This study critically questions the PLS paradigm of Islamic banks in fair distribution of profits.PLS paradigm theoretically enforces that there should not be a significant difference between the returns offered to IAH and returns offered to shareholders. Smoothing of return can have a potential problem as IAH do not have any control over managerial decisions while banks owner equity is affected through absorption through displaced commercial risk. Therefore, this study analyzes the previous literature in a critical and systematic way to ascertain if Islamic banks are distributing profits in a realistic manner or there are some anomalies in the PLS paradigm of Islamic banks. Furthermore, the literature was analyzed critically to find out the associated factors and constraints that lead Islamic banks to impairment of PLS paradigm. Through analysis of the literature, smoothing of income and PDM is discovered in the empirical studies of different researchers.Furthermore, constraints to efficiently and effectively managing the fair distribution of profits have been identified in the literature. These constraints shape several factors, which are broadly categorized as banking characteristics, macroeconomic and financial environment, geographic and population characteristics; corporate and legal environment. A diagrammatic representation of constraints framework is suggested based on available literature. Furthermore, future directions for future research are provided at the end