Legal Case Summary

Case Details
Case ID 0a84fc81-2fa6-459b-a68d-1a1eabc5eca8
Body View case body.
Case Number F.A.O. No. 42 of 2000
Decision Date May 14, 2004
Hearing Date Feb 10, 2004
Decision The Peshawar High Court determined that the two foreign companies involved in the Ghazi Barotha Hydro Project should be assessed on a Net Income Basis rather than subjected to the presumptive tax regime under section 80-C of the Income Tax Ordinance, 1979. The court ruled that the registration of foreign companies as a resident Association of Persons (AOP) was against the provisions of law, as they did not fulfill the criteria for being considered as domestic companies. The findings emphasized that double taxation treaties between Pakistan and the countries of the foreign companies exempt them from presumptive taxation, thus affirming the Tribunal's decision that foreign entities must be taxed based on their actual income rather than presumptive calculations.
Summary In the case of F.A.O. No. 42 of 2000, the Peshawar High Court addressed complex issues surrounding taxation for foreign companies involved in a joint venture for the Ghazi Barotha Hydro Project. The dispute arose from the classification of these companies under the Income Tax Ordinance, 1979, specifically regarding whether they should be taxed under the presumptive tax regime or on a net income basis. The court examined the implications of the Income Tax Ordinance and various sections, including 80-C, which governs presumptive taxation, and emphasized the significance of international tax treaties in determining tax liabilities. The ruling highlighted that foreign companies cannot be registered as domestic entities unless they meet specific criteria, which was not the case here. This decision is crucial for foreign investors and companies engaging in projects in Pakistan, as it clarifies tax obligations and the potential for double taxation. The court's judgment reinforces the importance of adhering to the legal definitions and requirements outlined in the Income Tax Ordinance and the implications of registration as an AOP. By addressing these issues, the court aims to prevent misinterpretation of tax law and ensure fair taxation practices, ultimately benefiting the economic landscape and foreign investment in Pakistan.
Court Peshawar High Court
Entities Involved WAPDA, Impregilo SpA, Ed Zublin AG, Saadullah Khan and Brothers, Nazir Ahmad and Company (Pvt.) Limited
Judges NASIR-UL-MULK, J
Lawyers Muhammad Ilyas Khan, Eid Muhammad Khattak, Waseem Sajjad, Ali Sajjad, Barrister Yousaf Khosa, Abdul Latif Yousafzai
Petitioners COMMISSIONER OF INCOME TAX
Respondents GHAZI BAROTHA CONSTRUCTION
Citations 2004 SLD 225, 2004 PTD 1994
Other Citations Mubarik Ali Khan v. Anjuman Islamia, Punjab, Lahore PLD 1982 SC 315, Muhammad Sayyar v. Vice-Chancellor, University of Peshawar PLD 1974 SC 257, Messrs Elahi Cotton Mills Limited and others v. Federation of Pakistan PLD 1997 SC 582, Julian Hoshang Dinshaw Trust v. Income Tax Officer and others 1992 PTD 1, Paper Products Limited v. Commissioner of Central Excise 2001 PTD 2253, Pir Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66
Laws Involved Income Tax Ordinance, 1979, Civil Procedure Code (V of 1908)
Sections 55, 3, 3a, 143, 2(21)(23)(30)(32)(40), 80C, 143B, 163, SecondSched., O.XLI,R.34, XLVII,R.1, 114