M/s A.J Textile Mills Ltd. v. Commissioner, Regional Tax Office, Sales Tax (Wing), Peshawar and another

Background

Background

In A.J Textile Mills, the Supreme Court allowed input tax adjustment on fire-destroyed raw material intended for taxable supplies under sections 7 and 8.

Legal questions

Legal questions

Can input tax on raw material destroyed by fire be adjusted against output tax where it was purchased for taxable supplies?

Court holding

What the Court decided

On the applicable statutory provisions and accepted facts, fire loss did not amount to non-taxable use under section 8(1)(a). The taxpayer satisfied section 7 and was entitled to adjustment.

Final outcome

Final outcome

Appeal allowed; Peshawar High Court judgment dated 27 September 2017 set aside; Appellate Tribunal Inland Revenue judgment dated 11 May 2010 restored.

Practical effect

What the decision means in practice

The disputed input adjustment was upheld. The reasoning must be applied to the relevant statutory period and proven facts.

This summary states the immediate effect recorded in the decision. The original judgment and the facts of the particular case remain controlling.

Key legal principles

Key legal principles

• Purpose of purchase and the conditions under section 7 govern entitlement under the provisions applied.
• Fire loss does not itself constitute use for a non-taxable purpose under section 8(1)(a).
• The Court applied Mayfair Spinning Mills, 2025 SCMR 1, and restored the Tribunal’s decision.