ISLAMABAD: The Federal Constitutional Court (FCC) on Tuesday upheld Sections 4(b) and 4(c) of the Income Tax Ordinance 2001, setting aside high court judgments and confirming parliament’s legislative competence in taxation matters.
A three-member FCC bench, headed by Chief Justice Aminuddin Khan and comprising Justice Syed Hassan Azhar Rizvi and Justice Arshad Hussain, heard appeals by the Federal Board of Revenue (FBR) against the judgments of Sindh, Lahore, and Islamabad high courts regarding the levy of Super Tax.
The court disposed of over 2,200 long-pending tax cases concerning these sections, safeguarding an estimated Rs310 billion in public revenue. It declared the provisions intra vires the Constitution and set aside the high court judgments, which were found to have exceeded their jurisdiction.
The cases pertained to tax levies under Section 4(b) for Tax Year 2015 and Section 4(c) for Tax Year 2022. While Section 4(b) had largely been upheld, Section 4(c) had been read down or struck down in some high court rulings on grounds of alleged retrospectivity, discrimination and double taxation.
Following the 27th Constitutional Amendment, the matters were transferred to the FCC. The court, in its order, held that the power to impose taxes and determine tax rates rests solely with parliament.
It observed that various high courts had invalidated or modified these provisions, exceeding their jurisdiction. The court further held that the Revenue Division is an independent body with full authority to file appeals.
The court ruled that a three to four percent tax on income exceeding Rs50 million under Section 4(b), and a one to 10 percent tax on 14 specified sectors with income exceeding Rs15 million under Section 4(c), is entirely valid. It confirmed these sections are constitutional, with Section 4(c) being an independent “charging section” that does not constitute double taxation.
The FCC held that tax liability arises upon filing the return, and matters of fairness fall within parliament’s review, not the courts. It upheld the Super Tax but exempted “benevolent funds,” noting matters related to petroleum companies will be reviewed individually.
Arguments were presented by Hafiz Ihsan Khokhar and Asma Hamid for the Revenue Division and FBR, while Makhdom Ali Khan represented other parties.
Speaking to the media, Khokhar said the decision has “clearly defined the limits of judicial intervention in tax disputes and reinforced the supremacy of parliamentary legislation.” He added that the ruling secured nearly Rs310 billion in revenue and set a strong precedent for future cases.
