ISLAMABAD: In a landmark ruling, the Federal Constitutional Court (FCC) on Tuesday upheld the super tax, affirming parliament’s exclusive authority to impose taxes through legislation and restoring Section 4-B of the Income Tax Ordinance (ITO) with retrospective effect from 2015.
The verdict was announced in the long-running super tax case, with the court rejecting objections to the maintainability of the petitions and declaring the levy lawful.
A three-member bench headed by Chief Justice Aminuddin Khan heard the case and ruled that parliament was fully empowered to impose the tax through legislation. The court dismissed challenges raised against the levy and reinstated Section 4-B of the ITO as valid since its introduction.
“The objections raised on the maintainability of the case are rejected,” the court ruled, adding that parliament holds constitutional authority over taxation matters.
In its judgement, the FCC observed that earlier rulings by various high courts declaring the super tax discriminatory were incorrect.
“The decisions of the high courts declaring the super tax discriminatory were not correct,” the order stated, noting that Sections 4-B and 4-C of the Income Tax Ordinance were in accordance with the law.
However, the court clarified that the super tax would not apply to modarabas, mutual funds and benevolent funds. It also allowed room for sector-specific relief, ruling that oil and gas companies could seek individual exemptions from the relevant tax commissioners.
Following the verdict, Revenue Division lawyer Hafiz Ehsan Khokhar said the decision would significantly strengthen the federal government’s finances.
“The federal government is expected to receive around Rs310 billion as a result of this judgement,” he said, adding that the court had reaffirmed parliament’s legislative supremacy.
“The Federal Constitutional Court has acknowledged parliament’s power to legislate, while the high courts exceeded their jurisdiction,” Khokhar added.
Background of the Super Tax
The super tax was first introduced in 2015 to help finance the rehabilitation of people affected by terrorism in Khyber Pakhtunkhwa. At the time, a 5% additional tax was imposed on entities earning annual profits exceeding Rs300 million—a measure upheld by all high courts.
In 2022, the scope of the tax was expanded to include profits above Rs150 million, with rates increased to a maximum of 10%. The move triggered legal challenges from businesses, banks and corporate entities, which argued that the tax amounted to retrospective application and double taxation.
The case has remained under litigation since 2019, initially heard by the Supreme Court. Following the 26th Constitutional Amendment, it was transferred to a constitutional bench and later moved to the Federal Constitutional Court after the 27th Amendment.
The FCC conducted a total of 17 hearings before delivering its final verdict.
