ATIR grants tax relief to IT exporter, remands Rs51.2 million case

The Appellate Tribunal Inland Revenue (ATIR) has granted relief to a software exporter by remanding a case involving Rs51.2 million in foreign remittances back to the assessing officer, ruling that the income may qualify for tax exemption under existing law, Business Recorder reported. 

The case involved Majaz Elahi, who had declared Rs51,195,457 as export proceeds from IT services and software in his tax return, claiming exemption under Clause 133 of Part I of the Second Schedule to the Income Tax Ordinance, 2001.

The return was initially accepted, but tax authorities later reopened the case under Section 122(8) following information regarding a property transaction. After the taxpayer denied owning any such property, the focus shifted to the source of the declared exempt income.

The assessing officer subsequently treated the amount as unexplained income under Section 111 and added it to taxable income, a decision that was upheld at earlier appellate stages.

The taxpayer challenged the ruling, arguing that the amount represented foreign remittances from IT exports, supported by bank statements, remittance certificates, and documentation issued by the Pakistan Software Export Board.

The tribunal noted that the earlier order contained a factual error regarding an alleged property sale and accepted that the available record prima facie supported the taxpayer’s claim.

Based on this assessment, ATIR set aside the earlier finding and directed the assessing officer to re-examine the case in light of the evidence.

The tribunal observed that export proceeds from IT services and software are eligible for exemption under the law and should not be treated as unexplained income without proper evaluation.

The decision highlights the need for tax authorities to assess foreign remittances linked to IT exports on the basis of evidence and applicable legal provisions.