Hafiz Ahsaan Ahmad Khokhar, Advocate Supreme Court and also renowned tax experts explained that through Finance Act 2022-2023 the Parliament has introduced Section 4C in the Income Tax Ordinance 2001 with titled Super tax on high earning persons defined Division IIB of Part I of the First Schedule with effect from retrospectively 2022 tax assessment year, and the government at the time of passing the budget had hoped to collect Rs215 billion to Rs247 billion via such super taxes.
According the tax experts that as per language of Section 4C of the Ordinance, a Super tax shall be imposed for the tax year 2022 and onwards at the rates specified in Division IIB of Part I of the First Schedule, on the income of every person where income exceeds Rs 150 millions. According to senior tax advocate that for tax year 2022 the rate of super tax under this section will be 10 per cent instead of four per cent, where the income of the persons engaged, partly or wholly, in the business of airlines, automobiles, beverages, cement, chemicals, cigarette and tobacco, fertilizer, iron and steel, LNG terminal, oil. The tax lawyer said that for tax year 2023, this super tax on income of banking companies will be 10 per cent if the income for the year exceeds Rs300 million.
According to tax experts, it is a very high rate of income tax or company tax paid by those with a very high level of income or profit to help make up the deficit in the public spending budget or to allocate the amount in government efforts for poverty alleviation in the country. He explained that Super tax is levied upon a certain class of taxpayers in the rates between 1% to 10% on income groups who earn at least Rs 150 million and that kind of tax was first introduced through insertion of section 4B of the Income Tax Ordinance (ITO) of 2001 for the rehabilitation of displaced persons was introduced through the Finance Act of 2015.
The tax expert said that many taxpayers challenged the imposing of super tax with retrospective effect for tax year 2022 and on wards before High Court and the Lahore High Court directed the Federal Board of Revenue (FBR) through interim orders to allow different industries to file their returns excluding the super tax under section 4C of the Income Tax Ordinance 2001 subject to deposit of post dated cheques of the differential amount, the cheques shall be encashed on the direction of the court or subject to final decision of the case.
According to Hafiz Ahsaan Ahmad Khokhar that FBR challenged the said impugned interim order of Lahore High Court before the Supreme Court of Pakistan and while hearing the case the Supreme Court directed the taxpayers/respondents to pay 50%of their due liability covered under amended Section 4C of the Income Tax Ordinance 2001 to tax department within 7 days from the date of Supreme Court orders.
Hafiz Ahsaan Ahmad Khokhar said that the Sindh High Court has as well issued order over the taxpayers grievances agitated to challenge the vires of Section 4C of the Income Tax Ordinance 2001 and struck down up to 10% super tax to the first proviso to Division IIB of Part I of the First Schedule to the Income Tax Ordinance 2001 and declared to be discriminatory, thus ultra vires to the Constitution.
According to the tax experts Hafiz Ahsaan Ahmad Khokhar that here is no cavil with the legal principle that a charging provision in a fiscal statute is to be given a strict interpretation and if a case does not fall within the purview thereof, tax cannot be charged from a person from whom it is being claimed. However, according to tax experts there is no doubt that the legislature has the power to make a law retrospective and this includes a power to give retrospective effect to a taxing statute, and in this particular case the legislatures has given their retrospective effect words through the Finance Act 2022-2023 and stated that the amended Section 4C of Income Tax Ordinance 2001 read with Division IIB of Part I of the First Schedule of Ordinance would apply from the assessment year 2022 and onwards which means to apply as retrospectively, and there are many judgments of Supreme Court ratifying such taxing legislation with retrospective effect and upholding the legislation on different occasions.
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