PTBA says concerned at move to levy default surcharge on super tax

LAHORE: The Pakistan Tax Bar Association (PTBA) has urged the Chairman of the Federal Board of Revenue (FBR) to instruct field formations to stop charging default surcharge on super tax, in line with the understanding reached between the two sides.

In a letter addressed to FBR Chairman Rashid Mahmood Langrial, PTBA President Sh Ahsan Ul Haq and General Secretary Tahir Mahmood Butt highlighted the potential adverse economic impact of recovery measures initiated following recent judgments of higher courts under Sections 4C and 4B of the Income Tax Ordinance, 2001, along with the imposition of default surcharge by field formations.

“We, in our capacity as a representative body of district tax bars across the country, respectfully draw your attention to the significant legal and practical implications arising from recent judgments delivered by the Federal Constitutional Court and the Islamabad High Court concerning Sections 4C and 4B of the Income Tax Ordinance, 2001,” the letter stated.

The PTBA observed that the Federal Constitutional Court has upheld the constitutional validity of the Super Tax, declaring it intra vires the Constitution. Meanwhile, the Islamabad High Court, in writ petitions No. 1125 and 1126 titled C M Pak Limited, ruled that the liability arising under Section 4C is independent in nature. As such, it does not allow adjustment of withholding tax or refunds under any provision of the Ordinance.

The association pointed out in the letter that, following these judgments, field formations have started issuing notices for the levy of default surcharge under Section 205 of the Ordinance. In cases of non-compliance, proceedings are being finalized under Sections 205 and 137.

“In these circumstances, a serious legal question arises: if the liability under Section 4C has been declared independent and standalone, with no provision for adjustment of withholding taxes or refunds, then on what legal basis are penal and recovery provisions being invoked, while relief provisions are being disregarded?” the letter questioned.

The PTBA argued that such an approach creates an apparent inconsistency in the application of the law. If the liability under Section 4C is treated as wholly independent for denying adjustments and refunds, then the simultaneous application of penal and recovery provisions under Sections 205 and 137 requires clear legal justification and must be enforced in a fair, uniform, and sustainable manner.

Referring to a meeting held at the FBR Headquarters on February 27, 2026, attended by representatives of PTBA, Lahore Tax Bar Association, and Karachi Tax Bar Association, the letter recalled that a consensus had been reached to implement court judgments in a facilitative and amicable manner, particularly regarding refunds and withholding taxes.

However, the subsequent judgment of the Islamabad High Court declaring Super Tax an independent levy, thereby disallowing adjustment of withholding taxes or refunds, came as a shock to stakeholders, the PTBA stated.

The association further observed that while all stakeholders share responsibility, the tax authorities, being in a stronger position, have an undue advantage that may lead to an unfavourable interpretation of statutory provisions. The PTBA representatives requested the FBR chief that, in line with the earlier understanding between the two sides, to direct the field formations to refrain from charging default surcharge, in order to ease the burden on taxpayers and encourage voluntary contribution to the national exchequer.

Copyright Business Recorder, 2026