Munib Akhtar, J.: This matter arises out of the Income Tax Ordinance, 2001 ("Ordinance") and relates to the tax year 2003. The petitioner-Commissioner (herein after the "Department") filed a tax reference in the High Court, raising two entirely distinct and separate questions of law against a decision of the Appellate Tribunal in favor of the respondent taxpayer. The learned High Court decided both by means of the same judgment. One question was decided against the Department and in favor of the taxpayer, whereas the other was decided conversely. Both the Department and the taxpayer filed their own leave petitions. In this matter, which relates to the question decided against the Department, after hearing learned counsel for the parties it was announced in Court that leave to appeal was being refused. The following are our reasons in this regard.

2. The question decided against the Department was as follows:

"Whether the learned Appellate Tribunal was justified to hold that the amount of Rs.7,893,898/- which was disallowed by the department under Section 21(c) of the Income Tax Ordinance, 2001 did not attract withholding tax under Section 153 by labeling it as Royalty instead of advertising services?"

The question arose in the following circumstances

3. In the tax year in question, the taxpayer (purveyor of the well known Coca-Cola brand) sold its products to the equally well known McDonald's chain (herein after referred to as the "customer"). In order to obtain exclusivity, i.e., to ensure that the customer did not sell the products of any competing brand at its outlets the taxpayer gave what was described as a "rebate" to the customer that, in total, amounted to Rs. 7,893,898/-. This "rebate" effectively meant that the taxpayer supplied its products at a discount, i.e., the price payable (and paid) by the customer to the taxpayer was less than what it would have otherwise charged. The Department claimed that the said amount was tantamount to a "royalty" inasmuch as the exclusive sale of the taxpayer's products amounted to the customer providing "advertising services" to the taxpayer at its outlets. The "rebate" was held to be a "payment" by the taxpayer to the customer for such "services" and on such basis it was contended that clause (b) of subsection (1) of s. 153 of the Ordinance was applicable. This subsection, as relevant for the tax year concerned, and to the extent here material was in the following terms:

"153. Payments for goods, services and contracts.—(1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non-resident person— …

(b) for the rendering of services …

shall, at the time of making the payment, deduct tax from the gross amount payable at the rate specified in Division III of Part III of the First Schedule…."

Since no amount was deducted by the taxpayer the whole of the "rebate" was added to its income in terms of s. 21(c) and taxed accordingly.

4. Section 153, like a number of other provisions in the Ordinance, requires for the advance payment of tax by way of deduction. Other provisions provide for advance payment of tax by way of collection. If the person who is required to so deduct or collect fails to do so then, among other consequences, s. 161 is activated. The section makes the person in default personally liable for the payment of the amount of tax that was not deducted or collected and the recovery provisions of the Ordinance become applicable, per s. 163, "as if it were tax due under an assessment order". Thus, a failure to abide by the duty to deduct or collect advance tax has severe penal consequences and he becomes, in essence, a taxpayer in default. Other consequences adverse to the person in default (such as the aforementioned s. 21(c)) also become applicable. In our view, suchlike provisions, and therefore s. 153, when viewed from the perspective of the person who is said to be under a duty to collect or deduct the advance payment of tax, may be regarded as akin or analogous to a charging provision. This is so because of the severe penal consequences that can result from a failure to abide by the statutory duty. These advance payment provisions therefore have to be strictly construed. This need not be with the same rigidity and literalness with which a charging section, in terms of well settled tax jurisprudence, is interpreted. Nonetheless, such provisions cannot be regarded simply as recovery mechanisms and dealt with accordingly. The severe penal consequences for a person who defaults on a duty to deduct or collect, as the case may be, militate against any such approach. The interpretation must be tight and narrow.

5. When viewed from this angle, it is at once clear that s. 153(1)(b) could not possibly have applied to the facts and circumstances of the present case. For the provision to apply would have required a payment being made by the taxpayer to the customer, from which the former had to deduct tax at the prescribed rate. The tax so deducted would of course be for the credit of the customer, to be suitably adjusted by it against its tax liability (leaving aside for the moment any considerations of "final" or "minimum" tax). Now, a moment's reflection shows that the amount of "payment" allegedly made by the taxpayer to the customer in the instant case was wholly notional. Nothing was in fact paid. Rather, all that happened was that the customer paid an amount less than what it would have otherwise been obligated, the difference being the "rebate" referred to above. But, on its plain language, for s. 153(1)(b) to apply requires an actual payment moving from the person mandated to deduct to the person receiving the same and for whom it becomes advance payment of tax. This is clear from the words "making a payment". This must be construed strictly and narrowly and therefore can only mean, in terms of the interpretative approach noted above, an actual and not a notional payment. Something must actually change hands, as it were, and here admittedly there was nothing. Indeed, the only actual payment was in the other direction, from the customer to the taxpayer. That such payment was less than what it could otherwise have been was on account of the nature of the business or commercial transaction between the parties and could not have made the differential a "deemed" payment moving in the opposite direction and to which s. 153 became applicable. Thus, on the face of it the provision had no application and nothing further needed to be examined. The Department's claim failed at its very inception being, on a correct application of the law, entirely outside any applicability of the provision. An actual payment had to be shown moving from the taxpayer to the customer and here there was nothing of the sort at all. The section therefore did not apply. We may note that this reasoning is somewhat different from that which found favor with the learned High Court and the learned Appellate Tribunal, both of which proceeded to consider whether there were any "services" that had been provided and the nature thereof. In our view, it was not necessary to reach that point in the analysis since the claim failed at the very outset. However, since the conclusion arrived at was correct nothing turns on this and we record no finding on whether the reasons that prevailed with the forums below were correct or otherwise.

6. For the foregoing reasons leave to appeal was refused and the petition stood dismissed.