Cooking oil, vegetable ghee exports to Afghanistan: ATIR rules in FBR’s favour on WHT exemption

ISLAMABAD: Appellate Tribunal Inland Revenue, Special Division Bench, Quetta has issued an order in favour of Federal Board of Revenue (FBR) regarding conditions applicable on exporters of cooking oil and vegetable ghee to Afghanistan, seeking withholding tax exemption under the Duty and Tax Remission for Exports (DTRE) Scheme.

Appellate Tribunal Inland Revenue, Special Division Bench, Quetta, comprising M M Akram and Abdullah Khan Kakar, Members, has ruled in favour of the Federal Board of Revenue, holding that the exemption from withholding tax under Section 154 of the Income Tax Ordinance, 2001, available to exporters of cooking oil and vegetable ghee to Afghanistan under clause (47C) of Part-IV of the Second Schedule, is strictly conditional upon actual collection of advance tax under Section 148 at the import stage and cannot be claimed merely on the basis that the corresponding liability was secured through an indemnity bond or an un-encashed post-dated cheque under the DTRE Scheme.

Source told that consolidated appeals pertaining to Tax Years 2013, 2014 and 2015 were filed by the CIR, WHT, RTO Quetta, against a common order of the CIR(A) which had annulled orders passed under Section 162 creating a combined withholding tax liability of over Rs.74 million against a Ghee Mill. The CIR(A) had held that the taxpayer, operating under DTRE, was entitled to the clause (47C) exemption since the import-stage duties and taxes had been “secured” through indemnity bonds and post-dated cheques.

Reversing this finding, the Tribunal held that the statutory language “from whom advance tax has been collected under Section 148” is plain, unambiguous, and deliberately chosen by the legislature, drawing a clear distinction between an amount that is merely secured and one that is actually collected or paid. Notably, the taxpayer’s own Authorized Representative conceded before the Tribunal that the post-dated cheques furnished under the DTRE arrangement were never subsequently encashed by the Collector of Customs, a fact fatal to the claim of exemption.

Relying on the settled principle that exemption provisions must be construed strictly in favour of the taxing authority, the Tribunal invoked the Supreme Court’s rulings in PLD 1991 SC 963, 2005 PTD 2131 & 1999 SCMR 412, holding that no implication can enlarge the scope of an exemption beyond its plain and clearly expressed language, and that every word of a statute must be given effect without being treated as surplusage.

The Tribunal further held that Circular No 14/2004, which introduced clause (47C), itself contemplated verification of the Bill of Entry to confirm actual collection of tax, reinforcing that the legislative intent was tied to real collection, not contingent security. It also rejected the argument that Section 154 being a “machinery provision” could dilute the express statutory condition, and clarified that reliance on an earlier appellate order in the taxpayers own case for Tax Year 2012 could not override the express requirement of the law, particularly once the factual position regarding non-encashment of cheques was established.

Non-deduction of tax remains recoverable under Section 162 once the exemption fails. Accordingly, the departmental appeals were allowed, the CIR(A) orders were set aside, and the original orders under Section 162 were restored in full: ATIR ordered.

Copyright Business Recorder, 2026