Sections 4b and 4c of ITO 2001: FCC issues detailed judgement on Super Tax

ISLAMABAD: The Federal Constitutional Court (FCC) on Wednesday issued a detailed judgment on Super Tax levied under Sections 4b and 4c of the Income Tax Ordinance (ITO), 2001. A three-judge FCC bench, headed by Chief Justice Amin-ud-Din Khan and comprising Justice Syed Hasan Azhar Rizvi and Justice Arshad Hussain Shah, had passed a short order on January 27, 2026. Justice Hasan concurred with the chief justice’s judgment but wrote a separate 49-page additional note. The judgment clarified the limits of judicial review, strengthened parliamentary supremacy, and established a binding precedent for future taxation disputes. It declared that reading down by the High Courts is constitutionally invalid, as it rewrites Parliament’s fiscal policy. The Commissioners of Inland Revenue, Lahore, Karachi, Peshawar, and Islamabad had challenged the judgments of Sindh, Lahore, and Islamabad High Courts regarding the levy of Sections 4b & 4c (Super Tax), inserted in ITO, 2001 through Finance Act 2022-23. A total of 1993 cases were filed against Section 4C, while 284 petitions/appeals were submitted before the FCC. The Court set aside the High Courts’ judgments striking down or reading down Section 4C. It held that courts cannot re-determine tax slabs, rates, thresholds, or fiscal policy, and that the High Courts committed judicial overreach, violating the doctrine of separation of powers. All appeals filed by the Secretary, FBR, and Commissioner of Inland Revenue were confirmed as maintainable. It rejected the appeals filed by taxpayers against the judgments of the High Courts relating to Section 4b. It held that Section 4b would be applicable from 2015 and Section 4c from 2022 when they were respectively enacted. The FCC declared that Section 4(c) does not amount to double taxation, and there is no retrospectivity or past and closed transactions. The Court further stated that equity, fairness, or rationality of tax does not provide grounds for judicial interference. Super taxes are valid, with specific exclusions for Benevolent/Provident Funds. The Court said in order to seek exemption under 4C, the Benevolent/Provident Funds have to present the exemption certificates to the Commissioners. The Federation of Pakistan and the FBR were led before the Federal Constitutional Court by Asma Hamid, ASC, who appeared as principal counsel along with senior counsels Raza Rabbani, Syed Ashtar Ausaf Ali and Dr. Shahnawaz Memon in the Super Tax matters who argued the constitutional defence of both provisions. The taxpayers were represented by several eminent counsels including Makhdoom Ali Khan, Khalid Javed Khan, Dr. Firogh Naseem, Rashid Anwar, Salman Akram Raja, Shahzad Elahi and Mehmood Mirza. Copyright Business Recorder, 2026

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