Law: Income Tax Ordinance, 2001

Section: 4C

SUMMARY; The petitioner, a banking company, challenged the constitutional validity and applicability of Section 4C of the Income Tax Ordinance, 2001, relating to Super Tax, particularly in respect of Islamic financing contracts entered into before the introduction or enhancement of Super Tax. The petitioner argued that Section 4C was unconstitutional, retrospective, discriminatory, amounted to double taxation, and unlawfully excluded brought-forward losses and depreciation. The respondents opposed the petition, arguing that tax liability arises from income accrued and recognized during the relevant tax year, not from the date on which the underlying financing contract was executed. They also raised objections regarding territorial jurisdiction and the availability of an alternative statutory remedy. The Court dismissed the constitutional petition primarily on jurisdiction and maintainability grounds. It held that all material tax proceedings occurred in Karachi, where the petitioner was assessed and administered by the LTO, Karachi, and where the impugned order was passed; therefore, the Islamabad High Court lacked territorial jurisdiction under Article 199 of the Constitution. The Court further held that the petitioner had already availed the statutory remedy by filing an appeal before the Appellate Tribunal Inland Revenue, Karachi, making the constitutional petition impermissible. On merits, the Court observed that Section 4C applies to income accrued and recognized in the relevant tax year, regardless of when the underlying Islamic financing contract was executed, and that the issue had already been settled by the Federal Constitutional Court in M/s DG Khan Cement Company Ltd. v. Federation of Pakistan, 2026 PTD 625. Consequently, the petition was dismissed, interim orders were vacated, and pending applications were disposed of JUDGMENT              INAAM AMEEN MINHAS, J.- The petitioner bank has filed the instant constitutional petition with the following prayer: - “(i) declare section 4C to the Income Tax Ordinance, 2001, alongwith any demand notices or recovery proceedings or orders including demand of the main tax…