TERENCE J SIGAMONY
ISLAMABAD: The Supreme Court questioned how much funds the federal government has collected in terms of super tax introduced through Finance Act, 2015, and would its collection continue until the doomsday.
A five-judge of the SC Constitutional Bench, headed by Justice Aminuddin Khan, and comprising Justice Jamal Khan Mandokhel, Justice Muhammad Ali Mazhar, Justice Syed Hasan Azhar Rizvi, and Justice Shahid Jamal, on Tuesday, heard about 354 petitions against Section 4B, which was inserted in the Income Tax Ordinance, 2001.
Justice Mandokhel questioned; “Was there any plan how much amount will be collected [under Section 4B of ITO], and how much will be spent, and how much was required for rehabilitation of the Temporarily Displaced Persons (TDPs).” He also inquired how many people were displaced, and which area was damaged as a result of military operation (Zarb-e-Azb). Justice Mazhar said though super tax was one-time collection, but it is challenged every year before the courts i.e. 2016, 2017, 2018, 2019 and 2020, and would it be collected indefinitely.
Federal Board of Revenue (FBR)’s lawyer Raza Rabbani argued that the war against terrorism was an ongoing process and that terrorism victims were displaced as a result of counter-terrorism efforts.
Makhdoom Ali Khan, representing more than 100 taxpayers, questioned whether terrorism had ended in 2020, as the government had stopped collecting the super tax that year. Rabbani responded that there was a lull at that time; therefore, the department had stopped the collection.
Makhdoom submitted the tax was imposed on the taxed income. Justice Mazhar remarked; therefore, it is called super tax.
Justice Amin raised concerns over how funds from the national consolidated fund could be spent without the consent of the provinces.
Justice Mandokhel observed if that amount (super tax) was deposited in the consolidated funds then that has to be distributed among all the provinces. Makhdoom responded that if super tax amount is merged with the consolidated funds then through Finance Commission awards the money will be distributed among the provinces.
At the onset of the proceeding, Ijaz Ahmed Awan, representing the taxpayers from the Punjab, briefed about the geneses of super tax. He stated that due to launch of joint military operation Zarb-e-Azb in the North Waziristan Agency of Federally Administered Tribal Areas (FATA) there was temporary migration, displacement of the locals from the area of operation.
The federal government through Finance Act 2015 imposed one-time super tax on the affluent and the rich individuals, association of persons and companies earning income above Rs500 million at the rate of four per cent of income for the banking companies and three per cent of income for all others for the rehabilitation of TDPs. The estimated total cost of rehabilitation of TDPs was Rs80 billion.
Ijaz contended that the funds were in fact for the welfare and social well-being of the TDPs, adding subject of “Social Welfare” was devolved to the provinces through the 18th Amendment. The impugned levy under the garb of “Social Welfare” is not the subject matter of the federal government.
Ijaz stated that the imposition of super tax was/is not only invalid, unwarranted but also illegal and unconstitutional besides miserably lacking the essential attributed of a tax. He prayed before the court to set aside the judgment of the Lahore High Court (LHC) dated 28-02-2020.
Ijaz stated that normal procedure was required to be adopted to impose impugned levy as against the one adopted via money bill. The levy of impugned tax on an affluent class, in utter negation of constitutional and statutory requirements is not justifiable in any manner, on the ground that the proceeds; therefore, are meant for a “Noble National Cause”.
He said that the levy has been imposed in a discriminatory manner without any adherence to the provisions of Article 25 of the constitution. Tax cannot be imposed, more than once, on the income of an assessee under the guise of Entry 47 of 4th Schedule of the constitution.
After making his submission briefly, Ijaz told the bench he was not feeling well, and requested to allow him to argue later on. The court asked other appellants’ lawyers, to argue the case, but no one stood up. The bench then asked Makhdoom Ali Khan to argue the case. Makhdoom replied he has challenged Sindh High Court (SHC)’s judgment.
However, on the insistence of the bench, Makhdoom made his submission. He informed that the judges of the Islamabad High Court (IHC) – Justice Babar Sattar and Justice Athar Minallah have passed verdicts on Section 4B, but the intra-court appeals (ICAs) against their orders are pending in the IHC.
Justice Mazhar questioned for how many months the Court will wait for the decision of the IHC divisional bench. Additional Attorney General Aamir Rehman stated that the petitioners before the IHC can approach the apex court as an intervener, and in the meanwhile, the IHC is asked to decide the ICAs soon.
Earlier, Dr Shahnawaz, another FBR lawyer, told that SHC, LHC and PHC have declared the law intra vires.
The case was adjourned until Wednesday (March 12).
