IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: MR. JUSTICE MIAN SAQIB NISAR, HCJ 
 
 
MR. JUSTICE MAQBOOL BAQAR 
 
 
MR. JUSTICE IJAZ UL AHSAN 
 
 
CIVIL PETITIONS NO.3551 TO 3555 OF 2015 
(on appeal from the judgment of the Islamabad High Court, 
Islamabad 
dated 
23.09.2015 
passed 
in 
I.T.R. 
Nos.224-
228/2015) 
 
 
M/s Pakistan Television Corporation Ltd. 
 
… Petitioner(s) 
(In all cases) 
VERSUS 
 
Commissioner Inland Revenue (Legal), LTU, Islamabad etc. 
 
… Respondent(s) 
(In all cases) 
 
For the petitioner(s): 
Mr. M. Makhdoom Ali Khan, Sr. ASC 
Hafiz Muhammad Idris, ASC 
Mr. Faisal Hussain Naqvi, ASC. 
Syed Rifaqat Hussain Shah, AOR 
(In all cases) 
 
 
For the respondent(s): 
Mr. Muhammad Bilal, Sr. ASC 
Mr. Babar Bilal, ASC. 
Mr. Ehsan Ullah Khan, Dy. 
Commissioner Inland Revenue 
 (In all cases) 
 
 
Date of hearing: 
07.03.2017, 14.03.2017 & 15.03.2017 
… 
JUDGMENT 
 
 
MIAN SAQIB NISAR, CJ.- The facts of the instant cases are 
that the petitioner, Pakistan Television Corporation Ltd. (PTV) collects 
‘television license fee’ from consumers. This fee was previously collected by 
the Water and Power Development Authority (WAPDA), and now by the 
successor Electricity Distribution and Supply Companies (DISCOS) for PTV 
in pursuance of an agreement dated 01.07.2004, through monthly 
electricity bills. WAPDA (this expression shall include DISCOs) would remit the 
balance license fee to PTV after retaining a portion of it as their fee for this 
collection service. PTV claimed the service charges retained by WAPDA as 
expenditure in terms of Section 21 of the Income Tax Ordinance, 2001 (the 
Civil Petitions No.3551 to 3555 of 2015 
-: 2 :-
Ordinance) in the income tax returns it filed for the tax years 2009 to 2013, 
which stood finalized under Section 120(1) of the Ordinance. Show cause 
notices was issued to PTV for further amendment of the assessments in 
terms of Sections 122(5A) and 122(4) of the Ordinance on the ground that 
the original assessments were erroneous as they were prejudicial to the 
interest of revenue for the reason that the ‘television license fee collection 
expense’ is a commission earned by WAPDA and PTV was required to 
deduct tax under Section 233 of the Ordinance, and since this was not 
done, therefore this expense was liable to be disallowed under Section 
21(c) of the Ordinance (note:- the assessment was once amended under Section 122(5A) of 
the Ordinance for some other reason but this is not relevant for the purposes of the instant issue). 
Thus the said expense was disallowed and the assessment orders were 
accordingly further amended. This amendment was upheld throughout: 
before the Commissioner Income Tax (Appeals), the Income Tax Appellate 
Tribunal (the Tribunal) and the learned High Court, hence these petitions. 
2. 
 
For the sake of brevity, the arguments of the learned counsel 
are not being recorded separately, rather would reflect in the course of 
this opinion. The key question involved in this matter is whether PTV was 
not entitled to deduct as expenditure, the service fee retained by WAPDA, 
as per the provisions of Section 21(c) of the Ordinance. In this regard, the 
relevant provisions of the Ordinance (as they existed at the relevant time, i.e. for the 
tax years 2009 to 2013) read as under:- 
 
21. Deductions not allowed.— Except as otherwise 
provided in this Ordinance, no deduction shall be allowed in 
computing the income of a person under the head “Income 
from Business” for – 
(a) 
…  
(b) 
… 
(c) 
any salary, rent, brokerage or commission, profit on 
debt, payment to non-resident, payment for services 
or fee paid by the person from which the person is 
required to deduct tax under Division III of Part V of 
Civil Petitions No.3551 to 3555 of 2015 
-: 3 :-
Chapter X or section 233 of Chapter XII, unless the 
person has paid or deducted and paid the tax as 
required by Division IV of Part V of Chapter X; 
… 
 
1153. Payments for goods and services.— (1) Every 
prescribed person making a payment in full or part 
including payment by way of advance to a resident person or 
permanent establishment in Pakistan of a non-resident 
person— 
(a) 
………………………………………………………… 
(b) 
for the rendering of or providing of services; 
(c) 
………………………………………………………… 
shall, at the time of making the payment, deduct tax from the 
gross amount payable at the rate specified in Division III of 
Part III of the First Schedule. 
… 
(6) 
The tax deducted under this section shall be a final 
tax on the income of a resident person arising from 
transactions referred to in sub-sections (1) and (1A): 
… 
(9) 
In this section,— 
“prescribed person” means— 
… 
(b) 
a company 
 
2153. Payments for goods, services and contracts.— (1) 
Every prescribed person making a payment in full or part 
including a payment by way of advance to a resident person 
or 3[* * *]—  
(a) 
………………………………………………………… 
(b) 
for the rendering of or providing of services; 
(c) 
…………………………………………………………  
shall, at the time of making the payment, deduct tax from the 
gross amount payable (including sales tax, if any) at the rate 
specified in Division III of Part III of the First Schedule.  
 
(2) ……………………………………………………………… 
 
(3) The tax 4[deductible] under clauses (a) and (c) of sub-
section (1) and under sub-section (2) of this section, on the 
income of a resident person or 5[* * *], shall be final tax.  
 
Provided that,—  
                                       
1 As it read prior to the Finance Act, 2011 (XVI of 2011). 
2 As it read in 2013 after substitution by the Finance Act, 2011 (XVI of 2011). 
3 The words “permanent establishment in Pakistan of a non-resident person” omitted by the Finance Act, 
2012 (XVII of 2012). 
4 Substituted for the word “deducted” by the Finance Act, 2012 (XVII of 2012). 
5 The words “permanent establishment of a non-resident person” omitted by the Finance Act, 2012 (XVII of 
2012). 
Civil Petitions No.3551 to 3555 of 2015 
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(a) 
………………………………………………………… 
(b) 
tax 
6[deductible] shall be a minimum tax on 
transactions referred to in clause (b) of sub-section 
(1); and 
… 
 
161. Failure to pay tax collected or deducted.— (1) Where a 
person– 
(a) 
fails to collect tax as required under Division II of 
this Part or Chapter XII or deduct tax from a 
payment as required under Division III of this Part 
or Chapter XII or as required under section 50 of the 
repealed Ordinance; or 
(b) 
having collected tax under Division II of this Part or 
Chapter XII or deducted tax under Division III of 
this Part or Chapter XII fails to pay the tax to the 
Commissioner as required under section 160, or 
having collected tax under section 50 of the repealed 
Ordinance pay to the credit of the Federal 
Government as required under sub-section (8) of 
section 50 of the repealed Ordinance, 
the person shall be personally liable to pay the amount of 
tax to the Commissioner who may pass an order to that 
effect and proceed to recover the same.  
… 
(1B) 
Where at the time of recovery of tax under sub-
section (1) it is established that the tax that was to be 
deducted from the payment made to a person or collected 
from a person has meanwhile been paid by that person, no 
recovery shall be made from the person who had failed to 
collect or deduct the tax but the said person shall be liable 
to pay 7[default surcharge] at the rate of eighteen per cent 
per annum from the date he failed to collect or deduct the 
tax to the date the tax was paid.  
 
(2) A person personally liable for an amount of tax under 
sub-section (1) as a result of failing to collect or deduct the 
tax shall be entitled to recover the tax from the person from 
whom the tax should have been collected or deducted. 
 
162. Recovery of tax from the person from whom tax was 
not collected or deducted.— (1) Where a person fails to 
collect tax as required under Division II of this Part or 
Chapter XII or deduct tax from a payment as required under 
Division III of this Part or Chapter XII, the Commissioner 
may pass an order to that effect and recover the amount not 
collected or deducted from the person from whom the tax 
                                       
6 Substituted for the word “deducted” by the Finance Act, 2012 (XVII of 2012). 
7 Substituted for the words “additional tax” by the Finance Act, 2010 (XVI of 2010). 
Civil Petitions No.3551 to 3555 of 2015 
-: 5 :-
should have been collected or to whom the payment was 
made.  
 
(2) 
The recovery of tax under sub-section (1) does not 
absolve the person who failed to deduct tax as required 
under Division III of this Part or Chapter XII from any other 
legal action in relation to the failure, or from a charge of 
8[default surcharge] or the disallowance of a deduction for 
the expense to which the failure relates, as provided for 
under this Ordinance. 
 
233. Brokerage and commission.— (1) Where any payment 
on account of brokerage or commission is made by the 
Federal Government, a Provincial Government, a Local 
Government, a company or an association of persons 
constituted by, or under any law (hereinafter called the 
“principal”) to a person (hereinafter called the “agent”), 
the principal shall deduct advance tax at the rate specified 
in 9[Division II of] Part IV of the First Schedule from such 
payment.  
 
(2) 
If the agent retains Commission or brokerage from 
any amount remitted by him to the principal, he shall be 
deemed to have been paid the commission or brokerage by 
the principal and the principal shall collect advance tax 
from the agent.  
 
(3) 
Where any tax is 10[required to be] collected from a 
person under sub-section (1), 11[such tax] shall be the final 
tax on the income of such persons. 
 
3. 
 
We find it appropriate to first deal with the objection raised by 
the learned counsel for the respondent that no question of law emerged 
from the order of the Tribunal and, since a reference before the High Court 
can only be filed on a question of law and not on a question of fact, 
therefore the tax references were not maintainable. Responding to this, 
the learned counsel for the petitioner submitted that the jurisdiction of the 
High Court, in a tax reference, can be invoked where:- (a) the Tribunal has 
decided a question of law incorrectly; (b) the Tribunal has decided a 
question of law not before it, whether correctly or incorrectly; or (c) the 
                                       
8 Substituted for the words “additional tax” by the Finance Act, 2010 (XVI of 2010).  
9 Inserted by the Finance Act, 2010 (XVI of 2010). 
10 Inserted by the Finance Act, 2012 (XVII of 2012). 
11 Substituted for the words “the tax so collected” by the Finance Act, 2012 (XVII of 2012). 
Civil Petitions No.3551 to 3555 of 2015 
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Tribunal has not decided a question of law before it. He stated that it 
cannot be said that the High Court shall have no jurisdiction where the 
Tribunal has failed to decide a question of law before it. An interpretation 
which restricts the scope of the reference in the High Court to categories 
(a) and (b) would mean that the Tribunal could deny the High Court’s 
jurisdiction simply by failing to decide questions of law before it. 
Undoubtedly, a reference under Section 133 of the Ordinance would lie 
before the High Court on a question of law only, however, in the instant 
cases, the issues (and in the statement of case) before the High Court required an 
interpretation of various provisions of the Ordinance including Sections 
21, 153 and 233 which were essentially questions of law. We have 
examined the order of the Tribunal and find that the above questions of 
law do arise therefrom, resultantly the tax references before the learned 
High Court were maintainable. 
4. 
 
Section 18 of the Ordinance provides the various incomes of a 
person which would be chargeable to tax under the head ‘income from 
business’ and the television license fee earned by PTV constitutes the 
profits and gains of its business carried on throughout the year. Section 
20 of the Ordinance allows, subject to the Ordinance, deductions for any 
expenditure incurred by a person during the year in computing their 
income chargeable to tax under the head ‘income from business’. PTV 
claimed deductions by declaring the service fee paid to WAPDA as 
expenditure. It is the department’s stance that since Section 20 ibid was 
subject to the Ordinance, therefore PTV was required to deduct tax under 
Section 153(1)(b) of the Ordinance, or alternatively under Section 233 
thereof, and it did not pay or deduct and pay such advance tax, thus PTV 
could not be allowed deduction of expenditure under Section 21(c) of the 
Ordinance. The general rule is that deduction of expenditure incurred by a 
person, in a year, for the purposes of business is allowed under Section 20 
Civil Petitions No.3551 to 3555 of 2015 
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of the Ordinance. Section 21 of the Ordinance creates an exception thereto 
where no deduction is to be allowed in computing the income of a person 
under the head ‘income from business’ for various items, including 
“payment for services or fee paid by the person from which the person is required to 
deduct tax under Division III of Part V of Chapter X or section 233 of chapter XII…” The 
department has taken two alternate pleas:- (i) PTV was bound to deduct 
tax from the gross amount payable to WAPDA for the rendering/providing 
of services under Section 153(1)(b) of Division III of Part V of Chapter X of 
the Ordinance; and/or (ii) PTV, the principal, was bound to deduct/collect 
advance tax from WAPDA, the agent, under Section 233 of the Ordinance. 
Therefore PTV could not claim the service fee as expenditure and deduct 
the same from its income.  
5. 
 
With regard to the first plea, PTV’s stance is that as no 
payment was made by the petitioner to WAPDA, therefore, the provisions 
of Section 153 supra are not applicable. The said section provides that 
every prescribed person making a payment in full or part, including a 
payment by way of advance, to a resident person etc. for the rendering of 
or providing of services, shall, at the time of making the payment, 
deduct tax from the gross amount payable at the rate specified in Division 
III of Part III of the First Schedule. The term ‘prescribed person’ is defined 
in Section 153(7)(i) of the Ordinance, part (b) whereof includes ‘a company’ 
thus PTV was a prescribed person for the purposes of Section 153 supra. 
WAPDA admittedly is a ‘resident person’ as per the definition provided in 
Section 2(52) of the Ordinance. When we confronted learned counsel for 
the petitioner with the hypothesis that since PTV was making payments in 
the form of a service fee to WAPDA for the collection of television license 
fee from the consumers, the former was liable to deduct tax in terms of 
Section 153(1)(b) supra, he candidly conceded that had the amount of 
television license fee come to PTV in full and then been made over as 
Civil Petitions No.3551 to 3555 of 2015 
-: 8 :-
payment of service fee to WAPDA, the former would have been bound to 
deduct tax. However, in the instant case, no payment was ever made by 
PTV to WAPDA, rather WAPDA collected the television license fee from the 
consumers through electricity bills, deducted its fee for this collection 
service and remitted the balance amount to PTV. Therefore, PTV was 
unable to deduct tax. At this juncture, it would be useful to examine 
Section 158 of the Ordinance which stipulates the time of deduction of 
tax. Sub-part (b) thereof is relevant which provides that a person required 
to deduct tax from an amount paid by the person shall do so (in cases other 
than that of deduction under Section 151 of the Ordinance) at the time the amount is 
actually paid. The effect of the combined reading of Sections 153(1)(b) 
and 158(b) of the Ordinance makes it clear that deduction is to be made 
by a person “making the payment” “at the time the amount is actually paid”, and as 
stated earlier, in the instant case, the payment was not channeled from 
PTV to WAPDA, thus the former could not possibly deduct tax.  
6. 
 
Another aspect of this matter is that the only way PTV could 
have been required to pay tax in this situation was if an obligation was 
imposed on it to collect the amount of tax from WAPDA, which Section 
153 supra did not provide for. In circumstances such as those in the 
instant matters, where the Ordinance requires a person to deposit tax in 
the treasury it either uses the term ‘deduct’ or ‘collect’. There is a 
distinction between the two which needs to be appreciated. In this context 
we find it appropriate to ascertain the true import of both words which 
have been defined as follows:- 
 
Deduct:  
To take away (a number, amount, etc.)12 
 
To take away money, points, etc. from a total amount13 
                                       
12 Chambers 21st Century Dictionary (Reprinted 2007) 
13 Oxford Advanced Learner’s Dictionary (9th Ed.) 
Civil Petitions No.3551 to 3555 of 2015 
-: 9 :-
 
Abate, attenuate, bate, cheapen, cut, cut down, decrease, 
deflate, deplete, depreciate, devaluate, dilute, diminish, 
discount, downgrade, dwindle, lessen, lower, make less, 
make smaller, mark down, remove, render few, shrink, slash, 
strike off, strip, subduct, subtract, take away, take off, trim, 
truncate, withdraw14 
 
Collect: 
To bring or be brought together; to gather; to get something 
from people, e.g. money owed or voluntary contributions 
etc.15 
 
To bring things together from different people or places; to 
ask people to give you money for a particular purpose16. 
 
Accept, acquire, appropriate, arrogate, assume, be given, be 
paid, collect payment, demand and obtain payment, exact 
payment, execute, gain, get back, get money, get possession 
of, levy, obtain payment, profit, raise, raise contributions, 
raise funds, reacquire, realize, receive money, receive 
payment, reclaim, recompense, recoup, recover, redeem, 
regain, retrieve, secure, secure payment, sequester, settle 
accounts with, take back again, take possession17 
  
 
From the above, it is clear that the words ‘deduct’ and ‘collect’ cater to two 
different situations. A perusal of the various provisions of the Ordinance 
in which the words ‘deduct’ or ‘collect’ (or both) are used indicates that the 
former is used where payment is being made by a person and he is 
required to take away or subtract a percentage of such payment as 
advance tax to be deposited with the treasury, whereas the latter is 
employed where the person receiving the payment is to deposit advance 
tax on behalf of the person making the payment. The key is how the 
money changes hands. This reasoning is supported by Section 233 supra 
itself. The legislature used the word ‘deduct’ in Section 233(1) of the 
Ordinance to cover situations where the brokerage or commission 
payment is made by the principal to the agent and the former would be 
                                       
14 Legal Thesaurus AH 34 (Regular Ed. Published 1981) by William C. Burton 
15 Supra (n 12) 
16 Supra (n 13) 
17 Supra (n 14) 
Civil Petitions No.3551 to 3555 of 2015 
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liable to deduct tax from such payment. However it used the word ‘collect’ 
in Section 233(2) of the Ordinance and introduced a legal fiction therein to 
cater to situations where payment of the entire amount was received by 
the broker or the commission agent who, after retaining his commission, 
remitted the rest of the amount to the principal, thus the former would be 
deemed to have been paid by the latter, who would collect the amount 
of tax from the former. Had it been the legislature’s intention that ‘deduct’ 
appearing in Section 153 supra be construed the same way as in Section 
233 supra, it would have introduced a similar legal fiction in the former 
provision and also used the word ‘collect’. The absence of the same points 
to the legislature’s intention that ‘deduct’ in Section 153 supra is to be 
read restrictively and cannot be interpreted liberally so as to extend its 
scope to include collection. It is trite law that fiscal statutes, particularly 
the provision creating a tax liability, must be interpreted strictly and any 
doubt arising therefrom must be resolved in favour of the taxpayer. In this 
respect, reference may be made to the judgments reported as Chairman, 
Federal Board of Revenue, Islamabad Vs. Messrs Al-Technique 
Corporation of Pakistan Ltd. and others (PLD 2017 SC 99), 
Commissioner of Income Tax Legal Division, Lahore and others Vs. 
Khurshid Ahmad and others (PLD 2016 SC 545), Zila Council Jhelum 
through District Coordination Officer Vs. Messrs Pakistan Tobacco 
Company Ltd. and others (PLD 2016 SC 398), Government of Sindh 
through Secretary and Director General, Excise and Taxation and 
another Vs. Muhammad Shafi and others (PLD 2015 SC 380) and 
Commissioner of Income Tax Vs. Messrs Eli Lilly Pakistan (Pvt.) Ltd. 
(2009 SCMR 1279). Further, in the judgment reported as The State Vs. 
Zia-Ur-Rehman and others (PLD 1973 SC 49), while interpreting Article 
281 of the Constitution of the Islamic Republic of Pakistan, 1973, a five 
member bench of this Court held:- 
Civil Petitions No.3551 to 3555 of 2015 
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“It is a well-established rule that we have to gather the 
intention of the law-maker from the words used by it; and if it 
has in two clauses of the same Article used different words, 
then it follows that its intention is not the same, particularly, 
where such a conclusion also appears to be in consonance 
with reason and justice.” 
 
The legislature, therefore, being aware of the distinct meanings of these 
words, consciously used them asymmetrically, and not interchangeably, in 
various provisions of the Ordinance, be it either word or both. The use of 
only the word ‘deduct’ in Section 153(1)(b) supra is to our mind 
intentional. If the legislature had the intention to cover any other 
situation, it could have conveniently used the word ‘collect’ in the said 
section (or introduced a legal fiction), as it has done in many other provisions of 
the Ordinance. This reasoning is augmented by the fact that the 
legislature has, by virtue of the Finance Act, 2016 (XXIX of 2016) 
substituted Section 21(c) supra which now contains the phrase “deduct or 
collect”. Therefore, as Section 153(1)(b) supra only requires prescribed 
persons to deduct, and not collect, tax from the payment being made to a 
resident person for the rendering of or providing of services at the time of 
making the payment, PTV could not have possibly deducted such tax as it 
did not make any actual payments to WAPDA. It is settled law that the 
statute is the edict of the legislature and the language employed in the 
statute is determinative of the legislative intent. From the reading of 
Section 153(1)(b) supra, on the principle of literal interpretation, the 
legislative intent is evident: that the prescribed person at the time of 
making payment to a resident person etc. shall deduct the amount so 
envisaged by Division III of Part III of the First Schedule. However when 
payment is not being actually, physically or practically made by the 
Civil Petitions No.3551 to 3555 of 2015 
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prescribed person the possibility of deduction does not arise at all. It is 
absolutely impracticable and impossible to deduct a certain amount from 
an amount which is not being paid. Therefore, from the above, we are not 
persuaded to hold that the interpretation of such section can be extended 
to require something to be done which is not possible. 
7. 
 
We now advert to the applicability of Section 233 of the 
Ordinance. According to sub-section (2) thereof, if an agent retains the 
commission from any amount he remits to the principal, the former shall 
be deemed to have been paid the commission by the latter, who shall 
collect advance tax from the former. The relationship of principal and 
agent is a sine qua non for the purposes of Section 233(2) of the 
Ordinance. Controverting the department’s plea in this regard, learned 
counsel for the petitioner submitted that as per the agreement between 
PTV and WAPDA, no relationship of principal and agent existed between 
them as the latter was only providing services to the petitioner. Suffice it 
to say that the agreement does not indicate a relationship of agency 
between PTV and WAPDA, rather the wording employed therein suggests 
that it was a contract for the provision of services for which the latter was 
entitled to a ‘service fee’. As such, no relationship of principal and agent 
existed between PTV and WAPDA requiring the former to collect tax from 
the latter in terms of Section 233 supra. In this context, the judgment 
reported as The Ramkola Sugar Mills Co., Ltd Vs. The Commissioner 
of Income-Tax, Punjab and North-West Frontier Province Lahore 
(PLD 1955 Federal Court 418) referred to by the learned counsel for 
the respondent examined whether dividend income could be said to 
have been received by the assessee in British India within the meaning 
of Section 4(1) read with Section 14(2)(c) of the Income Tax Act, 1922 
and is therefore distinguishable. 
Civil Petitions No.3551 to 3555 of 2015 
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8. 
 
Learned counsel for the respondents argued that by showing 
WAPDA’s service fee for collection of television license as an inter-account 
adjustment as opposed to an actual payment, PTV avoided withholding of 
advance tax, and according to the Income Tax Circular No.01 of 2009 
dated 20.02.2009, it was clarified that such adjustments would be 
tantamount to actual payments thereby attracting Section 158(b) of the 
Ordinance. Apart from the fact that circulars issued by the department 
are not binding on this Court, the clarification which sought to curb the 
alleged menace mentioned in the said circular is against the clear 
mandate of Section 153(1)(b) read with Section 158 of the Ordinance as 
mentioned above in paragraph No.5 of this opinion, and therefore, does 
not provide any support to the case of the respondent. 
9. 
 
The conclusion of the above discussion is that since PTV was 
not liable to deduct tax under Section 153(1)(b) of the Ordinance as it did 
not make any payments to WAPDA nor was the former required to collect 
advance tax under Section 233(2) thereof due to the absence of the 
relationship of agency with the latter, thus PTV did not fall within the garb 
of the exception of Section 21(c) supra and was entitled to claim deduction 
of service fee from its income as expenditure. The findings of all the 
forums below in this respect are liable to be set aside. 
10. 
 
Further, there is an exception to the exception in Section 21(c) 
supra, that “unless the person has paid or deducted and paid the tax…” such that the 
payment for services or fee paid is not to be treated as expenditure unless 
the person has (i) paid; or (ii) deducted and paid the tax. Learned counsel 
for the respondent submitted that since PTV did not pay or deduct and 
pay the tax, thus it did not fall within the exception to the exception 
resultantly payment for services could not be treated as expenditure. He 
argued that the word ‘person’ in Section 21(c) supra only refers to 
withholding agents and since PTV did not pay the tax, thus WAPDA’s 
Civil Petitions No.3551 to 3555 of 2015 
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service fee could not be treated as expenditure. To fortify his argument, he 
referred to Section 161 of the Ordinance according to which where a 
person fails to deduct tax from a payment, he shall be personally liable to 
pay the amount of tax to the Commissioner who may pass an order to that 
effect and proceed to recover the same. Further, that PTV was also liable 
to pay default surcharge under Section 161(1B) of the Ordinance, which 
provides that where at the time of recovery of tax under sub-section (1) it 
is established that the tax that was to be deducted from the payment 
made to a person or collected from a person has meanwhile been paid by 
that person, no recovery shall be made from the person who had failed to 
collect or deduct the tax but the said person shall be liable to pay default 
surcharge at the rate of eighteen per cent per annum from the date he 
failed to collect or deduct the tax to the date the tax was paid. He also 
argued that even if the amount of tax could be recovered from WAPDA 
under Section 162(1) of the Ordinance, sub-section (2) thereof does not 
absolve the person who failed to deduct tax (in this case PTV) from any other 
legal action in relation to the failure, or from a charge of default surcharge 
or the disallowance of a deduction for the expense to which the failure 
relates, as provided for under the Ordinance. Conversely, learned counsel 
for the petitioner submitted that if the tax is deducted and paid by PTV 
(which did not happen in this case) or WAPDA paid tax on the service fee, in either 
of the two situations, the former was entitled to deduct the said fee as its 
expenditure. According to him, the service fee retained by WAPDA was 
shown as its income and tax due has been paid thereupon. Since WAPDA 
cleared its tax liability, no loss has occurred to the revenue, hence 
invoking Section 21(c) supra was unjustified and at the most the 
provisions of Section 161(1B) supra could be applied and default 
surcharge imposed upon PTV due to delay in payment of tax, during the 
period when it was due and when WAPDA actually paid such amount. 
Civil Petitions No.3551 to 3555 of 2015 
-: 15 :-
Learned counsel stated that any other interpretation would result in 
double taxation which (interpretation) should be avoided unless the law very 
clearly so mandates. In this regard he relied upon the judgments reported 
as Pakistan Industrial Development Corporation Vs. Pakistan through 
the Secretary, Ministry of Finance (1992 SCMR 891) and Federation 
of Pakistan through Secretary M/o Petroleum and Natural Resources 
and another Vs. Durrani Ceramics and others (2014 SCMR 1630). He 
also referred to numerous judgments of this Court to argue that any 
uncertainty in the meaning of a taxing provision must be resolved in 
favour of the assessee. According to him, the claim of the department is 
not that since WAPDA did not pay tax, PTV should pay the same, rather 
that the latter failed to deduct tax that it was obliged to do and thus the 
service fee could not be treated as expenditure. He also stated that in 
identical circumstances, when the Gas Distribution Companies failed to 
deduct tax on the service charges retained by banks etc. for the collection 
of gas bills, the Tribunal allowed deduction of such expenditure from 
income under Section 21(c) supra in ITAs No.871/LB to 874/LB of 2008 
[2010 PTD (Trib.) 930] and Sui Northern Gas Pipelines Ltd., Lahore 
Vs. Commissioner Income Tax, L.T.U., Lahore [2012 PTD (Trib.) 801]. 
11. 
 
As discussed earlier, since no actual payment was  made from 
PTV to WAPDA, therefore no deduction could have been made, resultantly 
category (ii) of ‘deducted and paid’ does not apply. Thus the question is 
whether the phrase “unless the person has paid the tax…” in category (i) refers 
only to PTV or includes WAPDA as well. It is pertinent to note that till 
2003, only category (ii) existed. Thus “person…deducted and paid” clearly 
refers to withholding agents as it is only they who ‘deduct’ tax. Category (i) 
came into being by virtue of the Finance Act, 2003 (I of 2003) which 
inserted the words “paid or” in Section 21(c) supra. Prior to this 
amendment, the provision read “until the person has deducted and paid the tax…” 
Civil Petitions No.3551 to 3555 of 2015 
-: 16 :-
The amendment cannot be regarded as inconsequential, rather it has to 
be given meaning. By inserting the phrase ‘paid or’ the legislature has 
essentially widened the scope of the word ‘person’ to cover not only 
withholding agents but the person liable to pay the tax (the person on whose 
behalf advance tax is being paid). If it is presumed that both the expressions ‘paid’ 
and ‘deducted and paid’ relate only to one person (withholding agents), the 
amendment would have no implication whatsoever on the scope of the 
statutory provision and render the phrase ‘paid or’ completely redundant. 
It is settled law that redundancy cannot be attributed to statutory 
provisions (or any part thereof). In this respect, the following judgments are 
relevant:- Collector of Sales Tax and Central Excise (Enforcement) and 
another Vs. Messrs Mega Tech (Pvt.) Ltd (2005 SCMR 1166), Aftab 
Shahban Mirani and others Vs. Muhammad Ibrahim and others (PLD 
2008 SC 779) and Messrs Master Foam (Pvt.) Ltd. and 7 others Vs. 
Government of Pakistan through Secretary, Ministry of Finance and 
others (2005 PTD 1537). Thus, WAPDA is covered by category (i) and if it 
discharged its tax liability regarding the service fee, PTV is entitled to 
deduct the amount of such fee as expenditure under Section 21(c) supra.  
12. 
 
As regards Sections 161 and 162 of the Ordinance, as pointed 
out by the learned counsel for the respondent, we find that the wording of 
both sections reflects a presumption that a person was required to deduct 
and/or collect tax. As we have discussed in the earlier portion of this 
opinion, PTV could neither have deducted tax nor was it liable to collect 
tax from WAPDA under the law, thus Sections 161 and 162 supra, in the 
facts and circumstances, do not apply to the instant case. Thus, as we 
have held above, the exception itself does not apply to PTV therefore the 
question of the exception to the exception applying to it does not arise.  
13. 
 
During course of the arguments, learned counsel for the 
respondent submitted that PTV did not produce any documentary 
Civil Petitions No.3551 to 3555 of 2015 
-: 17 :-
evidence to establish that WAPDA paid tax on the service fee retained by 
it. We directed learned counsel for the respondent to obtain a certificate 
from the Chairman, Federal Board of Revenue (FBR) in this respect. On 
one of the hearings, the learned counsel for the petitioner filed a certificate 
issued by one of the DISCOs namely, IESCO certifying that “from tax year 
2009 to 2013, the commission deducted by IESCO from TV license fee paid to Pakistan 
Television Corporation was treated as one of the component of other income in IESCOS’s 
Revenue”. Learned counsel for the respondent also produced a certificate 
issued by the Chairman, FBR showing various charts relating to service 
fee deducted by the DISCOs viz. withholding tax collected and the net 
profit/loss shown by DISCOS viz. tax paid on that amount, in the tax 
years 2009 to 2013. It was also certified by the Chairman, FBR that 
“although withholding tax under section 153(1)(b) was not deducted/collected except 
Gujranwala Electric Supply Company (GEPCO). However, the DISCOS have discharged 
their normal tax liability on the basis of Return filed. Further examination of record 
reveals that the DISCOS were declaring losses whereas, had there been any tax withheld 
under section 153(1)(b) on service charges, the tax withheld would have been minimum 
Tax liability of the DISCOS. Therefore, the tax liability in cases of DISCOS showing losses 
has not been discharged.”   
14. 
 
It is not clear from the above certificates, except for GEPCO 
(which has paid tax), how much tax has been paid by the DISCOs on the 
service fee retained by them. However, it is clear that they have mentioned 
the said amount as one of the components of their income and have 
discharged their ultimate tax liability on their total income, i.e. whenever 
there was a profit, they paid the tax due and in case of loss, they were 
obviously not required to pay tax. In either of the two eventualities, they 
have mentioned the service fee as part of their income. Therefore, PTV was 
entitled to treat WAPDA’s service fee as expenditure and reduce its (PTV’s) 
income accordingly. 
Civil Petitions No.3551 to 3555 of 2015 
-: 18 :-
15. 
 
Learned counsel for the respondent also submitted that the 
tax on WAPDA’s service fee deductible by PTV in terms of Section 153(1)(b) 
supra, would be treated as minimum tax as per proviso (b) of Section 
153(3) of the Ordinance. Again, the said proviso uses the phrase ‘tax 
deductible’ and not ‘tax collectable’. As we have already held above, PTV 
was not liable to deduct tax from WAPDA’s service fee as no actual 
payment was made by the former to the latter, thus proviso (b) of Section 
153(3) ibid is irrelevant.  
16. 
 
In the light of the above, these petitions are converted into 
appeals and allowed and the impugned judgment(s) are set aside.   
 
 
CHIEF JUSTICE 
 
 
 
JUDGE 
 
 
 
JUDGE 
Announced in open Court  
At Islamabad on 24th  April, 2017 
Approved for reporting 
Mudassar/