Lawyer submits before FCC: Super tax falls under parliament’s exclusive taxing authority

ISLAMABAD: The counsel of Secretary Revenue Division argued that Section 4-C of the Income Tax Ordinance (ITO) falls squarely within Parliament’s exclusive taxing authority under Article 77 read with Entry 47 of the Federal Legislative List. A three-judge bench of the Federal Constitutional Court, headed by Chief Justice Amin-ud-Din Khan on Monday heard the FBR appeals against the judgments of Sindh, Lahore and Islamabad High Courts regarding levy of Section 4C (Super Tax), inserted in the Income Tax Ordinance (ITO), 2001 through Finance Act 2022-23. The FBR counsels – Asma Hamid and Hafiz Ahsaan Ahmed Khokhar – and Additional Attorney General for Pakistan Aamir Rehman have completed their arguments. It is expected that the bench after hearing the arguments of the lawyer of the taxpayers from Karachi may reserve judgment today (27th January). At the conclusion of proceedings, Advocate Saad Hashmi submitted before the bench that Makhdoom Ali Khan also likes to make submissions, and requested the Court to grant him sometime to rebut the contentions of the department’s lawyers. Justice Amin said they have already heard Makhdom, and asked Hashmi to tell Makhdoom to file a written submission. When Hashmi insisted, the bench then agreed to give 15 minutes to Makhdom to make oral submission on Tuesday. Hafiz Ahsaan Ahmad Khokhar, appearing on behalf of the Secretary Revenue Division, Federation of Pakistan, and the Federal Board of Revenue (FBR), presented comprehensive constitutional arguments regarding the imposition of Section 4-C. He submissions in T.C. No. 1031/2025 along with 225 connected matters, including 71 intra-court appeals, all transferred to the Constitutional Bench under Article 186-A of the Constitution, and now being heard following the Twenty-Seventh Constitutional Amendment. Khokhar maintained that Super Tax is a tax on income, not a fee or cess, and therefore fully within legislative competence. He argued that multiple fiscal levies on the same subject are constitutionally permissible where each is enacted under valid statutory authority. He submitted that Super Tax is expressly included within the definition of ‘tax’, making it an additional charge on high-income earners, akin to surcharge or advance tax, and not a parallel or independent impost. Khokhar opposed taxpayers’ objections on the maintainability of the appeals, saying under Article 99 of the Constitution and the Rules of Business, 1973, taxation and fiscal litigation fall within the exclusive domain of the Revenue Division and FBR, and revenue litigation is expressly excluded from mandatory consultation with the Ministry of Law and Justice or the Attorney General’s Office. Acts by Commissioners Inland Revenue, he added, are acts of the Federation itself, enjoying a strong presumption of legality. He further submitted that the federation and the FBR lawfully filed appeals against the Islamabad High Court judgments on Super Tax (4C), raising substantial constitutional and fiscal questions. Justice Syed Hasan Azhar Rizvi questioned whether any power was delegated to Commissioner-Inland Revenue to filed petition before the High Court and the Supreme Court? The lawyer argued that by Article 186-A and the 27th Amendment, the cases were automatically transferred to the Federal Constitutional Court, requiring no fresh authorization. He submitted that under Rule 14-A read with Entry 35 of Schedule II of the Rules of Business, 1973, the Revenue Division and its attached department, the Federal Board of Revenue, hold exclusive responsibility for the administration, enforcement, and protection of federal taxes and revenues, which necessarily includes the power to initiate, prosecute, defend, and pursue litigation arising from fiscal statutes; without such litigation authority, the statutory allocation itself would be rendered ineffective. Criticiwing the High Courts’ judgments, the counsel submitted that they failed to adhere to the settled principles governing the interpretation of the vires of law. The constitutional test for judicial review of legislation, he argued, is limited to examining: (i) whether Parliament possessed legislative competence, and (ii) whether the enactment transgresses any express constitutional prohibition. Khokhar emphasised that judicial review cannot extend to reassessing the wisdom, necessity, or fairness of fiscal measures. He added that the doctrine of “reading down” is meant only to preserve constitutionality, not to rewrite, reconstruct, or substitute the language of Parliament. By overstepping into fiscal policy— an area constitutionally entrusted to the Legislature and Executive— the High Courts, he contended, transgressed the separation of powers and displaced the will of the people as expressed through their elected representatives. He further stressed that financial enactments occupy a distinct constitutional footing, being the primary instrument through which the State mobilises resources and frames economic policy. Fiscal statutes involve complex economic assessments, distributive choices, and revenue exigencies, requiring judicial restraint and deference to legislative wisdom, as courts are institutionally unsuited to evaluate macroeconomic policy. Rejecting the double taxation argument, he submitted that Section 4-C operates as a distinct charging provision “in addition” to normal income tax under Section 4, imposing an additional fiscal burden rather than re-taxing the same income. He clarified that a “Special Tax Year” refers to self-contained or year-specific fiscal regimes, which do not limit Parliament’s authority to levy Super Tax within the ordinary tax year. Addressing reading down, past and closed transactions, and retrospectivity, the counsel emphasised that the levy of Super Tax under the Finance Act, 2022 was prospective; lawfully applicable to Tax Year 2022, as no vested right accrues until the return filing date under Sections 114 and 120 of the Ordinance. Fiscal statutes, unlike criminal laws, may validly operate retrospectively to meet revenue exigencies. Khokhar, concluding his arguments, asserted that the High Courts’ judgments reflect judicial overreach into fiscal and policy domains, contrary to the principles of separation of powers. He prayed that the judgments be set aside, and that Section 4-C of the ITO, 2001 be upheld as intra vires the Constitution, lawful, and consistent with principles of taxation, distributive justice, and constitutional governance. Copyright Business Recorder, 2026