The Federal Constitutional Court (FCC) on Monday reserved its decision on a set of petitions seeking a review of its Jan 27 judgement that upheld the legality of the Super Tax. A three-judge bench headed by Chief Justice Aminuddin Khan, and comprising Justice Syed Hasan Azhar Rizvi and Justice Syed Arshad Hussain Shah, heard the petitions during a day-long hearing.
In its Jan 27 ruling, the court held that the legislature was fully competent to impose, abolish, remit, alter or regulate the tax through a Finance Act as part of a Money Bill under Article 73(2)(a) of the Constitution. The court had also stated that Sections 4B and 4C of the Income Tax Ordinance (ITO), 2001, would apply from the dates on which they were levied.
Review petitions were filed by several companies, including Fauji Fertiliser Company Ltd, Fauji Fertiliser Bin Qasim (Pvt) Ltd, Thar Power Company Ltd, Colgate-Palmolive Pakistan Limited, The Searle Company Limited, JS Bank Ltd, Total Parco Pakistan Limited, Gas & Oil Pakistan Ltd, Arif Habib Corporation Limited, Pakistan Refinery Limited and Engro Corporation Ltd. The Defence Housing Authority, Lahore, was also among the petitioners.
Senior counsel Dr Farogh Nasim, Khalid Javed Khan, Sardar Ahmed Jamal Sukhera, Rashid Anwar and Imtiaz Ali Siddiqui presented arguments on Monday.
The government introduced the Super Tax in 2015. It applies to individuals, associations of persons and companies with income above Rs500 million. The rate is 4 per cent for banking companies and 3 per cent for other sectors. The stated purpose was to fund the rehabilitation of temporarily displaced persons.
Sardar Ahmed Jamal Sukhera, counsel for Fauji Fertiliser, told media that the bench reserved its ruling after the hearing. He asked the court to strike down Section 4C of the ITO as unconstitutional, arguing that the Jan 27 judgement gave no reasons for upholding it.
In the alternative, he requested a declaration that Section 4C does not apply to tax year 2022 or to income subject to final tax, and that brought-forward losses, depreciation and amortisation be excluded.
Sukhera said the Finance Act, 2022, took effect on July 2, 2022, and imposed a charge on income earned in a tax year that had already closed. He noted that taxpayers had by then closed their accounts, held annual general meetings and distributed dividends under the law then in force. He argued that a liability that could not have been foreseen was arbitrary and unreasonable.
He also pointed out that the levy was meant to raise about Rs215 billion, while losses of state-owned enterprises amount to Rs650bn a year and electricity theft causes annual losses of about Rs600bn. He added that continued federal spending on devolved subjects stands at about Rs328bn, and borrowing from a single treasury account beyond limits set by the Fiscal Responsibility and Debt Limitation Act, 2005, amounts to Rs404bn.
The review petition states that the FCC overlooked the constitutional bar on retrospective imposition of a fresh tax charge under Articles 10A, 18, 23 and 24. It further argues that denying the carry-forward of losses, depreciation and amortisation amounts to taxing expenses or losses, which Entry 47 does not permit, as it allows the federation to tax income only.
