Sections 4B and 4C of Income Tax law: IHC, LHC ordered to transfer pending ICAs to SC

ISLAMABAD: The Islamabad High Court (IHC) and the Lahore High Court (LHC) were ordered to transfer pending intra-court appeals (ICAs) and petitions against the Section 4B and 4C of the Income Tax Ordinance, 2001 to the Supreme Court.

A five-judge of the SC Constitutional Bench, headed by Justice Aminuddin Khan, on Wednesday, heard the appeals of 354 taxpayers against Section 4B, which was inserted in the Income Tax Ordinance, 2001.

Makhdoom Ali Khan, representing a number of taxpayers, asked the bench that now, after the insertion of Article 186A in the Constitution, the Supreme Court has the power to transfer any case, appeal or other proceedings, pending before any High Court to itself.

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Justice Muhammad Ali Mazhar questioned if they decide the case then would it not be binding on the IHC and the LHC in terms of Article 189 of the Constitution, adding even without Article 186A the Supreme Court has the power to transfer the cases to itself. He recalled that in DRAP case, the apex court had transferred the cases pending before all the High Court to itself.

Makhdoom requested that in light of Article 186A, the pending appeals/cases before the High Court could be brought to the apex court. He then cited a judgment of the Indian Supreme Court that empowered it to exercise this power routinely.

Justice Amin then inquired from the counsels of Federal Board of Revenue (FBR) and the taxpayers that if they withdraw the cases before the IHC and the LHC and transferred them to the Supreme Court then there is any objection. They replied, no.

Justice Amin then asked Makhdoom whether the power under Article 186A is discretionary or required filing of application. He responded that Article 186A be read with Article 187 of the Constitution.

Justice Amin ordered the SC office to send the copy of this order to the registrars of IHC and the LHC to place it before the respective chief justices to transfer the cases regarding Section 4B and 4C of the Income Tax Ordinance, 2001, to the Supreme Court.

During the proceeding, Makhdoom argued that whether this levy is tax, if not then it is outside the scope of Entry 47 of the Fourth Schedule of the constitution? He said if the levy is double-taxation and permissible then how can the amount be used. Picking a specific group of taxpayers and apply Sections 4B and 4C on them is the discrimination under the constitution.

Justice Mazhar inquired whether the apex court has issued stay order while granting leave to appeal. Makhdoom responded the bench headed by former chief justice Umar Ata Bandial had directed the companies to deposit 50 per cent of the due liability with regard to the super tax. The bench was informed that the super tax in terms of Section 4B was collected till 2019, and was zero in 2020 and 2021, adding in 2022, the federal government inserted 4C in the ITO.

Makhdoom argued that the Court has to examine whether the levy is tax, and falls in Entry 47, which says taxes on income other than agriculture income. The power of the government to levy tax is limited under Entry 47.

Justice Jamal Khan Mandokhel questioned if this (super tax) is for the specific purpose then can the federal government keep its share and use it for war on terror. He noted that after the 18th Amendment the rehabilitation work can be carried out by the provinces as well.

The case was adjourned until today (Thursday).

Copyright Business Recorder, 2025