SOHAIL SARFRAZ

ISLAMABAD: The Sindh High Court (SHC) has held that super tax on high-earning persons will not be applicable for the Tax Year 2022, but for Tax Year 2023 and onwards.

In this connection, the SHC has issued a short order on Thursday that section 4C (Super Tax on High Earning Persons) of the Income Tax Ordinance 2001 would not be applicable for the tax year 2022, but for 2023 and onwards. The petitions filed against the supertax are allowed, however, the judgment remained suspended for the next 60 days.

In this connection, the SHC has issued an order on Thursday, the section 4C (Super Tax on High Earning Persons) would not be applicable from 2022 but from 2023.

Under the Finance Act, 2022, a new section 4C has been introduced through Finance Act, 2022 and this section will apply for tax year 2022 and onwards. Except for the persons whose income as envisaged in this section is Rs150 million, all other persons including those assessed under Fourth, Fifth, and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from one per cent to four per cent based on graduated income slabs provided in Division JIB of Part I of First Schedule.

However, 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, fertiliser, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles exceeds Rs300 million. For tax year 2023, this supertax on income of banking companies will be 10 per cent if the income for the year exceeds Rs300 million.

The SHC’s order said that the petitioners have challenged the constitutionality of Section 4C of the Income Tax Ordinance, 2001, and provisions appurtenant thereto, introduced vide Finance Act 2022, inter alia, upon grounds that the same unlawfully vitiates vested rights accrued in past and closed transactions; is discriminatory; confiscatory; demonstrably devoid of any intelligible differentia having rational nexus with the object of classification; and amounts to impermissible double taxation.

For reasons to be recorded later and subject to what is set out therein by way of amplification or otherwise, these petitions are allowed in terms of and to the extent specificated herein below:

1. Sections 4C of the Income Tax Ordinance 2001 is read to reflect that the levy shall be applicable from the tax year 2023.

2. Notwithstanding the foregoing, the 1st proviso to Division IIB of Part I of the First Schedule to the Income Tax Ordinance 2001 is declared to be discriminatory, hence, ultra vires to the Constitution.

The operation of this judgment shall remain suspended for a period of 60 days from the date hereof; hence, the securities furnished pursuant to respective ad interim orders shall remain intact for the said period, the SHC order added.