ISLAMABAD: A five-member constitutional bench of the Supreme Court, headed by Justice Aminuddin Khan, resumed hearings on multiple petitions challenging the legality and constitutional basis of the super tax imposed on high-income entities and funds.
The bench questioned the legal framework and practical implementation of the tax, particularly its application to provident funds.
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Justice Muhammad Ali Mazhar remarked that provident funds are not personal assets but are held in trust, adding, “The fund is not someone’s personal property; it is held by trust authorities and then disbursed.” He referred to Section 53 of the Income Tax Ordinance, which deals with tax exemptions, noting its relevance to the case.
Justice Hassan Azhar Rizvi raised concerns about long-term implications for beneficiaries, citing an example, “If 100 rupees are taxed today, in 25 years that amount could compound to 550 rupees. This means the retirement benefits will shrink substantially.” He also questioned the basis of imposing a super tax when income tax itself may not be applicable.
The Federal Board of Revenue’s (FBR) lawyer Asma Hamid argued that the legislature had granted specific exemptions from super tax to provident fund holders. She pointed out that the Second Schedule of the tax law provides exemptions from all forms of tax, including super tax, on such funds.
Hamid further noted that taxpayers are interpreting the Islamabad High Court’s (IHC) decision alongside Section 4C, leading them to believe they are not liable for super tax. She clarified that while income beyond a certain cap is taxed, the exemption doesn’t mean the tax vanishes entirely.
Justice Jamal Khan Mandokhail, addressing the Additional Attorney General, remarked, “This (the Second Schedule) is showing you the way,” suggesting a clear legal basis for exemptions.
The bench also expressed concern about the method of advance super tax collection. Justice Muhammad Ali Mazhar asked, “How can super tax be paid in advance?” and questioned how it would be calculated if annual profits are not yet finalized.
Hamid responded that the advance tax could be calculated based on previous financial year profits, but the bench remained skeptical about the legality and fairness of this approach.
Following a short break in the hearing, FBR’s legal counsel Hafiz Ehsan began presenting his arguments. He said, “I will assist on the legal and constitutional points related to super tax and adopt all remaining arguments made by Asma Hamid.”
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Justice Mazhar urged the FBR lawyer to focus on his own legal points, to which Ehsan responded he would only need ten more minutes to wrap up.
However, due to the unavailability of one of the judges later in the day, Justice Aminuddin Khan announced that the hearing was adjourned until tomorrow.