SC Dismisses Tax Department's Appeals Against Insurance Companies

Case No.	C.A.854/2011 and connected appeals (20 appeals)
Parties	Commissioner Inland Revenue, Karachi (Appellant) vs M/s EFU General Insurance Ltd. & other insurance companies (Respondents)
Bench	Supreme Court of Pakistan, Islamabad
Matter	Civil Appeals (Tax Laws / Federal Tax / Income Tax — Insurance)
Judge(s)	Mr. Justice Muhammad Shafi Siddiqui (Author), Mr. Justice Yahya Afridi (Chief Justice), Mr. Justice Miangul Hassan Aurangzeb
Order Date	16 June 2026
Outcome	All appeals dismissed — in favour of the taxpayer insurance companies; CMAs disposed of as infructuous

This was the insurance industry's tax case. In twenty appeals — C.A.854 to 862 of 2011, 1666–1667 of 2013, 788–789 of 2015, 938–940 of 2017, C.M.As.8167–8168 of 2016, and C.A.484 of 2018 — the Commissioner Inland Revenue, Karachi challenged Tribunal and High Court orders that had annulled Section 122(5A) assessments on EFU General Insurance, EFU Life Assurance, Century Insurance, Central Insurance, Habib Insurance, State Life Insurance and Allianz EFU Health Insurance.

Heard over 1–4 and 10 June 2026, with short orders of dismissal dated 16.06.2026 and detailed reasons in this judgment, the Supreme Court — Mr. Justice Muhammad Shafi Siddiqui authoring, with Chief Justice Yahya Afridi and Mr. Justice Miangul Hassan Aurangzeb — dismissed all the appeals. Four technical questions were settled in the taxpayers' favour: the 'single basket income' concept for insurers under the Fourth Schedule to the Income Tax Ordinance; exemption of capital gains on sale of shares under Rule 6A of the Fourth Schedule; tax avoidance under Section 109 read with Rule 5(b); and whether Section 67's apportionment applies given the Fourth Schedule's special regime.

The core holding is structural: the Fourth Schedule creates a self-contained special regime for insurance business, and the general provisions of the Ordinance — including apportionment under section 67 — cannot be imported to fracture the single basket. Special law displaces general law within its field.

For the insurance sector, fifteen years of litigation end here: the department's 122(5A) assessments fall, and the Fourth Schedule stands as written. Khaas qanoon aam qanoon par haawi hota hai — and the Court has now said so for insurers, finally.