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ISLAMABAD: Makhdoom Ali Khan submitted that various judgments of the Supreme Court have restricted the word “fee” used in Section 2(63) of the Income Tax Ordinance in light of Entry 59 of Fourth Schedule of the Constitution.

Yesterday (Thursday), Justice Amin had questioned whether the definition of “tax” in clause 63 of Section 2 of Income Tax Ordinance, 2001, conflict with the definition of “tax” given in Article 260? He noted that the definition of “tax” in Article 260 of the Constitution says; “tax on income” includes a tax in the nature of an excess profits tax or a business profits tax, while in Section 2(63) “tax” means any tax imposed under Chapter II, and includes any penalty, fee or other charge or any sum or amount leviable or payable under this Ordinance.

A five-judge of the Constitutional Bench of the Supreme Court, headed by Justice Aminuddin Khan on Friday heard the appeals of 354 taxpayers against Section 4B, which was inserted in the Income Tax Ordinance, 2001.

Sections 4B and 4C of Income Tax law: IHC, LHC ordered to transfer pending ICAs to SC

Makhdoom, representing a number of taxpayers from Karachi, through a video link from Karachi Registry, argued that no authority to read fee and penalty into tax because it is beyond the scope of Article 73 of the constitution. The fee is for specific class and for special purpose.

He said there are number of judgments which say that the courts will make every effort to save the statute, which is in consonance with the constitution.

He said the Court has to see whether this levy has come through money bill or through some other legislation, adding the basic question before the court is whether this levy could be included in the money bill? The tax is imposed with clearer language.

The levy was imposed for specific purpose i.e. for the rehabilitation of temporary displaced person of erstwhile Federally Administered Tribal Areas (FATA), therefore it is not tax, but if it is tax then it should have gone through both the Houses of the Parliament.

Makhdoom argued that the apex court judgments in the cases of Income Support Levy and Workers Welfare Fund (WWF) clearly apply to the impugned judgment [Sindh High Court]. However, the reliance of the impugned judgment was on Shahbaz Garment judgment, which was reversed by the Supreme Court in the WWF, and now it is law of the land.

Upon that, Justice Muhammad Ali Mazhar told the counsel that review petitions have been filed against the SC judgment in Income Support Levy, and they are pending before the apex court, therefore it was not appropriate to discuss it [Income Support Levy judgment].

Makhdoom responded that even if an appeal or review against a judgment is pending it does not dilute the principle of law laid down, unless it is overturned in the appeal/review. He said the stay granted operates between the parties, but does not apply to the principle of law.

The taxpayers counsel argued that the levy is double taxation; therefore, it is unconstitutional, adding the constitution does not bar double taxation explicitly but bars implicitly. In Section 4B and 4C there is no deeming clause and the legislative fiction. The legislature imposed tax on income, which is already taxed.

He stated that super-tax was allowed in Income Tax Act, 1922, which was saved in Constitutions of 1956, 1962 and 1973, but the Income Tax Ordinance, 1979 and ITO, 2001, took different view, and it ceased to be law.

The case was adjourned until April 7.

Copyright Business Recorder, 2025

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