Disallowance

2024 PTD 1432 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.8Input tax adjustmentDisallowanceInput tax claimed by Gas Company in respect of UFG (Un-Accounted For Gas)Scope

Registered person (Sui Northern Gas Pipe Lines Ltd /SNGPL) filed appeal before the Appellate Tribunal Inland Revenue against order passed by Commissioner Inland Revenue (Appeals) whereby he upheld the disallowance of input tax claimed in respect of UFG (Un- accounted for Gas) over and above the permissible limit as determined by the OGRA and input tax claimed under S. 8 of Sales Tax Act, 1990

Held, that during the process of transmission and distribution, significant volume of natural gas remains unaccounted for due to leakage, pilferage, measurement errors or malfunctioning of gas meters which are termed as Unaccounted For Gas (UFG)

While determining the appellant's revenue, final tariff on the basis of guaranteed return OGRA allowed adjustment of UFG to the extent of certain percentage of gas available for sales as against the actual loss incurred on this account

In that background, the appellant was aggrieved by the disallowance of input tax of Rs.1,789,711,550/- as allegedly the same was in excess of percentage approval by OGRA

Previously, there were some conflicting judgments of the Appellate Tribunal Inland Revenue ('the Tribunal') on the issue-in-hand, hence during the course of hearing of company's appeal STA No.833/LB/2016, a miscellaneous application was given for the constitution of Larger Bench to resolve the controversy

Larger Bench of the Tribunal was constituted on the request of the taxpayer and matter was decided in favour of company

Input tax is admissible in respect of gas blown due to ruptures even if gas is not actually supplied as the intention of the appellant at the time of receiving gas was to make taxable supplies, which principle is squarely applicable in the present case

Appellate Tribunal, following the ratio decendi settled by the Larger Bench of the Tribunal in STA No.833/LB/2016, held that the Appellant (SNGPL) was entitled to input tax adjustment/claim incurred in respect of Un-accounted For Gas (UFG)

Commissioner Inland Revenue (Appeals) erred in law while upholding the disallowance of input tax on that account after completely ignoring the decision of the Larger Bench of the Tribunal which was against the lawful rights of the appellant

Tribunal set-aside the impugned order passed by Commissioner Inland Revenue (Appeals)

Appeal filed by registered person (SNGPL) was allowed, in circumstances.

2013 PTD 1083 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S.20Deductions in computing income chargeable under the head "Income from Business"Assessee, a BankProvisions for non-performing loansBad debts, written offDisallowance

First Appellate Authority observed that "there was no reason for disallowance of the claim of bad debts for the banks; that only criterion was adoption of rules fixed by the State Bank; and that if there was no deviation of the Prudential Bank Regulation, the claim of bad debt could not be disallowed and that since it was not the case of the department that there was deviation, the claim of bad debts of the bank were allowed in full"

Appellate Tribunal decided the issue in favour of banks

All the departmental appeals failed and that of taxpayer succeeded.

2012 PTD 1638 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

S. 8(1)(a)Tax credit not allowedInput tax on vehicles' batteries

Claim of input tax adjustment regarding batteries purchased for use in vehicles engaged in distribution of taxable goods

Disallowance

Validity

Vehicles were used for transportation of goods front manufacturing premises to retail outlets and as such by no stretch of imagination the aspect of `for the purpose of taxable supplies made or to be made' could be doubted

Claim, held, was legitimate and valid under the law.