FBR Auctions Bahria Land Over Rs26bn Tax Dues

In a significant enforcement development, the Federal Board of Revenue (FBR) has scheduled the auction of 527 kanals of land owned by Bahria Town in Tehsil Murree for 5 March 2026. The proposed auction is intended to recover approximately Rs 26 billion in outstanding income tax liabilities relating to tax years 2020 and 2022.

This represents the second scheduled auction date. The proceedings were initially fixed for 16 February 2026 but were subsequently deferred and rescheduled to 5 March 2026. The auction will be conducted at the Large Taxpayers Office (LTO) in Islamabad in accordance with statutory recovery procedures.

The enforcement action stems from a long-standing dispute concerning the appropriate method of revenue recognition applicable to real estate developers. For several years, Bahria Town applied the “Percentage of Completion” (POC) method, under which customer receipts were treated as advances and deferred from taxable income until specified construction milestones were achieved. This accounting treatment effectively postponed tax liability recognition.

However, a landmark judgment of the Supreme Court of Pakistan dated 18 March 2025 in M/s Emaar DHA Islamabad v. CIR conclusively resolved the issue. The Court held that land developers engaged solely in the sale of plots are not eligible to adopt the POC method. As such developers do not construct residential units for purchasers, they are required to apply the accrual basis of accounting, recognizing income at the point of sale. Consequently, amounts previously classified as deferred advances were recharacterized as taxable income, resulting in the present Rs 26 billion demand.

It is important to note that the current recovery proceedings are legally distinct from the earlier Rs 460 billion settlement matter concerning land acquisition in Malir, Karachi, and are unrelated to that separate litigation framework.

Exercising enhanced recovery powers granted under recent fiscal legislation, the FBR is authorized to attach and auction assets of tax defaulters. In a related action, the authority previously auctioned Bahria Town’s corporate office on Park Road, Islamabad, for over Rs 2 billion in connection with enforcement measures associated with the £190 million case involving Malik Riaz Hussain.

The present auction pertains to 527 kanals located at Mauza Kathar Sharqi, Angori Road, Murree. Although adjacent developments, including the Golf City project, remain subject to disputes by original landowners on environmental grounds, the FBR formally attached this specific parcel on 22 September 2025 following completion of assessment and recovery proceedings.

The enforcement drive has expanded further. On 30 January 2026, the FBR assumed physical possession of Bahria Town Tower in Karachi, comprising 145 residential units and 42 commercial offices, as part of measures to secure recovery of the outstanding demand. Reports also indicate that the authority is examining matters relating to the Mall of Islamabad to safeguard public investment exceeding Rs 30 billion while ensuring that state revenue claims are effectively protected.

This development reflects the FBR’s increasingly assertive approach toward high-value tax recoveries and underscores the broader regulatory shift toward strict enforcement of income recognition principles within Pakistan’s real estate sector.