In a landmark judgement the federal constitutional court hearing the cases involving section 4B and 4C of the income tax ordinance 2001 (super tax cases), announced their short order yesterday, upholding super tax which is expected to fetch revenue to the tune of PKR 300 billion to the public exchequer.
The tax departments lead counsel, Asma Hamid, led the arguments for the FBR. The Court dismissed the taxpayers’ appeals in cases of section 4B and declared section 4B to be constitutionally valid as a tax. The Court also accepted the appeals filed by the Commissioners Inland Revenue, Federal Board of Revenue and the Federation in cases of section 4C super tax, holding it to be constitutionally valid as enacted and retroactively applicable on the tax year 2022.
The Court held that section 4C super tax was to apply at the rate of 10% for the tax year 2022 on 15 sectors identified in the First Proviso to Division IIB of the ordinance if their income had exceeded Rs. 300 million in that tax year. In the application of section 4C to oil exploration and petroleum companies whose business is conducted under Petroleum and Concession Agreements governed under the Fifth Schedule of the Ordinance 2001, the Court directed the Commissioenrs to issue fresh notices and apply section 4C in accordance with law and the terms and conditions of each agreement keeping in view that the agreed caps in the agreements were not exceeded. The Court held that section 4C super tax is applicable to banking companies for tax year 2023 and onwards.