PESHAWAR: The Peshawar High Court has issued notices to the federal revenue secretary and Federal Board of Revenue seeking their response to the petition of a cement manufacturing company against a ‘super tax’ and its retrospective imposition.

Justice Mohammad Naeem Anwar of a single-member bench fixed the hearing into the plea of the Cherat Cement Company Limited by a division bench for Jan 11.

He also granted an interim relief to the petitioner by allowing it to submit tax returns by excluding the amount of tax (super tax) imposed under Section 4-C of the Income Tax Ordinance, 2001.

However, the bench declared that the interim relief should be subject to the deposit of post-dated cheques of the amount of super tax claimed by the FBR or calculated by the petitioner.

PHC asks govt for response to petition

The petitioner requested the court to declare that the imposition of the super tax for the tax year 2022 or any year thereafter is illegal and without lawful authority.

The respondents in the petition are the federal government through the secretary of the revenue division, FBR through its chairman, commissioner (inland revenue), and chief commissioner (inland revenue), Regional Tax Office, Peshawar.

Barrister Ibrahim Khan Afridi appeared for the petitioner and said parliament had passed the Finance Act, 2022, wherein through Section 5, a new section, 4-C, with Division IIB of Part I of the First Schedule, was introduced into the Income Tax Ordinance, 2001.

He said through Section 4-C, the levy of the ‘super tax’ on high-earning people had been imposed retrospectively for the tax year 2022.

The lawyer said since the Finance Act, 2022, had taken effect on July 1, 2022, and the tax year 2022 closed on June 30, 2022, the applicability of the impugned tax to the financial year 2022 was illegal.

He said the petitioner belonged to one of the 13 industries, which were subjected to a higher rate of ‘super tax’ compared with that of general taxpayers.

The counsel said his client had already worked out its income on the basis of the law prevailing during the tax year 2022 and it had also prepared the books of accounts and declared profits, dividends and capital gains for the year 2022 on the basis of decisions made while taking into account the prevailing tax laws at that time.

He contended that the imposition of ‘super tax’ on income earned and transactions done in the tax period that had already lapsed, coupled with unjustified discrimination, was illegal, arbitrary, and a violation of the fundamental rights guaranteed by the Constitution.

The lawyer argued that while the legislature was competent to introduce reasonable classification, it was a settled principle of law that even for taxes, there could be no discrimination in the same class of people.

He said the petitioner fell in the first proviso to Part I of the First schedule for which a higher rate of 10 per cent for income above Rs300 million had been prescribed.

The counsel, however, said according to the schedule in question, the rate of super tax was four per cent, but for the petitioner as a cement industry, it was 10 per cent, an act of discrimination against his client.

Published in Dawn, December 29th, 2022