M. M. AKRAM (JUDICIAL MEMBER): The appellant taxpayer has filed the titled appeal challenging the Order-in-Appeal No. 304/2023, dated January 20, 2023, issued by the Commissioner of Inland Revenue (Appeals-I), Large Taxpayers Office (LTO), Islamabad. This appeal pertains to the tax year 2018 and was filed under Section 131(1) of the Income Tax Ordinance, 2001 (“the Ordinance”), based on the grounds outlined in the memorandum of appeal.
2.    The relevant facts culled out from the record indicate that the appellant, a publicly listed company engaged in the manufacturing, importing, purchasing, and marketing of fertilizers and chemicals across Pakistan, filed its return of total income for the tax year 2018. This return constituted a deemed assessment finalized under Section 120(1)(b) of the Ordinance. Upon examination, the Additional Commissioner Inland Revenue (Add CIR) identified the deemed assessment as erroneous and prejudicial to the interest of revenue. Consequently, an amended assessment order was issued on September 13, 2019, assessing the appellant's income at Rs. 20,527,687,233/- and creating a tax demand of Rs. 3,030,049,853/-. Subsequently, the learned CIR(A), via an appellate order dated December 14, 2019, disposed of the appeal filed by the appellant. In response, the appellant filed a second appeal before the Appellate Tribunal Inland Revenue (ATIR) against the CIR(A)'s order, which remains pending.
3.    Pursuant to the appellate order dated December 14, 2019, the Assessing 
Officer issued an appeal effect order dated January 22, 2020, under Sections 
124/122(5A) of the Ordinance. This order addressed the issues confirmed by the CIR(A), determining the appellant's income at Rs. 12,542,631,698/- and 
calculating a tax liability of Rs. 232,021,210/-.
4.    On November 30, 2021, the learned CIR(A) remanded the appeal effect order dated January 22, 2020, for re-examination. The appellant subsequently filed a second appeal before the ATIR against the CIR(A)'s order, which remains pending adjudication. Meanwhile, the Assessing Officer issued a show-cause notice dated September 18, 2019, proposing further amendment of the appellant’s assessment for the tax year 2018 under Section 122(5A) of the Ordinance. The appellant's Authorized Representative (AR) submitted replies, which the Assessing Officer deemed unsatisfactory. Consequently, a further amended assessment order was passed on December 11, 2020, raising a demand of Rs. 412,346,949/-. The appellant filed an appeal before the CIR(A) against this order. The CIR(A) disposed of the appeal via an order dated December 7, 2022, under Section 129(1) of the Ordinance. The appellant has filed a second appeal before the ATIR against the CIR(A)'s order, which is still pending adjudication.
5.    The Assessing Officer also issued a show-cause notice dated October 25, 
2021, under sub-section (4) read with sub-section (5) of Section 122 of the Ordinance, proposing further amendment of the assessment pursuant to the selection of the case for audit. The appellant's replies were deemed unsatisfactory, and the Assessing Officer subsequently issued a further amended assessment order on December 31, 2021, under Section 122(4) read with Section 122(5) of the Ordinance, raising a demand of Rs. 6,435,254,090/-. The appellant filed an appeal before the CIR(A), who disposed of the matter via an order dated March 27, 2023. The appellant has filed a second appeal before the ATIR against this order, which remains pending adjudication.
6. Furthermore, the Additional Commissioner Inland Revenue (Add CIR) issued a show-cause notice dated April 5, 2021, proposing a further amendment of the assessment under Sections 122(5A) read with Section 122(4) of the Ordinance for the tax year 2018. The appellant was directed to provide explanations regarding the following issues: 

In response to the show-cause notice, the appellant submitted replies through letters T-5783 dated June 9, 2021, and T-5430 dated May 21, 2021, addressing the issues raised. Despite this, the Additional Commissioner Inland Revenue (Add CIR) issued a further amended assessment order dated October 7, 2022, under Section 

122(5A) of the Ordinance, making the following additions and disallowances.

In the further amended assessment order dated October 7, 2022, issued under Section 122(5A) of the Ordinance, the appellant's income was assessed at Rs. 53,695,793,462, with a corresponding tax liability of Rs. 14,098,146,894. For ease of reference, the relevant portion of the amended assessment order, along with the computation, is reproduced below.

Aggrieved by the aforementioned order, the appellant filed an appeal before the learned Commissioner of Inland Revenue (Appeals). Through the appellate order dated January 20, 2023, the learned CIR (Appeals) disposed of the appeal against the further amended assessment order dated October 7, 2022, upholding the additions/disallowances on the following account:-

Still feeling aggrieved, the appellant filed an appeal before this tribunal and assailed the impugned appellate order on a number of grounds. 
PROCEEDINGS BEFORE THE TRIBUNAL
7.    The case was heard numerous times and finally on December 18, 2024. During the proceedings, the learned Authorized Representative (AR) for the appellant focused exclusively on the addition/disallowance made under the head "Gas Infrastructure Development Cess (GIDC)." Regarding the other additions confirmed or remanded by the learned Commissioner of Inland Revenue (Appeals), it was mutually agreed by the parties that these matters would be referred back to the assessing officer for reconsideration. Consequently, the primary issue in this case concerns the addition/disallowance of the GIDC amounting to Rs. 18,891,676,000.
APPELLANT’S ARGUMENTS/SUBMISSIONS
8.    The learned AR submitted that GIDC was imposed under the GIDC Act, 2015, requiring specific gas consumers, including the appellant, to pay a cess based on the volume of gas consumed. Although the appellant recorded the GIDC as a liability in its financial statements, the payment was not made during the tax year under review because the constitutionality of the GIDC Act, 2015, was under judicial consideration by the Honorable Supreme Court of Pakistan. Subsequently, in its judgment dated August 13, 2020, the Supreme Court upheld the constitutionality of the GIDC Act, 2015. Further civil review petitions were dismissed by the Supreme Court on December 7, 2020, allowing the Government to recover arrears in installments. Following this, the appellant and other fertilizer companies filed suits in the Sindh High Court, which issued stay orders restraining coercive recovery actions. These stay orders were reflected in multiple entries made between 2020 and 2021.
9.    The AR further contended that the Income Tax Ordinance, 2001, is a comprehensive tax code, and its provisions override any conflicting provisions in other laws, including the GIDC Act, 2015, as explicitly provided in Section 3 of the Ordinance. The AR also referred to Section 54, emphasizing that exemptions, reductions, or other provisions from external laws hold no legal effect unless expressly incorporated into the Ordinance. On the matter of accounting treatment, the AR argued that under the accrual or mercantile system of accounting, as mandated for companies by Section 32(2) of the Ordinance, GIDC should be deductible even if unpaid, as it was accrued as a liability during the tax year. Furthermore, the AR referred to Section 34(1) of the Ordinance, which states that expenditures are deemed incurred when they become payable under the accrual method. Section 34(3) was also cited to assert that an amount becomes payable when all liability-determining events have occurred, and the liability can be measured with reasonable accuracy. In conclusion, the appellant asserted that the GIDC expense should be allowed as a deduction based on the principles of accrual accounting and the overriding provisions of the Income Tax Ordinance, 2001. In support of the arguments, the learned AR for the appellant placed reliance on judgments reported as (2006) 93 Tax 413 (SC), (1992) 65 Tax 254 (SC), (1985) 51 Tax 137 (HC), 2018 PTD 1344 (Trib), (2014) 109 Tax 141 
(Trib.), 2012 PTD 1055 (Trib), (2011) 106 Tax 208 (Trib), (2006) 96 Tax 408 (Trib) and 1991 PTD 894 (Trib) wherein the issue of allowability of an expenditure on accrual basis has been settled by various Appellate Authorities in favour of the taxpayer. The AR also referred to a judgment of the Tribunal in the case reported as (1996) PTD 890 (Trib) wherein it was held that the provisions of any other law shall have no legal effect unless also provided for under the Ordinance.
DR ARGUMENTS/SUBMISSIONS
10.    The learned Departmental Representative (DR) contended that the deduction of the Gas Infrastructure Development Cess (GIDC) claimed by the appellant, amounting to Rs. 18,891,676,000, was not permissible as the amount was not actually paid during the tax year under review. Relying on Section 5 of the GIDC Act, 2015, the DR emphasized that the cess qualifies as an allowable expense for income tax purposes only when it has been paid. The provision 
explicitly states:
"The cess paid by a company shall be an expenditure for which allowance is to be made under the Income Tax Ordinance, 2001, in computing the profits or gains of that company."
11.    The DR argued that since the GIDC was merely recorded as payable in the appellant's accounts and no actual payment was made, the claimed deduction was invalid. The purpose and wording of Section 5 make it clear that actual payment is a precondition for claiming GIDC as an expense under the Income Tax Ordinance, 2001. The DR further asserted that the reliance placed by the appellant on Section 54 of the Ordinance, which addresses the overriding effect of the Ordinance, was misplaced, as the assessing officer had not disputed the applicability of the GIDC Act, 2015 to the Income Tax Ordinance, 2001. The DR also addressed the appellant’s argument regarding the accrual basis of accounting under Sections 34(1) and 34(3) of the Ordinance. While acknowledging that the accrual system allows for expenditure to be recorded when it becomes payable, the DR argued that the liability for GIDC had not crystallized during the tax year in question. The DR pointed to the ongoing legal proceedings surrounding the GIDC Act, 2015:
1.    The Sindh High Court (SHC), in its judgment dated October 26, 2016, declared the GIDC Act, 2015 unconstitutional.
2.    The Supreme Court of Pakistan (SCP), in its judgment dated August 13, 2020, upheld the constitutionality of the Act.
3.    Following the SCP judgment, civil review petitions were dismissed on December 7, 2020, allowing the Government to recover arrears in installments.
Subsequently, the appellant and other fertilizer companies filed suits in the SHC, resulting in stay orders restraining the Federal Government and relevant authorities from taking coercive action for the recovery of unpaid GIDC arrears. 
The SHC issued these stay orders on multiple dates, including September 10, 2020, and January 14, 2021.
12.    Against this backdrop, the learned DR argued that the liability for GIDC had not become definitive, as the stay orders prevented any coercive recovery actions. Therefore, under Section 34(3) of the Ordinance, which stipulates that an amount is payable only when all liability-determining events have occurred and the liability can be determined with reasonable accuracy, the appellant’s claim was premature. In conclusion, the DR asserted that the GIDC expense claimed by the appellant did not meet the conditions of actual payment under the GIDC Act, 
2015, or the criteria for recognition under Sections 34(1) and 34(3) of the Income 
Tax Ordinance, 2001. Accordingly, the claimed deduction was not allowable.
FINDINGS/DECISIONS
13.    We have heard the parties and perused the record. The controversy between the parties hinges upon the interpretation of Section 5 of the GIDC Act, 
2015, and Section 34 of the Income Tax Ordinance, 2001. 
HISTORY OF GIDC ACT, 2015
In 2011, the Gas Infrastructure Development Cess Act, 2011 (GIDC Act, 2011) was enacted as a Money Bill in the National Assembly, categorizing the imposed Cess as a tax. The Cess was levied on industrial and commercial consumers of natural gas to fund infrastructure for importing natural gas via pipelines from Iran and Turkmenistan and for transporting liquefied natural gas (LNG) imported from Qatar through the North-South pipeline. The GIDC Act, 2011 was challenged in the Peshawar High Court by industrial and commercial consumers in Khyber Pakhtunkhwa, resulting in a 2013 decision declaring it unconstitutional. On appeal, the Supreme Court upheld this decision on 22 August 2014 in the Durrani Ceramics case (2014 SCMR 1630), holding that the Act constituted a fee rather than a tax and could not have been introduced as a Money Bill under Article 73 of the Constitution. Following the Supreme Court's ruling, the President promulgated the Gas Infrastructure Development Cess Ordinance, 2014 on 25 September 2014, reimposing the Cess with retrospective effect from 15 December 2011. This Ordinance remained effective until the Federal Government's review petition against the Durrani Ceramics decision was dismissed by the Supreme Court on 15 
April 2015 (PLD 2015 SC 354). Subsequently, the Parliament enacted the Gas Infrastructure Development Cess Act, 2015 (GIDC Act, 2015) on 15 May 2015. This Act reimposed the Cess on all natural gas consumers except domestic consumers and retrospectively legitimized the levies collected under the earlier GIDC Act, 2011, and GIDC Ordinance, 2014. The AR also submitted the following details of GIDC accrued and paid in prior years:-

14.                        The controversy firstly revolves around the disallowance of a Rs. 

18,891,676,000/- expense claimed for Gas Infrastructure Development Cess 
(GIDC) by the assessing officer under Section 20 of the Income Tax Ordinance, 2001. This disallowance was based on Section 5 of the GIDC Act, 2015, which permits the deduction of GIDC expenses only if the amounts have been paid, whereas the claim represented a payable amount not settled during the relevant tax year. Conversely, the appellant argued that the Income Tax Ordinance, being a comprehensive tax code, overrides conflicting provisions in other laws, including the GIDC Act, 2015, as stipulated in Section 3 of the Ordinance. The appellant also highlighted Section 54, which invalidates other law provisions unless explicitly incorporated into the Ordinance. To resolve this controversy, it would be expedient to first reproduce hereunder the relevant provision of the GIDC Act, 2015:-
Section 2(b). “company” means a company specified in the First Schedule.
THE FIRST SCHEDULE
[See section 2(b)]
1.    Sui Northern Gas Pipelines Limited.
2.    Sui Southern Gas Company Limited.
3.    Mari Petroleum Company Limited (formerly Mari Gas Company 
Limited).
4.    Pakistan Petroleum Limited.
5.    Tullow Pakistan Development Limited.
6.    Oil and Gas Development Company Limited.
7.    Any  other  company  engaged  in the sale  of  gas  to  any  category  of  gas  consumers  as  may  be notified in the official Gazette

Section 3. Levy of cess. (1) The cess shall be levied and charged by the Federal Government from gas consumers, other than the domestic sector consumers, or the company at the rates as provided in the Second Schedule to this Act. The gas company shall be responsible for billing of cess to gas consumers, its collection from gas consumers, and its onward payment to Federal Government in the manner as prescribed by the Federal Government.
Section 5. Allowance to be made for cess for purposes of income. The cess paid by a company shall be an expenditure for which allowance is to be made under the Income Tax Ordinance, 2001 (XLIX of 2001) in computing the profits or gains of that company. (Emphasis supplied)
Key Provisions of the GIDC Act, 2015: I. Section 3 (Charging Provision):
o    GIDC is levied on gas consumers (excluding domestic consumers), with gas companies responsible for billing, collection, and remittance to the Federal Government.
o    Gas companies bear the obligation to remit the cess, even if not recovered from consumers.
II. Section 5 (Tax Allowance):
o    Allows cess paid by gas companies only (specified in the First Schedule to the GIDC Act, 2015) to be treated as a deductible expense under the Income Tax Ordinance, 2001.
o    Does not explicitly extend this benefit to gas consumers. Hence, this provision does not relate to the appellant. 
Core Issues:
”¢    Gas consumers bear the primary liability for the cess, while gas companies act as intermediaries, assuming financial risk for non-recovery.
”¢    The tax allowance under Section 5 is limited to gas companies only, creating ambiguity regarding gas consumers’ ability to claim such expenses.
Reconciliation:
i.    Primary vs. Secondary Liability:
o    Gas consumers hold the primary liability for the cess.
o    Gas companies have a secondary operational liability, stepping in if consumers default.
ii.    Rationale for Tax Allowance to Gas Companies:
o    Gas companies incur administrative costs, financial risks, and obligations to remit the cess, justifying the tax allowance.
iii.    Gas Consumers’ Entitlement:
o    Although not covered by Section 5, gas consumers may claim cess as a deductible expense under general tax principles (section 20 of the Ordinance) if it is incurred and paid as part of business operations.
iv.    Non-Payment by Consumers:
o    In cases of non-payment, the financial burden shifts to gas companies, aligning with the intent of Section 5.
Conclusion: The GIDC is levied on gas consumers, with gas companies acting as intermediaries responsible for its administrative and financial management. Section 5 of the GIDC Act, 2015, only addresses the risks borne by gas companies and does not explicitly deny tax relief to consumers. Therefore, the revenue department's decision to disallow the expense under section 5 of the GIDC Act is based on an incorrect interpretation. At the same time, the appellant has also incorrectly justified their claim under section 5 ibid. However, the appellant (gas consumer) has otherwise the right to claim this expense under section 20 of the Income Tax Ordinance, 2001 as it is incurred exclusively for business purposes. 
15. The second limb of the argument of the learned DR is that the appellant's liability for GIDC was not definitive, as the legality of the levy was under challenge before various courts and ultimately resolved by the Hon’ble Supreme Court. During this period, stay orders prevented any coercive recovery actions. Consequently, under Section 34(3) of the Ordinance which requires that all liability-determining events must occur and the liability be determinable with reasonable accuracy. Thus, according to the learned DR, the appellant’s claim was premature. The provision of cess created by the appellant in its books of accounts was contradictory to the recognition criteria under Sections 34(1) and 34(3) of the Ordinance. To answer the aforesaid contentions of the DR, it is first important to interpret and understand the provisions that have given rise to this adjustment. The applicable legal authority governing the conditions under which an expense is deemed to be "incurred" and the criteria for its qualification as a deductible expense in the computation of taxable income on an accrual basis is found in Sections 34(1) and 34(3) of the Ordinance. For ease of reference, these provisions are reproduced below as follows: 
“S.34 Accrual-basis accounting ⎯ (1) A person accounting for income chargeable to tax under the head “Income from Business” on an accrual basis shall derive income when it is due to the person and shall incur expenditure when it is payable by the person.
(3) Subject to this Ordinance, an amount shall be payable by a person when all the events that determine liability have occurred, and the amount of the liability can be determined with reasonable accuracy.” 
Interpretation
Section 34(1) of the Income Tax Ordinance, 2001, specifies that income is recognized when it becomes "due" to the taxpayer, and an expenditure is recognized when it becomes "payable" by the taxpayer. The phrase "shall incur expenditure when it is payable by the person" means that an expense is recognized in the tax year when the obligation to pay arises. The term "payable" indicates that the liability for the expense has become definite and enforceable within the relevant tax year. This provision excludes liabilities that are uncertain, contingent, or dependent on future events from being considered "payable." For an expense to be deductible, the liability must be clearly established during the tax year and not subject to future conditions or unresolved contingencies.
Section 34(3) provides a two-stage test for recognizing a liability as "payable":
1.    All events that determine liability have occurred: This condition requires that all events establishing the obligation to pay must have occurred. The liability must no longer be contingent on future actions, conditions, or events. It must be definite and finalized, leaving no uncertainty regarding the obligation itself.
2.    The amount of the liability can be determined with reasonable 
accuracy: This condition stipulates that the amount of the liability must be determinable with reasonable accuracy. The taxpayer must be able to 
calculate or estimate the liability with sufficient precision.
Together, these conditions ensure that a liability is recognized as payable only when it is definite, enforceable, and its amount can be reliably estimated.
12. Keeping in view the facts of the present case and the interpretation of Section 34 of the accrual-basis accounting principles, let’s analyze whether the gas consumers have correctly created the provision in their books of account.
Key Considerations:
1.    Government-Imposed Cess: The Government has mandated a cess on gas consumers, and the gas companies are responsible for billing and 
collecting this cess.
2.    Billing and Collection: Gas companies must bill the cess along with gas bills and collect the specified amount from the gas consumers.
3.    Government Obligation: After collecting the cess, the government is obligated to develop infrastructure.
Analysis Based on Section 34:
1.    Accrual Basis for Income and Expenditure:
o    Income Recognition: The gas companies must recognize the income (cess) when it becomes due from the gas consumers, not necessarily when it is collected.
o    Expenditure Recognition: Similarly, gas consumers must 
recognize the expense when the liability to pay the cess becomes due, not necessarily when it is paid.
2.    Subsection (3) Analysis:
o    Events That Determine Liability: The liability arises when the government imposes the cess and the gas companies bill the gas consumers for it. The act of billing by the gas companies establishes the liability for the gas consumers.
o    Reasonable Accuracy: The amount of cess to be paid by the gas consumers is determined with reasonable accuracy as it is specified by the Government and billed by the gas companies.
Conclusion:
Given that, the liability for the cess arises when the gas companies bill the gas consumers, and the amount is determined with reasonable accuracy based on government rates, the gas consumers have rightly created the provision in their books of account. This aligns with the principles outlined in Section 34 for recognizing liabilities on an accrual basis.
In summary, the provision for the cess in the gas consumers' books is appropriate as it meets the criteria for accrual accounting by recognizing the liability when it is payable (upon billing) and determining the amount with reasonable accuracy.
16.    Further, it is important to analyze the provision of the cess in the context of International Accounting Standards (IAS) 37, which deals with provisions, contingent liabilities, and contingent assets.
IAS 37 Criteria for Recognizing a Provision
IAS 37 states that a provision should be recognized when all the following conditions are met:
1.    Present Obligation: A present obligation (legal or constructive) as a result of a past event.
2.    Probable Outflow of Resources: It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
3.    Reliable Estimate: A reliable estimate can be made of the amount of the obligation.
Application to the Provision of Cess
1.    Present Obligation:
o    Event: The government has imposed a cess on gas consumers.
o    Billing by Gas Companies: Gas companies are required to bill the cess to gas consumers, creating a legal obligation.
o    Conclusion: The imposition of the cess and the subsequent billing by gas companies establish a present obligation for gas consumers.
2.    Probable Outflow of Resources:
o    Liability: The obligation to pay the cess arises from the government's mandate and the billing process.
o    Likelihood: Given the legal requirement and the billing mechanism, it is more likely than not that gas consumers will need to pay the cess.
o    Conclusion: It is probable that an outflow of resources (payment of the cess) will be required.
3.    Reliable Estimate:
o    Specified Rate: The rate of the cess is specified by the government.
o    Billing: The amount to be billed to gas consumers is determined based on the specified rate.
o    Conclusion: The amount of the obligation can be estimated reliably based on the government’s specified rates and the billing details provided by gas companies.
Conclusion
Given the above analysis:
”¢    Present Obligation: The gas consumers have a present obligation to pay the cess once billed by the gas companies.
”¢    Probable Outflow: It is probable that an outflow of resources will be 
required to settle this obligation.
”¢    Reliable Estimate: The amount of the cess can be reliably estimated based on the specified rates and billing information.
Thus, the appellant has correctly created a provision for the cess in their books of account, as it meets the criteria set out by IAS 37. This provision reflects the present obligation, probable outflow, and reliable estimate needed for accurate financial reporting. For the reasons mentioned above, the second part of the learned DR's argument is also flawed and untenable.
17.    Considering the case from a different perspective, the levy of GIDC was ultimately upheld as intra vires by the Hon’ble Supreme Court in the case M/s Khurshid Soap & Chemical Industries (Pvt.) Ltd. vs. Federation of 
Pakistan, etc. (2020 SCP 150). The review petitions against this judgment were also dismissed through an order dated December 7, 2020. Following the judgment of the Hon’ble Supreme Court of Pakistan, the appellant, along with other fertilizer companies, filed Suit No. 1282 of 2020 before the Hon’ble Sindh High Court. In its interim order dated September 23, 2020, the Hon’ble Sindh High Court considered the core contention raised by the appellant (plaintiff in the said suit), which was presented before the court as follows: 
“2) Learned Counsel for the Plaintiff submits that Plaintiff is engaged in the business of urea and is the largest producer of urea in Pakistan. Through the instant Suit, the plaintiffs have impugned the levy of Gas Infrastructure Development Cess (GIDC) on the plaintiffs gas connections categorized as an industrial connection by the defendants No.2 and 3 in violation of the Judgment dated 13.08.2020 passed by the Honourable Supreme Court of Pakistan in Civil Appeal No.1113/2017 and others as well as in violation of proviso to Section 8(2) of the GIDC Act, 2015. Relevant portions from para-37 & 42 of the Judgment read as under:-
Para-37
"Every industrial and commercial entity using natural gas for its business activity is entitled to claim the burden of Cess as their business expense, being part of the cost of their goods or services rendered, and get it adjusted against their business profits. They must have already done so in their books of account and the annual returns of their income must have been filed before the Income tax authorities accordingly. Thus the Cess under GIDC Act, 2015 has been levied only on those consumers of natural gas who on account of their industrial or commercial dealings pass on its burden to their customers/clients."
Para-42
"(i) From the date of this judgment, we restrain the Federal 
Government from charging Cess which power of the Federal Government shall remain suspended until the Cess revenue collected and that which is accrued so far but not yet collected is expended on the projects listed in Section 4 of the GIDC Act, 2015.
(iii) As all industrial and commercial entities which consume gas for their business activities pass on the burden to their customers/clients therefore all arrears of 'Cess' that have become due up to 31.07.2020 and have not been recovered so far shall be recovered by the Companies responsible under the GIDC Act, 2015 to recover from their consumers. However, as a concession, the same be recovered in twenty-four equal monthly installments starting from 01.08.2020 without the component of late payment surcharge. The late payment surcharge shall only become payable for the delays that may occur in the payment of any of the twenty-four installments.”
Learned Counsel for the plaintiffs submits that plaintiffs fall within the category of gas consumers, who have neither collected the GIDC from their clients/customers and even not passed it on to their clients and customers.
Learned Counsel states that the period between 2011 and 2020 where the Plaintiffs have not paid GIDC to Defendant SSGC on the basis of injunctive orders and the reported judgments of the Hon'ble Supreme Court of Pakistan in the case of Federation of Pakistan V. Durrani Ceramics & Others (2014 SCMR 1630).
Learned Counsel for the Plaintiff states that the Plaintiff never collected the GIDC from their clients/customers and even not passed on to their clients and customers which is evident from the Income Tax Returns, Books of Accounts and Auditor's Report which are regularly audited. Learned counsel for the plaintiff further states that he has already filed the documents relating to the accounts of the company and income tax record. He has referred to page 671 wherein it is specifically mentioned that:-
“GoP had imposed GIDC effective from Jan 01, 2012, on 
Feed and Fuel gas. The rate of GIDC was increased from Jan 01, 2014. GIDC on Feed gas has been increased to Rs.300 per MMBTU from Rs.197 per MMBTU and Fuel gas to Rs.100 per MMBTU from Rs.50 per MMBTU. This will affect the profitability of the Company going forward as FEBL has not passed on its impact to the customers".
.....................................................” (Emphasis supplied) 
18. As the final fact-finding authority, this tribunal directed the appellant to provide records to verify the facts and contentions presented before the Hon’ble Sindh High Court when seeking interim relief. Specifically, the tribunal sought to determine whether the appellant had collected GIDC from its clients/customers and passed on the incident to them. In response, the appellant submitted its audited financial accounts for the tax years 2015 to 2019. A review of these records reveals the following:   

1. From the above Tabular presentation, it is crystal clear that the appellant Company itself declared in the Audited Accounts that the GIDC was part of creditors in the Tax year 2015 to 2019 without payment against the same.
   2.    The taxpayer company has not only used the said amounts of GIDC in the said tax years for its benefit but has also not paid applicable income tax by claiming the same as admissible expense without its payment under the head income from Business. 
   3.    The non-payment of the GIDC is also evident from note no. 10.1 of the audited accounts of tax years 2015, 2016, 2019 and note no. 9.1 of the tax years 2017 and 2018 and further, the amount of GIDC is accumulating in each subsequent year without its payment. The reason for non-payment has also been stated by the taxpayer company in note no. 10.1 of the tax year 2019 by stating that the GIDC payment was subjudice before the Honorable Supreme Court of Pakistan.
   4.    Hence there remains no doubt that the Taxpayer Company has already claimed GIDC as Profit and Loss expense in all the Tax years from 2015 to 2019 on an accrual basis without its payment to the respective Gas Distribution Companies.
   5.    GIDC has been claimed as an expense as a component of the cost of sales on an accrual basis for the amount reflected in the gas bills, which is relevant for the purposes of determination of the sale price of the end product. Thus, it clearly follows that the expense (GIDC) has been passed on to the ultimate consumer/purchaser of the end product. GIDC to the contrary was shown by the appellant as payable in the audited accounts for the relevant tax years. However, it is evident that because of the claim of such unpaid expense, the taxable profit was not offered for tax, and this short paid. In consequence of the respective short paid tax, notwithstanding the tax year, shall be recoverable from the appellant in the circumstances.
   6.    Based on the aforementioned facts and circumstances, it is evident that the core contention raised by the appellant before the Hon’ble Sindh High Court is not substantiated by the record. These facts were presented to the learned Authorized Representative (AR) of the appellant, who was unable to refute them. It is settled law that the burden of proof is on the appellant to establish that the cess was not passed on to their clients/consumers. The appellant miserably failed to establish this fact therefore, an adverse presumption may also be drawn against it under Article 129 of the Qanoon-e-Shahadat Order, 1984 that the incidence of cess had been passed on to the purchaser of the end product.       
   19.    Based on the provided facts and analysis, it is clear that the Gas Infrastructure Development Cess (GIDC) was passed on to the end consumer. 
   Below is a detailed rationale for this conclusion: 
   Key Observations
   1.    GIDC Included in Creditors' Closing Balances (Tax Years 2015”“ 2019):
   o    The taxpayer consistently reported GIDC amounts in the audited accounts as part of creditors, demonstrating non-payment to the respective gas distribution companies.
   o    The accumulation of unpaid GIDC balances across multiple years highlights the company's reliance on these funds without fulfilling its statutory payment obligations.
   2.    Claiming GIDC as an Expense:
   o    The taxpayer claimed GIDC as an expense under the cost of sales on an accrual basis without making actual payments.
   o    This treatment reduced the taxable profit while benefiting from the associated tax deduction, effectively lowering the company's income tax liability.
   3.    Increase in GIDC Amounts:
   o    The progressive accumulation of GIDC amounts across the years shows that the taxpayer included the cess in their pricing mechanism and used these funds as working capital or for other business purposes.
   4.    Judicial Proceedings:
   o    The company's justification for non-payment, citing ongoing legal proceedings before the Supreme Court, does not negate the fact that the GIDC cost was accounted for as part of the cost of sales, influencing the pricing of the end products.
   5.    Passing the Burden to End Consumers:
   o    The inclusion of GIDC in the cost of sales inherently signifies that the cess was incorporated into the pricing of the final product, thereby indicating that the burden of the cess was ultimately borne by the consumer. 
   o    This is further corroborated by the company’s audited accounts, which show GIDC as a payable liability, confirming that the company retained these amounts rather than absorbing the cost or paying it to the government. The appellant brought nothing on record to rebut that the incidence of cess has not passed on to the consumer. The appellant cannot be absolved of its responsibility to prove the factum passing or otherwise of the incidence of cess to the consumer. 
   Reliance is placed on the judgment titled M/s Asia Ghee Mills 
   (Pvt) Ltd vs Assistant Collector (Audit) and two others, [PTCL 2009 CL 28 (H.C, Lah)] 
   6.    From a legal and ethical perspective, when the appellant company had collected the cess from its customers on behalf of the Government, it assumes a fiduciary and legal obligation to remit the collected amount to the Federal Government forthwith. The company is not entitled to withhold payment and uses it for its own purpose. 
   20.    CONCLUSION
   i.    The revenue department's decision to disallow the expense under section 5 of the GIDC Act, 2015 is based on an incorrect interpretation. At the same time, the appellant has also incorrectly justified their claim under section 5 ibid. However, the appellant (gas consumer) has otherwise the right to claim this expense under section 20 of the Income Tax Ordinance, 2001 as it is incurred exclusively for business purposes.
   ii.    The provision for the cess in the appellant’s books is appropriate as it meets the criteria for accrual accounting by recognizing the liability when it is payable (upon billing) and determining the amount with reasonable accuracy. Thus, the appellant has correctly created a provision for the cess in their books of account, as it meets the criteria set out by IAS 37.
   iii.    It is evident from the record that the appellant collected the cess from its clients/customers and passed the incidence of the cess onto them. Therefore, in light of the judgment of the Hon’ble Supreme Court, the appellant is directed to promptly deposit the amount of cess into the government treasury, along with the applicable default surcharge. The relevant excerpt from the judgment of the Supreme Court is reproduced below for ease of reference:-
   “Para-42
   ...............................
   (iii) As all industrial and commercial entities which consume gas for their business activities pass on the burden to their customers/clients therefore all arrears of 'Cess' that have become due up to 31.07.2020 and have not been recovered so far shall be recovered by the Companies responsible under the GIDC Act, 2015 to recover from their consumers. However, as a concession, the same be recovered in twenty-four equal monthly installments starting from 01.08.2020 without the component of late payment surcharge. The late payment surcharge shall only become payable for the delays that may occur in the payment of any of the twenty-four installments.” iv. Regarding the other additions confirmed or remanded by the learned Commissioner of Inland Revenue (Appeals), it was mutually agreed by the parties that these matters would be referred back to the assessing officer for reconsideration. Order accordingly. However, being an old matter, the assessing officer is directed to pass the order preferably within two months from the date of receipt of this order after giving proper opportunity to the appellant.
   21. Let this order be sent to the following authorities for information and necessary action:-
   i.    Learned Secretary, Ministry of Petroleum and Natural Resources, Block-A, Pak Secretariat, Islamabad.
   ii.    Learned Director General, Oil and Gas Regulatory Authority. Office at Plot No.54, Fazal-e-Haq Road, Near PIA building, Blue Area, Islamabad.