IHC upholds super tax, dismisses Meezan Bank's petition in Rs11 billion dispute 

The Islamabad High Court (IHC) has dismissed a petition filed by Meezan Bank Limited challenging the constitutional validity of Section 4C of the Income Tax Ordinance 2001, upholding the levy of super tax in a dispute involving approximately Rs11 billion.

According to media reports, a division bench also vacated interim stay orders and dismissed all pending applications, holding that Parliament was constitutionally competent to impose the tax and reaffirming the statutory taxation regime applicable to banking companies.

Meezan Bank, represented by senior counsel Farogh Naseem, had argued that Section 4C was unconstitutional, discriminatory, and amounted to impermissible double taxation, since income already taxed under Section 4 of the ordinance was being taxed again under the super tax provision. 

The bank also challenged the retrospective enhancement of the levy, arguing that income arising from Islamic financing agreements executed before Section 4C was introduced or enhanced could not be taxed under it.

Representing the Federation and the Federal Board of Revenue (FBR), Advocate Hafiz Ehsaan Ahmad Khokhar opposed the petition on grounds of maintainability, arguing that the bank had already pursued the statutory remedy by filing an appeal before the Appellate Tribunal Inland Revenue (ATIR), Karachi, and therefore could not invoke the IHC's constitutional jurisdiction. 

He further contended that the court lacked territorial jurisdiction, as the assessment proceedings had been conducted in Karachi.

The bench sided with the federation's arguments, holding that liability under Section 4C was determined by income accrued during the relevant tax year, not the date on which financing contracts were executed. 

It ruled that the Seventh Schedule made no distinction between conventional and Islamic banks, and found no constitutional violation in the provision.