| Citation(s) |
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| 2026 SLD 3613 2026 SLG 3613 = 2026 SCP = 2026 SCMR 1681 |
Supreme Court of Pakistan
Civil Petition Nos. 5257 to 5265 of 2024 (On appeal against the judgment dated 19.09.2024 passed by the Islamabad High Court, Islamabad in ITR Nos.200 & 261/2011, 28/2013 and 84, 85 86, 190, 191 & 192/2015)
Presented By: Justice Yahya Afridi, HCJ Justice Aqeel Ahmed Abbasi
Mr. Manzoor Hussain, ASC (in all cases)
Civil Petition Nos. 5257 to 5265 of 2024 (On appeal against the judgment dated 19.09.2024 passed by the Islamabad High Court, Islamabad in ITR Nos.200 & 261/2011, 28/2013 and 84, 85 86, 190, 191 & 192/2015)
Presented By: Justice Yahya Afridi, HCJ Justice Aqeel Ahmed Abbasi
Mr. Manzoor Hussain, ASC (in all cases)
Commissioner Inland Revenue (Zone-1) Large Tax Payer Office, Islamabad (in all cases) �Petitioner(s
VERSUS
M/s Saudi Pak Industrial Agricultural Investment Company Private Limited, 61-A, Saudi Pak Tower Jinnah Avenue Islamabad (in CPLA Nos.5257 to 5259/2024) M/s Fauji Foundation Rawalpindi (in CPLA No.5260/2024) M/s Fauji Fertilizer Co. Ltd Rawalpindi (in CPLA No.5261/2024) M/s CAPGAS Pvt Ltd POL House Morgah Rawalpindi (in CPLA No.5262/2024) M/s State Engineering Corporation Pvt Ltd, Islamabad and others (in CPLA Nos.5263 to 5265/2024) �Respondent(s)
Law: Income Tax Ordinance, 2001
Section: 4,5,8,39
Law: Finance Act, 2007
Section: 8(1)(e)(ii)
Law: Income Tax Ordinance, 1979
Section: 80C
Summary: The Supreme Court dismissed the department's petitions and upheld the Islamabad High Court and ITAT rulings that dividend income received by companies is taxed under Section 5 of the Income Tax Ordinance, 2001 as a separate charge at the rate specified in Division III of Part I of the First Schedule (10%), forming a presumptive/final tax regime. The Court held that Section 5 is a primary charging provision and cannot be displaced by treating dividends as “income from other sources” under Section 39 or by machinery provisions in Section 8; therefore dividends are not chargeable to normal corporate tax at 35%. Core Points: Dividend received from a company is charged under Section 5 ITO 2001, attracting the rate in Division III, Part I of First Schedule (10%). Section 5 creates a separate charging mechanism and block of income (presumptive/final tax), distinct from the normal tax regime under Section 4. Section 8 is a machinery provision; its proviso (2007 amendment) cannot override the substantive charging effect of Section 5. Section 39 (income from other sources, including dividends residually) cannot be used to recharacterize dividends already covered by Section 5. Reliance on prior Supreme Court decision (Fawad Ahmad Mukhtar v. Commissioner) affirmed that Section 5 is the primary charging provision for dividends. Result: Department’s appeals dismissed; dividend taxed @10% (final) not @35% (normal corporate rate). Law and sections Law/Instrument Section Subject / Heading Key role in judgment Income Tax Ordinance, 2001 Section 4 Charge of tax and normal tax regime Creates general charge on taxable income under normal heads (salary, business, property, etc.) at rates in Division I & II of First Schedule; distinct from dividend charge under Section 5. Income Tax Ordinance, 2001 Section 5 Tax on dividends Primary charging provision for all dividends; imposes separate charge at 10% (Division III, Part I, First Schedule) and treats dividend as a separate block of income, not taxable at normal corporate rate (35%). Income Tax Ordinance, 2001 Section 8 General provisions for taxes under sections 5, 5A, 5AA, 6, 7, 7A, 7B, 7E A…