The Islamabad High Court (IHC) has upheld the constitutional validity of the super tax and dismissed a petition filed by Meezan Bank Limited. The case involved a tax dispute of around Rs. 11 billion, with the court ruling in favour of the existing tax framework for banking companies.
A division bench rejected the bank’s challenge and cancelled previous interim stay orders. It also dismissed all related pending applications. Furthermore, the court confirmed that Parliament has the authority to impose the super tax under Section 4C of the Income Tax Ordinance, 2001.
Meezan Bank Raises Double Taxation Concerns
Meezan Bank, represented by senior counsel Dr. Farogh Naseem, argued that the super tax created a double taxation burden. The bank claimed that income already taxed under Section 4 of the ordinance faced an additional charge under Section 4C.
Moreover, the bank challenged the retrospective increase in the tax rate. It argued that income earned through Islamic financing agreements signed before the introduction or increase of the super tax should not fall under the additional levy.
However, the government defended the tax measure and rejected the bank’s arguments.
Court Supports Government’s Position on Tax Liability
Representing the Federation and the Federal Board of Revenue (FBR), advocate Hafiz Ehsaan Ahmad Khokhar argued that the petition was not maintainable. He stated that Meezan Bank had already used the legal remedy by filing an appeal before the Appellate Tribunal Inland Revenue (ATIR) in Karachi.
He also argued that the Islamabad High Court lacked territorial jurisdiction because the tax assessment proceedings took place in Karachi.
After reviewing the arguments, the court accepted the government’s stance. It ruled that liability under Section 4C depends on the income earned during the relevant tax year. The court clarified that the date of financing agreements does not determine tax responsibility.
Additionally, the court observed that the Seventh Schedule of the Income Tax Ordinance does not differentiate between conventional and Islamic banks. Therefore, it found no constitutional violation in applying the super tax to banking institutions.
The ruling strengthens the existing tax structure and confirms the government’s authority to apply super tax provisions across the banking sector.
