ISLAMABAD: The Federal Constitutional Court (FCC) was told that 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, under the Final Tax Regime – but not both.
The FCC on Monday formally shifted to the Federal Shariat Court building, situated on Constitutional Avenue. FCC Chief Justice Aminuddin Khan along with other judges of the constitutional court inaugurated the new premises. Federal Law Minister Azam Nazeer Tarar and Attorney General Mansoor Usman Awan also attended the inauguration ceremony.
After the inauguration, three benches resumed hearing of cases at the FSC building.
A three-member bench, headed by the Chief Justice Amin, heard the FBR appeals against the judgments of Sindh, Lahore and Islamabad High Courts regarding levy of Super Tax under Section 4C, inserted in the Income Tax Ordinance, 2001 through Finance Act 2015.
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Raashid Anwer, representing the taxpayers, argued that the Super Tax (under Section 4C) was introduced in 2022 and imposed on individuals and companies earning an income upwards of Rs 150 million, adding a tax was imposed on a person’s income (which comprised of profit on debt, dividend, capital gains, taxable income, imputed income and so on).
At the outset, Anwer began his arguments 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.
He submitted that under the Fourth Schedule to the 1973 Constitution 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. The reason for the same is that Entry 52 expressly bars taxes to be imposed under both Entry 52 and Entry 47.
Anwer contended that the Supreme Court in its landmark judgment, Elahi Cotton, held that taxes imposed under the Final Tax Regime are taxes on the earning capacity of a person. He stated, 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.
Anwer, appearing on behalf of the Oil and Gas Exploration Sector, argued that pursuant to the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948, the day a Petroleum Concession Agreement is entered into between the federal government and the oil company, the prevailing law on taxation at the time is “frozen” as of the date of the agreement. The normal provision agreed to is usually that the income tax on a petroleum company will not be less than 50 percent and will not be more than 55 percent of its profits.
Anwer contended that the Islamabad High Court had rightly held that on those oil companies for whom the imposition of Super Tax would result in income tax being more than 55 percent, the imposition of Super Tax (to the extent it results in income tax being more than 55 percent) would be unlawful.
He argued that though the imposition and collection of Super Tax in the short term would benefit the Revenue Department, in the long term, the matter would go to foreign arbitration, which would almost definitely result in an adverse decision against the federal government. This would result in far greater cost than any short-term gain at present, reminding the Court of what had happened in the RekoDiq case.
Anwer apprised that his clients complained that out of every Rs100 earned by their companies, Rs29 was deducted as corporate income tax, Rs 7 under the heads of Workers Welfare Fund and Workers Profit Participation Fund. Thereafter a further Rs15 was deducted when a dividend was paid to shareholders. Thereafter a super tax of Rs10 was being further charged. Therefore, in effect Rs 61 was being taken away by the exchequer. Under these circumstances more and more businesses were relocating abroad to the detriment of the national economy. Anwer has concluded his arguments. The case is adjourned until Tuesday (today).
Copyright Business Recorder, 2026