COMMISSIONER INLAND REVENUE, LAHORE vs COCA COLA PAKISTAN LIMITED, LAHORE — 2026 PTD 29 SUPREME-COURT

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COMMISSIONER INLAND REVENUE, LAHORE VS COCA COLA PAKISTAN LIMITED, LAHORE. Ss. 21(c) & 153---Rebate granted by taxpayer to its customer for exclusive sale of products---Department treating rebate as payment for advertising services---Effect---Question raised whether such rebate attracted withholding tax---Deduction of tax, requirement of---Prerequisite---Actual payment to move from the person mandated to deduct to the person receiving the same and for whom it becomes advance payment of tax---Scope---The present case had arisen from the Income Tax Ordinance, 2001 concerning the tax year 2003---The department filed a reference before the High Court challenging a decision of the Appellate Tribunal that favored the respondent company---The dispute revolved around a "rebate" amounting to Rs. 7,893,898/- which the respondent company had given to its customer in exchange for sales exclusivity---The department treated this rebate as a payment for "advertising services" under Section 153(1)(b) of the Ordinance and disallowed it under Section 21(c), considering it taxable as "royalty"---The High Court ruled in favor of the respondent company leading the department to file the present civil petition for leave to appeal before the Supreme Court---Pivotal issue for determination before the Supreme Court was as to "Whether the rebate or discount allowed by respondent company to its customer, for ensuring exclusive sale of its products, constituted an actual "payment" for "advertising services" attracting withholding tax under Section 153(1)(b) of the Income Tax Ordinance, 2001"?---Held: It was clear that Section 153(1)(b) could not possibly have applied to the facts and circumstances of the present case---For the provision to apply would have required a payment being made by the taxpayer to the customer, from which the former had to deduct tax at the prescribed rate---The amount of "payment" allegedly made by the taxpayer to the customer in the present case was wholly notional and nothing was in fact paid---For Section 153(1)(b) to apply required an actual payment moving from the person mandated to deduct to the person receiving the same and for whom it becomes advance payment of tax---The provision had no application and nothing further needed to be examined---The department's claim failed at its very inception being, on a correct application of the law, entirely outside any applicability of the provision---An actual payment had to be shown moving from the taxpayer to the customer and here there was nothing of the sort at all, hence, the section did not apply---Leave to appeal was refused and petition was dismissed, in circumstances.

COMMISSIONER INLAND REVENUE, LAHORE vs COCA COLA PAKISTAN LIMITED, LAHORE — 2026 PTD 29 SUPREME-COURT

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