The Supreme Court of Pakistan has delivered an important judgment concerning the interpretation of wholly government-owned companies under the Income Tax Ordinance, 2001. In the case involving Zarai Taraqiati Bank Limited (ZTBL), the central question was whether the bank could be regarded as wholly owned, directly or indirectly, by the Federal Government for purposes of the Alternate Dispute Resolution mechanism under Section 134A. The Court examined the actual shareholding structure rather than relying solely on the institution’s status as a state-owned enterprise.
The Court observed that approximately 99.98% of ZTBL’s shares were held directly or indirectly by the Federal Government. While the Federal Government directly held approximately 23.76%, the State Bank of Pakistan held approximately 76.22%, which could be attributed indirectly to the Federal Government. However, the remaining shares were held by provincial governments. The Court considered even these extremely small shareholdings legally significant and concluded that ZTBL could not be classified as wholly owned by the Federal Government.
The judgment carries important implications for the application of Section 134A, particularly the distinction between subsections (12) and (13). It reinforces that statutory ownership conditions must be interpreted according to the precise language of the law. For state-owned enterprises and their tax advisers, the decision highlights the importance of examining the complete ownership structure when determining eligibility for statutory dispute-resolution procedures.