ISLAMABAD: The Supreme Court was told that the super tax under Section 4C of the Income Tax Ordinance could only be imposed on a person’s income under the Normal Tax Regime, or on a person’s earning capacity as determined under the Final Tax Regime – but not both.
A five-judge larger Constitutional Bench of the Supreme Court, headed by Justice Amin-ud-Din Khan, on Wednesday heard the appeals of the Federal Board of Revenue and the industries against the judgments of the Sindh, Lahore, and Islamabad High Courts regarding the levy of Super Tax under Section 4C.
At the onset of the proceedings, senior advocate Rashid Anwer, appearing on behalf of the taxpayers, argued by tracing the history of the Presumptive/Final Tax Regime. He explained that under the Income Tax Ordinance, there is a Final Tax Regime and a Normal Tax Regime (there is also a Minimum Tax Regime, which, for the present arguments, was not relevant).
He further said that under the Fourth Schedule to the Constitution of Pakistan, 1973, taxes can be imposed either on income (under Entry 47 of the Fourth Schedule to the Constitution) or on earning capacity (under Entry 52 of the Fourth Schedule to the Constitution), but not both, adding the reason for the same is that Entry 52 expressly bars taxes to be imposed under both Entry 52 and Entry 47.
The taxpayers’ counsel submitted that in the Elahi Cotton case, the Supreme Court has held that taxes imposed under the Final Tax Regime are taxes on the earning capacity of a person. He said; “Therefore, the Super Tax under Section 4C could only be imposed on a person’s income under the Normal Tax Regime, or, in the alternate, on a person’s earning capacity as determined under the Final Tax Regime – but not both.”
He reminded the Court that during the proceedings on Section 4B, the Additional Attorney General had conceded that the Super Tax, imposed under Section 4B (an older Super Tax, which is similarly worded to the newer Super Tax under Section 4C), was a tax on income under Entry 47 of the Fourth Schedule to the Constitution.
Earlier, he stated that the Super Tax was introduced in 2022 and imposed on individuals and companies earning an income upwards of Rs150 million. He further said that under this provision, tax was imposed on a person’s income (which comprised of profit on debt, dividend, capital gains, taxable income, imputed income and so on).
Anwer, while concluding his arguments stated that due to enhanced taxes on individuals and companies in Pakistan many of whom have left, or have been looking to invest overseas.
The hearing was adjourned till Thursday (Sept 18).
Copyright Business Recorder, 2025
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