IHC ruling favours FBR: Leading telecom co to pay Rs22bn
In this regard, a Division Bench of the Islamabad High Court, led by Justice Babar Sattar, has delivered a significant ruling in favor of revenue in a tax reference filed by a major Telecom operator. This ruling upholds the powers and jurisdiction of the Federal Board of Revenue (FBR) in assessing tax liability on a high-value intra-group transaction involving the transfer of Telecom Operator's tower assets. As a result, the Telecom Operator is now liable to pay taxes amounting to approximately Rs. 22 billion (USD 78 million) on its gain from the transaction.
The landmark case focused on 2018 internal asset reorganization, where the Telecom Operator transferred its nationwide tower infrastructure to its wholly owned subsidiary. The disposal of these assets for Rs. 98.5 billion (USD 940 million) by the Telecom Operator was recorded in its financial statements as an accounting gain of approximately Rs. 75.9 billion. However, the Telecom Operator contended that the transaction was not taxable because the asset was disposed of to its wholly owned subsidiary, according to section 97(1) of the Income Tax Ordinance, 2001 (ITO) concerning intra-group transfers.
The high court dismissed the petitioner's argument, stating that the provision permits a tax-neutral event only if all conditions of section 97 of the ITO are met. This includes ensuring that the written-down value of the transferred asset remains unchanged in the hands of the transferee compared to the transferor, meaning the transaction should not generate any economic value leading to taxable income. The Court determined that the transaction was conducted at a fair market value of USD 940 million, accepted by the petitioner as consideration, thereby violating section 97 of the ITO.
Consequently, the Court concluded that the gain from the transaction was clearly a taxable event since nothing remained to defer taxation to a later date. Additionally, the Court ruled that the Commissioner had the authority to consider accounting income when evaluating taxable income.
This remarkable success of the FBR on judicial front is another step toward accomplishment of vision of the Hon'ble Prime Minister for expeditious liquidation of state revenue involved in the cases pending before the various appellate fora.
Under the guidance of Rashid Mehmood, Chairman, FBR, Legal Wing of the FBR headed by Mir Badshah Khan Wazir, Member (Legal IR) in association with Director General (Law) has already taken a number of initiatives to actively pursue the pending cases by providing proper assistance to the courts. These collective efforts have resulted in resolution of large number of pending tax disputes at various legal fora involving revenue in billions of rupees. Asma Hamid, ASC, and Dr. Ishtiaq Ahmed Khan (DG Law) effectively represented the Federal Board of Revenue in this case.
While dismissing another petition of the same telecom operator filed against a show cause notice issued under the Federal Excise Act, 2005, the court-imposed cost of Rs. 100,000 upon the petitioner to be paid to Deputy Commissioner-IR, LTO, Islamabad within four weeks.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Express Tribune
40 minutes ago
- Express Tribune
GTA 6 predicted at $100 price point and expected to generate $10 billion in lifetime revenue
Analysts expect Grand Theft Auto 6 to carry a standard retail price of around US $100 and generate more than US $10 billion in total revenue for developer Take-Two. The forecast comes amid reports of elevated development costs and a proven demand for long-term live-service support. Michael Pachter of Wedbush Securities estimates the game has already cost upwards of US $1.5 billion to produce. He predicts GTA 6 will deliver immense profits, stating the title 'will likely generate US $10 billion lifetime and another US $500 million annually from GTA Online.' The projected $100 price marks a departure from the typical AAA launch cost nearer to US $70. However, analysts argue that the game's scale, extended support and proven franchise longevity warrant premium pricing. Fans continue playing Grand Theft Auto V more than a decade after release, underscoring sustained engagement potential. Previous speculation placed the expected cost closer to US $80, but ongoing enthusiasm—amplified by the record-breaking YouTube trailer performance—supports projections of higher pricing. GTA 6's reveal became the most-viewed non-music debut trailer, accumulating over 100 million views within a day, with every subsequent trailer drawing millions more. Analysts believe the scale of the upcoming release could exceed previous benchmarks. Supporters cite its massive built-in audience, franchise longevity, and successful live-service revenue model as indicators that GTA 6 could become one of the most profitable video games ever released. Take-Two has not confirmed official pricing or revenue targets.
Business Recorder
12 hours ago
- Business Recorder
Govt confident of full-year achievement as FBR meets July tax target
After meeting its revenue target for July, the government believes that the Federal Board of Revenue (FBR) is on track to achieve the full-year target. The development was highlighted during a weekly review meeting held in Islamabad regarding matters related to FBR, read a statement released by the Prime Minister's Office (PMO) on Tuesday. The FBR provisionally collected over and above Rs754 billion during July 2025 against the assigned monthly target of Rs748 billion, reflecting achievement of 100.9% percent of target. Chairing the meeting, Prime Minister Shehbaz Sharif expressed satisfaction on the increase in the tax-to-GDP ratio, terming the development a result of reforms undertaken in the FBR. 'The federal government and I personally will fully support and safeguard the reform measures taken by the authorities,' he said. He directed authorities to ensure consistent implementation of reforms by eliminating red tape and institutional barriers. PM Shehbaz directed that in order to sustain the gains of tax collection in the ongoing fiscal year, the federation and provinces must work in coordination with an integrated strategy. 'Effective and efficient implementation of already levied taxes in the ongoing fiscal year will play a key role in further increasing tax collection,' he said. PM Shehbaz urged authorities in FBR to formulate a strategy in consultation with relevant federal agencies and the provinces, to improve the tax-to-GDP ratio. He said that the FBR and customs clearance departments should enhance their capacity in collaboration with the Ministry of Information and Broadcasting to raise public awareness about the reformed system. During the meeting, it was told that on the special directive of the prime minister, the income tax returns form has been compiled online in Urdu. The meeting was told that approximately 84% of filers will benefit from the simplified and Urdu-based online income tax return form. It was learnt that the establishment of digital enforcement stations for customs clearance across the country is underway on a priority basis. The meeting was informed that a full implementation of the Centralized Assessment Unit (CAU) and the faceless customs system will help make the customs clearance system more efficient and transparent.
Business Recorder
13 hours ago
- Business Recorder
China's yuan little changed against US dollar on tariff caution
HONG KONG: China's yuan was little changed against the U.S. dollar on Tuesday following upbeat domestic economic data, as markets remained watchful of trade tensions. China's services activity expanded at its fastest pace in 14 months in July fuelled by stronger demand, including a rise in new export orders. Meanwhile, markets were still watching if Trump will decide to extend a trade truce with China that expires on August 12, or potentially let tariffs shoot back up to triple-digits. 'The key swing factor will be the outcome of the U.S.-China trade negotiations,' analysts at UOB said, adding that they project the USD/CNY rate to reach 7.17 in the fourth quarter of 2025 and 7.10 by the second quarter of 2026. By 0517 GMT, the yuan was 0.03% lower at 7.1820 to the dollar after rebounding from 2-month low in previous session. The offshore yuan traded at 7.184 yuan per dollar, up about 0.01% in Asian trade. The offshore yuan wavered as markets also responded to Trump threatening secondary sanctions against countries purchasing Russian oil including China, with Russia facing an August 8 deadline to reach a Ukraine ceasefire deal, Citi analysts said. Prior to the market opening, the People's Bank of China set the midpoint rate at 7.1366 per dollar, the strongest since November last year and 301 pips firmer than a Reuters' estimate. The spot yuan is allowed to trade up to 2% on either side of the fixed midpoint each day. Based on Tuesday's official guidance, the yuan is allowed to drop as far as 7.2793. The U.S. dollar wavered on Tuesday as the rising odds of Federal Reserve rate cuts weighed on sentiment, while investors assessed the broader economic impact of U.S. tariffs unleashed last week.
