I. BACKGROUND

(1) We refer to TLQC in trail, blue, italic and double Line 3367 of ------------ about FST Input Tax allowable on --------------- – --HC (2) For List of other relevant QCs, please refer to Para E.

II. EXECUTIVE SUMMARY 

1. This judgment decides a set of connected tax references involving overlapping questions of law arising out of judgments passed by the ATIR. The tax department challenged the ATIR’s findings primarily on three issues:

(i) whether food and beverages provided by airlines form part of stock-in-trade under SRO -------------;

(ii) whether input tax adjustment on food, beverages, and hotel services procured for ----------------- is admissible under the STA, 1990 and the Federal Excise Act, 2005; and

(iii) the correct determination of the “relevant date” for limitation purposes under section 14 of the Excise Act.

2. On the first two questions, the Court upheld the findings of the ATIR, relying on SCP precedent and established principles distinguishing circulating capital from fixed capital, The Court held that --------------- acquired by --------------------------constitute stock-in-trade.

3. Such goods are acquired with the intention of disposal in the ordinary course of business and form part of the airline’s circulating capital, irrespective of whether their cost is itemized separately or embedded in the ticket price. Consequently, input tax paid on such goods is adjustable against output tax under section 7 of the Excise Act read with section 7 of the STA, and is not barred by SRO 490(I)/2004.

4. The IHC further held that input tax paid on --------------------- services procured for --------------- is also admissible for adjustment. These services are a mandatory operational requirement for -------------------- operations and are incurred wholly and exclusively in the course of providing taxable services, not for entertainment or personal perquisites. The tax department failed to identify any statutory provision prohibiting such adjustment.

5. On the third question concerning limitation, the Court clarified the law and partially disagreed with the ATIR. It held that the “relevant date” under section 14 of the Excise Act is not the date of the underlying transaction, but the due date for payment of duty, which—by reference to the STA—is the 15th day of the month following the relevant tax period. While the ATIR had misapplied this principle, the error was ultimately academic in the present case, as the impugned demand was unsustainable on merits and that finding was not challenged. For purposes of legal clarity, however, the question was answered in favor of the tax department.

6. Accordingly, the principal issues relating to stock-in-trade and input tax adjustment were decided in favor of the taxpayer, while the issue of limitation was clarified in favor of the tax department. 

A. Reference & Issues

1 to  4

B. Learned Counsel (Mr ----------------) for Department Appellant Submissions

1 to 3

C. Learned Counsel (Mr -------------------------) for the Taxpayer / Respondent Submissions

1 to 4

IHC Deliberations

1 to 9 with several sub-point in each heading

IV. LIST OF FURTHER TLQCs

Also refer to several Other TLQC including

(a) 3350 of 15.11.25 about Input tax Ok, whether used indirectly or remotely - ATIR Multan

(b) 3357 of 20.11.25 about Builder & Developers 7F tax returns PDF is not enabled on IRIS - KTBA

(c) 3223 of 30.7.25 about Input Tax & Alleged Fake Flying Invoices - SCP order against Department

(d) 3056 of 15.3.25 about No Input tax of Cement, Steel, etc for Construction –SHC

(e) 2906 of 21.9.24 about 6M Input Adjustment limit will extend, if RP win – SHC Interim order & KCV
(f) 2866 of 8.8.24 about SRO 350: Input Tax - FTO Notice u/s 10(4) to FBR for 5.8.24

(g) 2669 of 13.3.24 about Credit Notes, Registration, Filing Rules’ amendments - ST SRO 350.

(h) 2848 of 27.7.24 about SRO 350: Input Tax adjustment - No relief by LHC

(i) 2615 of 15.1.26 about Input Tax Adjustment for Leather, Tent, etc

(j) 2286 of 1.4.23 about 5 Export Sectors’ New Refund & Negative List (stated in the Subject as for 5 Sectors in heading but actually covered 3 Sectors).

V. FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.