Despite the notification, the court is still operating from IHC; FCC will look into the supertax affair tomorrow
President Asif Ali Zardari swears in Justice Aminuddin Khan as the Chief Justice of the Federal Constitutional Court at a ceremony at Aiwan-i-Sadr on Friday. Photo: APP
ISLAMABAD:
The Federal Constitutional Court (FCC) – established under the 27th Constitutional Amendment – commenced its proceedings on November 18 from its temporary premises – the Islamabad High Court (IHC).
However, despite a delay of more than 40 days, the court has not been transferred to new premises.
A December 11 notification said the FCC would be housed in the Federal Sharia Court (FSC) building, while the FSC would operate from the IHC.
The FSC has been transferred to the IHC, but the FCC has not yet started work at the notified location.
We learn that renovation work is currently underway in the FSC building. It will take at least another week before the FCC can begin work in the new facility.
The FCC will also continue its work at the IHC next week.
The source said the FCC is facing several logistical issues, including a severe staffing shortage. The Supreme Court approved the transfer of only 20 officials for the operation of the FCC.
Even 40 judges of the Punjab judiciary were transferred to the FCC. Some retired Supreme Court officials have also been inducted into the Constitutional Court.
Of 56,608 cases, 22,910 were transferred to the FCC from the Supreme Court.
Some experts estimate that to handle more than 22,000 cases transferred to the court, a large number of officials would also have had to join the FCC.
It has also been observed that the rate of filing complaints with the FCC is higher than that of the Supreme Court.
A senior government official said the FCC could have easily worked from the Supreme Court premises, as three courtrooms could have been reserved for the FCC in the SC building.
Currently, seven judges work at the FCC. Despite the enormous anticipation, there is no indication that new judges will be appointed to the new court.
A senior government official said new judges would be appointed to the FCC soon after the logistical issues were resolved.
FCC addresses the supertax affair tomorrow
Meanwhile, a three-member FCC bench headed by Chief Justice Amin-ud-Din Khan will hear the super-tax case on Monday.
Before the adoption of the 27th Constitutional Amendment, nearly 50 hearings were conducted by the Constitutional Chamber of the Supreme Court in this case. The proceedings were nearing conclusion when the case was transferred to the FCC. Of the three judges, two FCC members were part of the SC panel hearing the case.
The controversy surrounding Sections 4B and 4C of the Income Tax Ordinance, 2001 constitutes one of the most significant tax and constitutional disputes in Pakistan’s recent history.
This has revenue implications running into hundreds of billions of rupees and raises fundamental questions about the taxing power of Parliament, equality before the law and the scope of judicial review in tax matters.
Section 4B was introduced by the Finance Act, 2015, imposing a “super tax” on high-income earners, particularly banking companies and others earning income above Rs 500 million.
Federal Board of Revenue (FBR) lawyer Hafiz Ahsaan Ahmad Khokhar, while giving the background of the case, said the levy was initially justified as a temporary tax measure to generate funds for the rehabilitation of temporarily displaced persons.
Although introduced for a specific financial year, the super tax under Section 4B was extended through subsequent Finance Acts, sparking constitutional challenges in various high courts.
However, on several occasions, the Lahore High Court (LHC), Sindh High Court (SHC), IHC and Peshawar High Court (PHC) have consistently upheld the validity of Section 4B, holding that double taxation is not per se unconstitutional.
They noted that Parliament enjoys wide latitude in tax legislation under Articles 73 and 77 of the Constitution.
Despite constant validation of Section 4B by all the high courts, the taxpayers finally took the matter to the Supreme Court for a final decision.
The dispute remained pending before the SC for several years, provisional provisions allowing conditional recovery.
Although no nationally consolidated figures for Section 4B collections have been officially disclosed, audit and tax records have indicated substantial exposure, with examples of audit observations alone reflecting the absence of super tax collections, illustrating the significant tax issues involved.
While the challenge to Section 4B was already pending before the SC, Parliament enacted Section 4C through the Finance Act, 2022, significantly expanding the scope and scale of the super tax regime.
Section 4C imposed an additional levy on individuals and businesses earning income above Rs 150 million, with progressively higher rates applied to designated sectors identified as having made windfall profits.
For some sectors – including banking, oil and gas, fertilizers, cement, sugar, iron and steel, LNG terminals, textiles, automobiles, beverages, chemicals, airlines and cigarettes – the super tax rate reached 10%, significantly increasing the effective tax burden on banks and large companies.
The budgetary scale of Section 4C was unprecedented. The FBR has officially projected that the levy would generate around Rs 250 billion in additional revenue in the 2022-23 fiscal year alone.
Budget documents and contemporaneous reports further indicated that the government expected between Rs215 billion and Rs247 billion specifically from the super tax regime, including around Rs180 billion from corporations and around Rs87 billion from the public sector and state-owned enterprises.
