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---Exports to unregistered foreign buyers---Whether included--- Income Tax Reference under S.133(1) of Income Tax Ordinance, 2001 arose from order of Appellate Tribunal Inland Revenue. For tax year 2011, taxpayer declared that 85.32% of sales were made locally to registered persons while 14.68% represented exports to foreign entity not registered or liable to be registered under Sales Tax Act, 1990. Return was initially deemed assessed under S.120 but later amended under S.122(5A) by tax authorities and tax credit claimed under S.65A was disallowed. Tribunal allowed tax credit and department challenged the order before High Court. Issue before High Court was whether requirement of 90% sales to registered persons under S.65A was to be calculated with reference to total sales including exports or only local sales made to registered persons. Held--- Foreign entity was neither registered in Pakistan nor liable to be registered under Sales Tax Act, 1990. The interpretation suggested by Revenue was misconceived as the entire purpose of requirement of 90% sales to registered persons was to encourage documented transactions. Persons who were neither registered nor liable to be registered could not be included for calculation of 90% threshold. Term "sales" used in S.65A could not be interpreted in isolation and must be read with overall scheme of Income Tax Ordinance, 2001. High Court held that exports made to unregistered foreign buyers were not to be included for calculation of 90% threshold. Impugned order of Tribunal was found to be in accordance with law. Proposed questions were answered against Revenue and reference application was dismissed.

COMMISSIONER INLAND REVENUE, ZONE-II, LARGE TAXPAYERS UNIT, LAHORE vs COCA COLA EXPORT CORPORATION Ss — 2026 PTD 318 LAHORE-HIGH-COURT-LAHORE

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