IN THE SUPREME COURT OF PAKISTAN  
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE UMAR ATA BANDIAL 
MR. JUSTICE FAISAL ARAB 
MR. JUSTICE QAZI MUHAMMAD AMIN AHMED  
 
 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
(On appeal against the judgments dated 13.03.2013 & 
01.12.2011 passed by the High Court of Sindh, 
Karachi in C.P. No. D-3336/2011 & Islamabad High 
Court, Islamabad in W.P. No. 2895/2011) 
 
FBR through Chairman, Islamabad etc 
 
 
(In both cases) 
… Appellants/Petitioners 
 
VERSUS  
M/s Wazir Ali and Company etc 
 
 
(In CA 1460/2013) 
Shahid Aziz Zahidi and others  
 
 
(In CP 133/2012) 
 
For the App/Petitioners:  
Mr. Abdul Hameed, ASC 
 
 
 
 
 
(In CA 1460/2013) 
 
 
 
 
 
 
Mr. Babar Bilal, ASC 
 
 
 
 
 
(In CP 133/2012) 
 
Mr. Masood Akhtar, Chief Legal 
Officer, FBR 
 
For the Respondents: 
 
Nemo 
 
 
 
 
 
(For Respondent No. 1 in CA 1460/2013) 
 
 
 
 
 
 
Ex-parte 
 
 
 
 
 
(For respondent No. 2 to 4 in CA 1460/2013) 
 
 
 
 
 
 
Mr. M. Raheel Kamran Sh, ASC 
 
 
 
 
 
(For respondent Nos. 1 to 13 in CP 133/2012) 
 
Date of Hearing:  
 
09.03.2020 
 
JUDGMENT 
 
CIVIL APPEAL NO. 1460/2013 
 
 
FAISAL ARAB, J.- The respondent is a partnership 
firm engaged in the business of importing goods and selling them 
in the local markets. During the course of tax year 2011, the 
respondent paid advance income tax at the import stage on the 
value of goods which tax in terms of Section 148 of the Income Tax 
Ordinance, 2001 (“2001 Ordinance”) had become its final tax 
liability for that tax year. During the same tax year, Section 4A was 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
2
inserted in the 2001 Ordinance through the Income Tax 
(Amendment) 
Ordinance, 
2011 
dated 
16.03.2011 
whereby 
surcharge was imposed at the rate of 15% of the income tax 
payable under the 2001 Ordinance for the period commencing 
from the promulgation of the 2001 Ordinance till 30.06.2011. 
Section 4A of the 2001 Ordinance reads: 
 
‘4A. Surcharge: - (1) Subject to this Ordinance, a surcharge 
shall be payable by every taxpayer at the rate of fifteen per 
cent of the income tax payable under this Ordinance including 
the tax payable under Part V of Chapter X of Chapter XIII, as 
the case may be, for the period commencing from the 
promulgation of this Ordinance, till the 30th June, 2011.  
 
(2) Surcharge shall be paid, collected, deducted and deposited 
at the same time and in the same manner as the tax is paid, 
collected, deducted and deposited under this Ordinance 
including Chapter X or XII as the case may be:  
 
Provided that this surcharge shall not be payable for the tax 
year 2010 and prior tax years and shall be applicable, subject 
to the provisions of sub-section (1), for the tax year 2011 only.’ 
 
2. 
 
On 12.09.2011, FBR issued Circular No.11 of 2011, 
relevant portion of which reads ‘However, it has been decided that 
the tax liability for the entire T/Y (Tax Year) 2011 may not be 
subjected to imposition of surcharge and the same be levied on the 
proportionate liability for a period of three and a half months.’ Thus, 
in terms of the Circular, the liability of surcharge was confined to a 
period of 3½ months (16.03.2011 to 30.06.2011) and the tax 
liability of the tax year 2011 was to be proportionately allocated to 
the 3½ month period. This Circular was then followed by the 
Federal Government’s Notification SRO 977 (1) 2011 dated 
19.10.2011 whereby in exercise of the power conferred by Sub-
Section (2) of Section 53 of the 2001 Ordinance, Clause (11) was 
added in Part III of the Second Schedule which reads ‘The amount 
of surcharge payable on the income tax liability for the tax year 
2011 under Section 4A shall be computed on the proportionate 
amount of income tax liability for three and a half months.’ 
 
3. 
 
Before the period for the filing of tax returns under 
Section 114 and the statement of income under Section 115 of the 
2001 Ordinance for the tax year 2011 expired, the respondent 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
3
challenged FBR’s Circular dated 12.09.2011 in the High Court of 
Sindh in its Constitutional jurisdiction. The main ground for the 
challenge was that the surcharge can only be computed on that tax 
liability that exclusively pertained to the income derived in the 3½ 
months period. It was thus maintained by the respondent that for 
the purpose of computing surcharge, all payments of advance 
income tax made at the import stage in the entire tax year 2011 
should not be taken into consideration proportionately for the 
purposes of determining surcharge for the 3½ month period and 
the advance income tax paid in the said 3½ month period only 
could have been considered. On such basis, prayer was made to 
declare FBR’s Circular unlawful and void ab initio.  
 
4. 
 
The learned judges of the High Court in the impugned 
judgment gave the findings to the effect that Section 4A of the 
2001 Ordinance does not envisage proportionate determination of 
the tax liability of the entire tax year 2011 for the purposes of 
calculating surcharge for the 3½ month period and only that 
income was to be taken into consideration which pertained to such 
period only. In other words, taxable income for 3½ month period 
falling between 16.03.2011 to 30.06.2011 alone was to be 
ascertained on which tax liability was to be worked out afresh and 
then on such tax liability surcharge was to be computed. The effect 
of the impugned judgement was that it split the entire tax year 
2011 into two and then the income of the last 3½ month period 
only was taken into consideration for computing tax liability and 
on that limited tax liability of 3 ½ month period the surcharge was 
to be computed. In deciding so, the High Court invoked the 
principle that when two interpretations of a charging provision are 
reasonably possible, the one favouring the taxpayer is to be 
preferred and adopted. This principle was applied after taking into 
consideration the fact that most of the respondent’s taxable income 
related to the first 8½ month period of tax year 2011 and not the 
remaining period of 3½ month and the interpretation which it put 
on Section 4A of the 2001 Ordinance was more beneficial to the 
respondent’s case. Upon giving such findings, FBR’s Circular dated 
12.09.2011 was declared to be inconsistent with the provisions of 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
4
Section 4A of the 2001 Ordinance. Aggrieved by such decision, the 
department has preferred this appeal with the leave of this Court. 
 
5. 
 
The whole of the 2001 Ordinance envisages that the 
income tax liability is to be determined on the basis of taxable 
income that is derived or legally presumed to have been derived in 
a whole tax year and not any part of it. Therefore, even for the 
purpose of computing surcharge under Section 4A of the 
Ordinance, the entire income tax liability of the tax year 2011 was 
to 
be 
taken 
into 
consideration 
which 
was 
then 
to 
be 
proportionately allocated to the 3½ month period and on that 
figure of proportionate tax liability surcharge was to be calculated. 
This is so as no provision of the 2001 Ordinance allows splitting of 
a tax year into two periods for the purposes of determining two 
separate taxable incomes of the same tax year and then on the 
income of one such period tax liability is to be computed. If that is 
done, it would be in derogation of the provisions of the 2001 
Ordinance itself, most relevant being the provisions of Sections 
4(1), 74, 114 and 115 of the 2001 Ordinance. When we read 
Section 4 (1) of the 2001 Ordinance, it clearly provides that income 
tax liability is to be determined for the entire period of  a tax year 
not any part of it and tax year is specifically defined in Section 74 
of the 2001 Ordinance which means a period of twelve months. 
This period normally ends on 30th June and may also end on any 
other date in case the same is allowed by the competent authority 
to be adopted. Nevertheless, a tax year under Section 74 of the 
2001 Ordinance has to be of twelve months. It is for this reason 
that Section 114 of the 2001 Ordinance under which return of 
income is required to be filed covers entire tax year. Even in cases 
where payment of advance tax becomes a person’s final tax liability 
and he is required to file only a statement of income under Section 
115 of the 2001 Ordinance, that statement too has to be with 
regard to the tax year and not any part of it. Whatever method of 
computing taxable income is applicable to a person, either at the 
rates specified in the Schedule to the 2001 Ordinance or the 
advance tax deductions become his final tax liability, one thing is 
certain that income tax liability is determined on the actual or 
presumptive income of the whole tax year. Therefore, in cases 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
5
where advance tax deduction made on the basis of value of goods 
imported by a person is considered to be his final tax liability, the 
legally presumed taxable income of such a person would be the 
total value of goods imported in a given tax year. Hence in 
whichever mode the tax liability of a person is determined under 
the 2001 Ordinance, it is determined on a taxable income that 
pertains to a whole tax year. Splitting of taxable income of the 
same tax year would negate the very intention of the Legislature 
reflected from the provisions of Sections 4(1), 74, 114 and 115 of 
the 2001 Ordinance. Not only this, the provision of Section 4A (1) 
of the 2001 Ordinance also leads us to reach to the same 
conclusion. It reads as follows:- 
 
“4A. Surcharge: - (1) Subject to this Ordinance, a surcharge 
shall be payable by every taxpayer at the rate of fifteen per 
cent of the income tax payable under this Ordinance including 
the tax payable under Part V of Chapter X of Chapter XIII, as 
the case may be, for the period commencing from the 
promulgation of this Ordinance, till the 30th June, 2011.  
 
6. 
 
As is evident from the contents of Section 4A(1) of the 
2001 Ordinance, it starts with the phrase ‘Subject to this 
Ordinance’, underlined to lay emphasis, which clearly points out 
that it does not have any overriding effect, hence, it cannot be in 
derogation of any provision of the 2001 Ordinance and, as already 
discussed, no provision of the 2001 Ordinance envisages splitting 
of a taxable income of a tax year. Secondly, Section 4A also 
contains the phrase ‘…. at the rate of fifteen percent of the income 
tax payable under this Ordinance…’ underlined to lay emphasis, 
which further leads us towards the direction that surcharge is to 
be computed on the income tax that is determined in the manner 
provided under the 2001 Ordinance itself and not in any other 
manner. This leaves no room for computing tax liability of the tax 
year 2011 on a basis other than what is provided in the 2001 
Ordinance. This then means that the whole basis for computing 
surcharge even for 3½ month period should be the income tax 
liability that is determined for the entire tax year, 2011 and then 
such tax liability is to be proportionately allocated for the 3½ 
month period for the purposes of computing surcharge without 
determining two separate taxable incomes of the same tax year and 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
6
then working out tax liability of 3½ months separately for the 
purposes of computing surcharge. In other words, there cannot be 
separate determination of taxable income for 8½ month period 
(from 1st July to 15th March) for which accounting is to be 
separately done and then a separate accounting is done for the 
remaining 3½ month period (from 16th March to 30th June) and on 
the basis of taxable income emerging for the 3½ month period, 
income tax liability is computed and on that surcharge payable 
Section 4A of the 2001 Ordinance is calculated.   
 
7. 
 
As discussed above, when no provision of the 2001 
Ordinance permit splitting of tax year for the purposes of 
determining two separate taxable incomes of the same tax year and 
the only way to compute surcharge was to allocate tax liability of 
the entire tax year 2011 proportionately to the 3½ month period 
then the question of more than one interpretation of Section 4A 
does not arise. Even for argument sake we assume that more than 
two interpretation of Section 4A were possible then how to deal 
with the situation where there are two sets of taxpayers, one to 
whom the proportionate basis would be more suitable as they may 
have derived all or substantial income in the last 3½ month period 
of the tax year 2011 in comparison to first 8½ month period of the 
tax year 2011. For them the interpretation of the learned judges of 
High Court which splits the tax year into two would not be of any 
benefit as proportionate determination of taxable liability would be 
more suitable to them. Whereas the other set of taxpayers like the 
respondent to whom the splitting of the tax year for the purposes 
of determination of taxable income and on that tax liability is 
computed separately would be more beneficial instead of 
proportionate allocation of tax liability. Both the situations can 
arise. This would mean to vary the interpretation in order to give 
beneficial interpretation. The Courts cannot put two separate 
interpretations of the same provision of law on the principle of 
beneficial interpretation, one of which is beneficial to one set of 
taxpayers and the other to another, though the taxing provision 
applies equally to both the sets of taxpayers without any 
distinction whatsoever. This would create an anomalous situation. 
We are clear in our minds that Section 4A does not admit more 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
7
than one interpretation as it was inserted in the 2001 Ordinance 
with the rider that it is subject to the other provisions of the said 
Ordinance and none of its provisions permit splitting of the period 
a tax year for the purposes of determining one tax liability for one 
period and the other for the other period of the same tax year. 
Therefore, the only way Section 4A would have become workable 
for the purposes of computing surcharge keeping within the four 
corners of the Ordinance was that the tax liability of the entire tax 
year 2011 was proportionately divided in order to notionally work 
out the tax liability for the 3½ month period that falls between 
16.03.2011 and 30.06.2011 and then liability of surcharge is 
computed on such determination.    
 
8. 
 
The respondent follows normal tax year of twelve 
months that ends every year on 30th June. Whatever advance tax 
was recovered from the respondent at the import stage during the 
entire tax year 2011 that had become his final tax liability for the 
entire tax year 2011. As income tax liability for the whole tax year 
had already stood determined then this tax liability was to be 
proportionately divided in order to determine the notional tax 
liability of 3 ½ month period and on that surcharge under Section 
4A of the 2001 Ordinance was to be computed. For example, 
income tax liability of the respondent for the entire tax year 2011 
is assumed to be Rs.120,000, the same was to be divided by 12 
and then multiplied by 3½ which would have given proportionate 
income tax liability for the 3½ month period, which comes to 
Rs.35,000/-. (Rs.120,000 ÷ 12 x 3½ = Rs.35,000). On this 
proportionate tax liability 15% surcharge payable under Section 4A 
of the 2001 Ordinance was to be calculated. The Circular in 
question had only explained the only possible way the surcharge 
under Section 4A could be computed by remaining within the 
ambit of the provisions of the 2001 Ordinance.  
 
9. 
  
We may also point out an important aspect of the case 
which had escaped the attention of the advocates of the parties as 
well as the learned judges of the High Court. When we read Section 
4A (1) of the 2001 Ordinance, it states that surcharge was to be 
calculated ‘…..for the period commencing from the promulgation of 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
8
this Ordinance, till the 30th June, 2011.’ This clearly means that 
Section 4A in its application came into effect right from the date of 
the promulgation of the 2001 Ordinance i.e. the year 2001 till 
30.06.2011 which application was then restricted to only tax year 
2011 by its proviso which reads ‘Provided that this surcharge shall 
not be payable for the tax year 2010 and prior tax years and shall 
be applicable, subject to the provisions of sub-section (1), for the tax 
year 2011 only.’ The proviso makes Section 4A effective for the tax 
year 2011 only. By no means Section 4A is to be read to mean that 
it covers only a part of the tax year, 2011. Probably realizing the 
fact that Section 4A, in its application covers the entire tax year 
2011 though inserted in the 2001 Ordinance on 16.03.2011 i.e. 
during the course of tax year 2011, FBR through its Circular No.11 
of 2011 announced that the surcharge was to be paid with effect 
from 16.03.2011 i.e. the day Section 4A was inserted in the 2001 
Ordinance till 30.06.2011 which was to be computed on the basis 
of proportionate tax liability of the tax year 2011. This Circular in 
effect granted concession to the taxpayers otherwise Section 4A 
had covered the entire tax year 2011 and not any part of it. 
Probably realizing the fact that FBR through its circulars cannot 
grant any concession, the same was followed by the Federal 
Government’s Notification SRO 977 (1) 2011 dated 19.10.2011 
which was issued in exercise of the power conferred on it under 
Sub-Section (2) of Section 53 of the 2001 Ordinance whereby 
Clause (11) was added in Part III of the Second Schedule. Clause 
(11) provided ‘The amount of surcharge payable on the income tax 
liability for the tax year 2011 under Section 4A shall be computed on 
the proportionate amount of income tax liability for three and a half 
months.’ The said SRO which was issued by the Federal 
Government in exercise of powers contained in Section 53 of the 
2001 Ordinance and granted exemption in the sense that it limited 
the application of Section 4A to only 3½ month period, which in 
terms of Section 4A covered the entire tax year 2011 and while 
extending such exemption, provided the mode in which the 
surcharge was to be computed i.e. on the basis of proportionate 
tax liability of the tax year 2011. Hence the said SRO 977 (1) 2011 
dated 19.10.2011 on its own strength had the force of law and 
CIVIL APPEAL NO. 1460 OF 2013 AND 
CIVIL PETITION NO. 133 OF 2012 
9
never came under challenge. So has to be given effect to  
regardless of the FBR’s Circular dated 12.09.2011, which only was  
challenge was  challenged in the High Court.  
 
10. 
 
The above are the detailed reasons of our short order 
dated 09.03.2020 whereby the delay was condoned, this appeal 
was allowed and the connected Civil Petition No. 133 of 2020 was 
converted into appeal and allowed. The short order reads as 
follows:- 
 
“We have heard the C.P. No. 133 of 2013 and have 
arrived at the conclusion that the surcharge levied under 
Section 4A of the Income Tax Ordinance, 2001 added thereto 
by Income Tax (Amendment) Ordinance IV of 2011 levies a 
surcharge on the income tax payable for the entire tax year. 
Accordingly, for reasons to be recorded later, this petition is 
converted into appeal and allowed.  
 
2. 
In Civil Appeal No. 1460 of 2013 leave was granted 
by order dated 02.12.2013 but subject to the question of 
limitation as the petition is admittedly barred by 09 days. 
According to the principle laid down in Mehreen Zaibun Nisa 
etc. versus Land Commissioner, Multan etc (PLD 1975 SC 
397) and Province of Punjab versus Muhammad Tayyab 
(1989 SCMR 1621) when a common question of law is 
decided in one case, another case involving the same point 
that is time barred is liable to be heard on merits. 
Consequently, following the said principle, we condone the 
delay and insofar as the merits are concerned, for reasons to 
be recorded later, we allow this appeal.”  
 
 
 
JUDGE 
 
 
JUDGE 
 
 
JUDGE 
Islamabad, the 
9th of March, 2020 
Approved For Reporting 
Khurram 
