ISLAMABAD: In a major development for Pakistan’s information technology export sector, the Appellate Tribunal Inland Revenue (ATIR) has passed a landmark order, providing meaningful tax relief to a software exporter whose foreign remittance income under exemption schedule of the Income Tax Ordinance, 2001, had been subjected to arbitrary addition by the tax department. The ATIR documents revealed that the IT Exporter Majaz Elahi through lawyer Waheed Shahzad Butt along with Anthony Cyril Williams challenged the illegal treatment by the department to tax the foreign based export of IT services income as taxable in Pakistan, wherein after hearing the rival parties the ATIR granted lawful relief to promote IT Export sector in Pakistan on lawful logical grounds. Majaz Elahi, a salaried individual also engaged in export of information technology services and software, had filed his income tax return declaring salary income and export proceeds from IT services/software amounting to Rs. 51, 195, 457/-, which was claimed as income exempt from tax under Clause 133 of Part I of the Second Schedule to the Income Tax Ordinance, 2001, the statutory provision that grants tax exemption on export proceeds of computer software, IT services, and IT-enabled services. READ MORE: Tax exemption misuse: Senate panel voices concern over abuse of IT sector The return was initially deemed assessed under Section 120. However, the department subsequently invoked Section 122(8) on the basis of alleged information that the taxpayer had purchased immovable property. When the taxpayer clarified that he did not own property, the Assessing Officer shifted focus and issued an addendum requiring explanation of the source of assets worth Rs. 51, 195, 457/- declared as exempt income in the wealth statement. The Assessing Officer, allegedly without adequate appreciation of the taxpayer’s response, proceeded to make an addition of Rs. 51, 195, 457/- under Section 111 of the Ordinance through an amended assessment order. This order was upheld by the Commissioner Inland Revenue (Appeals) and subsequently confirmed by the Tribunal. Aggrieved by a factual mis-recording in the Tribunal’s order, the taxpayer filed a miscellaneous application under Section 221 seeking rectification. The Tribunal had incorrectly recorded in paragraph 2 of its order that the concerned officer had received information “regarding sale of immovable property at the cost of Rs. 51, 195, 475/- during the instant tax year which was not declared in the relevant wealth statement”, a factually incorrect narration with no basis in the assessment record. The authorized representative (AR) argued compellingly that the amount of Rs. 51, 195, 457/- did not represent any sale of property whatsoever, but rather represented remittances received against export of software and IT services, as evidenced by remittance encashment certificates, detailed bank statements from banks, the original wealth statement, and a certificate of software export duly issued by the Pakistan Export Board. The Tribunal, upon careful examination of documentary material placed on record, acknowledged that the evidence produced by the appellant prima facie supported his stance that the amount in question represented export proceeds of software or IT services qualifying for exemption under Clause 133 of Part I of the Second Schedule to the Income Tax Ordinance, 2001. Invoking principles of fairness and proper administration of justice, the Tribunal remanded the matter back to the Assessing Officer. This order is a positive affirmation that Pakistan’s statutory IT export exemption framework must be applied fairly and on the basis of evidence. The case underscores that tax authorities must distinguish between genuine foreign remittances earned through software exports, which enjoy statutory protection, and unexplained income, rather than making blanket additions on procedural grounds, Waheed Butt added. Copyright Business Recorder, 2026
Foreign remittance tax exemption case: ATIR grants relief to software exporter
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