I. BACKGROUND (BG)

1. We refer to the related Important TLQC ------------------- in trail, blue, italic and double Line about Apportionment of Expenditures as per IT Section 67, IT Rules 13 OR 231? – LHC

2. We also refer to related Other TLQC55 including about Apportionment under IT Rule 231(1)(b) vis-à-vis Rule 13 - ATIR Landmark order

II. EXECUTIVE SUMMARY

A. Reference of Issue

The SCP judgment, delivered on ------------, allowing Coca Cola appeal against a LHC order on apportionment under the ITO, 2001. 

Case Origin: Arises from TY -------, involving apportionment of expenses between non-PTR / FTR income (local soft drink manufacturing under Income from Business) and PTR income (imported soft drinks taxed at import under s. 148 as final tax). 

Dispute: Taxpayer apportioned Common Expenditures using Gross Profit ratio, deemed reasonable under S. 67(1). Department insisted on Rule 13(3)(a) of 2002 Rules, using gross receipts formula. 

Lower Proceedings: Deemed assessment amended per Department's view; Tribunal favored taxpayer, but High Court reversed, holding Rule 13 mandatory. 

B. Core Legal Analysis

S. 67(1) Principle: Mandates apportionment of expenditures relating to multiple income classes "on any reasonable basis," considering relative nature and size of activities. 

Rule 13 Interaction: Framed under discretionary s. 67(2); provides a reasonable basis but not exclusive or overriding. Taxpayer can use alternative reasonable method (e.g., gross profit) if applicable. 

Application Here: Manufacturing expenses allocable solely to non-PTR income (per Rule 13(2)); gross profit basis reasonable for common expenses given differing activities (manufacture vs. import). Department's total expenses inclusion erroneous. 

S. 122(5) Amendment: No "escaped assessment" if any reasonable basis used; taxpayer's method valid, preventing under-assessment claim. 

C. SCP Decision

Appeal succeeds i.e. Rule 13 not mandatory for S. 67 apportionment between income subject to FTR & NTR. High Court judgment set aside; taxpayer's method upheld.

III. DETAILS

A.    Case Reference & Question of Law

1 to 3 

B. Statutory Provisions

1 to  2

C. Factual Context

1 to 2  

D. Proceedings from Tax Department to High Court

1 to 4 

E. Learned Counsel for the Taxpayer Submissions

1 to 2

F. Learned Counsel for the Department Submissions

Learned counsel for the Department on the other hand contended that the learned High Court had reached the correct conclusion. It was prayed that the leave petition be dismissed.

G. SCP Deliberations

1. General

1.1 to 1.13 

2 Amendment under s. 122(5)

2.1 to 2.3

3. Application of Rule 13

3.1 to 3.4

4. Precedent Review

4.1 to 4.3

5. SCP Decision

Accordingly, this leave petition is converted into an appeal and the question posed in the beginning of the judgment is answered in the affirmative in the facts and circumstances of the case. Since that answer is in favor of the taxpayer and against the Department it follows that the appeal succeeds and is hereby allowed.

IV. FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.

Best regards for Here & Hereafter
 

Asif S Kasbati (FCA, FCMA & LLB)

Managing Partner

Kasbati & Co (1400+ Tax, Levies, Companies, Economy, Inflation, HR, Banking, Finance, etc

Quick Commentary Service Provider and High Level 440+ Tax & Levies Laws Consultants)