| Citation(s) |
|---|
| 2023 SLG 2354 2023 SLD 2354 2023 SCMR 1803 |
Supreme Court of Pakistan
Civil Appeals Nos. 94 to 106/2008 (On appeal against thejudgment dated 12.10.2007 passed by the High Court of Sindh,Karachi in ITRAs Nos. 71/1997, 99/2006, 274/1997, 275 to281/1998, 514 to 516/2006)Date of hearing: 7th September,2022. And Civil Appeal
Present: Umar Ata Bandial, CJ, Qazi Faez Isa and Syed Mansoor Ali Shah, JJ
Ms. Misbah Gulnar Sharif, Advocate Supreme Court for Appellant (in C.As. Nos. 94 to 106 of 2008). Ch. Akhtar Ali, Advocate-on-Record for Appellant (in C.A. No. 94 of 2008). Sh. Mehmood Ahmed, Advocate-on-Record for Appellant (in C.As. Nos. 95 to 106 of 20
Civil Appeals Nos. 94 to 106/2008 (On appeal against thejudgment dated 12.10.2007 passed by the High Court of Sindh,Karachi in ITRAs Nos. 71/1997, 99/2006, 274/1997, 275 to281/1998, 514 to 516/2006)Date of hearing: 7th September,2022. And Civil Appeal
Present: Umar Ata Bandial, CJ, Qazi Faez Isa and Syed Mansoor Ali Shah, JJ
Ms. Misbah Gulnar Sharif, Advocate Supreme Court for Appellant (in C.As. Nos. 94 to 106 of 2008). Ch. Akhtar Ali, Advocate-on-Record for Appellant (in C.A. No. 94 of 2008). Sh. Mehmood Ahmed, Advocate-on-Record for Appellant (in C.As. Nos. 95 to 106 of 20
The COMMISSIONER OF INCOME TAX---Appellant
VERSUS
Messrs INTER QUEST INFORMATICS SERVICES---Respondent
Law: Income Tax Ordinance, 2001
Section: 107,133(1)
Law: Income Tax Ordinance, 1979
Section: 163,136(1)
Income Tax Ordinance (XLIX of 2001)--- ----Ss. 107 & 133(1)---Income Tax Ordinance (XXXI of 1979) [since repealed], Ss. 163 & 136(1)---Convention Between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, 1982, Arts.7, 12, paras. (3)(a), (3)(b), 22, 23 & 24---Concept of "Royalties"--- Scope--- Business profits---Non-resident foreign company---Exemption from income tax---Income/royalties earned by the non-resident company in Pakistan for the lease of certain software---Whether such income was business profits and thus exempt from payment of income tax in Pakistan under Article 7 of the Convention Between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ('the Convention'), or the same constituted "royalties" as defined in paragraph 3 of Article 12 of the Convention and was liable to tax. Per Qazi Faez Isa, J. (Majority view) The respondent, a company incorporated in the Netherlands and thus a non-resident for Pakistan income tax purposes, and another company ('SSI'), which had a place of business in Pakistan, entered into an 'Agreement for Lease of FLIC Tapes' dated 1 February 1986 and a 'Software Rental Agreement' dated 1 January 1995 (respectively 'the 1986 Agreement', 'the 1995 Agreement' and collectively 'the Agreements'). In the 1986 Agreement 'SSI' is described as the lessee and in the 1995 Agreement it is described as the customer. The tax returns filed by the respondent claimed that the said receipts were business profits and exempt from payment of income tax in Pakistan under Article 7 of the Convention Between the Kingdom of the Netherlands and the Islamic Republic of Pakistan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income ('the Convention'). However, the appellant's (tax department's) case was that the receipts were royalties under Article 12 of the Convention and the respondent was liable to pay income tax thereon at the rate of fifteen percent. The…
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