Sindh High Court (SHC) has suspended the applicability of Super Tax on High Earning Persons for the tax year 2022 which would be applicable from the tax year 2023.
In this connection, the SHC issued an order on Thursday, that section 4C (Super Tax on High Earning Persons) would not be applicable from 2022 but from 2023.
The petitions filed against the Super Tax are allowed to the following extent: Super tax is not leviable this year; Proviso of 10 percent Super Tax has been struck down and judgment will remain suspended for the next 60 days.
Under the Finance Act 2022, a new section 4C has been introduced through Finance Act, 2022, and this section will apply for the tax year 2022 and onwards. Except for the persons whose income as envisaged in this section is Rs. 150 million, all other persons including those assessed under Fourth, Fifth, and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from 1 percent to 4 percent based on graduated income slabs provided in Division JIB of Part I of First Schedule.
However, for the tax year 2022, the rate of super tax under this section will be 10 percent instead of 4 percent, where the income of the persons engaged, partly or wholly, in the business of airlines, automobiles, beverages, cement, chemicals, cigarette & tobacco, fertilizer, iron & steel, LNG terminal, oil marketing, oil refining, petroleum & gas exploration and production, pharmaceuticals, sugar, and textiles exceeds Rs. 300 million. For the tax year 2023, this super tax on the income of banking companies will be 10 percent if the income for the year exceeds Rs. 300 million.
SHC order said that the petitioners have challenged the constitutionality of Section 4C of the Income Tax Ordinance 2001, and provisions appurtenant thereto, introduced vide Finance Act 2022, inter alia, upon grounds that the same unlawfully vitiates vested rights accrued in past and closed transactions; is discriminatory; confiscatory; demonstrably devoid of any intelligible differentia having rational nexus with the object of classification; and amounts to impermissible double taxation.
For reasons to be recorded later and subject to what is set out therein by way of amplification or otherwise, these petitions are allowed in terms of and to the extent specificated herein below:
- Sections 4C of the Income Tax Ordinance 2001 is read to reflect that the levy shall be applicable from the tax year 2023.
- Notwithstanding the foregoing, the 1 st proviso to Division IIB of Part I of the First Schedule to the Income Tax Ordinance 2001 is declared to be discriminatory, hence, ultra vires to the Constitution.
The operation of this judgment shall remain suspended for a period of sixty days from the date hereof; hence, the securities furnished pursuant to respective ad interim orders shall remain intact for the said period, SHC order added.
