The Special Provisions in Section 73(4) of STA 1990 limiting tax benefits to Registered Persons take Precedence over General Definitions in Section 2(25) of STA 1990 --- Lahore High Court, Lahore

Islamabad 12-11-2024: In a recent judgment, the Lahore High Court has clarified the eligibility requirements for input tax adjustments and other benefits under the Sales Tax Act, 1990, ruling that only formally registered entities may claim such benefits. The decision, delivered in Commissioner Inland Revenue, LTO Multan Vs. M/s AN Textile Mills Ltd. (S.T.R. No.34/2023), emphasized the statutory limits on benefits for non-registered persons, rejecting the concept of “deemed registration” for those merely liable to be registered.

The dispute centered on the interpretation of Sections 73(4) and 2(25) of the Sales Tax Act, where the applicant, Commissioner Inland Revenue, argued that the Act restricts input tax deductions to transactions conducted by registered persons only. The Court examined whether the Appellate Tribunal Inland Revenue (ATIR) erred in granting benefits to the respondent despite transactions with non-registered persons.

The judgment made clear that Section 73(4) is a special provision meant to limit input tax adjustments specifically to registered persons, whereas Section 2(25) broadly defines a “registered person.” In this context, the Court held that general definitions cannot override specific provisions, a principle affirming that the benefits outlined in Section 73(4) do not extend to non-registered or “potentially registerable” persons.

The Court further criticized the tribunal’s interpretation of Section 8(1)(m), which relates to input goods, noting that it had no bearing on the input tax adjustment rules under Section 73(4). The ruling emphasized legislative intent, asserting that only entities formally registered under the Act qualify for tax benefits.

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