The Federal Board of Revenue (FBR) has issued a Rs. 1.82 billion income tax demand to Faisal Town (Private) Limited, alleging that the real estate developer significantly understated its taxable income for Tax Year 2020 by using an incorrect method of revenue recognition.
According to an assessment order issued by the Large Taxpayers Office (LTO) Islamabad, the FBR revised the company’s tax assessment after concluding that its original filing resulted in a substantial understatement of taxable income. The tax demand is separate from any additional audit-related issues that may be reviewed in the future.
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The dispute centers on the Percentage of Completion (POC) method used to recognize income from long-term development projects. The FBR stated that Faisal Town initially estimated its project development cost at Rs. 40.46 billion but later revised it to Rs. 90.46 billion, citing an expansion of the project’s area.
According to the tax authority, the revised estimates significantly reduced the project’s completion ratio, resulting in lower reported revenue and taxable income. The FBR rejected the revised figures, stating that the company did not provide sufficient documentary evidence, including feasibility studies, board approvals, or timely cost estimates, to justify the change.
The tax authority also noted that the revised approval from the Rawalpindi Development Authority (RDA) was issued after the close of Tax Year 2020 and therefore could not be applied retrospectively. Faisal Town has not publicly responded to the assessment, and the matter remains subject to the applicable legal and tax appeal process.
