WORLDCALL TELECOM LTD. vs THE COMMISSIONER OF INCOME TAX, LARGE DIVISION, LARGE TAXPAYER UNIT, NABHA ROAD, LAH

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WORLDCALL TELECOM LTD. VS THE COMMISSIONER OF INCOME TAX, LARGE DIVISION, LARGE TAXPAYER UNIT, NABHA ROAD, LAHORE. Ss.161, 205 & 236(1)(b)---Advance payment of tax---Principles---Conceptual framework---Prepaid telephone services---Transactions between telecom company and franchisees---Liability to collect advance tax---Scope---Brief facts were that petitioner company operating through a network of franchisees was subjected to proceedings under the Income Tax Ordinance, 2001 in respect of tax years 2004 and 2005 on the basis that it had not collected advance income tax under Section 236(1)(b) on the supply of prepaid telephone cards to its franchisees---Consequent orders were passed by tax authorities treating the company as a deemed taxpayer in default under Section 161, which were upheld in departmental appeal but set aside by the Appellate Tribunal---Tax references filed by the Commissioner were initially dismissed by the High Court and later remanded by the Supreme Court for decision afresh, and thereafter decided in favour of the department, leading the taxpayer to file the present civil petitions for leave to appeal before the Supreme Court---Held: If at all Section 236 applied between the taxpayer and its franchisees, then the latter had to be the persons from whom the advance tax had to be collected along with the payments made by them for prepaid cards---However, if so, then they would have been the persons who could claim the benefit of tax so collected in advance---It was common ground between the parties that franchisees were not the persons who could claim benefit of any tax collected in advance under Section 236---It was correctly accepted that they could not be in the picture at all when it came to claiming the benefit of advance payment of tax---The only possible persons who could claim benefit under Section 236 were the persons who purchased prepaid cards from franchisees i.e. subscribers or customers---Taxpayer was under no obligation to collect advance tax from franchisees and hence Section 161 read with Section 205 could not be applied against it---This fundamental aspect was not kept in mind by the High Court---Question was answered in negative against the department and in favour of taxpayer---Petitions were converted into appeals and succeeded by setting aside the impugned judgment.

WORLDCALL TELECOM LTD. vs THE COMMISSIONER OF INCOME TAX, LARGE DIVISION, LARGE TAXPAYER UNIT, NABHA ROAD, LAHORE — 2026 SCMR 663 SUPREME-COURT

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