TAXATION

9 Months Ended

Sep. 30, 2025

TAXATION

TAXATION

24. TAXATION

The provision (benefit) for income taxes for the three and nine months ended September 30, 2025 and 2024 consisted of the following:

	Three Months Ended September 30,				Nine Months Ended September 30,
Current provision	2025		2024		2025		2024
For the period	$	66,760	$	97,623		196,858		193,269
Prior periods		-		-		-		-
Total current provision		66,760		97,623		196,858		193,269
Deferred provision		-		-		-		-
Total provision	$	66,760	$	97,623		196,858		193,269

The provision for current taxation represents minimum / final tax under the provisions of the Income Tax Ordinance, 2001 (ITO), as applicable in Pakistan.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Current provision
Federal	$	-		-		-		-
State		-		-		-		-
Foreign		66,760		97,623		196,858		193,269
Total current provision		66,760		97,623		196,858		193,269
Deferred	$	-		-		-		-
State		-		-		-		-
Foreign		-		-		-		-
Total provision		66,760		97,623		196,858		193,269

The provision for current taxation represents minimum / final tax under the provisions of the Income Tax Ordinance, 2001 (ITO), as applicable in Pakistan.

Since the Company does not have taxable income and accounting income for the three and nine month periods ended September 30, 2025 and September 30, 2024, therefore minimum tax on turnover has been levied under the Income Tax Ordinance, 2001, as applicable in Pakistan and details are shown below.

The components of the Company’s deferred income taxes as of September 30, 2025 and December 31, 2024 are as follows:

	September 30,			December 31,
	2025			2024
Asset for deferred taxation comprising temporary differences related to:	Unaudited
Unused tax losses	$	15,230,935		$	15,389,335
Provision for doubtful debts		3,255,539			3,289,396
Post employment benefits		194,048			196,066
Provision for stores and spares & stock-in-trade		4,163			4,207
Provision for credit losses of advances and other receivables		279,244			282,148
Valuation allowance		(3,970,606	)		(4,011,889	)
		14,993,323			15,149,252
Liability for deferred taxation comprising temporary differences on other liabilities		(6,612,106	)		(6,680,872	)
Deferred tax asset	$	8,381,217		$	8,468,381

Deferred tax asset on tax losses available for carry forward has been recognized to the extent that the realization of related tax benefit is probable from reversal of existing taxable temporary differences and future taxable profit. These unused tax losses mainly represent allowable depreciation expenses for an indefinite period. However, there are no such tax benefits which remain unrecognized into the financial statements and tax related contingencies have been adequately disclosed in note 18 of these financial statements. Management’s assertions of future taxable profits are primarily supported by projections in the Company’s business plan, which focuses on the expansion and execution of Fiber-to-the-Home (FTTH) services and other IT-based solutions. The Company believes that these initiatives are expected to generate sufficient taxable income in the foreseeable future, thereby enabling the Company to utilize the carried-forward tax losses.

A significant portion of the deferred tax asset is attributable to unabsorbed depreciation, which continues to be available for set-off against future taxable income under the Income Tax Ordinance, 2001 (as applicable in Pakistan). In accordance with this ordinance, such unabsorbed depreciation can be carried forward indefinitely until it is fully utilized.

1) Negative evidence

The Company has experienced recent cumulative losses for the three-year periods ended December 31, 2024, 2023 and 2022, which may represent significant negative evidence under ASC 740-10-30-23. These cumulative losses indicate uncertainty regarding the Company’s ability to generate sufficient taxable income in the near future to realize the deferred tax assets.

2) Positive evidence

Deferred tax assets arising from unabsorbed depreciation have an indefinite carryforward period, eliminating concerns about expiration and providing a strong source of positive evidence.

The Company has already recognized a partial valuation allowance of $3,970,606 to the extent that the deferred tax is not considered recoverable. Exercising prudence, management of the Company has estimated future profitability. Based on this assessment, it was determined that while sufficient taxable profits may not be available in the immediate short term to utilize the full balance, a significant portion remains realizable in the foreseeable future.

It is also important to note that under the Income Tax Ordinance, 2001 (the primary law governing income tax in Pakistan)(the “Tax Ordinance”), business losses can generally be carried forward for up to six years; however, only 10% of the Company’s total carryforward losses relate to business losses, while the remaining 90% represent unabsorbed depreciation. Unabsorbed depreciation can generally be carried forward indefinitely under the Tax Ordinance. This provides strong positive evidence supporting the recognition of deferred tax assets in the Company’s’ books of accounts.

While the existence of cumulative losses may carry significant negative weight, management has noted consistent reduction in the Company’s losses before tax over the past three years; decreasing from $12 million in 2022 to $8 million in 2023, and further to $2.7 million in 2024. It is also noteworthy that cash flow from operating activities turned positive in 2024, further strengthening the Company’s ability to generate sustainable operating cash inflows and support future taxable profits. Considering these historically positive trends, the Company has significantly reduced the negative weight of cumulative losses as it believes this demonstrates a steady improvement in operating performance and indicates movement towards profitability.

Management has prepared detailed internal financial projections, reflecting anticipated revenue growth from telecom, broadband and IT business. New products of IT, establishing a dedicated data center (center of excellence) are ready to launch in the market and contracts with customers are believed to be imminent. The Company would initially serve the US market and thereafter, would seek to expand and explore international markets like the United Kingdom (UK) and UAE. The Company believes that these projections demonstrate sufficient future taxable income to support realization of the deferred tax assets. The Company is expecting taxable temporary differences to reverse in future periods, which will generate taxable income against which the deferred tax assets may be realized.

Overall, the Company believes that the combination of the indefinite carryforward of unabsorbed depreciation, the reversal of taxable temporary differences, positive historical trends demonstrating reductions in cumulative losses and reasonable forecasts of future taxable income, provide sufficient positive evidence to outweigh the recent cumulative losses negative weight.