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Commissioner Inland Revenue Zone-I, Regional Tax Office, Quetta V. M/s. Quetta Electric Supply Company Limited, Quetta,

PLJ 2023 Quetta 60 · Balochistan High Court

This case is about how Quetta Electric Supply Company (QESCO) should be taxed on money it receives from the Government of Pakistan known as the Tariff Differential Subsidy (TDS). QESCO sells electricity to consumers at a rate lower than the tariff fixed by the power regulator NEPRA, and the Government pays it the difference. The tax department treated this TDS amount as part of QESCO's "turnover" or sales, making it subject to minimum tax under Section 113 of the Income Tax Ordinance, 2001. QESCO argued the TDS was a subsidy from the Government, not sale proceeds, and should be tax-exempt. A tax tribunal ruled in favor of QESCO, and the tax department challenged that ruling in the High Court.

The Balochistan High Court disagreed with the tribunal. It held that the TDS is not truly a "subsidy" or bailout grant, but simply the balance price of electricity that the Government pays on behalf of consumers to give them relief. Since it represents payment for electricity actually supplied, the full amount, including the TDS, counts as gross revenue from the sale of electricity and is subject to minimum tax unless a specific legal exemption exists. The court also found the tribunal had wrongly relied on an exemption clause that only applies to total income, not to minimum tax exemptions, which fall under a different part of the law.

This decision matters because it clarifies that electric supply companies cannot avoid minimum tax on government-paid subsidy amounts tied to electricity sales,

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