ISLAMABAD: President Asif Ali Zardari has directed the Federal Board of Revenue (FBR) to implement a taxpayer-favorable decision issued by an Alternate Dispute Resolution Committee (ADRC), rejecting the positions taken by both the Federal Tax Ombudsman (FTO) and the FBR.
The presidential order relates to FTO Order No. 1499/2026 involving a corporate taxpayer engaged in manufacturing equipment for Pakistan’s exploration and production sector. The taxpayer had challenged the FBR’s decision to dissolve an ADRC that had been constituted following directions from the Supreme Court of Pakistan.
According to tax expert, the ADRC, headed by a retired Lahore High Court judge, completed its proceedings on December 23, 2025. The committee ruled in favor of the taxpayer and discharged the principal tax liability under dispute in the presence of the relevant departmental team from the Chief Tax Office, Islamabad.
However, the Secretary of Sales Tax Operations dissolved the ADRC on January 12, 2026, stating that the committee had failed to decide the matter within the statutory timeframe. The taxpayer was not provided notice or an opportunity to be heard before the committee was dissolved.
The FTO, in its original order dated February 20, 2026, did not determine the validity of the ADRC’s December 23 decision or order its implementation. Instead, it directed the FBR to constitute a new ADRC and introduce institutional safeguards.
The taxpayer subsequently filed a review petition, which the FTO declared non-maintainable on April 6, 2026. The FTO noted that the FBR had separately challenged the FTO’s order before the President. The FBR’s representation was later dismissed.
During a hearing on August 6, 2026, attended by representatives of both sides, President Zardari held that the ADRC’s decision should remain effective. The presidential order noted that the FBR had not formally challenged the ADRC’s decision and that the proceedings had been conducted with the consent of both parties.
The President therefore directed the FBR to implement the ADRC decision dated December 23, 2025.
Tax practitioners believe the ruling could have wider implications for Pakistan’s ADRC framework. It may reinforce the principle that an ADRC constituted pursuant to Supreme Court directions cannot simply be dissolved after reaching a decision, particularly where both parties participated in the proceedings and the committee’s decision has not been formally challenged.
The decision could also provide greater certainty to taxpayers using the ADRC mechanism to resolve disputes with the tax authorities, while highlighting the importance of due process and procedural safeguards when tax dispute resolution committees are constituted or dissolved.
