ISLAMABAD, Jan 27 (ABC): The Federal Constitutional Court (FCC) on Tuesday upheld the super tax, confirming Parliament’s power to impose taxes and allowing the recovery of more than Rs300 billion in public revenue.
As a result, Sections 4-B and 4-C of the Income Tax Ordinance (ITO), 2001 will remain effective from their original dates at the prescribed rates.
A three-member bench headed by Chief Justice Aminuddin Khan announced the short order. Justice Syed Hasan Azhar Rizvi and Justice Syed Arshad Hussain Shah were also part of the bench. The court said it would release a detailed judgment later.
Ruling concludes long-pending tax cases
Importantly, the verdict brings an end to more than 2,200 tax cases pending for several years.
According to senior counsel Hafiz Ahsaan Ahmad Khokhar, who represented the Revenue Division secretary, the ruling protects around Rs310 billion in public revenue. Therefore, the decision removes major uncertainty surrounding super tax recovery.
Earlier, these cases were heard by the Supreme Court. However, after the 27th Constitutional Amendment, they were transferred to the FCC.
Background of legal challenges
Previously, businesspersons, banks and companies had challenged the super tax in different high courts.
They claimed the tax applied retrospectively. Moreover, they argued that it resulted in double taxation and unfair treatment.
As a result, the Islamabad, Lahore and Sindh high courts issued conflicting rulings. While some judgments upheld Section 4-B, others struck down or restricted Section 4-C.
Court reaffirms Parliament’s authority
On Tuesday, the FCC clearly stated that Parliament alone has the authority to impose taxes.
The court observed that judges cannot decide tax rates, income thresholds or fiscal policy. Instead, courts can only interpret the law.
Therefore, the FCC held that the high courts exceeded their jurisdiction. It said this amounted to judicial overreach and violated the principle of separation of powers.
Consequently, the FCC set aside all relevant judgments of the Islamabad, Lahore and Sindh high courts.
Validity of super tax provisions
The court declared both Sections 4-B and 4-C fully valid under the Constitution.
In addition, it ruled that earlier decisions limiting or striking down Section 4-C had no legal standing. The FCC also confirmed that appeals filed by the Federal Board of Revenue and Inland Revenue authorities were maintainable.
Exemptions and special treatment
However, the FCC clarified that the super tax does not apply to benevolent funds, modarabas and mutual funds.
Meanwhile, the court allowed oil and gas exploration companies to seek relief individually. These companies may approach the relevant tax commissioner. Each case, the court said, must be assessed separately under the 1948 concession regime.
Why the super tax was introduced
Originally, the government introduced the super tax in 2015 as a one-time levy.
At that time, its purpose was to fund the rehabilitation of areas affected by Operation Zarb-i-Azb. A 5 percent tax applied to annual profits above Rs300 million.
Later, in 2022, the government expanded the tax. It lowered the income threshold to Rs150 million and raised the maximum rate to 10 percent.
Currently, banking companies pay a 4 percent super tax. Other sectors pay a 3 percent levy. The government uses these funds to support temporarily displaced persons.
Revenue impact going forward
Separately, the Federal Board of Revenue said the decision would generate around Rs300 billion for the national exchequer.
Overall, the ruling strengthens the government’s position on tax collection and brings clarity to a long-running legal dispute.