Legal Case Summary

Case Details
Case ID 10c8a698-18ea-4fd1-86bf-64f58110e046
Body View case body.
Case Number I.T.A. No.74/KB of 2010
Decision Date Dec 02, 2013
Hearing Date Oct 25, 2013
Decision The Appellate Tribunal ruled in favor of the department regarding the apportionment of deductions under Section 67 of the Income Tax Ordinance, 2001. The Tribunal emphasized that a reasonable basis for apportionment must consider the relative nature and size of activities. The decision highlighted that income from exports and local sales should be appropriately segregated for tax purposes. The Tribunal found that the taxpayer's method of apportionment based on the quantity sold was valid and reasonable, while the department's contention to base apportionment on turnover was rejected. The Tribunal allowed the appeal from the department and dismissed the taxpayer's appeals on this issue.
Summary In the case I.T.A. No.74/KB of 2010, heard by the Appellate Tribunal Inland Revenue, the key issue was the apportionment of deductions under Section 67 of the Income Tax Ordinance, 2001. The taxpayer, Pakistan Refinery Limited, argued for a reasonable basis for apportioning direct and indirect expenses related to crude oil processing. The Tribunal underscored the importance of a reasonable basis that reflects the nature and size of business activities. The case examined various income tax laws, including the Income Tax Rules of 2002 and 1982, and the Income Tax Ordinance of 2001 and 1979. The Tribunal ruled that the taxpayer's method of apportionment based on the quantity of products sold was justified, while the department's reliance on turnover for apportionment was deemed inappropriate. The decision provided clarity on the application of tax regulations concerning export and local sales, emphasizing that the method of apportionment should be consistent and reasonable, particularly in the volatile oil market. This ruling is significant for businesses in similar sectors, providing guidance on the apportionment of expenses for tax purposes.
Court Appellate Tribunal Inland Revenue
Entities Involved Pakistan Refinery Limited
Judges Faheemul Haq Khan, Accountant Member, Muhammad Jawed Zakaria, Judicial Member
Lawyers Shabbar Zaidi, FCA
Petitioners Not available
Respondents Messrs Pakistan Refinery Limited
Citations 2014 SLD 1499, 2014 PTD 935, (2014) 110 TAX 1
Other Citations 2013 PTD 2095, PTD 1961 SC 375, (1999) 80 Tax 217, PLD 1997 SC 582, 1997 PTD 1555, PLD 2002 Pesh. 118, PLD 2002 Lah. 369, 2000 CLC 1583
Laws Involved Income Tax Ordinance, 2001, Income Tax Rules, 2002, Income Tax Rules, 1982, Income Tax Ordinance, 1979
Sections 67, 122(5A), 13, 231, 216, FirstSched:Part-IV