COMMISSIONER INLAND REVENUE, ZONE-II, LARGE TAXPAYERS UNIT, LAHORE vs COCA COLA EXPORT CORPORATION Ss

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COMMISSIONER INLAND REVENUE, ZONE-II, LARGE TAXPAYERS UNIT, LAHORE VS COCA COLA EXPORT CORPORATION Ss.65a, 120, 122(5a) & 133(1)---Tax credit, disallowing of---Sales to registered persons---Computation of 90% threshold---Whether exports to unregistered foreign buyers are to be included---Threshold condition---application limited to sales made to registered or (liable to be registered) persons---Present income tax reference under S.133(1) of the Income Tax Ordinance, 2001 was filed against respondent company which arose out of an order passed by the appellate Tribunal Inland Revenue---Precisely, for tax year 2011, the taxpayer declared that 85.32% of its sales were made locally to a registered person, while 14.68% of its sales were exports made to a foreign entity not registered or liable to be registered under the Sales Tax act, 1990---The return was initially deemed assessed under S. 120, but was later amended by the tax authorities under S.122(5a), disallowing tax credit claimed under S.65a---The disallowance was upheld by the commissioner (appeals) but set aside by the tribunal, which allowed the tax credit---The issue requiring determination before the High Court was "whether, for purposes of S.65a of the Income Tax Ordinance, 2001, the statutory requirement that ninety percent of sales be made to registered persons was to be calculated with reference to total sales including exports, or only with reference to local sales made to persons registered or liable to be registered under the Sales Tax act, 1990"?---Held: It was an admitted position under the law that 'foreign entity' was an entity, which was neither registered in Pakistan nor it was liable to be registered, therefore, the interpretation sought to be placed by the Revenue was clearly misconceived as the entire purpose and essence of the condition/threshold of 90% sales to registered persons was rooted in the rationale of promoting and incentivizing the sales to registered persons---It was for this reason that a tax credit was being inured for those who made 90% of the total sales to registered persons---The threshold requirement of 90% in the present case was not applicable against the entire magnitude of the 'sales' made---The term 'registered persons' as defined in the act clearly manifested that persons not even liable to be registered under the Sales Tax act, 1990, could not be included for the purpose of calculation of 90% threshold required under S.65a of the Ordinance, 2001---Moreover, while highlighting the principles for interpretation of statues, High Court greatly emphasized that term 'sales', as used in S.65a of the Ordinance could not be read in isolation and must be construed in line with the overall scheme of the Ordinance---Impugned order having been passed in accordance with law did not warrant intervention---Proposed questions were answered in negative and resultantly present reference application was dismissed, in circumstances.

COMMISSIONER INLAND REVENUE, ZONE-II, LARGE TAXPAYERS UNIT, LAHORE vs COCA COLA EXPORT CORPORATION Ss — 2026 PLD 90 LAHORE-HIGH-COURT-LAHORE

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