A.   Background (BG)

1.   This refers to the related Important TLQCs in trail, blue, italic and double line (a) 3101 of 30.4.25 about Super Tax u/s 4B Tax OR Fee – SCP 15.4.25 update & next update shortly (b) 3085 of 16.4.25 about Super Tax u/s 4B Major Constitutional issues raised in SCP 15.4.25 hearing (c) 2247 of 2.3.23 about Comparison of Super Tax SCP Interim orders & Way Forward 

2.   We also refer to several Other TLQC including (a) 3100 of 30.4.25 about Super Tax u/s 4C applicable from TY 2022 (b) 3099 of 30.4.25 about Phased Super Tax exit for growth - OICCI  (c) 2203 of 9.2.23 about Super Tax SCP Interim order @50% payment about LHC Interim orders & Way Forward 

B.   Updated Commentary

1.     Further to matters in BG and considering ITO provisions and Section 4B: SC urged to harmonise definition of ‘income’ (Attachment 3104.1) we would inform you the Important matter in the ensuing paragraphs, with bold for quick reading.

2.   The Supreme Court asked to harmonise the definition of income given in various provisions of ITO and the Section 4B.

3.   Lawyer Makhdoom Ali Khan argued that the super tax was imposed on the banks, companies and industries whose income was more than Rs 500 million. He questioned that if a company does not have this much income then how this levy could be imposed.

4.   A five-member CB, headed by Justice Aminuddin Khan, and comprising Justice Jamal Khan Mandokhail, Justice Muhammad Ali Mazhar, Justice Syed Hasan Azhar Rizvi, and Justice Shahid Bilal Hassan on Tuesday heard 354 petitions filed against Section 4B and 182 against the Section 4C of ITO, 2001.

5.   Makhdoom Ali Khan, representing a number of taxpayers, concluded his arguments against the judgment of the SHC on Section 4B of the ITO, 2001. The lawyers appearing on behalf of other taxpayers adopted his arguments.

6.   Makhdoom said the levy has been imposed in a discriminatory manner without any adherence to the provisions of Article 25 of the constitution. Tax cannot be imposed, more than once, on the income of an assessee under the guise of Entry 47 of 4th Schedule of the constitution.

7.   Justice Aminuddin observed that the super tax is levied on the income and not the losses.

8.   Makhdoom argued that the government cannot impose the super tax on the final income of a company which has already been taxed. He submitted if I (petitioner) am not allowed liability, depreciation, amortisation and brought forward allowance in the annual income then the result of it will be that grossly it may be deemed income but in fact the individual will be facing losses.

9.   Justice Amin remarked that calculation of tax is on the basis of the formula given in Section 4B of the ITO.

10.   Makhdoom said generally the income of a person is his total gain minus the total expenditure. He said that if the Court came to the conclusion that the super tax was imposed for the social welfare of a class then the government would have to inform how much money collected under Section 4B. He said that the tax is imposed on a certain number of persons, adding the purpose in the law has been identified but it was not informed that whether objective has been achieved or not? The tax on social welfare can be imposed by the provinces and not the federal government. If the tax is oppressive and inequitable then it is against Articles 4 and 9 of the Constitution, Makhdoom argued.

11.   Advocate Waqar Rana, who also represented a number of taxpayers, contended whether the notification of speaker National Assembly is not justified. He then apprised that he fully adopts the arguments of Makhdoom Ali Khan.

12.   Imtiaz Siddiqui, also a taxpayers’ lawyer, has challenged the LHC on Section 4B. He asked the bench to direct the federal government to submit a statement on how much funds collected in terms of super tax and how much money was spent on the social welfare of FATA temporary displaced persons.

C.   Next Hearing

As per reliable resources an Tax payer Representatives, who which to speak have agreed and now hearing will be on Monday 5.5.24 when Department Representative will confuse the cases

D.   Further Details & Services 

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Advisory, Statement or Return Filing or Review services, or related accounting matters like the above, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com. Your Goodself may continue to get other services from your current Tax & Legal Advisors.