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ISLAMABAD, Nov 12 (APP):The Supreme Court of Pakistan has ruled in favor of Coca-Cola Pakistan Limited, dismissing the Federal Board of Revenue’s (FBR) stance in a long-standing tax dispute.
According to the court’s written judgment, the apex court held that there is no mandatory formula or single rule for apportioning expenses across different sources of income.
Instead, such allocation can be made on “any reasonable basis” as provided under the law.
The judgment was authored by Justice Muneeb Akhtar, with Justice Muhammad Shafi Siddiqui and Justice Mian Gul Hassan Aurangzeb comprising the bench.
The case pertained to the tax year 2003, during which the FBR argued that Coca-Cola Pakistan had not apportioned its expenses in accordance with Income Tax Rule 13.
However, the Supreme Court observed that if a taxpayer allocates expenses on a reasonable and justifiable basis, the method cannot be deemed incorrect merely because it differs from FBR’s formula.
The judgment clarified that under Section 67(1) of the Income Tax Ordinance, 2001, a taxpayer must allocate expenses on a reasonable basis, but FBR’s prescribed rules cannot be treated as absolute or binding.
Justice Akhtar noted that the enactment of FBR’s rules does not render them the only acceptable standard for apportionment. The phrase “any reasonable basis” under the law implies that multiple valid methods may exist, even if they differ from the FBR’s approach.
Since Coca-Cola had apportioned its expenses using the Gross Profit Ratio (GPR) — a method the court found reasonable — the FBR’s amended assessment was declared legally unsustainable.
The Supreme Court consequently set aside the Lahore High Court’s judgment and allowed Coca-Cola Pakistan Limited’s appeal.