Despite notification, the court still operates from the IHC; FCC takes up super tax case tomorrow
President Asif Ali Zardari administers the oath of office to Justice Aminuddin Khan as Chief Justice of the Federal Constitutional Court during a ceremony at Aiwan-i-Sadr on Friday. Photo: APP
ISLAMABAD:
The Federal Constitutional Court (FCC) – formed under the 27th Constitutional Amendment – commenced the proceedings on November 18 from its temporary premises – the Islamabad High Court (IHC).
Despite the passage of more than 40 days, the court has not moved to new premises.
A December 11 announcement stated that the FCC would be housed in the Federal Shariat Court (FSC) building, while the FSC would operate from the IHC.
The FSC has been moved to the IHC, but the FCC has not yet started its work at the notified site.
It is learned that renovation work is currently underway in the FSC building. At least one more week is required before the FCC can begin its work in the new premises.
The FCC will also continue its work on the IHC next week.
The source said the FCC is facing several logistical problems, including an acute shortage of staff. The Supreme Court approved the transfer of only 20 officials to the FCC’s function.
Even 40 judicial officers have been transferred to FCC from Punjab judiciary. Some retired Supreme Court officers have also been admitted to the Constitutional Court.
Out of 56,608 cases, 22,910 have been transferred to the FCC from the Supreme Court.
Some experts believe that in order to deal with the more than 22,000 cases transferred to the court, a large number of officials should also have moved to the FCC.
It has also been observed that the filing ratio of cases in the FCC is higher than that of the Supreme Court.
A senior official said the FCC could have easily worked from the Supreme Court premises as three courtrooms could be spared for the FCC in the SC building.
Currently, seven judges serve on the FCC. Despite the huge dependency, there is no indication that new judges will be appointed to the new court.
A senior official said that new judges will be appointed to the FCC shortly after the resolution of logistical issues.
FCC takes up super tax case tomorrow
Meanwhile, a three-member FCC bench headed by Chief Justice Amin-ud-Din Khan will hear the super tax case on Monday.
Before the adoption of the 27th constitutional amendment, almost 50 hearings were conducted by the Supreme Court Constitutional Court on this matter. The case was close to ending when the case was transferred to the FCC. Out of the three judges, two members of the FCC were part of the SC bench that heard the case.
The controversy surrounding Sections 4B and 4C of the Income Tax Ordinance, 2001 constitutes one of the most consequential tax and constitutional disputes in Pakistan’s recent history.
It involves revenue implications running into hundreds of billions of rupees and raises fundamental questions about the taxing power of Parliament, equality before the law and the scope of judicial review in tax matters.
Section 4B was introduced through the Finance Act, 2015, which imposed a “super tax” on high-income earners, particularly banks and other individuals earning income above Rs 500 million.
Hafiz Ahsaan Ahmad Khokhar, counsel for the Federal Board of Revenue (FBR), while giving background on the case, said the levy was originally justified as a temporary fiscal measure aimed at generating funds for the rehabilitation of temporarily displaced persons.
Although introduced for a specific tax year, the super tax under Section 4B was extended through subsequent Finance Acts, giving rise to constitutional challenges in various High Courts.
However, on several occasions, the Lahore High Court (LHC), Sindh High Court (SHC), IHC and Peshawar High Court (PHC) have consistently upheld the validity of Section 4B and affirmed that double taxation is not per se unconstitutional.
They noted that Parliament enjoys wide latitude in tax legislation under Articles 73 and 77 of the Constitution.
Despite the consistent validation of Section 4B by all Supreme Courts, the taxpayers ultimately took the case to the Supreme Court for final adjudication.
The challenge remained pending in the SC for several years, with interim arrangements allowing conditional recovery.
Although no consolidated nationwide figure for Section 4B collections was officially published, audit and tax records showed significant exposure, with sample audit observations only reflecting non-collection of super tax, illustrating the significant fiscal efforts involved.
While the challenge to Section 4B was already pending in the SC, Parliament passed Section 4C through the Finance Bill 2022, which significantly expanded the scope and scope of the super tax scheme.
Section 4C imposed an additional tax on individuals and companies earning income above Rs 150 million, with progressively higher rates applied to designated sectors identified as having windfall profits.
For certain sectors – including banking, oil and gas, fertilizers, cement, sugar, iron and steel, LNG terminals, textiles, automobiles, beverages, chemicals, airlines and cigarettes – the super tax rate reached 10%, significantly increasing the effective tax burden on banks and large corporations.
The fiscal size of Section 4C was unprecedented. The FBR officially expected the levy to generate approximately Rs 250 billion. in additional income for the tax year 2022-23 alone.
Budget documents and concurrent reporting further indicated that the government expected between Rs215 billion and Rs247 billion specifically from the super tax regime, including an estimated Rs180 billion from corporate entities and about Rs87 billion from public and state-owned enterprises.
