In a landmark decision with major constitutional and fiscal implications, the Federal Constitutional Court (FCC) on Tuesday upheld the validity of the super tax under Sections 4-B and 4-C of the Income Tax Ordinance (ITO), 2001. The ruling reinforces Parliament’s exclusive authority to legislate on taxation and overturns earlier high court judgments that had challenged the levy.
A three-member bench, headed by FCC Chief Justice Aminuddin Khan and including Justices Syed Hasan Azhar Rizvi and Syed Arshad Hussain Shah, announced the short order following a brief hearing. A detailed judgment is expected to follow.
The decision resolves over 2,200 pending tax cases concerning Sections 4-B and 4-C, safeguarding an estimated Rs310 billion in public revenue, according to senior counsel Hafiz Ahsaan Ahmad Khokhar, representing the Revenue Division.
The super tax was originally introduced in 2015 by the PML-N government as a one-time measure under a money bill to fund the rehabilitation of areas affected during Operation Zarb-i-Azb.
Initially levied at 5 percent on annual profits exceeding Rs300 million, it was later applied in 2022 to individuals earning over Rs150 million, with a maximum rate of 10 percent. Section 4-B covers super tax for rehabilitation of temporarily displaced persons, while Section 4-C applies to high-earning individuals.
The FCC held that the earlier judgments by the Islamabad, Lahore, and Sindh high courts, which had read down or struck down Section 4-C, were constitutionally invalid, noting that the courts had exceeded their jurisdiction and violated the doctrine of separation of powers. The bench emphasized that courts cannot redefine tax slabs, rates, thresholds, or fiscal policy, and that their role is limited to interpretation.
The ruling also allowed for specific exemptions, including benevolent funds and case-by-case assessment for oil and gas exploration companies under the 1948 concession regime. All appeals filed by the Federal Board of Revenue secretary and Inland Revenue commissioner were confirmed as maintainable.
The FCC’s verdict secures the constitutionality of Sections 4-B and 4-C, ensuring the super tax remains enforceable and reinforcing Parliament’s supremacy in fiscal legislation.
