Islamabad High Court upholds super tax as independent levy under Section 4C

The Islamabad High Court has ruled that the super tax under Section 4C of the Income Tax Ordinance 2001 is a separate levy and cannot be reduced through adjustment of withholding taxes.

According to a news report, a division bench comprising Justice Muhammad Azam Khan and Justice Raja Inaam Ameen Minhas dismissed petitions filed by CM Pak Ltd, which had challenged tax recovery notices issued for the tax year 2023.

The petitioner argued that taxes already deducted at source should be credited against its super tax liability. It maintained that denial of such adjustment resulted in excessive taxation and was inconsistent with the structure of tax laws.

Counsel for the company submitted that withholding taxes form part of the overall tax liability and should be considered when determining obligations under additional levies such as the super tax. The petition also questioned the authority of tax officials to issue demands without allowing such adjustments.

Opposing the plea, Federal Board of Revenue counsel argued that the super tax is distinct from the standard income tax framework. He stated that it is an independent charge on income and cannot be adjusted using mechanisms applicable to other taxes.

In its detailed judgment, the court held that Section 4C operates as a separate charging provision within the law. It observed that the legislation establishes multiple taxation mechanisms that function independently, even if they apply to the same income.

The bench noted that the wording of Section 4C, particularly the phrase “a super tax shall be imposed,” indicates clear legislative intent to create a new and independent levy rather than extend existing income tax provisions.

The court also referred to a prior ruling of the Federal Constitutional Court, which had upheld the legal validity of the super tax and recognised it as a standalone charge. It held that this interpretation is binding and does not allow for further challenge on the same grounds.