Law: Income Tax Ordinance, 2001

Section: 24B

Doctrine "exhaustion of rights after first sale "--Scope- Doctrine of "exhaustion of rights after first sale" means that an owner of a particular good ceases to have control over further sale of his goods once he had made valid transaction of sale-Besides a litmus test in cases of intellectual property rights, same ratio could also be used in cases where a court had to examine residual effect of a sale agreement-If there appeared that even after the first sale, the seller retained power to exercise control over the goods, the doctrine of "exhaustion of rights " would become an instrument to microscopically analyse such relationship. Service provider-Supply chain management/distribution (including delivery) service-Sale agreement, residual effect of- Applicant was compulsorily registered under S.24B of Sindh Sales Tax on Services Act, 2011, for providing distribution services to manufacturer-Applicant contended that he was not rendering such services and was already registered and paying Federal Sales Tax under the Sales Tax Act, 1990-Applicant's appeals were rejected by Tax hierarchy-Validity-Relationship between applicant as established under the agreement/appointment letter could be analysed under the doctrine of the "exhaustion of rights after first sale "-Applicant was mandated to perform some services for the benefit of the manufacturer even after making full and final payment-Agreement between the parties left a residual element of control of the manufacturer on the goods which was exercised through the hands of the applicant, which clearly did not fill the regime of classical sale of goods agreement- Some services were performed by the applicant aimed to give a value- add to the manufacturer's profitability-Assesse as distributor was not an agent of company but was a purchaser, hence the transactions in question were liable to be included in the turnover of the assesse- Agreement/appointment letter aimed to propel a service performed by the applicant which could rightly fall under the head of "supply chain management/distribution (including delivery) service "-Application was dismissed accordingly. While construing a statute /instrument/document, whole…

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