Section 4B of Income Tax Ordinance, 2001: Spent more than collection for TDPs rehabilitation: AAG
A five-judge Constitutional Bench of the Supreme Court, headed by Justice Aminuddin Khan, on Tuesday, heard the appeals of 354 taxpayers against Section 4B, which was inserted in the Income Tax Ordinance, 2001 through the Finance Act 2015.
AAG Aamir Rehman, on behalf of the Ministry of Finance, submitted that Rs114 billion were collected in terms of Section 4B, while the federation spent Rs117 billion on the rehabilitation of the TDPs, adding the estimated total cost of rehabilitation of TDPs was Rs80 billion.
SC CB asks whether super tax is a 'tax' or 'fee'
He stated that super tax, collected from affluent and rich individuals, association of persons, companies earning income above Rs500 million and the banks, is deposited into consolidate funds and from there through divisible pool is distributed among the federation and the provinces.
The AAG said after the distribution under Article 160 of the Constitution the federal government from its share of 42.5 per cent spent the amount on the rehabilitation of the TDPs.
Justice Jamal Khan Mandokhail questioned why super tax was imposed. Asma Hamid, FBR counsel in appeals against Lahore High Court (LHC) judgment, explained that if this amount (Rs80 billion) was spent from the existing budget amount then the government had to divert money from other projects, which could have affected them, therefore, super tax was imposed.
Advocate Raza Rabbani, who also represented FBR in appeals against the Sindh High Court (SHC) judgment, argued that this levy has been imposed on income of every person specified in Division IIA of Part-I of the First Schedule, the Ordinance, 2001. It is a separate charge of super tax, in addition to the income tax, charged under section 4, the Ordinance, 2001, where a distinct mechanism for assessment, collection and recovery is provided. Both income tax and the super tax are imposed on the income, he added.
Regarding argument that the tax levied under Section 4B is not tax as legislative procedure laid down in Article 73 is not followed, Raza Rabbani argued that in some federations of the world, Money Bills are passed by both Houses, in other federations Money Bills are passed by the Lower House of the Parliament, which comprises directly elected representatives of people.
He said that Section 4B is a special tax and has been levied for a special purpose, and by virtue of the definition of taxation given in Article 260 of the constitution the parliament was well within its competence to impose such a tax.
Raza Rabbani also contended that Entry 47 of the Fourth Schedule empowers the legislature to impose more than one tax on the income of a person. The term tax on income in Entry 47 effectively nullifies the arguments with regard to double taxation, adding the constitution does not impose a prohibition on double taxation but in fact permits the levy of more than one tax on income.
He emphasised that before insertion of Section 4B, there was no provision for super tax in the Ordinance 2001. However, there is no bar on Parliament to insert, by way of an amendment in the law. He said that deliberately, a confusion is being created with a play of words that a tax has to have a characteristic of a 'general purpose', whereas, the law developed is for the 'general revenue' and 'public purpose', adding there are a string of judgments in which this characteristics, for 'public purpose' is discussed.
Raza Rabbani has concluded his arguments.
The case is adjourned until May 19.
Copyright Business Recorder, 2025
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