IHC declares super tax as ‘ultra vires’ constitution

Islamabad High Court (IHC) Building.  — IHC website/file
Islamabad High Court (IHC) Building. — IHC website/file
  • Islamabad court rules that section 4C is over and above fundamental rights.
  • Super tax will not be applicable on any transaction before June 30.
  • Charitable funds, petroleum companies were exempted from super tax.

Islamabad: The Islamabad High Court (IHC) has ruled that Section 4C of the Income Tax Ordinance 2001 – super tax on high-income individuals and companies – is ultra vires fundamental rights and against the Constitution.

,[Section] 4C, as it stands now, falls outside the purview of fundamental rights under Articles 18, 23 and 24 read with Article 4 of the Constitution,” said the judgment written by Justice Ijaz Sardar Ishaq Khan on Thursday.

Citing the Supreme Court’s judgment in Imrana Tiwana case, the court said that Section 4C “is held to be against the scheme of the Constitution and the reasons given in this judgment must either be read down or declared ultra vires”.

In the light of the apex court’s decision, the IHC said that taxpayers from whom tax is collected as final tax will not be charged super tax.

In a detailed judgement, the IHC judge said the move to exclude loss, depreciation and amortization allowance of previous years from the definition of income by changing the definition of income in Section 4C of the Income Tax Ordinance has also been declared unconstitutional.

,[Section] 4C, as read below, shall have only prospective application, and shall not apply to any transactions or events closed on or before June 30, 2022,” the judgment said.

Further, the court held that the super tax would not apply to philanthropic funds, petroleum and exploration companies – to the extent that its application would result in taxation of such companies exceeding the limit prescribed in Rule 4 of the Fifth Schedule to the Ordinance.

In the decision, the court also termed the move to impose super tax at the rate of 10 per cent on ten industries as discriminatory.

IHC quashed all super tax notices and directed to issue new notices as per the judgment

Several companies, including Fuji Fertilizer Company Limited, filed a petition in the Islamabad High Court against the super tax.

The petitioner companies were represented by advocates Salman Akram Raja, Adnan Haider Randhawa and other lawyers dealing with tax matters.

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