The COMMISSIONER INCOME TAX vs KARACHI STOCK EXCHANGE (G) LTD — 2025 PTD 96 KARACHI-HIGH-COURT-SINDH

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The COMMISSIONER INCOME TAX VS KARACHI STOCK EXCHANGE (G) LTD. S. 2(14) & Second Sched., Clause (93)---Assessee being Stock Exchange---Charitable purposes---"Advancement of any other object of general public utility"---Exemption---Scope and effect---Department approached the High Court against the findings of the Income Tax Appellate Tribunal declaring the income from property of the assessee (Karachi Stock Exchange, now Pakistan Stock Exchange) is exempted from tax under Clause (93) of Second Schedule to Ordinance, 1979 contending that it (respondent) was neither a religious nor a charitable institution---Stance of the respondent (Karachi Stock Exchange, now Pakistan Stock Exchange) was that the revenue-under-question was by way of premium ("Salami") for granting permission to operate from portions (cubicals) of its property in terms of the agreement, separately executed in that regard, thus, the revenue so generated formed part of the capital reserve having exemption under clause (93) of Second Schedule of Income Tax Ordinance, 1979 ('the Ordinance, 1979') as per (last component of) the definition of "charitable purpose "under S.2(14) of Ordinance, 1970 i.e. "advancement of any other object of public utility"---Validity---Second Schedule of the Ordinance, 1979, exempts certain incomes or classes of income or persons or classes of persons enumerated therein from tax subject to the conditions and to the extent specified thereunder---Respondent (Karachi Stock Exchange/Pakistan Stock Exchange) sought exemptions of revenue-in-question under Clause (93) of ibid Second Schedule claiming that it (respondent), which was a company by guarantee, meant no dividends were to be paid to its members and secondly that, as is evident from the Memorandum and Articles of Association, the property of the company was under legal obligation for utilizing its income for the object of the company---Respondent was a commercial organization engaged in business of trading securities; it formed a main commercial hub where facilities for securities trade were being provided wherein members operating therefrom assembled for their financial gains besides other support to cater their financial growth such as outlets of any financial institutions including Bank whose existence was inevitable for such operations from the subject property, on payment of consideration which was strangely called "Salami" by the respondent and sought exemption of such revenue in said regard---Entity of Karachi Stock Exchange/Pakistan Stock Exchange, now or at the relevant time, could neither be equated to have been operating for charitable purposes or for imparting relief to the poor, education or medical issues nor for the advancement of any other object of public utility---As an ancillary cause the benefit may have bubbled over to individuals having interest in security trade through entrusted members and having commercial interest in dealing with trade of securities through the members of the Stock Exchange but to apply such exemption to the revenue generated by respondent was not sufficient to categorize this event/activity of trade as advancement of any other object of public utility, let alone other phrases like for poor, education and medical relief---Primarily, from the specified portions of that building/property the individuals were looking after their own monetary interests and revenue component, so generated, either as a commission in trade of securities or as license fee for operating from a particular portion of that property or rent for occupying the cubical/portions, as in the case of Banks operating on payment of consideration---Thus in no way it can be termed to be an activity to keep the respondent under the umbrella of charitable activity or an act towards "advancement of any other object of general public utility"---Thus, the impugned findings of Income Tax Appellate Tribunal did not subscribe to Clause (93) of the Second Schedule of Income Tax Ordinance, 1979 and the relevant definitions of charitable purposes in terms of S.2(14) of the Ordinance, 1979---Answer to the question proposed was in "negative" i.e. in favour of the appellant department and against the respondent---Resultantly the orders of Commissioner/Deputy Commissioner was maintained---Income Tax Cases, filed by the Department, was allowed.

The COMMISSIONER INCOME TAX vs KARACHI STOCK EXCHANGE (G) LTD — 2025 PTD 96 KARACHI-HIGH-COURT-SINDH

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