The Supreme Court of Pakistan has reaffirmed that fiscal and tax statutes must be interpreted strictly on the basis of their wording, without judicial additions or assumptions. A three-member bench, led by Chief Justice Yahya Afridi and comprising Justice Muhammad Shafi Siddiqui and Justice Miangul Hassan Aurangzeb, ruled in an appeal filed by the Commissioner Inland Revenue against a Lahore High Court decision dated November 21, 2022.
In its judgment authored by Justice Shafi Siddiqui, the Court held that the “well-recognised rule of construction or interpretation of any fiscal statute or its particular provision is that the intention of the legislature must be discovered from the words used. If the words used are capable of one construction only, then it would not be open to the courts to adopt any other hypothetical construction.” The Court further emphasized that when provisions are clear and unambiguous, they must be applied without hesitation.
The ruling clarified the powers of the Commissioner Inland Revenue (Appeals), noting that after the 2005 Finance Act amendment, the Commissioner has the authority to confirm, modify, or annul an assessment order. However, the Commissioner cannot remand matters to lower authorities and is bound to decide cases within the framework of Section 129(1)(a) of the Income Tax Ordinance, 2001.
The case stemmed from an order passed under Section 122(5A) against M/s Seven Star Sugar Mills (Pvt) Ltd, Karachi. While the Commissioner (Appeals) had annulled the order but directed a fresh proceeding, the Appellate Tribunal Inland Revenue overturned that direction, ruling in favor of the taxpayer. The Lahore High Court upheld the tribunal’s view, prompting the Commissioner to seek relief from the apex court.
The Supreme Court has now remitted the matter back to the Commissioner (Appeals) with clear directions to decide within the statutory limits, reinforcing the principle that tax authorities cannot exceed their prescribed jurisdiction.
Supreme Court: Literal Rule Must Guide Tax Law Interpretation, CIR Appeals Cannot Remand Cases
