Matters related to ITO Section 4-C: Federation, FBR have filed several ICAs before IHC, FCC told

ISLAMABAD: The Federal Constitutional Court (FCC) was told on Friday that the federation and the Federal Board of Revenue (FBR), aggrieved by a series of judgments passed by the Islamabad High Court (IHC) concerning matters related to Section 4-C of the Income Tax Ordinance, 2001, had filed several intra-court appeals before the IHC.

A three-judge bench of the FCC, headed by Chief Justice Amin-ud-Din Khan 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 (ITO), 2001 through Finance Act 2022.

Hafiz Ahsaan Ahmad Khokhar, representing the Secretary Revenue Division, informed the bench that the preliminary objections raised by the taxpayer-respondents regarding the alleged non-maintainability of the petitions were wholly misconceived, legally untenable, and contrary to the constitutional and statutory framework.

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He said these appeals were subsequently transferred, under Article 186A of the Constitution to the constitutional jurisdiction of the Supreme Court and are presently pending before the FCC for final adjudication due to 27th Constitutional Amendment.

During the proceedings, Khokhar, providing further clarification on the constitutional framework, emphasised that Article 99 of the Constitution explicitly governs the conduct of executive business within the federation.

He pointed out that the article mandates that such business must be transacted in strict adherence to the Rules of Business, 1973, underscoring the importance of procedural compliance in the functioning of the executive branch.

The counsel for Secretary Revenue Division argued that under Rule 14A read with Entry 35 of Schedule II of the Rules of Business, 1973, the Revenue Division and FBR are exclusively entrusted with matters pertaining to taxation, fiscal policy, administration of tax laws, and the protection of federal revenue.

Consequently, the institution, prosecution, and defence of revenue litigation fall squarely within the constitutional domain of the Revenue Division and constitute acts of the federation carried out through a constitutionally designated Division.

He further said that in light of the amendments made to the Rules of Business, 1973, consultation with the Ministry of Law and Justice or the Office of the Attorney General is no longer mandatory for the institution or defence of revenue matters.

He further clarified that the subject of revenue litigation is explicitly excluded from Entry 21 of Schedule II of the Rules of Business. This exclusion, he argued, grants the Revenue Division and the FBR full autonomy in handling fiscal and taxation matters. As such, the FBR is not required to seek prior approval or consultation for such litigation, thereby affirming its independent authority in these matters.

He emphasized that once a subject is allocated to a Division under the Allocation of Business, Rules 3 and 4 of the Rules of Business, 1973, fully empower that Division to take all necessary executive actions to give effect to the law governing that subject, including the initiation, prosecution, and defence of legal proceedings. Any insistence on mandatory consultation, he argued, would defeat the very object of the amendments and undermine the efficiency of fiscal governance.

Khokhar further submitted that the FBR, being an attached department of the Revenue Division as per schedule 3 of the Rules of Business, 1973, derives its authority from both the constitutional framework and statutory enactments, including the Federal Board of Revenue Act, 2007, therefore all acts performed by the FBR and its officers in revenue litigation, constitute acts of the federation itself and enjoy a strong presumption of legality.

He maintained that the superior courts have consistently held that where executive authority flows directly from the Constitution and the Rules of Business, objections based on an alleged lack of authorization are devoid of merit unless a clear statutory prohibition is demonstrated.

He stressed that fiscal governance and the protection of public revenue cannot be frustrated by hyper-technical objections, particularly when statutory remedies are pursued in good faith within the constitutional framework.

Khokhar will make his further submissions on Monday.

Earlier, Asma Hamid argued that the taxpayers in their respective high courts have made the relevant Inland Revenue Commissioners party, but when they filed petitions before the IHC, then they also cited federation as respondent.

Justice Amin remarked that the taxpayer lawyers’ main objection is that the federation only can file appeals when the federal legislation is set aside by the High Courts, and not in case of issuance of notices.

Asma responded that all the high courts upheld the vires of Sections 4B and 4C, adding that the Supreme Court bench in its March 2023 leave grant order directed the taxpayers to pay 50 percent amount regarding the Super Tax.

Asma, continuing her arguments, noted that no taxpayer had raised any challenge against the Sindh High Court’s ruling, which had declared Section 4C of the Income Tax Ordinance intra vires and applicable from 2022. She concluded by stating that she would present her final submissions on Monday.

Copyright Business Recorder, 2026