01 / ANALYSIS
Overview of the Case
The Supreme Court considered whether Zarai Taraqiati Bank Limited (ZTBL) could appeal against an Alternate Dispute Resolution Committee decision under the proviso to section 134A(13) of the Income Tax Ordinance, 2001. The parties agreed that ZTBL was a state-owned enterprise. The dispute was whether the Federal Government wholly owned it, directly or indirectly.
The Income Tax (Amendment) Act, 2026 introduced transitional rules for challenges to earlier committee decisions. Subsection (12) provides for abatement of specified pending petitions by wholly federally owned SOEs. Subsection (13) also abates specified High Court petitions by other SOEs, but its proviso allows an appeal to the Federal Constitutional Court or the Supreme Court, as the case may be, within 60 days of commencement.
02 / FACTUAL RECORD
Brief Facts
ZTBL challenged a decision of the ADR Committee in five connected civil appeals. The respondents argued that federal ownership reached 99.98% once the State Bank’s shares and the shares standing in the name of the former Government of East Pakistan were attributed to the Federation. They submitted that the remaining provincial holdings should be counted with the federal shares or disregarded.
The Court heard the preliminary objection on 19 June 2026 and dismissed it at the close of the hearing. Justice Munib Akhtar gave the reasons for the bench.
03 / LEGAL ISSUES
Questions of Law
- What does “wholly owned” mean under section 134A(12) and (13)?
- Why did the State Bank’s shares count towards federal ownership?
- Why did the provincial shares matter, and what did the Court decide?
04 / JUDICIAL REASONS
The Court’s Answers
What does “wholly owned” mean under section 134A(12) and (13)?
Answer. For this transitional appeal provision, the Court read “wholly owned” literally. In a company limited by shares with a single class of shares carrying uniform rights, the Federal Government must own the entire shareholding, directly or indirectly. The Court declined to disregard a small shareholding under the de minimis principle. It favoured a construction that preserved an existing avenue of judicial recourse where the statutory language allowed it. (¶¶ 5–7)
“the phrase ‘wholly owned’ has to be given a strict and literal meaning.”
Why did the State Bank’s shares count towards federal ownership?
Answer. The Court treated the State Bank of Pakistan’s 76.22% holding as indirectly federally owned for this purpose. It relied on section 4(3) of the State Bank of Pakistan Act, 1956, under which the State Bank’s capital is held exclusively by the Federal Government and is non-transferable. The Court also counted shares recorded in the name of the former Government of East Pakistan with the Federal Government’s direct holding, bringing direct and indirect federal ownership to 99.98%. (¶ 8)
Why did the provincial shares matter, and what did the Court decide?
Answer. The Federal and Provincial Governments are legally distinct. The four Provincial Governments held shares in their own names in ZTBL’s register of members. The Court considered that sufficient for this purpose, referring to section 121 of the Companies Act, 2017, and treated the shares’ possible federal origin as immaterial. The Court dismissed the preliminary objection and held the appeals maintainable. The tax merits remained open. (¶¶ 9–10)
“the shareholdings of the Provincial Governments, vanishingly small though they may otherwise be, are decisive.”
05 / PRACTICAL APPLICATION
Practical Relevance
The ruling makes the register of members and the statutory basis for any claimed indirect federal holding central to assessing whether a share company qualifies for the transitional appeal route. A small holding registered to a legally distinct owner can be decisive even where federal control is overwhelming.
The Court confined its interpretation to the appeal provisions in section 134A(12) and (13). An ownership test in another statute may serve a different purpose and call for a different analysis.
06 / SOURCES