LAHORE: The Lahore High Court has directed the Federal Board of Revenue (FBR) to allow different industries to file their returns excluding the super tax under section 4C of the Income Tax Ordinance 2001 subject to deposit of postdated cheques of the differential amount.

The section 4C of the ordinance deals with tax on high earning persons for poverty alleviation.

Justice Shahid Jamil Khan issued the interim order on petitions filed by Service Industries Limited and others challenging the imposing of the super tax with retrospective effect for tax year 2022 and on wards.

During Thursday’s hearing, Advocate Asma Hamid argued on behalf of the FBR that past and closed transactions can be disturbed by legislation through retrospective legislation. She relied upon a Supreme Court’s 1993 judgment in case of Molasses Trading and Export versus Federation.

She further said that the levy of the super tax had already been upheld by the high court in its 2020 judgment titled DG Khan Cement versus the federation. Therefore, she said it cannot be reexamined. She pointed out that the language of sections 4B and 4C of the ordinance was identical. .

The counsel further said that there was no question of past and close transactions as the returns were to be filed by Sept 30 and declarations under the returns had not attained finality.

The petitioners’ counsel submitted that the special tax year 2022 closed on Dec 31, 2021 and all accounts had been prepared and finalized. He argued that the transactions and accounts made for the tax year 2022 had become past and closed transactions, therefore, the impugned section 4C even if applied retrospectively, could not be effective against the past and closed transactions.

In his written order, Justice Khan noted that no question of vires of section 4C was involved, therefore, a judgment relied up on by the petitioners was not applicable.

The judge directed the FBR to allow the petitioners to file returns excluding the super tax under the section 4C subject to the deposit of postdated cheques of the differential amount liable to be deposited under the impugned provision. However, the judge, on the request of the petitioners, clarified that the cheques shall be encashed on the direction of the court or subject to final decision of the case.

The judge would resume further hearing on Oct 20.

Published in Dawn, October 1st, 2022