President Zardari Orders FBR to Honor Taxpayer-Favorable ADRC Ruling, Overruling FTO and FBR

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), setting aside positions taken by both the Federal Tax Ombudsman (FTO) and the FBR.

Key points

• The Secretary of Sales Tax Operations subsequently dissolved the committee on January 12, 2026, citing its failure to decide the matter within the statutory period.
• The FTO's original order dated February 20, 2026, did not rule on the validity of the ADRC's December 23 decision or direct its implementation.
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• According to The presidential order, the FBR had not formally challenged the ADRC decision and that the proceedings had been conducted with the consent of both parties.

Notably, the presidential ruling arose from FTO order No. 1499/2026, involving a corporate taxpayer that manufactures equipment for Pakistan's exploration and production sector. The taxpayer had challenged the FBR's dissolution of an ADRC that had been constituted after directions from the Supreme Court of Pakistan. Tarbela Dam Project Cost Goes Over-Budget By Rs. 23, 400 Crore.

According to tax expert Khurram Shahzad Butt, the ADRC, headed by a retired Lahore High Court judge, concluded its proceedings on December 23, 2025, and ruled in favor of the taxpayer, discharging the principal tax liability under dispute in the presence of the relevant departmental team from the Chief Tax Office, Islamabad.

Notably, the Secretary of Sales Tax Operations subsequently dissolved the committee on January 12, 2026, citing its failure to decide the matter within the statutory period. The taxpayer was not given notice or an opportunity to be heard before the dissolution.

Meanwhile, the FTO's original order dated February 20, 2026, did not rule on the validity of the ADRC's December 23 decision or direct its implementation. Instead, it ordered the FBR to constitute a fresh ADRC and establish institutional safeguards.

For context, the taxpayer afterwards sought a review, but the FTO declared the petition non maintainable on April 6, 2026, noting that the FBR had separately approached the President against the FTO's order. That representation was subsequently dismissed.

During a hearing on August 6, 2026, attended by both sides, the President held that the ADRC's decision should stand since the FBR's own representation against the FTO's findings had already been dismissed. According to The presidential order, the FBR had not formally challenged the ADRC decision and that the proceedings had been conducted with the consent of both parties. It consequently directed the FBR to implement the ADRC's decision dated December 23, 2025.

Tax practitioners remarked the ruling could have broader implications for the ADRC mechanism, particularly by reinforcing the principle that committees constituted under Supreme Court directions cannot be dissolved after reaching a decision simply as the outcome is unfavorable to one of the parties. Stay Connected with ProPakistani.

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Taken together, the developments around president Zardari Orders FBR to Honor Taxpayer-Favorable ADRC Ruling, Overruling FTO and point to a situation that is still moving, and the coming days should bring more clarity.