Judgment on super tax validity: FCC reserves verdict on review petitions

ISLAMABAD: The Federal Constitutional Court (FCC) reserved its verdict on petitions seeking a review of its judgment upholding the constitutional validity of the super tax imposed under Sections 4B and 4C of the Income Tax Ordinance, 2001.

A three-judge bench, headed by Chief Justice Aminuddin Khan, on Monday reserved its judgment after hearing arguments of taxpayers, the federation, and the Federal Board of Revenue (FBR) counsels.

The FCC, through its 244-page detailed judgment, upheld the Super Tax under Sections 4b and 4c of the Income Tax Ordinance (ITO), 2001, intra vires the Constitution, and declared that the Legislature is competent to pass tax law with retrospective and prospective effects. “Parliament has exclusive authority to determine taxation under Sections 4(b) and 4(c); courts’ role is limited to interpretation,” it added.

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The judgment clarified the limits of judicial review, strengthened parliamentary supremacy, and established a binding precedent for future taxation disputes. It declared that reading down by High Courts is constitutionally invalid, as it rewrites Parliament’s fiscal policy.

During the proceedings, senior counsel RaashidAnwer advanced arguments seeking exclusion of dividend and export income from the scope of super tax. He contended that the judgment contained a fundamental error in its interpretation of the constitutional framework governing taxation.

Anwer argued that, on a proper reading of the Constitution (namely entries 47 and 52 of the Federal Legislative List), super tax could be imposed on income falling under either the normal tax regime or the final tax regime, but not both. In this context, he referred to dividend and export income as income falling under the final tax regime. He placed his reliance on the Supreme Court’s landmark 1997 Judgment in the Elahi Cotton’s petition.

He pointed out that in the judgment under review the court had held that, “In that case, the courtheld expressly that Sections 80C and 80CC, the very antecedents of the FTR now at issue, derived their validity from a combined reading of Entries 47 and 52, and that the charge remained throughout a direct income tax.” He argued that in the Elahi Cotton judgment the opposite had been held - namely that a tax could either be levied on income under entry 47 or on presumptive income (now FTR) but not both, hence a review was warranted.

Other counsels appearing for the taxpayers adopted his submissions on the issue. Arguments were also advanced against the retrospective imposition of super tax.

FaroghNaseem appeared on behalf of banks, while Khalid Javed Khan contended that the judgment had incorrectly treated super tax as a windfall tax. Senior counsel Abid Hussain Shaban and Sardar Ahmad Jamal Sukhera also appeared in the proceedings.

Appearing for the tax department, Asma Hamid opposed the review petitions and argued that each petition seeks a rehearing of the super tax appeals decided by the FCC through detailed judgment on 27-01-2026. She stated that none identifies an error that can be seen without argument. Each repeated what was argued over 17 days in January 2026 answered in detailed reasons: the Entry 52 “in lieu” arguments recorded at para 31 and rejected at para 87, while the imputation argument decided at para 85 and 91 of the detailed judgment.

She submitted that the FCC in a judgment tilted Commissioner Inland Revenue vs Muhammad dismissed the department’s review petitions on the test; review is “limited and exceptional”; “neither an extension of appellate jurisdiction nor a mechanism for securing a fresh determination of questions already adjudicated”; It “cannot be exercised merely because another interpretation of the relevant constitutional or statutory provision is conceivable.”

Copyright Business Recorder, 2026