Federation, FBR and CIR party to 650+ connected cases: Maintainability objection ought to be rejected, FCC told
ISLAMABAD: The Federal Constitutional Court (FCC) was informed that in over 650 connected cases wherein federation, Federal Board of Revenue (FBR) and Commissioner Inland Revenue are a party; and all involve a common question of law, therefore the objection as to maintainability of the appeals ought to be rejected on this ground alone.
A three-judge bench of the Federal Constitutional Court, headed by Chief Justice Amin-ud-Din Khan has been hearing the FBR appeals against the judgments of High Courts regarding levy of Super Tax under Section 4C since December, 2025.
The taxpayers’ counsels have raised various objections on maintainability of the appeals including whether the Commissioner-IR is competent to challenge the order passed by the Sindh High Court (SHC) wherein the vires of law is challenged? Is 4C retrospective in operation? If yes, is that constitutionally permissible? Is proviso added to Division IIB to the 1st Schedule of the Income Tax Ordinance, 2001 discriminatory? That the words “additional tax” are missing or a deeming provision is also missing or there is no non-obstante clause is also missing; and that 4C cannot be covered under Entry 47.
Dr Shah Nawaz, who is also representing the FBR, in his reply filed before the FCC contended that in all petitions [under Article 199] before Sindh High Court (SHC) Commissioner-Inland Revenue was a party and writ is sought against him and as such he has the right to challenge it before this court (FCC).
He submitted that an appeal lies against any order/judgment passed under Article 199 before this court under Article 175F, which does not qualify who could file an appeal.
The FBR lawyer also argued that Section 4C of ITO itself empowers the Commissioner-IR to recover tax and all other enabling provisions to recover tax are also empowering the Commissioner-IR to proceed and collect/recover tax; as such, he is empowered to defend any challenge to law.
On the issue of retrospectivity of 4C, Dr Shah Nawaz stated that Section 4C is not retrospective in operation. In fact, income tax is collected at the end of a financial year, and the applicable law is the law in force on the 1st day of new financial year i.e. 1st July. This principle is reiterated in many judgments i.e. Elahi Cotton; Shahnawaz Pvt. Ltd; and Commissioner of Income Tax North Zone, West Pakistan verus Wazirunnisa Begum. He stated that all the three judgments establish that the applicable law is the law as it stands on the 1st day of July; therefore, any other interpretation would be against the settled principles of income taxation.
He submitted that the SHC has treated retrospectivity argument in a different way. The reasoning of the SHC is that since 4B and 4C are of the same specie therefore vested rights are accrued in favour of the taxpayers as 4B is zero rated and in the presence of zero rate, 4C cannot be paid. There is a fundamental error in this observation, he contended.
He further submitted that 4B and 4C are different taxes being charged through separate charging sections. The rates are also different as are described in Division IIA for 4B and Division IIB for 4C in 1st Schedule.
On vested rights, the counsel arguments are that the law developed by several judgments of superior courts is that a right is an interest recognized by a state. A right vests when all prerequisites to achieve a right are exercised. In simple words, if a law says if you do “A” you will get “X”. Now if a person does “A” he has a vested right to get “X”. A vested right transforms into a past and closed transaction when a person having done “A” gets “X”. Now that right transform into a past and closed transaction. In the instant case, nowhere in the entire Ordinance it is said that if 4B is zero rated you won’t be paying 4C.
No attempt was made by the legislature, as is understood by the SHC, to vitiate that vested right and the court had not either struck down any such attempt. It was simply a case of interpretation and resolving anomaly between the main provision and its’ schedule.
Vested rights are created by operation of law. Neither 4B nor any other provision including 4C says that if 4B is zero rated, 4C shall also be zero rated. It is a settled law and a fundamental principle of taxation that the applicable law is the law as it stands on the 1st day of July. In the instant case, 1st day of July 2022. Any other interpretation would be tantamount to doing violence to the express language of the legislature. All taxpayers including those who have challenged vires have paid tax as per the law applicable on 1st day of July.
It is a settled law that hardship is no ground to challenge vires of a law. It is a settled law that Parliament is competent to destroy rights, vested rights and even rights that have transformed into past and closed transactions through an express language or by necessary intendment.
Copyright Business Recorder, 2026