Federal Constitutional Court declares super tax constitutional, Islamabad High Court's decision null and void

Chief Justice of the Federal Constitutional Court Aminuddin Khan has issued a detailed 293-page judgment on super tax, in which the imposition of super tax under Section 4C of the Income Tax Ordinance 2001 has been declared completely constitutional. The court has set aside all the judgments of the Islamabad High Court against Section 4C and clarified that the direction of the Islamabad High Court to issue a circular to the FBR was beyond its jurisdiction.

According to the main points of the judgment, super tax will be considered as a tax independent and separate from the general income tax and its implementation will be applicable for the tax year 2022 and all subsequent years. The court also clarified that Parliament has full power to impose tax on income under the Income Tax Ordinance and it is legally permissible to impose taxes retrospectively through legislation. Imposing super tax at a higher rate on specific sectors is not discrimination but the power of the legislators.

However, some exceptions have been given in the judgment. Income that is not subject to tax under the general law will not be subject to super tax. In the case of tax exemption on the sale of property or shares, super tax will not be applicable. Income from the sale or income from agricultural land, inheritance and income received after a specified period will also be exempt from super tax. Welfare and pension funds will have to get certificates verified for exemption, while super tax will be applicable to petroleum and exploration companies according to specific legal limits and agreements.