could arise from a joint reading of both the subsections of S.239 of the Ordinance, 2001 led to an ineluctable conclusion that the law applicable viz the assessment in respect of any income year ending on or before the 30th day of June, 2002, was the Ordinance, 1979 but the competent authority for making such assessments would be the authorities competent to proceed under the Ordinance, 2001---The authority competent to make assessment and determine tax liability for the purpose of case in hand, was the Commissioner of Income Tax or a Taxation Officer appointed or empowered to do so under S. 209(2) of the Ordinance, 2001---Reliance placed upon the authority having been conferred by virtue of letter dated 11.05.2004 was non-est and of no lawful consequences as neither the office of IAC of Income Tax was recognized by the new dispensation under the Ordinance, 2001 nor such an officer could be deemed to have existed for the purpose of the proceedings in terms of S. 13(1), read with S. 239 of the Ordinance, 2001---The proposed questions were answered in negative and resultantly present reference application was dismissed. Mian Yousaf Umar for Applicant. Shahbaz Butt, Ibrahim Hassan and Mazhar Hussain Tahir for Respondent. Date of hearing: 6th October, 2025.

Summary: (Against the judgment dated 16.06.2022 passed by the Lahore High Court, Lahore in P.T.R. No. 349 of 2010). (a) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 21(c) & 153---Rebate granted by taxpayer to its customer for exclusive sale of products---Department treating rebate as payment for advertising services---Effect---Question raised whether such rebate attracted withholding tax---Deduction of tax, requirement of---Prerequisite---Actual payment to move from the person mandated to deduct to the person receiving the same and for whom it becomes advance payment of tax---Scope---The present case had arisen from the Income Tax Ordinance, 2001 concerning the tax year 2003---The department filed a reference before the High Court challenging a decision of the Appellate Tribunal that favored the respondent company---The dispute revolved around a “rebate” amounting to Rs. 7,893,898/- which the respondent company had given to its customer in exchange for sales exclusivity---The department treated this rebate as a payment for “advertising services” under Section 153(1)(b) of the Ordinance and disallowed it under Section 21(c), considering it taxable as “royalty”---The High Court ruled in favor of the respondent company leading the department to file the present civil petition for leave to appeal before the Supreme Court---Pivotal issue for determination before the Supreme Court was as to “Whether the rebate or discount allowed by respondent company to its customer, for ensuring exclusive sale of its products, constituted an actual “payment” for “advertising services” attracting withholding tax under Section 153(1)(b) of the Income Tax Ordinance, 2001”?---Held: It was clear that Section 153(1)(b) could not possibly have applied to the facts and circumstances of the present case---For the provision to apply would have required a payment being made by the taxpayer to the customer, from which the former had to deduct tax at the prescribed rate---The amount of “payment” allegedly made by the taxpayer to the customer in the present case was wholly notional and nothing was in fact paid---For Section 153(1)(b) to apply required an actual payment moving from the person mandated to deduct to the person receiving the same and for whom it becomes advance payment of tax---The provision had no application and nothing further needed to be examined---The department’s claim failed at its very inception being, on a correct application of the law, entirely outside any applicability of the provision---An actual payment had to be shown moving from the taxpayer to the customer and here there was nothing of the sort at all, hence, the section did not apply---Leave to appeal was refused and petition was dismissed, in circumstances. (b) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 153(1), 161 & 163---Advance payment of tax by way of deduction or collection---Failure to comply---Consequences---Person in default---Personal liability for undeducted or uncollected tax---Scope---Section 153, like a number of other provisions in the Income Tax Ordinance, 2001, requires for the advance payment of tax by way of deduction---Other provisions provide for advance payment of tax byway of collection---If the person who is required to so deduct or collect fails to do so then, among other consequences, Section 161 is activated---The section makes the person in default personally liable for the payment of the amount of tax that was not deducted or collected and the recovery provisions of the Ordinance become applicable, per Section 163, “as if it were tax due under an assessment order”, thus, a failure to abide by the duty to deduct or collect advance tax has severe penal consequences and he becomes, in essence, a taxpayer in default---Section 153, when viewed from the perspective of the person who is said to be under a duty to collect or deduct the advance payment of tax, may be regarded as akin or analogous to a charging provision---This is so because of the severe penal consequences that can result from a failure to abide by the statutory duty---These advance payment provisions therefore have to be strictly construed---This need not be with the same rigidity and literalness with which a charging section, in terms of well settled tax jurisprudence, is interpreted---Nonetheless, such provisions cannot be regarded simply as recovery mechanisms and dealt with accordingly---The severe penal consequences for a person who defaults on a duty to deduct or collect, as the case may be, militate against any such approach---The interpretation must be tight and narrow. Ahmed Pervaiz, Advocate Supreme Court for Petitioner (via video-link, Lahore). Muhammad Shoaib Rashid, Advocate Supreme Court for Respondent (via video-link, Lahore). Date of hearing: 3rd October, 2025.