FCC restores super on corporate income

ISLAMABAD: The Federal Constitutional Court (FCC) on Thursday upheld the legality of a controversial “super tax”, overturning a previous Islamabad High Court ruling that had struck down its application, in a detailed 293-page judgment.

Chief Justice Aminuddin Khan issued the ruling, which declared that the super tax imposed under Section 4C of the Income Tax Ordinance 2001 is constitutional and valid.

The court said that the levy should be treated as a separate tax regime distinct from regular income tax, and confirmed that it applies to tax years 2022 onwards.

It set aside the IHC’s decision against Section 4C, ruling that parliament has full authority to impose taxes on income under the ordinance.

The court also held that the high court had exceeded its jurisdiction by directing the Federal Board of Revenue (FBR) to issue circulars regarding the tax.

According to the judgment, the super tax is an additional levy on top of income tax and not a substitute for it, and applies to incomes falling under a separate tax regime, including capital gains.

It further said the tax would apply to the petroleum and exploration sectors within the limits of relevant laws and contractual obligations.

The court ruled that welfare and pension funds would be required to obtain certification to qualify for exemptions, while retrospective taxation through legislation was legally permissible.

It added that imposing higher tax rates on specific sectors did not constitute discrimination but fell within the legislative domain.

However, the court clarified that any income exempt from taxation under the law would also remain exempt from super tax, including gains from property or share sales where exemptions apply.

It further stated that inheritance-based income, agricultural land transactions and income after specified holding periods would also be exempt from the levy.