ISLAMABAD: The Supreme Court has directed the individuals and companies earning more than Rs500 million to deposit 50 percent of the outstanding amount of Super Tax, levied for rehabilitation of temporarily displaced persons.
The PML-N government had introduced Super Tax on rich individuals, association of persons and companies earning income above Rs500 million in tax year 2015 at the rate of four percent of income of banking companies, and three percent on other categories for rehabilitation of temporarily displaced persons through Finance Bill (2015-16).
The Court said if the appellants deposit 50 percent of the outstanding tax amount, then the authorities shall not take coercive action against them.
The bench granted leave to appeals, and said the points raised in the appeals need consideration.
Justice Umar Ata Bandial, heading a three-judge bench, asked the appellants' lawyers that it is time we all should contribute as the displaced persons are suffering.
Around 297 petitioners have challenged the provisions of Section 4B of the Income Tax Ordinance, 2011 regarding levy of Super Tax.
Makhdoom Ali Khan, representing Be Energy Ltd and others, while arguing the case, raised questions of law of first impression and general public importance.
He questioned whether super tax imposed under Section 4B of the Income Tax Ordinance, 2001 for the specified purpose of "rehabilitation of temporarily displaced persons" is ultra vires the Constitution in view of the test for validity of tax laid down by the Lahore High Court in Azgard Nine Limited v Pakistan; 2013 PTD, and confirmed by the Supreme Court in Workers Welfare Fund v East Pakistan Chrome Tannery; PLD 2017 SC 28 at 45 (para.14), wherein it was held that the distinguishing feature of a tax is that it imposes a "common burden" for raising revenue for a general as opposed to a "specified and restricted purpose?"
He further questioned; whether Super Tax not being a taxation measure in view of the criteria spelt out by the apex court could have been levied through a Money Bill? Whether the revenue is kept in the Federal Consolidated Fund or a special fund is not determinative of the measure being a tax as held by the Court in Federation of Pakistan v Durrani Ceramics; 2014 SCMR 1630, and Khurshid Soap & Chemicals Limited v Federation of Pakistan at p45 (para.38)?
Whether in the absence of clear language the levy of super tax on income, which has already been subject to income tax is constitutionally impermissible double taxation? Whether super tax does not fall under either Entry 47, 48 or 52 of the Fourth Schedule to the Constitution?
Faisal Rafique Malik, who filed appeal on behalf of Mr DRE (Pvt) Ltd, submitted that the Super Tax was initially levied for the Tax Year 2015, however, through Finance Act, 2017 it was also made applicable for Tax Year 2017.
It was meant for specific purpose, ie, rehabilitation of temporarily displaced persons.
The super tax was not meant for the general revenue and therefore is not a common burden and does not fall within the definition of tax and therefore can't be levied through a money bill.
The Super Tax as levied does not fall within the definition of common burden as it has not been levied across the board, but has been on specific persons.
In order for levy of super tax to qualify to be a tax, two basic conditions are to be collaterally met; first the levy is to be compulsory exaction and secondly, the purpose of the levy should not be specific but a contribution to the general revenue.
He submitted that Entry 47 of the 4th Schedule of Constitution allows the federal government to impose taxes on income other than agriculture income.
Income tax is a levy, the proceeding whereof are meant to go into the general revenue, however, Super Tax is a levy for a particular and specific purpose.
But income tax by its very nature is not meant for any particular purpose but rather it is meant for the contribution into the general revenue, ie, being part of the common burden. Therefore, in no rational sense or in pith and substance the impugned levy can be justified to fall within the parameters of Entry 47 of 4th Schedule of the Constitution.
He stated, if the impugned levy is a fee, it could not have been imposed through a money bill. Therefore, the impugned levy is beyond the competence of the federal legislature, which is mala fide, without jurisdiction, void ab-initio and of no legal effect.
He stated that the Super Tax is not a tax; therefore it cannot be levied through a Money Bill under Article 73 of Constitution. The case is adjourned until next week.
Copyright Business Recorder, 2020
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