Pakistan’s Federal Constitutional Court has struck down Section 7E of the Income Tax Ordinance, 2001. The court ruled it unconstitutional and without legal force. This decision removes a disputed tax on immovable property.
Justice Aminuddin Khan announced the short order. He stated that the levy is illegal and cannot be applied. As a result, Section 7E is now void from the beginning. The court also rejected appeals from the Federal Board of Revenue. The FBR had asked to restore the provision. With this ruling, those appeals have now been dismissed.
Previously, Section 7E taxed immovable assets with a value above Rs. 25 million. It included a limited exemption for one self-occupied residential property. Many property owners were affected by this rule. However, the court held that the provision cannot survive constitutional scrutiny. It declared Section 7E ultra vires the Constitution. Therefore, it has no legal standing.
Importantly, the court held that the section was introduced by the Finance Act, 2022. It ruled the entire provision void ab initio. This means it is treated as invalid from the start. All actions taken under Section 7E have now been set aside. Notices and proceedings issued by the FBR are also declared unlawful.
The ruling ends a long legal battle across multiple courts. The Peshawar High Court had already struck it down. The Balochistan High Court reached the same conclusion. Meanwhile, the Islamabad High Court partially invalidated the law. It read down specific parts of the section. The Lahore High Court first upheld it. Later, a division bench reversed that decision.
The Sindh High Court had earlier dismissed challenges against the law. This created conflicting rulings across provinces. As a result, appeals reached the Constitutional Court for final judgment. After detailed hearings, the court allowed all taxpayer petitions. It rejected the government and FBR appeals. This brought final closure to the dispute.
The ruling is widely seen as major relief for property owners. It especially benefits high-net-worth individuals. They were previously taxed on deemed income from immovable assets.
