| Citation(s) |
|---|
| 2017 SLG 874 2017 SLD 874 2017 PTCL 646 2017 PTD 1303 (2017) 115 TAX 341 |
Supreme Court of Pakistan
CIVIL APPEALS No. 622 & 623/2008 AND 1403 & 1404/2009, Dateof order: 26-04-2017, Date of hearing: 08.02.2017
MR., JUSTICE MIAN SAQIB NISAR, HCJ MR., JUSTICE UMAR ATA BANDIAL MR., JUSTICE FAISAL ARAB
For the appellant(s): Dr. Muhammad Farough Naseem, ASCFor the respondent(s): Mr. Muhammad Siddique Mirza, ASC
CIVIL APPEALS No. 622 & 623/2008 AND 1403 & 1404/2009, Dateof order: 26-04-2017, Date of hearing: 08.02.2017
MR., JUSTICE MIAN SAQIB NISAR, HCJ MR., JUSTICE UMAR ATA BANDIAL MR., JUSTICE FAISAL ARAB
For the appellant(s): Dr. Muhammad Farough Naseem, ASCFor the respondent(s): Mr. Muhammad Siddique Mirza, ASC
1. M/S Squibb Pakistan Pvt. Ltd. In C.As.622 & 623///2008Vs.Commissioner of Income Tax2. Commissioner Income Tax (Legal In C.As.1403 & 1404///2009 Division) Large Tax Payer Unit KarachiVs.M/S Syngenta Pakistan Ltd.
Law: Income Tax Ordinance, 1979
Section: 79
Law: Income Tax Act, 1918
Section: 51
Law: Income Tax Act, 1922
Section: 66,66(1),66(2)
Law: Income Tax Ordinance, 2001
Section: 133
INCOME TAX ORDINANCE, 1979 (XXXI OF 1979) Section 79 The Income Tax Officer had not conducted a reasonable investigation or offered prima facie evidence based on an appropriate pricing method adopted by him, thereby showing transfer mispricing and resultant depletion in profits of the resident companies, hence the burden never shifted to resident taxpayers to prove that the pricing method adopted by the Income Tax Officer was not appropriate. Therefore the Income Tax Officer erred in invoking Section 79 and adjusting the profit of the resident companies.-The Squibb Pakistan (Pvt.) Ltd. and Syngenta Pakistan Ltd. were resident companies (registered in Pakistan) engaged in the import, manufacture and sale of pharmaceutical products. They imported pharmaceutical raw material from their parent companies (foreign companies), namely M/s Bristol-Myers Squibb International, USA ("Squibb International") and M/s Ciba Geigy, Basel, Switzerland ("Ciba Geigy") respectively. Their assessments were finalized by making additions under Section 79 of the Ordinance, 1979 on account of the difference between the price of raw material imported by the companies from their parent companies and that imported by some other companies from other sources. The sole issue that remains is whether the course of business was so arranged that the business transacted between the resident and non-resident produced to the resident less than the ordinary profits which might be expected to arise in that business. The Income Tax Officers relied upon the accounts provided by the resident companies compared to their previous years and the details of import(s) of ingredients for its pharmaceuticals from the non-resident associate concerns as furnished by the assessees compared with the prices of imports of parallel companies from other sources, duly certified by the Assistant Drugs Controller, and concluded that the raw material ingredient was imported by Squibb Pakistan and Syngenta Pakistan at a higher price, thereby reducing the profits that would have otherwise accrued to them and have adjusted the tax payable accordingly. What the Income Tax Officer(s) failed to show was that the course of business…