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FATIMA FERTILIZER COMPANY vs COMMISSIONER INLAND REVENUE, ZONE-3, LARGE TAXPAYERS OFFICE, MULTAN Ss — 2026 PTD 390 LAHORE-HIGH-COURT-LAHORE

Case information

Citation
2026 PTD 390 LAHORE-HIGH-COURT-LAHORE
Court
Lahore High Court
Year
2026
Reporter
PTD
Parties
FATIMA FERTILIZER COMPANY vs COMMISSIONER INLAND REVENUE, ZONE-3, LARGE TAXPAYERS OFFICE, MULTAN Ss
Subject matter
Criminal
Provisions referred to
S. 2; S. 3; Sales Tax Act

Fields are extracted from the reported citation and judgment text. Where a detail is not stated in the record, it is not shown.

Judgment text as reported

FATIMA FERTILIZER COMPANY VS COMMISSIONER INLAND REVENUE, ZONE-3, LARGE TAXPAYERS OFFICE, MULTAN Ss.2(12) & 3---Carbon credits not "goods"---Scope--- Carbon credits---Trading / sale abroad---Whether taxable supplies--- Appellate Tribunal Inland Revenue held that Certified Emission Reduction certificates fell within the meaning of goods as defined in S.2(12) of the Sales Tax Act, 1990 and the consideration received from outside Pakistan by the company/taxpayer, arising from sale of Certified Emission Reduction certificates in international emissions trading markets, was subject to sales tax under the Act, 1990. Validity--- No provision of the Sales Tax Act, 1990 explicitly or specifically defines Certified Emission Reduction certificates (Carbon credits) as taxable supplies. Attempt to bring carbon credits within the ambit of definition of "goods" under S.2(12) of the Act, 1990 amounted to rewriting the scope of charging provision contained in S.3 of the Act, 1990. Department failed to explain how trading or sale of Carbon credits outside Pakistan could be construed as taxable supply made in furtherance of taxable activity. Merely classifying carbon credits as goods was not sufficient to bring the transaction within the sales tax regime. Carbon credits were, at best, an entitlement accrued in lieu of efforts made for reducing carbon emissions. Commissioner (Appeals) correctly annulled the claim raised against carbon credits, whereas Tribunal erred by treating them as goods despite acknowledging them as intangible assets. High Court answered the proposed questions in affirmative in favour of Applicant/Company. Decisions of Appellate Tribunal Inland Revenue and Order-in-Original were annulled. Reference application filed by Company was allowed accordingly.

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